Conjuncture. Stock market inflation sweeps across Europe

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A specter haunts the euro zone, that of stagflation. That is to say the association of a stagnation of growth with a significant increase in prices. An identical phenomenon had been observed in the 1970s. If its main driving force then resided in the rise in hydrocarbon prices, this time it was above all the formidable hypertrophy of the global financial sphere, from Wall Street to Frankfurt, Tokyo and Shanghai, who is at the origin.

After having showered the media with soothing analyzes on “the transitory nature of inflation”, the latest reports from European economic institutes now point almost entirely to the reality of this risk. The International Monetary Fund (IMF), itself, worries about it at the same time that it revises downwards its expectations for all the nerve centers of the planet. For Germany, the largest economy in the euro zone, the IFO institute has just reduced its growth forecasts for 2021 to 2.4% (against 4.2% at the start of the year). This means the anticipation of a virtual shutdown of activity across the Rhine in the last quarter of this year. “In this sense, in view of the situation in the 4th quarter, underlines Jörg Krämer, chief economist of Commerzbank, we can speak of an outbreak of stagflation. “France would certainly still manage to post a better performance. But the first signs show that it will not emerge unscathed from this cyclical cold. Especially since it has started to hit the first economy in the euro zone, reputed to influence the orders of its European partners.

Chronic unemployment

The outbreak of inflation is caused by a scarcity of basic products. Not only raw materials such as gas or oil, but also so-called intermediate products such as semiconductors, essential for the manufacture of all modern machines, such as automobiles. Result: the state of technical unemployment takes on an almost chronic dimension at the end of certain international production chains. Germany, whose economy is strongly export-oriented, is doubly hit. A victim upstream of bottlenecks on its supplies and downstream of the drop in orders from across the Atlantic or China when growth is slowing down. The IMF has reduced its 2021 forecast for the United States by one point and China will post more than 0.2% in the last quarter, according to him, compared to the previous one.

The surge in energy prices, which should be much longer than expected, could further intensify the intensification of the correlated phenomenon of inflation and stagnation. Especially in Europe where Washington, all in its hawkish maneuvers against Moscow and Beijing, still maintained its pressure on Berlin on Wednesday against a rapid commissioning of the Nord Stream 2 gas pipeline.

Flood the markets with liquidity

At this point, the strategies of the central banks, which consisted in literally shooting the financial markets by flooding them with almost free liquidity, presenting this as the only way out of the crisis caused by the lockdowns linked to the Covid-19 pandemic, begin to elicit at least a few questions. “We have issued the money supply which can authorize this strong in flation”, notes Philippe Trainar, professor at the National Conservatory of Arts and Crafts, who warns: “It is no longer in the hands of central banks, but in those of the private sector. You have to be extremely careful. “

This mass of liquidity, recovered almost exclusively by billionaires, champions of Wall Street, the CAC or other stock market indices, has not been allocated to concrete investments, but confiscated for the benefit of mostly speculative operations. The aspiration of almost free credits from central banks by financial brokers is thus one of the main sources of equipment shortages. And therefore price increases. Mankind needs to put things right: not to wean economies from cheap credits, but on the contrary to orient them towards its needs which are so glaring today in common goods and new public services.

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