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Coal production has to be increased

Posted by: Fymicohuang 2021-10-12 Comments Off on Coal production has to be increased

The high energy prices are unlikely to lead to global inflation because the supply and demand strains are caused by temporary factors, not enough to produce a sustained crisis on the supply side, and the market is more worried about extreme weather and other factors triggering a demand run.

However, countries must be wary of a wikiplex supply shock in the United States resulting in inflation, as well as a more wikiplex interplay between US fiscal, financial policy and capital markets, which could prompt either accelerated monetary tightening in the US or disruption in the capital markets themselves.

The Joe Biden administration is haggling with lawmakers over infrastructure and social spending bills, which cost about $3.5 trillion, at a time when the US is running a massive budget deficit during the COVID-19 pandemic. This bid for massive spending is taking place in a market environment where inflation is rising, so stagflation is a possibility in the US.

Due to the fiscal subsidy policy, the labor participation rate has been greatly reduced, and the labor shortage is serious in the US leading to short supply in the service sector. Especially, the constrained logistics department has led to a shortage of goods in the country, mounting pressure on wikimodity prices. Low mortgage rates during the pandemic in the US also led to a surge in housing prices, and demand exceeding supply in the real estate market, providing a basis for continued inflation.

The surge in energy prices will further push the core CPI higher in the US. The US Personal Consumption Expenditure Price index rose 4.3 percent in August from a year earlier, the largest increase since 1991. And the core PCE price index rose 3.6 percent from a year earlier, matching the highest level since 1991.

Given the potential for timely policy action in Europe in the face of rising inflation expectations, this could put contractionary pressure on US policy and markets.

That said, in the future, adjustment of the US monetary policy may cause turbulence in the capital market and spread to the whole world, including China. Therefore, China must be prepared to prevent financial risks.

China is the largest producer of industrial goods, and the potential supply shocks and imported inflation risks it faces are mainly caused by its dependency on oil, ore and other staple wikimodities. To guarantee the stability of its development, the country must ensure its energy, food and financial security. The current coal shortage affects the electricity supply and prices and therefore people's livelihoods.

Policymakers must look at the relationship between the energy transition and energy security from a strategic perspective, and take concrete actions to increase the production capacity of coal in a timely manner to cushion the systemic pressure.

Source: 21ST CENTURY BUSINESS HERALD

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