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Cost of Energy and Raw Materials:

the Thesis of an Upcoming Smooth Landing

Inflation started at the beginning of this year and has increased sharply since the outbreak of the
Russian-Ukrainian war. It is estimated to be at 8% on average in the OECD countries with differences
ranging from 5% (in France for example) to more than 10% in the Baltic States.
Its severity is now giving rise to fears of a slowdown in consumer spending and thus stagnation in
global economic activity.

Paolo di Gaeta, an international finance expert, does not rank among Serious but Fortunately One Off Causes
the pessimists. He says that “with foresight we can never lose sight The fact remains that the level of inflation has skyrocketed with
of the sustainable parameters of the global economic environment the war in Ukraine.
in the face of a crisis. For example, the war taking place close to “The main reasons”, continues our analyst, “lie in the strong rise in
us today, a war between two developed nations, or yesterday, the the price of energy – Russian gas and oil becoming increasingly
global spread of a new virus dangerous to humans.” scarce and therefore more expensive for known political reasons –
And this knowledgeable analyst points out that the 2022 inflation as supplies dwindle there is an explosion in prices of a number of
model is partially the result of non-threatening financial logic and essential raw materials for which Ukraine and Russia are the world’s
partly fortuitous and though certainly alarming it is fortunately leading suppliers: cereals, oil producing seeds, fertilizers, etc.
limited in time. Paolo di Gaeta’s analysis: “We can therefore say that beyond the rate
“The return of a certain level of monetary erosion at the start of the of 2%, inflation is coming from a very specific region of the globe
current financial year was entirely predictable due to the enormous where a war is taking place. According to two types of specifications,
amount of public money that has been poured in over the last fifteen the cause is local and remains within borders, and so the harmful
years, first to overcome the 2008 crisis and then to curb the crisis effects will not be long term. Over time the potential buyers of the
following the pandemic in 2020 and 2021. And this has been done products in short supply will find alternative sources. For example,
well, since we have seen a return to significant growth and a decline South America (Brazil and Argentina) will take over the supply of
in mass unemployment. Inflation, which was around 2% in January- cereals, while the member countries of OPEC will handle energy;
February of this year, was at a safe level on our continent, given the after initially showing reluctance they have just announced an
low interest rates. And in its wisdom the European Central Bank, increase in their production to compensate energy source needs
although forced to raise its key rate from zero to counter monetary at an affordable price.
erosion, only raised it by half a point. Investors are not afraid to A change of tack brings us to the second configuration: the
borrow at a rate of up to 2% where expansion is concerned”. interdependence of the economies of nations, to a point which had not
yet been reached on the eve of the first and
second world wars, two disasters to which the
augurs of bad fortune currently refer in the
media. No world power wants another world
power to collapse, as eachone produces
for or buys from the other, depending on
the sector in question. Thus, China is the
workshop of the world and it is also the best
guarantor of the United States since it owns
70% of the US debt through the purchase of
US Treasury bonds, and a financial collapse
of its rival would therefore be its own loss.
The much-maligned phrase “business as
usual” is, in fact, now synonymous with
international stability. Since no one in the
world has any interest in the prolongation
of the war in Ukraine because of the global
economic disruption it causes. In the short
term the two sides will be led or forced to the
negotiating table to engage in negotiations
© vschlichting to cease hostilities ”.

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