1/ FT report today that gas demand has fallen. But in reality this is just the beginning of Europe’s coming deindustrialisation. Short 🧵.
2/ The paper notes that most of the decline in use is due to industry paring back. With prices so high, gas usage is disincentivised.
3/ This is reflected in the PMI which started to go negative (>50) in the summer months, at the same time as the FT chart shows gas usage falling below normal levels. With high gas prices, producing goods in Europe stopped making economic sense.
4/ And the paper notes what many of us have been saying for some time: this isn’t a single year crisis. If something doesn’t change, this will be ongoing for years and European industry will cease to exist. The continent will be impoverished.
5/ Recently Russia has confirmed it will not sell oil to countries engaged in the price cap. Russian oil makes up 20-30% of European supply. Unless something changes layer oil shortages on top of deindustrialisation. This will mean major supply chain breakdowns and shortages.
6/ British business groups are already warning of a ‘lost decade’. Unless something changes on the energy front what that really means is a sharp fall in living standards and possibly a depression.
7/ For those who think that Europe can rearm with its industry shut down, inflation and shortages, runaway inflation and falling living standards: please take an intro level economics course and figure out how armies etc are paid for.
8/ The recent decline in the European PMI is just the beginning. It’s this next six months that we’ll start seeing a serious collapse of European manufacturing.
9/ Looks like it’ll be primary products that’ll be hit worst. Expect shortages of metals, chemicals (including fertiliser), plastic and food. Food and fertiliser shortages will at least create serious food inflation, at worst serious food shortages and malnutrition.
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1/ In a new study undertaken in partnership with @hiia_budapest I compare the relative geoeconomic strength of NATO and the BRICS+. We do not think a war between these is likely, but a war between members might turn these into autarkic trading blocs.
2/ Our first major finding is that the economies of the two groupings are now roughly the same size, with BRICS+ being slightly larger. This is an enormous development. Policymakers seem to imagine that we live around the year 2000 in this regard. They’re dead wrong.
3/ We also find that the BRICS+ is far ahead on steel production, of which NATO has barely any. It seems unlikely NATO would be able to build sufficient materiel without access to BRICS+ steel. Very important finding.
1/ Here is a thread on why recent record sales by the Chinese of US Treasuries might be one of the first signs of a major fiscal crisis in the US. There is a lot of confusion about how this would work so let's go through it step by step.
2/ What matters here is not overall US government debt but rather the balance of payments. If a country runs a trade deficit this must be offset by financial inflows on the financial account to maintain equilibrium.
3/ The United States runs a consistent, large trade deficit. As predicted - because it is a necessity - this trade deficit must be matched with financial inflows. Let's look at what those inflows are.
1/ A new paper is out with the @hiia_budapest. In it we explore reindustrialisation. With governments across the world waking up to the catastrophe caused by a decline in manufacturing we want to explore what reindustrialisation might entail and what might constrain it.
2/ Do not believe those who tell you deindustrailisation is driven by technology. A portion of it is, but most of it is a redistribution of manufacturing capacity from the Western countries to the emerging BRICS+ bloc - especially China.
3/ Some countries try to build manufacturing sectors by attracting FDI. Good news for countries with higher wages: only a weak correlation between wage rates and FDI. So, wealthy countries can attract FDI without crashing living standards. (BRICS in red, West in blue).
1/ Ever since the pandemic the Western world has started to talk about ‘derisking’ and ‘decoupling’ which are both euphemisms for increased protectionism in the West, especially vis-a-vis China. A study I worked on with @hiia_budapest shows that this has not been thought through.
2/ Through globalisation the world has become highly interconnected. It used to be that China relied heavily on imports but now the EU is more reliant and the US is as reliant.
3/ Nor are many of these imports from other Western countries. The EU is as reliant on imports from BRICS+ as China is on imports from the West and America isn’t far behind.
1/ In conjunction with the @hiia_budapest I will be working on a comprehensive series of economic studies on the emergence of the multipolar world in the 2020s. In the first othis series, we explore the Origins of Economic Multipolarity. Highlights in this 🧵.
2/ China overtook the US and the EU as the largest economy in 2017, but little attention was paid to this because of a flood of fake economic metrics (details in report).
3/ Following on from this, the new BRICS+ that added new members in August of this year, is now as large as the entire West in terms of its total economic size. If more members join from the shortlist it will be substantially larger.
1/ In our new paper demographer Paul Morland and I argue that Western countries facing low and falling birth rates are confronted with a trilemma. They can only pursue two of three possibilities: economic dynamism, ethnic continuity, and egoism. @arc_forum
2/ Countries like the United Kingdom can barely reproduce itself. Deaths in the country are close to outstripping births. Extremely high immigration rates are needed to keep the economy rolling.
3/ Immigration can be healthy. But at a certain point it becomes destabilising, both politically and socially. Rates of immigration can, for example, predict income inequality, as low-skilled migrants are forced to become a self class.