While prices are soaring, should we fear the return of inflation?

While prices are soaring, should we fear the return of inflation?

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What we can say with certainty for the moment is that this sudden stroke of hot on labels is first of all a collateral damage of the COVIR crisis.For many months, the Couronne virus has laid back country and savings, returned to them employees and confined households to their homes, which plunged consumption and exploding savings.In Europe, where partial activity measures largely saved jobs and income, woolen stockings have swelled by 1.400 billion euros.

Result: after months of restrictions, the world wakes up the empty stab and full pockets, ready to throw itself on the shelves of supermarkets.The problem is that the latter are not at all garnished enough to satisfy all the desires.During the crisis, manufacturers have indeed greatly reduced the wing of their production, the supply lines were disorganized, and bottlenecks were formed everywhere everywhere.So much so that the supply of products is Chasserant today.

This is the first cause of the return of inflation: the imbalance between supply and demand.Its effects are particularly sensitive in raw materials.In order not to miss the resumption train, industrialists around the world have rushed in recent months on all basic substances, causing the courses.At a time when we wrote these lines, despite a slight decline due to the last statements of the American central bank, steel had jumped 53% in one year, copper of 39%, nickel of 36%, wood by 14%, coffee by 59%, sugar by 58%, and aluminum squarely 105%, enough to boil all manufacturers of saucepan.

These increases are all the more marked since, as Didier Saint-Georges, member of the Carmignac strategic investment committee observe, “producers of raw materials and intermediate goods do not rush to increase their offer, they preferLet prices go up ".The last six -month weather disastrous has contributed to aggravating the evil.Everywhere on the planet, the weather has massacred agricultural yields and stressed a little more markets.The heat dome which fell on the western part of its territory during the summer has, for example, deprived Canada of 30% of its harvest of durum wheat, of which it is the world's leading producer ...

Naturally, these increases end up being in the prices paid by consumers.Toys, clothing, food, building materials ... No industrial sector or almost spared, and certainly not that of smartphones and other electronic lugs.Assailed by demand, flea manufacturers have not been able to face for several months, and they do not hide that the shortage has left to last, because the construction of new production units will take a lot of time.

The TSMC Taiwanese, the world's leading producer, announced at the end of August that it increased by 10 to 20% the price of its components, which will soon constitute the entire electronic sector to readjust its own.In the automotive industry, the shortage has already started to wreak havoc.Failing to be able to provide semiconductors, many manufacturers have been forced to slow down?.Suddenly, it is the used cars that win the bet!On ad sites, prices have taken off like in Roissy.In the United States, their prices have increased 25% in one year.

To arrange anything, oil, whose courses were dragged out of the ground, also started to flare.OPEC+countries, which were committed, once the resumption came, to gradually put on sale on the 9.7 million barrels/day which they had withdrawn from the market in April 2020, do todaythe dear mouth.Just if they agreed to fall under 400.000 barrels/day their production from August, a misery.Suddenly, between summers 2020 and 2021, the courses have almost doubled.What further increase the price of transport, already engaged by the doubling of the price of containers, also victims of the explosion of demand."In maritime freight, the return to normal may take time," warns Philippe Chalmin, professor at Paris Dauphine University, and founder of the Cyclope Circle.

Alors que les prix flambent, faut-il craindre le retour de l'inflation ?

Is that all ?Not yet.The recovery is so strong that companies also have to face labor shortages.At the beginning of September, the number of positions offered by Pôle Emploi reached the incredible figure of 975.000, a historic record.Suddenly, to attract candidates, companies often have no choice but to increase their wages.

And it’s the same in all rich countries.In the United Kingdom, the desertion of truck drivers from Eastern Europe, panicked by the pandemic, today leads to supply problems to the pubs, short of beer.And, in the United States, the hourly wage continues to increase.Index that the situation is serious, Amazon, however little versed in the social, offered an increase of up to 3 dollars an hour at 500.000 of its employees.For them, it's probably a good thing.But it may supply a price-and-school loop which will be very difficult to reverse over time."It's like toothpaste: when you pressed it, you cannot put it back in the tube," alerts Marc Touati, the president of the Cabinet Acdefi.

These primers of inflationary processes fall all the more bad as they occur in a world stuffed with liquidity.To prevent the economy from sinking into depression after the subprime crisis, in 2008, central banks made the quotation board at full speed.They brought back their interest rates to zero and bought obligations with money created from scratch.As they have never dared to interrupt the infusion - it still continues today - it is in total more than 15.000 billion dollars which were thus poured into the planet.

However, according to economic theory, when the money supply increases faster than the creation of wealth, this mechanically creates inflation.For reasons that no one understands too well, it has not happened, but we probably don't lose anything to wait."The world is sitting on a pressure cooker," sighs Radu Vranceanu, professor of economics at ESSEC.

As if all this was not enough, the government of the United States has found nothing better to do than add a gigantic ladle of liquidity in the pot, through a series of recovery plans.To cope with the pandemic, Donald Trump had already offered 3.100 billion dollars in 2020 (more than France's GDP!) To Americans, in the form of aid and subsidies.Joe Biden returned by voting a new plan of $ 1900 billion last March.

And two other infusions, 500 billion for infrastructure investments and 3.500 billion for "human infrastructures" (spread over several years, it is true), should come to add to it.In an already overheating economy, this delusional Christmas distribution - millions of American households began to receive their big cuts: 1.$ 400 per adult and per child - may be enough to trigger an increase in uncontrollable labels, fear many experts.

No wonder the central banks, whose official role is to guarantee price stability, are on ardent coals!Admittedly, technically speaking, they have all means to drown in the egg the resumption of inflation.The problem is that their remedy - close the liquidity tap by going up their rates and reducing their asset purchases - may well prove worse than evil.

For more than ten years that it has been used in white gloves, the world economy has indeed been accustomed to the policy of easy money, which allows companies and households to borrow - therefore to consume and d'Invest - for almost nothing.Suddenly deprive it of this oxygen, when it is barely recovering from two years of health crisis, would inevitably plunge it into a deep recession.All experts agree on this point.The consequences of brutal monetary tightening could also be terrible in the financial markets.

The Cassandres already see the beginnings not only of a collapse of the scholarship, but also of a new bond Krach - with the increase in rates, the old obligations issued by the States would lose a good part of their value, plunging all theirowners in difficulty - likely to put banks in the carpet.

But it is undoubtedly the over -indebted states that would pay the most salty addition.A possible increase in rates would immediately add the bill for their borrowing repayments, which would further increase their deficits and forced them to ... borrow even more, at the risk of losing the confidence of the markets.It was this disastrous spiral that almost took Greece in 2010.To this lost game loses, France, now in debt up to 118.7% of its GDP, could leave a lot of feathers.But it is Spain and especially Italy would be on the front line.

Ten years after having almost been swept away by the Greek crisis, Europe, whose defense mechanisms remain embryonic, could this new shock take?No economist would put his head on it."The situation is likely to be extremely tense between the countries of the South, which will always prefer the increase in rates, and those of the northern, more virtuous, which already wonder how far they will be able to support them on this path", summarizes Radu vranceanu.

This is why central banks are today extremely cautious.At the end of August, at the Jackson Hole symposium, the boss of the American Federal Reserve (Fed) Jerome Powell took tweezers to announce that "if the economy evolved as expected, it could be appropriate to start reducing the pace of purchases of'active this year ".This was enough to plunge (a little) the markets.

But for the moment, despite pressures from the Rigor camp, neither he nor Christine Lagarde, his counterpart of the ECB, have not yet moved a toe.And none of them went so far as to mention a possible rise in interest rates, the weapon of mass destruction of inflation ... and growth.No doubt they still hope, like some economists, that the rise in prices calms down by itself."This is not a lasting phenomenon.If there is concern in the United States because of the prices of raw material prices in recent months, this is not the case in Europe, where underlying inflation remains very low, ”reassures Patrick for exampleArtus (Natixis).

The optimists also argue that, the day it intervenes, the monetary tightening aroused by central banks will be dosed in the Trébuchet to do the least possible damage."We must distinguish between a less accommodating policy and a restrictive policy, nuance Christophe Barraud, chief economist at Market Securities.The Fed will continue to buy active ingredients, just a little less than before, so there will be no negative shock before years.»»

There remains one last reason to keep hope: if the massive liquidity injections of recent years have not flown the prices, as the economic theory provided for, it is that, in our globalized world, the deflationary structural factorsare legion.Generalization of digital technologies (which lowers production costs), the presence of a large workforce ready to work cheap in the countries of the South (which lowers wages), exacerbated international competition (which pushes thecompanies to lower their labels) ... Come on, the fight against the price increase may not be lost in advance.

Vade retro, Inflationas!

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