The hawkish tone of the Fed’s chairman Jerome Powell on Friday 26^th was unequivocal. His most important sentence, in my view, was the following: “With inflation running far above 2% and the labour market extremely tight, estimates of longer-run neutral are not a place to stop or pause.”

What does this mean? The Fed will do what it takes to cut inflation if the labor market remains strong. These strong messages sent ripple effects to markets. Stocks and risky assets fell in unison and the US dollar relative strength created another widespread depreciation of weaker currencies.

Governments and central banks have become the lender of first resort instead of the last resort, and this is immensely dangerous. Global debt soars, inflation creeps in and many of the so-called “supply chain disruptions” are the result of zombification after years of subsidising low productivity and penalizing high productivity with increased taxes.

There are many reasons why nations should not “spend now and deal with the consequences later.” First, the spending is made by politicians that will not be held accountable for the malinvestment and unwise outlay decisions. Furthermore, the cost will always be paid by taxpayers and businesses.

In the past three months, oil prices have corrected dramatically as global oil demand eased and concerns about a Chinese slowdown add to a possible European recession. The picture of demand growth may be weakening, but the global supply-demand balance remains tight, and years of underinvestment may bring elevated oil prices for longer.

OPEC has cut its 2022 forecast for growth in world oil demand for a third time since April, Morgan Stanley noted. It expects 2022 oil demand to rise by 3.1 mb/d, or 3.2%, down 260,000 bpd (barrels per day) from the previous forecast. The IEA, on the other hand, raised its forecast by 380,000 bpd to 2.1 mb/d (million barrels per day), but it was mostly updating and moving closer to other estimates from international bodies.

The European Union has announced strict “energy efficiency” consumption reduction measures to cut 15% of gas demand as Russia threatens to shut down gas supplies. Some regions and cities have imposed aggressive heating and air condition limits as well as cuts in building lights. Does this work, or will it backfire?

Spoiler alert. It will backfire again. Interventionism always damages the ones they pretend to protect.