Posted on 03/22/2022 6:44:31 PM PDT by blam
First there was supply-chain disruption brought on by the coronavirus, then war in Ukraine further rocked commodity markets. The next bout of inflation via raw material prices will be brought on by resource nationalism.
While the cost pressures brought on by the difficulty in moving goods in a world in lockdown are fading, other factors are more enduring.
For instance, the post-Cold War spread of e-commerce allowed companies to treat the world as both factory floor and marketplace. Comparative advantage, strategic partnerships and the success of globalization led to growth and prosperity. Russia’s invasion of Ukraine jarred that dynamic and has set in motion a series of quasi-isolationist responses.
What started as economic sanctions on Russia has tipped the balance: we are no longer in a uni-polar world. We have entered into a multi-polar one where traditional economic superpowers can no longer call the shots. Service-driven economies are price takers and have far less leverage over those producing raw materials.
The geopolitical landscape has changed and economic incentives along with it. The growing emergency that sanctions on Russia have caused over energy supply security will be inflationary for years to come. Nowhere is this more evident than in Europe, given its direct exposure to Russia energy, with individual countries prioritizing domestic energy security as a first port of call.
The European Union entered an era of energy inflation given its commitment to address climate change and fossil fuel dependence by “greening” the economy. Such aims create price pressure, and has led to discussion at the European Central Bank on whether its inflation target should be adjusted.
Russia and Ukraine are two of the globe’s top grain producers. Conflict has triggered panic and price squeezes on everything from fertilizer to cooking oil, and has also led nations to rethink their approach to national stockpiling.
Energy security pulls into focus security of other commodities. The list of countries restricting agriculture exports is growing. It includes Indonesia, Hungary, Argentina, and Turkey. China’s begun stockpiling corn and soybeans while sources mention state refiners are considering pausing exports of gasoline and diesel in April.
Effectively, every resource a nation produces has the potential to become a bargaining chip. There is a price to meet security of resources. As more economies step away from globalization that cost will get steeper as isolationist tendencies produce greater trade frictions.
The process is unlikely to extend to a fear-driven mania. Consider it more of a purposeful step-change in both governments’ and corporations’ mental accounting and future planning, increasing both cost and scarcity to ensure resource security.
Nations cannot adopt a complete isolationist approach — it’s impossible to fully unwind decades of economic integration. However, lack of supply reliability results in additional inflation premia, regardless of the war’s outcome or duration.
“… the success of globalization led to growth and prosperity.…”
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Really? Tell that to the American rust belt residents.
has also led nations to rethink their approach to national stockpiling.
But the insurance lobbyist paid more to the politicians than the grain bin lobbyist.......................
Trump didn’t seem to have this problem…
“… it’s impossible to fully unwind decades of economic integration…”
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Well, vis-à-vis the ChiComs Donald Trump successfully began the process of economic disengagement. The Globalists were desperate to prevent going further down the road with that so they needed to get rid of Trump and install a compliant puppet. And they did!
What do Russians pay at the pump?
First there was a stolen election.
“Well, vis-à-vis the ChiComs Donald Trump successfully began the process of economic disengagement. The Globalists were desperate to prevent going further down the road with that so they needed to get rid of Trump and install a compliant puppet. And they did!”
Anti Trump partisans & Biden Republicans won a pyrrhic victory with the Big Steal of 2020.
Their “great victory” won’t mean much after 3 more years of economic pain & incompetence.
1.85 a US gallon, according to that link nasc posted.
I’ve heard it’s pretty cheap over there.
A very interesting read, and Resource Nationalism a very interesting concept.
I wonder if we can Inflate and Tax our way to prosperity and abundance?
No, I don't.
Pardon me House, I intended to post #11 to Blam.
Globalization meant labor arbitrage.
That made many of the world’s wealthy a lot wealthier while a lot of “deplorables” got hung out to dry.
“Globalization meant labor arbitrage.
That made many of the world’s wealthy a lot wealthier while a lot of “deplorables” got hung out to dry.”
The globalist economic system will burn out this decade, their little economic fun is about to crash & burn on a road they created.
Plus, I’m registering new deplorables right & left, many of them younger people not experienced in politics.
People on Free Republic would be surprised what a Trump 2024 hat, 6-pack of beer, & a tobacco product can buy.
“It buys a new voter, a Trump voter, for the next 2 election cycles.”
This article raises some interesting claims, most fairly obvious, but it makes a crucial error in terminology.
When we read about Wheat production, or Corn, or cooking oils and percentages from Ukraine or Russia it makes it kind of difficult to envision. I read somewhere, don’t know how true it is, but between the two countries they are responsible for 12% of the global Calorie exports. Now that would leave a dent if it went offline. They are also responsible for significant petroleum exports including Diesel fuel, and natural gas, and Fertilizer. This could have serious cost pressure to say the least, due to good old Supply and Demand.
Monetary Inflation is a completely different animal, and is always and ever a matter of monetary policy. Prices go up without regard to supply and demand. And you can “print” all you want, and it won’t get fertilizer to the farmers fields, or the fuel for the combines, or the locomotives to haul the grain.
American farmers can do amazing things in terms of production if the weather does its part, but they if they can’t pencil it out because our government has buggered the currency, you can’t pin all of that blame that on the Russkies.
Another way to put it, monetary inflation always leads to higher prices. Supply and Demand issues can lead to higher (or lower) prices, but it has nothing at all to do with Inflation. To use “Inflation” interchangeably with “higher prices” is simply not accurate, and is not helpful in the discussion.
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