Thought for the day

Inflation and money supply

There is mounting evidence that inflation is being seen in actual prices. This chart is for intermediate goods and services, but it’s hard to see why this doesn’t bleed through to retail prices soon. The ISM figures are lagged by 3 months.

PCT - the percentages are against longs

Purecycle is yet another ESG revenue-free fraud.

Wrap

The biggest news for today was a miss in new jobs numbers for April. The number was 266K, which would normally be good, but compared to the 770K which were created (net) in March, this is pretty disappointing. Unemployment hit 6.1%, hardly evidence of an overheating economy. Rather surprisingly, bonds held steady: 10Y was at 1.58%. Technically 2bp higher yield. German and Jap yields remained precisely flat. Commodities are roaring away: iron ore was up 5.35%. Copper up 2.9%. Food and hydrocarbons were up, but much more modestly. There is some indication of pressure on yields in the Eurodollar market. Read chartpoint.com for colour.

Politics

The Conservatives seem to have done unexpectedly well in the elections yesterday. I wish I understood why ordinary voters vote the way they do. I have spent a huge amount of time thinking about economics and politics, and I feel I have lost my gut feel for what is good politics. David “Two Brains” Willetts used to say that it was important that the Conservatives did not become the ‘economics party.’ I guess he was pointing out the fact that people frequently choose to vote for policies that make them objectively worse off. One can argue about whether an economist’s estimate of welfare effects fully captures the feeling of smugness at having been on the winning side of the vote in a referendum. The last successful PM who had a rigorous economics training was Harold Wilson. One could probably argue that the policies of his party were much more shaped by the views of his cabinet than would be the case in any subsequent PM and as such reflected a composite, largely non-economic viewpoint.

Anyway, the full picture will not emerge until next week. One of the biggest issues is the independence of Scotland. This is something I find about as interesting as the Schleswig-Holstein Question.