LevelMagazine – CA – Inflation could rise sharply


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(Bloomberg Opinion) – It may seem odd to worry about inflation in the midst of a global recession, pandemic, and huge recession, political ruin in the u. S.. . , but I very much suspect that it will tighten soon and sharply. How quickly this happens will depend on how quickly developed countries recover over the next few months, but the pressure is mounting. As has been the case for many years, global inflation is everywhere marked with “Made in Asia”. This time, however, this is likely to be exacerbated by much greater supply bottlenecks in the economy.

A little humility first. Predicting inflation is devilishly difficult. In general, the best forecast right now is inflation. Central banks were neither good at predicting nor creating inflation. This is mainly due to the fact that classical economics largely assumes that an increase in the supply of money if conditions remain the same will drive up inflation. And yet, after years of rate cut, quantitative easing, etc.. only asset prices rose. It was Apple Inc. . no apples, so to speak.

So it is clear that not all things are created equal. Economic models assumed that the rate at which money changes hands (its rate in the jargon) is both stable and predictable. Instead, it collapsed. Therefore, everyone who predicted a massive spike in inflation due to the central bank’s QE was wrong. The pace may be increasing – your guess is as good as mine – but that wouldn’t tell us much about what’s going to happen in the next few years as it’s more of a long-term indicator. And there are numerous signs that inflation is rising.

Ask yourself the following counterfactually. Had you known that the economies of the industrialized countries would largely come to a standstill, what would you have expected with the prices of commodities? You probably would have expected them to collapse. However, as the graph below shows, they haven’t even plummeted as sharply as they did in the 2015 manufacturing recession, let alone during the global financial crisis.

Prices are now rising sharply, also because Asian growth is booming. Chinese export prices have increased year on year. Without oil, the prices of industrial goods are also higher than at the end of last year. Even if nothing moves until late spring 2021, the year-on-year comparisons will look very dramatic – as prices were at their lowest point this spring. These trends are already noticeable in the industrialized countries. U. . S.. . For example, import prices are rising sharply. The prices for durable goods are on a crack. There are signs that service inflation is also rising.

Even so, much of the developed world is still in the midst of a pandemic that is suppressing demand. When the vaccine comes or the virus blows itself out, the demand increases intelligently. What happens to the prices if this is the case? I very much suspect that a lot of production capacity has been lost. Both domestically and internationally, transport is both more difficult and expensive. The fashion for ESG investing has likely also resulted in a lack of investing in things that you dig out of the ground or drop on your foot.

Assuming this is all taking a long time to get operational, you would expect these restrictions to persist. The same is probably true for services. Many companies have already been taken out of business and many more are likely to hit the wall. The supply potential of the national economies has therefore lost a lot. All of this means that the way of least resistance when demand increases is higher prices.

How the central banks react is crucial. They told us they were going to get the economy hot. What they are really saying is that nothing they did made the slightest difference to headline inflation and they don’t know why. But let’s take them at their word. What would it mean in practice? Would they avoid setting short rates, or would they try to keep long rates low at a time when the national debt is likely to remain huge? Both of these would, in fact, ease monetary policy by lowering real interest rates when economies – and inflation – grow strongly. This is not believable and countries that do nothing would likely instead see their currencies fall, pushing imported inflation higher.

I suspect private longer-term bondholders don’t wait for central banks to change their minds knowing they’ll have to rise at some point. The risk is asymmetrical. Bond yields are staggeringly low and sooner or later they may rise rapidly: Fixed income has great leverage, and bonds with de minimis coupons can move much more expensive than those that actually pay a decent interest rate.

Those with a few gray hair will remember the 1994 Bond slaughter. At some point I would expect the yield curves to steepen dramatically compared to today’s level. It makes sense to avoid longer-term government and corporate debt and stick to the very short end. As well as buying out of the money, long term put options on long term debt.

Central banks have been suppressing volatility and interest rates in the debt markets for years. This becomes much more difficult.

This column does not necessarily reflect the opinions of the editors or Bloomberg LP and its owners.

Richard Cookson was Head of Research and Fund Manager at Rubicon Fund Management. Prior to that, he was Chief Investment Officer at Citi Private Bank and Head of Asset Allocation Research at HSBC.

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BAKU, Azerbaijan – When Azerbaijan regained control of the country it lost to Armenian forces a quarter of a century ago, civilians who fled the fighting decades ago wondered if they can – and if – return home there is still a home to return to.
An estimated 600. 000 Azerbaijanis were displaced in the war of the 1990s when the Nagorno-Karabakh region remained under the control of ethnic-Armenian separatists and large areas of the surrounding area remained in Armenian hands. For six weeks of renewed fighting that fall that ended in November. 10, Azerbaijan took back parts of Nagorno-Karabakh itself and considerable parts of the peripheral areas.
More territory is being returned as part of the ceasefire agreement that stopped recent fighting. However, as the Azerbaijani armed forces discovered when the first territory, Aghdam, was handed over on Friday, much of the reclaimed land is uninhabitable. The city of Aghdam, in the 50. 000 people lived, is now a ruined ruin.
62-year-old Adil Sharifov, who left his hometown in 1992 during the First War and lives in Azerbaijan’s capital Baku, knows that he will experience similar devastation when he returns to the city of Jabrayil, which he longs for.
Jabrayil is one of the remote areas recaptured by Azerbaijani forces before the end of recent fighting. Shortly after it was taken, one of Sharifov’s cousins ​​went there and told him the city was being destroyed, including the large house with an orchard where Sharifov’s family once lived.
Still, « the day I come back will be my greatest happiness, » he said.
For years, his family had followed reports of Jabrayil on the Internet. They knew the destruction was terrible, but Sharifov’s late mother desperately hoped that her house had been spared and that the keys had been held.
« I’ll build an even better house, » he vowed.
Fifty-year-old Ulviya Jumayeva can return in better, if less than ideal, circumstances in her hometown of Shusha, a city captured by the Azerbaijani armed forces in the key offensive of the six-week war.
Her younger brother, Nasimi, took part in the battle and called her to tell her that the apartment her family had fled from in 1992 was intact, even though it was largely stripped of the family’s possessions.
“According to him, it is clear that the Armenians lived there after us and then took everything away. But our big mirror in the hallway, which we liked to see as children, remains, « said Jumayeva and added: » Perhaps my grandchildren will look in this mirror. ”
« We all have houses in Baku, but everyone did not consider them permanent because we lived all these years hoping to return to Shusha, » she said. « Our hearts, our thoughts have always been in our hometown. ”
But she admitted that her feelings towards Armenians have become bitter.
“My school friends were mostly Armenians. I have never mistreated ordinary Armenians and believed that their criminal leaders who started the war are responsible for the massacre, war and grief that they also brought to their people, « Jumayeva said.
But after the current events, after the shelling of peaceful cities . . . After the Armenians, who are now leaving our areas, which are even outside of Karabakh, burned down the houses of the Azerbaijanis where they lived illegally . . . something is broken in me. I’ve changed my attitude towards them, « she said. “I understood that we Azerbaijanis will not be able to live peacefully next to the Armenians. ”
While Sharifov has less to fall back on, he is more moderate, saying that the two ethnic groups with different religious traditions still have the potential to live together amicably.
« If the Armenians obey the laws of Azerbaijan and do not behave like bearded men who came to kill, we will live in peace, » he said. “The time to shoot is over. Enough sacrifice. We want peace, we don’t want war. ”
Associate press writers Aida Sultanova in London and Jim Heintz in Moscow contributed to this story.

The Associated Press

PHILADELPHIA – As they desperately sought ways to save President Donald Trump’s failed re-election bid, his campaign ran a dizzying game of legal hopscotch in six states that focused on the greatest prize of all: Pennsylvania.
The strategy may have worked well on television cameras and on talk radio. But it turned out to be a disaster in court when the judges consistently rejected their allegations of electoral fraud and found the campaign’s legal work to be amateurish.
In a judgment late Saturday, U. . S.. . District Judge Matthew Brann – a member of the Republican and Federal Society in central Pennsylvania – compared the campaign’s legal arguments to « Frankenstein’s monster » and concluded that Trump’s team only made « speculative allegations, » not evidence of rampant corruption.
Now that the legal doors are closing on Trump’s attempts to get the courts to do what voters wouldn’t on election day and grant him a second term, his efforts in Pennsylvania show how far he is willing to go beyond unsubstantiated theories to promote widespread electoral fraud.
It was led by Rudy Giuliani, Trump’s personal lawyer, who was relegated to the state on the Saturday after November. 3 elections when the count dragged on and the president played golf. Summoning reporters to an unkempt, far-off corner of Philadelphia in November. 7 it stopped in a place that would soon become legendary: Four Seasons Total Landscaping.
The 11:30 am. Press conference was doomed from the start.
At 11:26 a.m.. m. The news agencies had started calling the presidential contest for Democrat Joe Biden. The race was over.
Trump’s plan was to undermine the elections with litigation and howls of fraud – the same tactics he used to ward off losses in the business world. And it would soon spread well beyond Pennsylvania.
« Some of the ballots looked suspicious, » said 76-year-old Giuliani of the Philadelphia vote as he stood behind a chain link fence next to a sex shop. He slandered the city as being run by a « rundown democratic machine ». ”
« Those postal ballot papers could have been written the day before by the Democratic Party hacks who were all over the convention center, » said Giuliani. He promised to file a new round of lawsuits. He wandered.
« This is a very, very strong case, » he said.
Justin Levitt, a Loyola Law School professor who specializes in suffrage, described the Trump lawsuits as dangerous.
« It’s a sideshow, but it’s a harmful sideshow, » Levitt said. « It’s a poisonous sideline. The persistent unsubstantiated, evidence-free allegations of alternative facts are indeed affecting a significant number of Americans. They create the conditions so that elections no longer work in the future. ”
Not a single court has approved the strength of the case, but that didn’t stop Trump’s team from raising nearly two dozen legal objections to Biden’s Pennsylvania win, including an election day early morning lawsuit filed by a once incarcerated attorney.
The president’s lawyers fought for the three-day grace period for postal ballot papers to arrive. They complained that they were not allowed in to watch the number of votes. They said democratic counties wrongly let voters correct mistakes on their ballot papers. Everywhere they turned they sniffed fraud.
« I felt insidiously betrayed, » said Philadelphia election observer Lisette Tarragano when Giuliani called her to the landscaping firm’s microphone.
In fact, one Republican runs the city’s electoral board and said his office received death threats as Trump’s ranting about the elections increased. No judge has ever found evidence of electoral fraud in Pennsylvania or any other campaign suing state – not Michigan, Wisconsin, Arizona, Nevada or Georgia.
Instead, Trump attorneys have been sidelined when pushed to court on admissible evidence or when accused of contributing to derailing the democratic process.
“I ask you, as a member of the bar association of this court, whether these are persons who represent the Donald J.. Trump for the President (campaign) … in this room? “U. . S.. . District Judge Paul Diamond asked at an off-hours hearing on November. 5 when Republicans asked him to stop the Philadelphia vote count because of their alleged banishment.
« There are a non-zero number of people in the room, » replied attorney Jerome Marcus.
The census continued in Philadelphia. The Trump losses continued. Until Friday, Nov.. . 6, when a state appeals court dismissed a Republican preliminary ballot complaint and a Philadelphia judge refused, Jan.. Throwing away 300 postal ballot papers challenged by them was Biden by about 27. 000 votes increased.
The race had not yet been scheduled nationally. However, it became clear that a Biden win in Pennsylvania with his 20 votes was imminent.
When it did so, Trump quickly turned to litigation. It didn’t go well.
A U. . S.. . The appeals court found Pennsylvania’s three-day extension of postal ballots commendable given the interruptions and mail delays caused by the pandemic. Michigan and Arizona judges who found no evidence of fraud declined to block certification of votes from the county. Law firms representing the campaign came under fire and withdrew.
Giuliani, who had not discussed a case in court for three decades, was responsible for the efforts to overturn the election.
« You can say a lot in a driveway (press conference). . . . If you go to court, you can’t, ”said attorney Mark Aronchick, who represented election officials in Philadelphia, Pittsburgh and elsewhere in multiple suits in Pennsylvania. « I don’t really pay attention to the chatter until I see a legal mandate. ”
Giuliani entered the courtroom on Tuesday. He was a late addition after Porter Wright Morris & Arthur’s election lawyers left last weekend. He had an entourage in tow, a show of force that was anything but a compelling legal argument.
Giuliani asked Brann to suspend State 6 certification. 8 million ballots for two Republican voters whose postal ballots were thrown due to technical errors.
« I sat and listened in amazement, » said Aronchick, a seasoned trial attorney.
“We were ready to argue about the one count. Instead, he offered us an expanded version of his press conference on Total Landscaping, ”said Aronchick. « It had no relation to the actual case. ”
Giuliani, admired by some for his tough talk as Manhattan’s chief prosecutor and leadership as Mayor of New York City in September. 11 terrorist attacks struggled to answer even basic legal questions.
But he was concerned about an alleged conspiracy to manipulate the state elections.
« The best description of this situation is widespread national election fraud, » argued Giuliani. However, when questioned, he admitted that her complaint no longer contained a fraud complaint.
And then, just like with Four Seasons, reality fell upon him when word came in the courtroom that the Pennsylvania Supreme Court had dismissed the campaign’s appeal over admittance to Philadelphia. It was one of the last remaining claims of the campaign.
Even the dissent was overwhelming.
“The notion that suspected valid ballots cast by Pennsylvania voters would be ignored because of isolated procedural irregularities that have been fixed . . . is misdirected ”, said Chief Justice Thomas G. . Saylor wrote for the minority in the 5-2 decision.
Brann, who is based in Williamsport, allowed the federal court hearing to extend past mealtime and gave both sides time to file additional motions. The campaign submissions were rife with typos, misspellings, and even an incorrect reference to a « second amendment complaint » instead of a second amended complaint.
The campaign took the opportunity to answer one of the more puzzling questions that arose from his electoral challenge: he just wanted the results of the presidential elections to be put aside, not the votes for the same offices for other offices. The pleadings were filed by Giuliani and co-counsel Marc Scaringi, a local Conservative talk radio host who, prior to his hiring, questioned the point of the Trump lawsuit, saying, “This election will not be reversed. ”
Aronchick contradicted the core campaign premise that local election workers – perhaps working for the Mafia, as Giuliani suggested – planned to spoil Trump’s victory.
« You are going to suggest that part of you are in a conspiracy? How does that work? » Asked Aronchick. « Who? Where? When? How? »
Brann said in his decision that he expects massive evidence of rampant corruption from the campaign as it sought to destroy millions of votes. Instead, the campaign presented “strained legal arguments without merit and speculative allegations. ”
Trump could appeal against the judgment at 3. U insert. S.. . Philadelphia appeals court, but that court may have tipped its hand. In his Nov. . In its decision, the court called it « undeniable in our democratic process: that every citizen’s right to vote must count. ”
Biden’s lead in the state has increased to more than 80. 000 votes expanded.
“Our system depends on the possibility that you will lose a fair competition. If you don’t have that option, you don’t have democracy, ”said Levitt, the law professor. “There are countries that do this. It just doesn’t describe America. ”
___ Follow Maryclaire Dale on Twitter at https: // twitter. com / maryclairedale.

Maryclaire Dale, The Associated Press

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Inflation, Finance, Bonds

EbeneMagazine – CA – Inflation could rise sharply soon
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Inflation may rise sharply

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