Inflation

On Friday, the U.S. bureau of labor statistics published the March inflation report. The monthly increase was 0.9%, and the YoY price increase was 3.3%. In the chart below you can see that the jump was basically due to energy prices, linked to the conflict in Iran. The market thinks this is temporary. The news from Hormuz tells us it may be more permanent than we think. There’s a toll now imposed on we very ship that crosses thr strait, and now it appears that no ship is allowed to cross it (situation changes by the minute). The bottom line is the U.S. economy is increasing its debt at an alarming rate, it’s decelerating (in terms of GDP), and the rate of inflation is higher. That’s not good. There is a long explanation about how this can be overcome, but there’s also the fact that piling up straws on the camel back, will end up breaking it. And that’s what’s being done. The solution of sending tankers to the U.S. for oil to compensate the supply shock is a bad aid on the problem. The same applies to the US blockade on Hormuz. China will likely buy oil from Russia before it buys from the U.S. , and perhaps Japan too. On top of that, Europe is turning its back on the U.S. We need a strategy and we need better diplomacy.

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