This was released about a week ago. Notice the disturbing...

This was released about a week ago. Notice the disturbing correlation with the world’s obsession with ultra low monetary policy settings and the key input to infrastructure spending.

China hasn’t obsessively loosened MP with the rest of the world and has instead focussed its attention on fiscal stimulus.

At one point and I think this will be the wildcard going into 2020, the world will realise the high risk environment we are creating with current MP settings and its failure to stimulate private/public capex. Without the stimulus, we meander on with poor productivity, anaemic growth and so forth.

I played around with npv scenarios and I still find it hard to believe that central bankers seem to think that using low discount rates are the panacea to investment decisions.

If there is uncertainty/volatility with the numerator part of npv, this is a far far worse outcome than substantially increasing your discount rate (in denominator) part and having more stable cashflows. The steel output figures below provide some insight into this.

Governments need to stop obsessing with surpluses and provide stimulus in areas that require it most.

Had Europe for example not had such a poor year in steel output, the demand supply imbalance in IO would be far worse. If infrastructure spending becomes a focus next year as opposed to further kicking the can down the road with ultra low rates, IO producers will become a big beneficiary of this.