Inflation is back, no one disputes it anymore, not even the French National Institute of Statistics and Economic Studies (INSEE), and that's saying something! Contrary to most economists and central banks, we had announced it here a long time ago in several articles, including these:

And we explained that it would not be transitory but sustainable, contrary to what the Fed and the ECB wanted us to believe:

Now another catastrophe will befall our economies, historically often associated with inflation: shortages. Russia's invasion of Ukraine and the ensuing sanctions are rapidly redefining the world economy, which is moving away from the shores of "happy globalization" to one of confrontation between regional blocs, as we discussed in our previous article.

Vladimir Putin's decision to invoice his gas in rubles rather than in dollars or euros has caused an explosion: Germany denounces a unilateral breach of contract, but the Kremlin spokesman clearly replied that "No one will supply gas for free, it is simply impossible, and you can pay for it only in rubles". Who will give in? 

In the context of sanctions, the European Union wants to do without Russian gas as soon as possible, but how can this be achieved without jeopardizing the productive apparatus and the heating of the population during the winter? Although France is much less dependent on Gazprom than Germany, it is already announcing possible targeted cuts at the sites with the highest consumption. The president of the Energy Regulation Commission, Jean-François Carenco, has called on all French people to save energy, at the risk of facing supply tensions next winter.

In addition to Russian gas and oil, we are suddenly rediscovering other links of dependence that weaken our economy, such as fertilizers, a large part of which comes from Russia and Ukraine. Will French and European agricultural production reach its usual yields? This is not certain.

Beyond the context of the war in Ukraine, we must be aware of the close interrelationship between inflation and shortages: when I own an asset that is expensive to produce - we are not talking about durable goods produced in China, but energy and food raw materials, or minerals, which require high investments - and I see that prices are rising by 10% a year or more, am I going to sell all my production? No, I will wait a few months to be able to sell it at a higher price. By doing so, I feed the shortages, and therefore the price increases. This self-perpetuating mechanism is unhealthy but understandable from the point of view of those who profit from it. It is then passed on to semi-finished or intermediate products (building materials, fertilizers, etc.), and eventually disrupts the entire production chain up to the finished product.

This is what awaits us. We can already hear the leaders of Western countries blaming Putin for the rise in prices... It's very convenient, but it's not true: it's their money printing, to finance their deficits, which has long been feeding the current inflation. The war in Ukraine only reinforces and accelerates this trend. Let's not be fooled.