{"id":59752,"date":"2021-10-08T18:46:22","date_gmt":"2021-10-08T23:46:22","guid":{"rendered":"https:\/\/olduvai.ca\/?p=59752"},"modified":"2021-10-08T18:46:22","modified_gmt":"2021-10-08T23:46:22","slug":"albert-edwards-its-starting-to-feel-a-bit-like-july-2008","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=59752","title":{"rendered":"Albert Edwards: “It’s Starting To Feel A Bit Like July 2008”"},"content":{"rendered":"
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Albert Edwards: “It’s Starting To Feel A Bit Like July 2008”<\/a><\/h3>\n<\/header>\n
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One of the theories seeking to explain the Lehman collapse and the ensuing financial crisis points to the record surge in oil prices which rose as high as $150 in the summer of 2008, and which combined with tight monetary conditions, precipitated a giant dollar margin call which in turn pricked the housing bubble with catastrophic consequences. In his latest note, SocGen’s resident permabear draws on that analogy and writes that “as energy prices surge with a backdrop of central bank tightening it\u2019s starting to feel a bit like July 2008″\u00a0<\/strong>referring to that moment of “unparalleled central bank madness as the ECB raised rates just as oil prices hit $150 and the recession arrived.”<\/strong><\/p>\n

Is today any different?<\/p>\n

Pointing to the recent surge in global energy prices (described in detail in\u00a0Gasflation<\/a>), Edwards writes that “the current high energy prices will hugely impact the debate about whether the post-pandemic surge in inflation is transitory or permanent.” And while we wait for the Fed (and to a much lesser extent the ECB) to commence tapering as neither will be willing to admit they were wrong about “transitory” being permanent, financial conditions are already sharply tighter with breakeven inflation rates (a proxy for market inflation expectations) surging, especially in Europe, and\u00a0especially in the UK where the Retail Price Index\u00a0<\/a>points to 7% inflation as soon as April.<\/em><\/p>\n

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