Inflation
An inflation is a rise in the prices of goods and services.
- What causes inflation?
Cost-push inflation is when the price of “production costs” goes up due to an increase in the wages or in the price of raw materials.
Demand-pull inflation is due to an increased demand for certain goods and consumers are willing to pay more for something.
- How do you measure inflation?
Consumer Price Index (CPI) measures the inflation from the consumer / household perspective.
Producer Price Index (PPI) measures inflation from the producers’ perspective.
There’s currently an increase in the price of (bio)plastics and polymers. There may be several reasons or explanations.
Shipping
Shipping costs have increased because there’s a shortage of containers.
There are around 180 million containers worldwide but these containers are on the wrong places.
Companies are paying premium rates to get these empty containers.
There may be a global transport crisis and the recent accident in the Suez canal is not helping.
China
China is a booming economy and their growth is influenced by two factors: export and internal demand.
- Export
China is the factory of the world and there has been a “covid boost” because China was the first country to open their economy again while many EU and US industries are still in lockdown.
The covid crisis has accelerated the production shift from the West to China.
Resulting in the fact that China is buying more and more natural ressources and raw materials.
- Interior Market
The Chinese middle class is growing and they want the same lifestyle as Westerners.
They want cars, clothes, luxury goods and cosmetics.
They want to eat meat and drink milk and want to go on holiday twice a year, etc.
These two factors (export and internal demand) lead to a booming economy, an increase in wages, an increase in purchasing power resulting in price increase.
- Empire
China should be considered as an advanced civilisation and not as a Third World country
China was more advanced than Europe during the Middle Ages.
They invented gunpowder, paper, compass and printing 1.000 years before Europeans.
China was an advanced civilisation before America was discovered.
China has a plan, they want to re-build their empire.
- Strategic Industrial Policies
Chinese are naturally born business men. They have trade as a second nature.
China understood that raw materials and natural ressources is the “nerf de la guerre”.
EU institutions are to some extend in a bourgeois vision that we have to be morally superior with green climate policies.
China understood that if they play their cards well, they will run the world in less than five years time.
China has a plan; they want to conquer the world through trade.
- Disrupted Global Trade
There should be a balance in global trade. Here’s how it should happen:
Chinese goods are sent in containers to the West. The containers arrive and are emptied. The containers are filled with Western goods and sent back to China. The containers arrive in China, are emptied, filled again with Chinese goods and sent back to Europe. Etc. Etc.
There’s a disruption in global trade. The West is not exporting anymore to China. Once the containers are emptied in Europe, China wants them immediately back. No need to fill them with Western goods. Chinese companies are ready to pay top dollars to get their hands on all the “empty”containers.
Cartels
A cartel is a group of independent market participants who collude with each other in order to improve their profits and dominate the market.
You have two types of cartels:
- Price cartels where companies agree on the price;
- Market cartels where companies agree on markets.
It is a reasonable possibility that some oil and chemical companies have mutually agreed to increase the prices of base chemicals and polymers (a bit more than they should have).
It may have been the right moment to do so as it will go unnoticed in the current global turmoil