The global economic shock that occurred in the 1970s may recur, said Saxo Bank’s chief economist and investment director, Steen Jakobsen, in a macroeconomic forecast for the third quarter, Mando Visione reported. 

“Today globalisation has reached its maximum, even without the trade spat. China produces everything, so the “making things cheaper” process has run out of room. Add to that the potential trade war and massive focus on the environmental impact of all facets of consumption, from plastics to packaging, airline and sea transport pollution, and, with central banks wrongly focused on excessively low inflation, you get a perfect storm brewing that will turn the tide back toward inflationary outcomes. From anti-globalisation, higher unit cost of production due to environmental considerations, a fiscal push into infrastructure and shoring up injured global supply chains — all that creates a massive repeat of the 1970s global supply shock,” the source noted. “The shock this time will come sometime after the global fiscal expansion set to arrive in the third and fourth quarter. In this situation, the markets that stand to benefit the most will be commodities and real resources, infrastructure plays, wages and gold. By the summer of 2020 – one year from now – we will have seen the end of any belief in monetary policy moving the needle, and will be witnessing extravagant spending driving inflation to levels beyond anyone’s expectations, just a couple of quarters after inflation, once again, has been pronounced dead.”