For just three weeks, the economic consensus was satisfied. Inflation appeared to be tamed, expectations were reasonably expected, and the subsequent movement of central banks – particularly in individual states – should lead to some other types.
The cycle had low control. no embargo, wars have a habit of violating consensus and Iran, and their nicknames, they know the consequences of chaos.
The conflict has moved oil to the center of the geopolitical table. We know that a higher price for raw meat is not really relevant until we understand why it is happening. This is not happening because the world is consuming more energy because there is a global boom in demand.
The market is full of fear that there are fewer offers. The extreme Ormuz – through which about 20% of the oil traded in the world – appears as butt of the bottle strategic. When the market fears a collapse, the price must be a signal of prosperity to transform into a signal of vulnerability.
This creates an analytical error that leads in some commentaries to explain how to interpret the complaint about inflation caused by the oil automatically requires a list of types of interest. This reading confuses distinct phenomena.
Struggling with monetary policy and supply-side inflation may exacerbate the problem as energy becomes more expensive and growth more problematic
The inflation of the past few years has been demand-driven expansionary inflation under good circumstances. Extraordinary fiscal stimulus, horrors built up during the pandemic, and surprisingly strong consumption have put pressure on prices that could be moderated by higher interest rates.
But inflation caused by a supply shock is another matter. When oil suffers because the ruler is uncertain, Interest types only have the ability to solve a problem.
No new barrels will appear because they are subject to the price of money, and no sea routes will be unblocked by a more restrictive monetary policy. The only thing bubbling is the economy.
Struggling with monetary policy and supply-side inflation may exacerbate the problem as energy becomes more expensive and growth more vulnerable. This is the Keynesianism that shapes the economy and condemns the West.
Another interesting change that seems to be creeping into this episode is neither in the prices nor the types of interest. It’s a dollar.
And if oil turns into a currency battleground, the real impact of this crisis may not be in barrels or inflation
During the Middle Ages, the international energy system neglected the fact that oil was paid for in dollars. This mechanism – called the petrol pump – is one of the silent pillars of the financial strength of the United States.
Today, 60% of the world’s official reserves are denominated in dollars, and the vast majority of international oil trade is settled in this currency. This dual condition allowed the United States to finance fiscal and external deficits for decades they would be unsustainable for any other economy.
However, geopolitical tensions always bring incentives to reduce dependencies. If the energy trade is fragmented – through sanctions, blockades or new strategic alliances – some countries may be tempted to pay for oil in other currencies.
Today it is found in marginal form. But rare structural changes are often full of great announcements; Fill them with small exceptions that become exceptions over time.
The most obvious case is China. It is the world’s largest oil importer and still manages $750,000 million in the United States treasury. China has amassed dollars for its foreign trade and energy bill.
But if a significant part of its energy imports begins to be paid in yuan, this circuit will begin to break. The question is not monetary but geopolitical.
As China looks to recycle trade surpluses from dollar-denominated assets, the question is whether it will finance the structural deficit of the treasury. For decades, this response has included two clear pillars: Asia in general and Japan in particular. Y Japan has its hands full with changes.
Over the years, the Bank of Japan has begun to normalize its monetary policy. If Japanese horror makes more attractive returns at home, some of the capital that has historically funded the former state could begin to decline. Japan is now the largest foreign holder of government bonds with more than $1.1 billion, but this balance is It doesn’t seem as stagnant as it did ten years ago.
The burden on Washington would not be a sudden collapse of the dollar. Large monetary systems are rarely broken by coups. It may be much slower and much more difficult to manage if there is a gradual erosion of money’s monopoly on the energy trade. A world in which some oil is paid for in yuan, some in rubles, and some in emerging regional currencies would be a more fragmented but likely more volatile world.
For years, the BRICS monetary ambitions seemed more like a slogan than a real project. Whoever realizes that this is something improvised, theoretical, which is not part of Iran’s plan for Western intervention, has not understood the last three decades. Wars, no embargo, They have a unique ability to speed up processes that seem unlikely.
And if oil turns into a currency battleground, the real impact of this crisis may not be in barrels or inflation. We could be meditating on something much deeper than the slow erosion of the dollar’s financial prerogative.
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