Friday 26, August 2022

Week Wrap

This was a risk-off week. Commodities, especially natural gas, has continued to surge, in the US at least. Hard commodities have been flat, reflecting China weakness, but energy and softs have been strong. Equities are almost all down, although many are still up on the month. They were particularly affected today by a speech from Powell at Jackson Hole which seemed to signal that he was not going to let up until inflation came down. Macro Alf wrote about it.

UK

The crazy situation in which Ofgem dictates the prices that energy companies can charge, but then sets them at a level at which nobody can afford them continues. The pointless contest to become PM continues, even though Rishi doesn’t have a chance.

It seems (to me) inconceivable that the government will pay for everyone’s fuel bill. Well, more accurately, all taxpayers will pay for everyone’s fuel bill. Well, we will each pay for each other’s fuel bill, but in such a way that the incentive to economize on fuel is eliminated. This is the sort of thing that would make Milton Friedman (and Margaret Thatcher, in many ways his disciple) spin in their graves.

Oil prices

I am reading “The Prize” by Daniel Yergin. He points out that Thatcher and Reagan were enormously helped by a collapse in oil prices in the mid 80’s, and were very welcoming of it. The stability of supply, and the lowering of prices was all orchestrated by OPEC, a self-proclaimed cartel, resolutely opposed to a free market. As usual, politicians should be judged by their actions, not by their words. Almost invariably, the most neoliberal politician will be against increased any competition that might lead to job losses in his own constituency, or profit losses in the accounts of his corporate donors (and this is not a party-political point).

US

Biden has announced limited student debt forgiveness, with very limited means testing. The excessive costs of further education, and the wholly pointless tertiary education of perhaps two thirds of all graduates will continue apace. How the UK ended up copying this diabolical system is quite beyond me. It is explained here, but I can’t bear to read it.