Boiling over
By Justin Pyvis – Delivered on 22 Nov 2021

Good morning! Anti-vax, anti-mandate, anti-lockdown... let's just say pandemic protesters of all stripes were out in force yet again on Saturday, with tens of thousands hitting the pavement across Melbourne, Sydney, Adelaide, Brisbane and Perth. Unlike previous rallies they appeared to have been conducted peacefully, with police in NSW and VIC reporting zero and one arrest respectively.

But unfortunately for the protesters, they don't seem to be having the desired effect – on Sunday NSW Premier Dominic Perrottet said he would not bring forward additional freedoms for the unvaccinated (scheduled for 15 Dec), stating that "these measures are not tailored for rules for the sake of the government, they are tailored to keep people safe and that's what we're focused on". WA Premier Mark McGowan said "it hardens my resolve".

Moving on, the NT will tighten its border by requiring all arrivals to be fully vaccinated against COVID-19, even if they're travelling from a "low risk" jurisdiction. Explaining the decision, Chief Minister Michael Gunner said:

"Unvaccinated people from green zones are more of a risk to us than fully vaccinated people from red zones... If we stopped [the original case, who travelled from QLD but lied about having been to VIC] from entering the Territory based on the vaccination status, or tested her on arrival, there would be no spread of COVID-19."

There was also some border clarification from SA, where the government outlined the rules that will guide its reopening on Tuesday, explaining that the only people who will have to isolate are those arriving from local government areas with COVID-19 community transmission and a vaccination rate below 80%.

However, everyone – even those coming from "low" and "moderate" risk areas – will have to pass a COVID-19 test up to 72 hours before arriving and consent to a daily symptom check using a new app.

Fully vaccinated population (aged 16+)


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Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries.

The US S&P500 finished the week down 0.14% as fresh lockdowns in Europe dented the reopening trade, helping to suppress US 10-year bond yields (due to a 'flight to safety') and the price of oil, which fell over 3% to hit a six-week low.

Locally, the ASX200 added 0.23% with modest gains for the health, consumer staples and energy sectors. A notable mover was Crown Resorts (+16.6%), which shot up after emerging from a trading halt by revealing an improved $A8.5 billion takeover offer from private equity firm Blackstone.


A slow moving stimmy: US President Joe Biden's trillion-dollar 'Build Back Better' stimulus bill was passed by the House, although still faces hurdles in the Senate in the form of moderate Democratic Senators Joe Manchin and Kyrsten Sinema.

Subsidies are addictive: India's Prime Minister Narendra Modi repealed laws passed in September 2020 that rolled back government subsidies and price supports for farmers after "more than a year of protests by farmers who doggedly occupied highways surrounding New Delhi and held demonstrations that sometimes led to bloody clashes with police and supporters of the government".

Hey, big spender: Japan's government will spend a record 55.7 trillion yen ($A680 billion) on a fresh economic stimulus package, requiring the issuance of new bonds that will "worsen Japan's fiscal health, already the worst among major developed countries".

Fed to ease off: Fed vice Chair Richard Clarida said "it may well be appropriate at that meeting to have a discussion about increasing the pace at which we are reducing our balance sheet". His comments were shared by Fed Governor Christopher Waller, who said "The rapid improvement in the labour market and the deteriorating inflation data have pushed me towards favouring a faster pace of tapering and a more rapid removal of accommodation in 2022."

Unaffordable?: Canadian asset prices soared even higher in October, with new house prices increasing 0.9% from September and 11.5% from a year ago. But higher prices don't seem to be discouraging buyers, with the Canadian Real Estate Association reporting that existing home sales rose at their fastest one-month pace in more than a year (prices were also up). Leverage ratios must be quite literally through the roof.

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Boiling over

Producer prices in Germany – what manufacturers charge wholesalers for products – increased 18.4% in October from a year ago and 3.8% in just a month (an annualised rate of 56.4%!).

Breaking it down: October's annual increase in German producer prices was the most since November 1951 (+20.6%), with the key driver being the energy component, which was up 48.2% compared to October 2020 and 12.1% from them month prior. However, even excluding energy the index was up 9.2% from a year ago with solid increases to every component.

Why this matters: Rising producer prices don't necessarily lead to higher consumer prices, given that many manufacturers can absorb declining margins to some extent or cut costs elsewhere. But we're now several months into the pandemic recovery and while businesses may have believed the "transitory" inflation argument for a few months (and been more willing to absorb higher prices by reducing profits), the situation is really starting to boil over.

Consumer prices in Germany are already running at 4.5% annually (the highest since August 1993) and if producer prices keep rising it seems inevitable that those rising input costs will increasingly fall on consumers.

Looking forward: Rising prices are not unique to Germany – just about everywhere in the world is seeing increases in consumer and producer prices. While many central bankers still insist that it's "transitory" due to "passing or supply-driven inflation shocks", those kind of shocks don't cause a rise in all prices.

It only appears as though a supply shock is causing inflation (global merchandise trade has actually increased, by the way) because the price of certain goods where demand is strong but supply is constrained are increasing quite a lot relative to other prices, but those prices are also rising. A true supply shock would mean other prices have to fall in aggregate, barring an increase in the quantity of money in circulation (or consumer preference to hold less cash).

What has actually happened is the price of money has fallen relative to everything else. And the cause of that is central bankers, who enabled and partially monetised an almost unprecedented surge in global debt.

At this stage it appears as though the only way inflation will be "transitory" is if central bankers concede defeat and decide to remove the root cause of it by tightening monetary policy (and risking a recession in the process).

The Wrap Up
    📜A rare copy of the US Constitution was sold at auction for $US43.2 million to billionaire Kenneth Griffin, CEO of Citadel and "public enemy number one for GameStonk acolytes". He outbid ConstitutionDAO, a group of crypto enthusiasts who had formed the largest crowd-funding initiative ever.
    👊Austria mandated COVID-19 vaccination for all adults from 1 February 2022 because of "overcrowded intensive care units and enormous human suffering".
    💉COVID-19 booster shots were made available to all adults in the US provided it has been at least six months since their last dose.
    👃A new research letter estimates that "somewhere between 700,000 to 1.6 million people in the US who had COVID-19 had a loss of smell—or a change in their sense of smell—that lasted for more than six months".
    Thousands of people took to the streets in the Netherlands to protest the government's latest lockdown and vaccine passport requirements, with the centre of Rotterdam "transformed into a war zone".
    🤪The US Conservative Political Action Conference banned Big Bird, Elmo, and other Sesame Street stars from attending due to their pro-vaccination stance.
    👩‍💻Former US Presidential candidate Hillary Clinton claimed cryptocurrencies have "the potential for undermining currencies, for undermining the role of the dollar as the reserve currency, for destabilising nations, perhaps starting with small ones but going much larger".
    📱Tasmania's government is offering people aged 12-18 iPads and 14 other prizes for getting vaccinated against COVID-19.
    Disgraced former WA bureaucrat Paul Whyte was sentenced to 12 years in jail "for masterminding the theft of $A27 million of taxpayers' money and using it to fund a lavish lifestyle".
    🦗Australian test wicketkeeper Tim Paine stood down as captain after a "sexting" scandal that was kept quiet by Cricket Australia back in 2017 managed to surface.
    🦇A study published by a veteran virologist in Science claims that the origins of SARS-CoV-2 "was almost certainly" Wuhan's Huanan wet market, not a lab leak.
    🎾Australian Open chief Craig Tiley confirmed that all players, including world number one Novak Djokovic, will have to be vaccinated against COVID-19 to compete in the tournament.
    🏉The Wallabies ended their European tour without a win for the first time since 1976, going down 29-28 to Wales after a controversial red card to Rob Valetini in the 15th minute.
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