macrolensblog

[macrolensblog]

It’s official. First Fitch and now Moody’s.

[macrolensblog]

[macrolensblog]

JP Morgan Chase CEO Jamie Dimon called out the Federal Reserve for being wrong about inflation 18 months ago - nothing new - but interestingly, he said he is cautious that the U.S. government and central bank can manage the various challenges we face. The current backdrop is war in Ukraine, Israel bombing Palestine and the U.S. sending navy fleets to back-up Israel, and the U.S. looking to enter another conflict with China. Domestically, Republicans kicked out Speaker McCarthy and have since failed 3x to elect a new speaker.

This quote from Dimon on ESG is more indicative of the current government:

“You can’t build pipelines to reduce coal emissions. You can’t get the permits to build solar and wind and things like that,” he said. “So we better get our act together.”

One prime example of the U.S. lacking a coherent strategy is the EV tax credits included in the Inflation Reduction Act. The bill seemed to be written by folks who didn't bother to look up supply chains, or they had an ulterior agenda - to actually limit EV adoption.

The EV tax credit rules disqualified many EVs because they required vehicles to be made in North America and a significant portion of their batteries and battery materials need to be sourced from U.S.-friendly countries.

Here geopolitics have gotten in the way of achieving those climate change targets. A coherent strategy would have also included funding to create battery component and materials businesses if they didn't exist. Instead, the government has been confusing consumers and causing businesses to scramble, looking to change their supply chains. European and Korean EV makers may lose out the most unless they onshore production or take a loss on their vehicles. But I think the real loser is the U.S. consumer and the environment.