September 14, 2023

Ooops.

The so-called supercore measure of consumer prices for services, which strips out housing and energy, rose 0.4% in August from July, the most in five months, and was up more than 4% over 12 months — still way too high for Fed officials’ comfort.

Seems as though the whole "making the economy slow-down deals with inflation" myth is hitting a wall of reality.

Slowing wages, slowing industrial production, slowing investment along with persistent inflation well above (the arbitrary) target. One might think that it takes more than tweaking overnight lending rates and messing with investment liquidity to steer an economy.

Major issues driving inflation: housing and energy costs. Add to that the slow-down in production not quite in line needed output and you have prices going back up.

It has been a slow moving recession for real people. Spreading around the misery, high oil prices (for sellers), and pretending innovation is driving real investment is the only thing that is keeping the numbers above the waterline.

Central bankers still feel they have things under control. The reason? They all feel that they have learned from over-tightening schedules from previous bouts of increased interest rates.

In previous rounds of tightening, it takes 5-6 months for effects to start to land. This includes core inflation continuing even after we reach peak rises in rates (according to Barclays bank). This is all based on what happened "last time" which is where economics usually goes off the rails.

In Europe, the expectation is for inflation to stay above 3% for next year with the expectation of their central bank to continue to increase their policy rate. This is even with the German manufacturing engine of Europe sputtering.

We are in a cyclical downturn in the economy that was delayed because of subsidies after the pandemic (which might have made it worse) as well as a tightening of monetary policy rates. And, there is a war. So, what does capital want of German workers? For them to work more hours—like workers in the Czech Republic—since private investment has been following lower wages.

The other part of the issue is that Germany, in many ways similar to Canada, subsidizes only some of their industries with an eye to stable production. Those industries are the ones that have historically needed access to dirty energy. Those companies (like BASF) have no interest in staying now that energy, even with the subsidy, is too expensive.

EV sales in the USA have passed 1M.

This is "free trade" with "friendshoring" in the USA:

The US tariff on EVs coming from China completely wipes out the 20% to 25% cost advantage China has because of lower labor costs, local suppliers and vertical integration. In Europe, the tariff on Chinese EVs is 9%.

“If you have a 20% to 25% cost advantage, it makes sense to go to countries where even after the tariff you are price competitive," Arora said.

The only way for the Chinese to sell EVs in the US competitively is to make them locally and make the batteries locally because of requirements in the Inflation Reduction Act. “Localization will be key and it will take time,” Arora said. (Boston Consulting Group, BN)

On the other side of the pond, the EU is going after Chinese EV imports by doing a research program looking at Chinese subsidies. In an normal world without cynical cold wars, the EU would be looking at the USA, not China.

The joke is that Europe produces some of the cheapest EVs on the world market. But, it is no joke that Europe, without state supports that they are ideologically opposed to, will fall behind in production of their own cars and other industrial goods.

To reach the Paris Agreement decarbonization targets (Net Zero by 2050), the conservative estimate (done by WoodMackenzie) is $2.7T per year.

Are we there?

No.

… compared to the rest of the universe.

The Webb space telescope is on the front pages of the news sites because it has confirmed what we already suspected: that the universe is expanding and is expanding faster than our physics says it should. Which means either something is wrong with our math or there is something wrong with the universe.

It is probably the universe, say physicists. They blame exotic dark energy and exotic dark matter. Really. The simpler reason is just that we cannot see things that are really far away clearly.

Forget that, though. There are some great new "pictures" from Chandra:

One includes the our Galactic Centre which contains a supermassive black hole which is too big. Another is a picture of the Vela Pulsar, the brightest pulsar we can see. It has a particle jet fountain.

Kepler's supernova remnant is pretty cool too, if you like that kind of thing.