Neil Shearing

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Geopolitics are creating a more uncertain economic environment as the global economy splinters into competing blocs.

There is now broad agreement among economists and commentators that the world has reached peak globalization, but there is little consensus about what comes next. One view is that we are entering a period of ‘deglobalization’, in which global trade volumes decline and cross-border capital flows recede. An alternative and more likely outcome is that the global economy starts to splinter into competing blocs.

This would result in an altogether more volatile macroeconomic and market environment which would pose a formidable challenge to some countries and companies operating in vulnerable sectors. But this process needn’t involve any significant shrinkage of international flows of goods, services and capital, nor a broad reversal of other gains of globalization.…  Seguir leyendo »

Recently constructed show homes are illuminated for potential buyers on a new housing estate on 3 February 2022 in Knutsford, United Kingdom

A key driver of the surge in inflation across advanced economies – and the associated ‘cost of living crisis’ – has been a huge jump in energy inflation, which is now running at record highs across Europe.

Let’s start with some basic facts. While services inflation is beginning to increase in several advanced economies, most of the increase in headline inflation over the past year has been driven by consumer goods and energy.

In fact, energy alone has been responsible for over half of the increase in Consumer Price Index (CPI) inflation in advanced economies since the fourth quarter of 2020.…  Seguir leyendo »

Empty shelves and shop fittings, sheets of closing down posters lying on the shop floor. Photo by In Pictures Ltd./Corbis via Getty Images.

Concerns are growing in some corners of financial markets about the longer-term consequences of government and central bank support packages - and two in particular are starting to gain more attention.

The first is that a huge injection of policy stimulus eventually leads to a pick-up in inflation. Concepts such as ‘helicopter money’ and ‘deficit monetisation’ have now entered the mainstream, invoking images of Weimar Germany post-World War One. The second is that the costs of providing fiscal support will lead to an unsustainable rise in debt.

These concerns are actually related, since one way of eroding debt burdens over time is through higher inflation.…  Seguir leyendo »