Source: Li Jianqiu’s world (id:lijianqiudeshijie)
With the gradual unsealing of all localities, our production and life will gradually resume. Although it is a good thing, it will also bring about a problem, that is, inflation in the future.
In the past time, inflation has risen sharply in almost all countries in the world, including the European Union, which has always been a deflationary country. The Federal Reserve has raised interest rates for two rounds, and China’s inflation has always been at a low position. One important reason for its low position is not complicated, that is, production has not recovered and demand is low.
At present, Brent crude oil has soared to 117. Crude oil can very well reflect inflation. Many people think that due to the sanctions imposed by European and American countries on Russia’s energy sector, the crude oil has soared, but China has not participated in it. Therefore, we should not be so nervous in the energy sector. This idea is wrong.
The supply of energy is actually a circular system. If Europe and the United States import less Russian crude oil, they will import more crude oil from the Middle East. If India imports more Russian crude oil, they will import less crude oil from the Middle East. This is actually a circular system. The reason why bulk commodities are bulk commodities is not that they sell vegetables on the street. Sanctions against the Russian energy sector are more a political gesture, It’s not really about Russia’s energy exports. In fact, after Russia tied energy to the ruble, the ruble appreciated a lot.
How far has energy soared?
Just last year and the year before last, the Iraqi government was almost bankrupt due to financial difficulties. The Iraqi government could not collect taxes, and more than 90% of government revenue depended on oil exports. Due to the poor energy prices last year and the year before last, Iraq has always wanted to obtain loans from the United States to alleviate its current financial difficulties. As a result, energy surged this year, and Iraq suddenly received a huge amount of cash, making a lot of money, At present, Iraq is in a very good financial situation, and even has the spare power to promote economic reform that has not been promoted in the past.
Many people think that the pressure of inflation has eased when they see the data of the United States and the recent decline in inflation in the United States – we need to know how much this will promote energy for the 1.4 billion people to resume production and life.
It is not only the problem of energy, but also the problem of food production and transportation caused by the conflict between Russia and Ukraine, the soaring price of chemical fertilizer, drought, high temperature and extreme weather, which are constantly impacting the world market. Yesterday, I saw the wonder of the temperature in Canada. On the 28th local time, the temperature in Leighton, British Columbia reached 117.5 degrees Fahrenheit (47.5 degrees Celsius), It is about 48 degrees Fahrenheit (8.8 degrees Celsius) above the normal temperature at this time of year. In British Columbia, Canada, more than 130 people have died suddenly.
This kind of extreme temperature will never occur only in Canada. In the future, more countries are bound to appear, which will have a serious impact on the world food market. Please pay more attention.
In addition to these factors, there are three other factors impacting the market:
The epidemic has impacted the global supply chain and has not recovered so far.
The European Union and the United States introduced extremely loose monetary policies during the outbreak, and the side effects are still continuing.
The increase of international trade conflicts brought about by anti globalization, and the shift of supply chain from efficiency to security, will inevitably lead to the decline of supply chain efficiency and increase inflation.
What I want to remind you is that inflation is not short-term. It is very likely to be long-term. Even if a single factor eases, it may also increase inflation due to the intensification of other factors.
Let’s review the inflation situation in history. The situation in 2008 is similar to that today. In order to cope with the economic crisis, major countries in the world have launched monetary easing policies, resulting in a substantial rise in the international market of crude oil and other industrial raw materials.
The sharp rise of raw materials and fuels has driven the domestic inflation to rise rapidly. In 2007, the inflation reached 4.82%, in 2008, it reached 5.93%, and in 2009, it began to tighten to -0.73%, but in the following years, it will reach 3.18% in 2010 and 5.55% in 2011. In this way, four of the five years will be at a relatively high inflation level.
Several constraints on short-term inflation are:
Whether the Federal Reserve will continue to raise interest rates, to what extent, and by what extent.
What is the degree of shale oil shale gas production increase.
Energy trade with Russia.
Due to the war between Russia and Ukraine and the impact of extreme weather, the increase of grain.
The peak period of pig marketing cycle is in March and April. In the future, the supply will decrease. How much will the pork rise
What is the consumption desire of Chinese people after returning to work
How effective are the domestic economic stimulus policies.
Finally, let’s talk about the issue of exchange rate. Generally speaking, the impact of exchange rate on inflation is very complex. The shorter the transmission chain from raw materials to the final industry, the more vulnerable it is to the impact of exchange rate. The longer it is, the less easy it is. Theoretically, the appreciation or depreciation of RMB against the US dollar will help reduce or increase the cost of domestic crude oil importers, and there is a motivation to transfer to consumers. In terms of data, commodities do have the characteristics of imported inflation. (except for grain, China has always attached importance to food security)
However, if the transmission chain is long enough, it will lead to several layers from raw materials to final products, and the transmission efficiency will become low. Chinese enterprises have fewer upstream and more downstream. Although the price factor of raw materials is indeed very important, enterprises often want to maintain market share and the depreciation of exchange rate will be spread to the whole industrial chain, resulting in enterprises directly absorbing the pressure from exchange rate in order to maintain market share.
Take a few examples: in the refined oil market, the transmission chain from oil processing to fuel oil is relatively short, and China is highly dependent on oil imports, so this inflation is easier to transmit.
Some more complex products may be directly absorbed by enterprises.
Finally: since the domestic policy has been determined as the foundation for employment and economy, the policy level will tolerate inflation to a certain extent. Under the relatively loose monetary policy environment, the domestic inflation pressure may break out at a certain point. Whether the policy intervention depends on the economic situation at the breaking point and the range of inflation.
This means that at the policy level, even if there is a certain amount of inflation, such as 4% or even 5%, due to the greater emphasis on employment and economic recovery, higher inflation may be tolerated and the loose monetary environment will not be withdrawn.
Please pay close attention to this trend.
Finally, I would like to warn you young friends: as the policy has been gradually increased, the interest rate has been lowered, and the tolerance of the policy to inflation has been strengthened. It is almost time for you to buy a house, especially for those who just need it. I have already reminded you before, and I will remind you again here.
We should change our direction. We should not be paranoid about a certain point of view because of our stubbornness. We should also follow up at a certain position in a timely manner, and the policy is good.
Don’t underestimate the power of policy.