Page 79 - bne magazine July 2022_20220704

bne July 2022
Opinion 79
markets freeze up, etc) and then to begin its fifth Quantitative Easing (QE) programme.
As Peter Schiff stated: “The most important mistake investors [and I might add: Central Banks] are making is thinking that a recession will solve the inflation problem. In reality, it will make it worse. When the Fed pivots and launches QE5 to stimulate the economy, the dollar will tank, accelerating the increase in consumer prices.”
As macro strategist Lyn Alden recently stated, there are two major supply-side factors redefining the world economy today:
1. For at least the past decade, there has been massive underinvestment in energy. Hydrocarbon drilling has plummeted. The Keystone pipeline was cancelled. Uranium programmes have been shuttered (e.g. Germany); no new uranium mining capacity developed since Fukushima. Meanwhile, insufficient supply of minerals required for alternative energy development (nickel, lithium, copper, etc.) constrains capacity.
2. For decades, the global value chain was optimised for efficiency. Since the Ukraine war started, priorities have changed, and have suddenly become security of supply.
COMMENT
How to keep the EU accession dream alive
Clare Nuttall in Glasgow
Russia’s invasion of Ukraine has confirmed what many feared already: Russia is aggressively seeing to expand its presence in what it sees as its spheres of influence, and that includes the Western Balkans. Expanding the EU to this region, made vulnerable by its poverty relative to other parts of Europe and its long-standing unresolved conflicts, is a way of exporting stability and prosperity. Yet even before the war, political disputes had stymied the progress of the six Western Balkan countries. With no more clarity than before on how to resolve these, the question arises: can the region receive some of the benefits of EU membership while these political divisions are being resolved?
Manufacturing closer to home, holding more inventory, etc, requires massive investment, and contributes to considerable price increases.
Central Banks have no control on the above factors. Nor
do they have control of coronavirus (COVID-19) and the Ukrainian war, which play further havoc with supply chains and price pressures. Whereas higher interests may dampen demand, so long as interest rates are negative in real terms, dampening of demand will be insufficient to quell inflation, especially as the aforementioned pressures on supply chains remain with us or even intensify.
Of course globally high debt levels (Government, corporate, individuals – for a grand total of over $350 trillion) add to global economic fragility, and less ability to tolerate higher interest rates.
This article is for educational purposes only and must not be construed as investment advice. Investors should obtain their own investment advice.
Les Nemethy is the CEO and founder of Euro-Phoenix Financial Advisors Ltd and a former official at the World Bank.
German Chancellor Olaf Scholz with North Macedonia's Prime Minister Dimitar Kovacevski during Scholz's tour of the Western Balkans. bundeskanzler.de
The idea of extending some sort of quasi-membership or some of the benefits of membership to those states that
are waiting to accede has been around for a while. This is
a politically sensitive topic, as there is resistance among the aspiring EU members as long as it’s seen as potentially an alternative to membership (rather than a step on the road towards full membership). But the concept was raised again after first Ukraine, then Georgia and Moldova filed membership applications, joining the queue along with the six Western Balkans countries that are at various stages of the process – and have been for many years.
www.bne.eu