The Market Ear catching up with MB today. It looks to me like the Wall Street commodities bubble has burst but not yet the underlying real economy version. As the recession takes hold and real commodity demand is hit hard there is more downside yet for dirt and oil.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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- Will oil ruin or save the cycle? - August 9, 2022
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So that is it? Go back to our homes, nothing to see here . . . everything is under control? Do you have a position on the recent FT opinion piece which casually suggested that the oil market is as vulnerable to Russian weaponization as the natural gas market?
‘That if Putin becomes tired of remaining customers lightly processing his crude and selling it on, or otherwise wishes to achieve some political objective 3-5 million BPD could be shut in with little long term consequence (to Russia).’
Yep.
Well, I mean, I don’t purport to have insight like them big city commodity traders, but my gran used to say “there is many a slip twix cup and lip”. It is the height of Northern hemisphere summer, US gulf refineries are running 97.5% capacity while the strategic reserve is being drawn down (before a single hurricane). European demand is so insatiable that the inevitable disasters at US facilities serve to lower domestic pricing, and apparently the only reason Euro demand has been serviceable is they have been substituting Russian gas into Russian oil and, incomprehensibly, Russian coal. Thanks Greta!
A savage war of attrition is raging in the heart of Europe, which cannot be de-escalated because one of the parties, nominally a member of the community of nations and a partner, has off-handedly said nuclear weapons are in play whenever they feel slighted or obstructed.
The best case scenario is an engineered recession which creates just enough demand destruction to help commodity producing nations remember their place and go back to accepting worthless paper, from developed nations who sat out the COVID epidemic and hoarded vaccines, in exchange for their tangible stuff.
And it is only Wednesday.
Prefer to digest some critical disinterested analysis rather than lazy, childish told-ya-so’s…
Deflation people, not inflation. Real structural inflation comes later (after more easing), we are not there yet.
Can understand that view.. on the other side of the coin tho.. wages growth is starting to get entrenched?? I’ve just had to put through a 6% odd pay rise for everyone in my business…Can’t see that ever being unwound… so once its into wages, it becomes sticky…Becomes entrenched in expectations….
Hard to make reliable predictions about the future hey!
How is gold going to play out with these events?