{"id":7369,"date":"2022-01-20T15:23:21","date_gmt":"2022-01-20T13:23:21","guid":{"rendered":"http:\/\/www.liberalglobe.com\/?p=7369"},"modified":"2022-01-20T15:23:22","modified_gmt":"2022-01-20T13:23:22","slug":"how-inflation-shadows-the-joe-biden-governance","status":"publish","type":"post","link":"https:\/\/www.liberalglobe.com\/?p=7369","title":{"rendered":"How Inflation Shadows the Joe Biden Governance"},"content":{"rendered":"\n

Annual inflation is high internationally. In the US, annual inflation is now “running” at a rate of 7.1%, the highest in the last forty years.<\/p>\n\n\n\n

Such high inflation creates economic, social and political upheaval. It overshadows the outlook for the American economy. It magnifies social differences and problems in a country facing a crisis of social cohesion. It weakens Democrats and President Joe Biden politically, who managed to rally the poorest voters in the presidential election against Donald Trump on the grounds that a policy should be pursued in favor of the poorer classes.<\/p>\n\n\n\n

Joe Biden is taking important initiatives in this direction, but these are largely canceled due to high inflation. On an annual basis, wage increases are significant – of the order of 4.5% – but well below the annual inflation of more than 7%.<\/p>\n\n\n\n

Whichever de-escalation of inflation will be slow to achieve, with what probable phenomenon in the last quarter of 2022 it will de-escalate, but remain at high levels. The end result will not be particularly positive as annual inflation is likely to remain around 5% in the US in 2022.<\/p>\n\n\n\n

High inflation is not an American exception, but part of the international standard. Annual consumer price inflation reached 5.8% in November in OECD countries. In November 2020, inflation in OECD countries was 1.2%. The annual inflation of 5.8% recorded is the highest of the last twenty-five years.<\/p>\n\n\n\n

Forty-year record in the US, twenty-five-year record in the OECD zone and worst of all, the continuation is predicted to be more difficult in the coming months.<\/p>\n\n\n\n

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The causes and policy mistakes that led to<\/strong> this high inflation<\/strong><\/p>\n\n\n\n

Inflation will last, because it is associated with deeper causes that will prevail for quite a long time.<\/p>\n\n\n\n

1.<\/strong> \u03a4he effects of the impressively relaxed monetary policy of central banks can be seen. The international economy is “swimming in an ocean of money”. The view that loose monetary policy has no effect in the current context is being tested in practice. Some central banks are beginning to react to this situation by planning a gradual consolidation of monetary policy and an increase in key interest rates.<\/p>\n\n\n\n

2.<\/strong> \u03a4he green-energy transition, as it is organized, will create the so-called green inflation. The transition from fossil fuels to a greener economy calls into question the medium-term forecasts of International Organizations and Central Banks for inflation. Rising energy costs due to the green transition may force the ECB to abandon its extremely loose monetary policy relatively soon.<\/p>\n\n\n\n

This can be achieved through an inflationary cycle of price increases and then wage increases in an effort to protect workers’ real incomes.<\/p>\n\n\n\n

3.<\/strong> At the same time, energy prices in the Eurozone increased by 26% in December 2021 compared to December 2020. Especially gas prices quadrupled compared to pre-pandemic levels. The EU has set as a strategic goal the completion of the green transition by 2050 and the complete independence from fossil fuels. Except that its specific weight in the world economy is not so great as to be able to impose its choices. Even in greenhouse gases, EU involvement is limited, 8% of the world total.<\/p>\n\n\n\n

Producers of oil, gas and even coal are not going to remain apathetic observers of the EU’s green transition. They will do everything they can to exploit fossil fuels in the coming decades and beyond the time horizon set by the EU.<\/p>\n\n\n\n

Russian President Vladimir Putin’s handling of Russian gas shows what to expect. During the period when Russia was under great economic pressure from the reduction of the gas demand from the EU, it made strategic investments to connect the Russian gas with the Chinese economy. Now that the demand for gas from the EU is increasing. Vladimir Putin emerges from a position of power, determined to impose his financial terms.<\/p>\n\n\n\n

We have similar developments in oil, where the major producers in the Arabian Peninsula are little influenced by EU decisions, as it absorbs only 4% of their total oil exports.<\/p>\n\n\n\n

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4. <\/strong>China and India are increasing their extraction and consumption of coal to meet their energy needs. Indonesia is dramatically increasing its coal exports to China and Australia to India. Fossil fuel prices are hovering high – especially in the case of gas – and geopolitical controversies seem to be holding them back.<\/p>\n\n\n\n

5.<\/strong> The problems posed by COVID-19 are combined with the dynamic recovery of the international economy to cause serious problems in the supply chains, thus amplifying inflationary pressures.<\/p>\n\n\n\n

Unfortunately, the problems will continue throughout 2022 keeping inflation high. China, which has become a “factory in the world”, operates 7 of the 10 largest container ports in the world. Because it has a zero tolerance policy, COVID-19 imposes complex procedures that delay the loading of ships, thus contributing to shortages of goods and rising prices. In addition, the dynamic spread of Omicron is leading the Chinese authorities to impose harsh lockdown on large urban centers that may affect the country’s largest ports.<\/p>\n\n\n\n

During the COVID-19 period, the trade in goods has grown dramatically to the detriment of services, some of which have been hampered by limited social contacts. It is noteworthy that imports of goods from the US increased by about 20% in September and October 2021 compared to 2019, before the advent of COVID-19. But the infrastructure in the ports of Asian, especially Chinese, exports to Los Angeles and Long Beach lags behind the needs, while the Americans are unable to ensure the operation of their ports 24 hours a day, 7 days a week, such as Chinese.<\/p>\n\n\n\n

The end result is long queues of giant merchant ships – now more than a hundred – waiting outside the strategically important ports to unload. Maritime transport has become more expensive and their normalization, in most cases achieved, transfers the problem to road transport. No solution is foreseen in the near future.<\/p>\n\n\n\n

6.<\/strong> The last major reason why inflationary pressures are expected to continue in the first half of 2022, perhaps for the whole year, is the international trend of rising food prices. Inflationary dynamics are also developing in the food sector, which is expected to reach the shelves of supermarkets in the near future and continue in the long run.<\/p>\n\n\n\n

“Green” inflation, geopolitical tensions in the energy sector, the effects of a loose monetary policy, serious supply chain problems and large increases in international food prices are combined to create an inflationary environment.<\/p>\n","protected":false},"excerpt":{"rendered":"

Annual inflation is high internationally. In the US, annual inflation is now “running” at a rate of 7.1%, the highest in the last forty…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[390,819],"tags":[25,243,1290,1532,215],"class_list":["post-7369","post","type-post","status-publish","format-standard","hentry","category-politics","category-usa","tag-eu","tag-inflation","tag-joe-biden","tag-pandemic","tag-us"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/7369","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=7369"}],"version-history":[{"count":1,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/7369\/revisions"}],"predecessor-version":[{"id":7373,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/7369\/revisions\/7373"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7369"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7369"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7369"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}