Inflation? The big investment houses, already busy designing future scenarios, do not talk about anything other than the first effects of the investment plan promoted by Joe Biden. The theme goes beyond the expected data on consumption for April, which at 14,30 pm will provide the first test on the advance in prices and, consequently, on the behavior of the Fed which, as anticipated by Janet Yellen, could proceed with a temporary upward correction of interest rates.
But, beyond the short term, the "gurus" are grappling with a much more demanding question: the world is or is not on the eve of an epochal turning point, like the one that followed the 1973 oil shock? In other words: after forty years of falling rates, from Paul Volcker's dramatic turnaround in the XNUMXs onwards, we are about to reopen a “supercycle” in the name of rising returns? Let me be clear: we are not talking about an economic situation, albeit important, but limited. But of an epochal turning point, such as the rise in the prices of metals and soft commodities that followed the boom of the Chinese economy from 2007/08 onwards, when the yellow locomotive, with the full support of the West, gathered speed devouring metals and soft commodities with great rapidity.
No, we are not discussing a geopolitical trend that could lapse in the face of the arrival of any Trump. The supercycle, although triggered by basic political choices, expresses a trend destined to last for decades. The time required to plan long-term investments for which making mistakes is truly prohibited, especially in the energy field. And this explains why and how the opinions of experts, obviously not independent, are divided.
According to the Financial Times the Western economy has lived from the XNUMXth century four expansive supercycles: the first accompanied the emergence of American superpower, from 1880 onwards. Then there is the post-war expansion interrupted by the crisis of the Thirties and resumed with the reconstruction. A trend abruptly corrected after the peak increase in oil prices since 1973 which was indirectly transmitted to the entire world of raw materials, both metals and agricultural commodities. The latest shock, as has been said, is linked to China's irruption onto the stage of the global economy. The effect was spectacular: copper, which was getting by around 2 thousand dollars a ton, rose up to 10.000 while in parallel crude oil rose up to 140 dollars a barrel. A trend that lasted until 2011, when the growth prospects of the global economy faded, together with the lower increase in productivity.
But now? Can we glimpse the fifth cycle in the post-pandemic? Yes for Goldman Sachs. Governments, which have focused on financial recovery since Lehman Brothers, are focusing attention on job creation, relying heavily on environmental issues. The growth in demand also came at the end of a season of bone-in investments which left the infrastructures both in America and in Europe in precarious conditions. The phenomenon, notes the US investment bank, does not only concern the relationship between supply and demand for raw materials, which has been declining since 2014. The knot also affects oil, which is destined to slow down over time as the production of cars accelerates electric. But an epochal change is also looming in agriculture in the face of the expansion of bio-fuels and the need to feed livestock. In short, the increase in inflation is structural, with long-term effects.
Not everyone thinks so. THEn reality, the upward trend in prices is only a consequence of the pandemic, which has brutally lowered consumption. But which, once the emergency has passed, will return to normal values: even the Chinese model, in fact, is veering towards more contained levels. Furthermore, the growth in demand concerns only a limited number of commodities, from copper to cobalt to nickel needed for new sectors, first and foremost batteries for electric cars. The risk is to remain with the match in hand, or in the middle of the ford with investments that, in a season of recovering rates to remedy the public and private debt which has risen to unsustainable levels, it will not be possible to complete. And for the Stock Exchanges, the awakening will be hard.
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Enough with the Cassandras, growl Goldman's analysts: the Baltic Dry index, which measures the supply/demand of maritime freight, is still below the 2007 level. And welcome to the "good inflation".
