The IRA and the four horsemen of the climate apocalypse

Michael Roberts Blog

The announcement that US President’s Biden’s Inflation Reduction Act (IRA) has got the backing of pro-business, coal-mining owner Democratic Senator Manchin has been greeted with a wave of optimism that the US target of cutting carbon emissions in half before the end of this decade (or 40% compared with 2005 levels), can be met.  “This bill will really turbocharge that transition to clean energy, it will transform markets where already solar PV, wind and batteries are in many cases cheaper than incumbent fossil fuels,” said Anand Gopal, executive director of policy at Energy Innovation, an open source research body.  “Increasingly I’m more optimistic that keeping the temperature rise under 2C (3.6F) is more reachable. 1.5C is a stretch goal at this point.” 

The bill will cut US emissions by between 31% and 44% below 2005 levels by 2030, according to Rhodium Group, a non-partisan research firm. A separate…

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Will global inflation subside?

“El riesgo de una recesión global absoluta está aumentando. Si los bancos centrales continúan aumentando sus tasas de política, todo lo que hará será aumentar el costo de los préstamos para los consumidores y las empresas, lo que llevará a las empresas más débiles a la bancarrota y suprimirá la demanda en todos los ámbitos. Claro, eso finalmente puede reducir la inflación, pero solo a través de una depresión.”

Imagen tomada del Banco Mundial.

Michael Roberts Blog

Is the global inflationary spiral peaking?  And if it is and inflation is set to fall over the next year, then has the inflation scare been just a momentary blip and now things will start to turn back to the previously low pace of inflation in the prices of goods and services?

That seems to the view of investors in financial assets in the US, where the stock market has rallied by as much as 20% from lows in mid-June; and both government and corporate bond yields have steadied. Markets seem to believe in what is called the ‘Fed pivot’, where the US Federal Reserve, having hiked its policy rate aggressively since April, will now start to end its hikes going into 2023 as inflation subsides.

Certainly, there is some evidence of peaking inflation in the US where the consumer price inflation (CPI) rate slowed more than expected in July…

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The inflation debate

The inflation debate among mainstream economists rages on.  Is the accelerating and high inflation rate of commodities here to stay for some time and or is ‘transitory’ and will soon subside?  Do central banks need to act fast and firmly to ‘tighten’ monetary policy (ie cut back on injection credit into banks through purchases of […]

The inflation debate

Fallen angels

In several previous posts, I have highlighted what are called ‘zombie’ companies (companies whose regular profits do not even cover the cost of servicing their outstanding debts) and so must, to paraphrase former BoE governor Mark Carney, depend on the kindness of their creditors”. An OECD study found that such zombies take up a frighteningly […]

Fallen angels

Inflation: supply or demand?

The debate among economists continues on whether the recent hike in inflation rates in the major economies is due to a ‘supply shock’ or ‘pent-up consumer demand’; and related to that, whether the inflation rise will be ‘transient’ or ‘permanent’. Supply or demand?  If prices rise, is it because supply is not rising ‘enough’ or […]

Inflation: supply or demand?

The Fed, interest rates and stagflation

“The economy has made progress toward employment and inflation goals and if progress continues broadly as expected, a moderation in the pace of asset purchases may soon be warranted”, the US Federal Reserve officials said in their September monetary policy statement. The Fed also signalled interest-rate increases may follow more quickly than expected, with 9 […]

The Fed, interest rates and stagflation