Ukrainian war, is this the moment when we can good business or should we expect further escalation?
There perfect storm eventually it came and hit the markets. Analysts had smelled something strange, so much so that for weeks – well before the invasion of Ukraine – the Ftse Eb and other equity indices had begun to decline from the highs recorded at the end of 2021. Per Piazza Affari there was even talk of exceeding 30,000 points, a level never reached since the collapse of Lehman Brothers.
Instead, suddenly or almost, we ended up with a huge problem. The conjunction between the long tail of Covidthe crisis of semiconductorsthe scarcity of raw material, the risks to logisticsthe uncontrolled increase of energy pricesa and, lastly, the geopolitical tensions they created a monster which will be difficult to get rid of.
So far, in fact, the central banks they have mitigated the effects of the various economic crises with a very long period of purchase of securities. The bazooka Of Mario Draghisymbol of amonetary action fort that saved Italy and the whole euro, had ushered in a long period almost a decade of quantitative easing.
L’advent of Covid He forced Christine Lagarde to launch a particular plan, the PePP (pandemic purchasing plan) which contributed to the maintenance of the cost of money and rates. Basically, in order to avoid speculation, in the last ten years we have chosen to narcotize the markets with yields that did not respond to real country risk.
Today, however, with the uncontrolled price growththe ECB and the other central banks had already initiated a mechanism to reduce purchases which had yet to begin for Europe. There war in Ukraine further complicated the plans: how to keep the inevitable drop in GDP at bay?
Normally they would have bought other titles, but now this can no longer be done, otherwise the risk would be of further inflation. You have to choose which is the lesser evil: stimulate economic growthsterilized by an exponential rise in prices, as was the case in the late 70’s and early 80’s?
Or it is better to stem the growth of prices, however, increasing the cost of money and reducing the room for maneuver for banks which, for example, could lead to a new credit crunch, generating a dramatic spiral that no one wants to see.
Of course, there is always there possibility of making new debt, postponing the return to “normal” public accounts for a little longer. Italy should next year bring the ratio between deficit and GDP within the 3% threshold. But if an arms race were to really start to give life to a European army; and if further interventions are needed to sterilize inflation, the increase in bills and the decline in raw material here then we would quickly find ourselves in a short circuit situation in which the accounts … do not add up.
Hence the question that also the investors they are doing is as simple as it is brutal: now is the time maximum peak of fear, where you can do good deals trusting in a quick solution to the conflict after all? Or we must expect further escalation and therefore fear that the worst has not yet come?
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