International Forecaster Weekly

A newsletter for economic news, global trends, politics, money, and investment. Published on Wednesdays and Saturdays for subscribers. Get a free sample of our full issue, or Subscribe today.

SOARING OIL & GAS PRICES PRESSURING INFLATION EVEN MORE

Guest Writer, March 9 2022

Prices at the gas pump are soaring toward an all-time high, but drivers appear to be saying, oh well—for now anyway.

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AS POWELL TESTIFIES, ANALYSTS WONDER IF SANCTIONS SUGGEST RESURGENCE OF THE DOLLAR

Guest Writer, March 5 2022

Fed Chair Jerome Powell told Congress on Wednesday that he supports a quarter-percent increase in the Fed’s benchmark short-term interest rate when the Fed meets in less than two weeks.

Powell did open the door to a bigger hike, like the half-percent increase called for by most of his colleagues, but only if inflation doesn’t noticeably decline this year—as the Fed expects it to.

Most other Fed officials have vocally supported a 25-basis point rise.

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WEST AND RUSSIA UNVEIL NUCLEAR OPTIONS - One is Figurative, the Other Real

Guest Writer, March 2 2022

Felix Salmon writes that until last weekend, Russia's invasion of Ukraine looked quaint, with “columns of tanks, prisoners of war [and] bombed buildings.” 

As a new week unfolds, however, the U.S., Canada and Europe on one side and Putin on the other have rolled out their respective nuclear options—the former three financial, the latter literal—although neither has actually been used.

The stakes couldn’t be higher. This is no longer just about Ukraine. It’s quickly evolved into a full-blown confrontation between nuclear powers. 

Salmon fears if the conflict continues to escalate like a hundred-yard sprint, the unthinkable could quickly become a reality.

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Eurozone Heavily Energy Dependent on Russia - The Stakes (and Prices) Just Got Higher

Guest Writer, February 26 2022

Catherine Clifford writes that Europeans had already been suffering under high energy prices in the months leading up to Russia’s invasion of Ukraine.

Those prices, and others, surged after Russia crossed the Ukrainian border, with international benchmark Brent crude oil breaching the $100 per barrel mark for the first time in 8 years. 

Natural gas prices were at least 6.5% higher after the invasion and were up about 2% as of midday Thursday.

And on Tuesday, Germany halted the Nord Stream 2 gas pipeline project, which was intended to double the flow of Russian gas directly to Germany.

Sad to say, but the European Union is heavily dependent on Russian energy sources, which Clifford says is becoming “increasingly unsustainable.”

The EU, however, is reportedly planning energy independence from Russia. That plan was expected to be announced by the European Commission next week.

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WILL PAY TRANSPARENCY PROMOTE PAY EQUITY?

Guest Writer, February 23 2022

Does transparency promote equity? More to the point, does pay transparency promote pay equity?

That’s the goal in California, where a state senator introduced a bill last week that would require employers to disclose salary ranges for jobs they’re trying to fill and to report employee and contractor pay data to the general public.

            Pay transparency laws are being seen by equal pay advocates as the next key policy in closing gender and racial pay gaps.

They’re saying it means the next time you’re looking for a job, you might know how much it actually pays—before you’re hired.

Emily Peck reports that a similar law went into effect in Colorado last year, while another is about to start in New York City in May.

Peck says California already requires employers to disclose salary ranges, but only if asked by a prospective candidate.

Jessica Stender, policy director for Equal Rights Advocates, says, "I think the tide is turning in terms of support for stronger pay equity laws."

She noted that employers in the UK have had to disclose pay disparity data for some time now—helping to narrow certain gaps.

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Is a New Gold Standard on the Horizon? - Revaluing Gold Could Write Off Government Debt

Guest Writer, February 19 2022

Is a new Gold Standard coming to town? If one is, it’s likely to be in Europe. So says independent financial writer Jan Nieuwenhuijs. 

The gold analyst writes in The Gold Observer that Europe is the most likely to take the initiative—as opposed to the U.S.—because revaluing gold “would damage the dollar’s status as world reserve currency.” 

The euro, on the other hand, as the second most liquid currency in the world, “would enable the eurozone to revalue gold without devaluing much against other currencies and commodities.”

The more debt is being accumulated on the balance sheets of European central banks, the more likely they will revalue gold to write off this debt. 

Here’s the gist of Nieuwenhuijs’ thinking: The ratio of government debt to GDP in many countries is at record highs. And no country, leader or economist has proposed a strategy to lower those debt burdens. 

He points to the primary tools that governments can lower their debt to GDP levels:

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As Money Supply Goes, So Goes Inflation (Or As the Discount Rate Goes, So Go Interest Rates)

Guest Writer, February 16 2022

Merriam-Webster defines “discount” as “a deduction from the usual cost of something, typically given for prompt or advance payment or to a special category of buyers.”

The Federal Reserve’s “discount rate” is the interest rate charged to commercial banks (yes, they’re special) and other depository institutions on loans they receive from their regional Fed bank's discount window.

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PRICE INCREASES OFFSET WAGE GAINS - So, Put a Hold on Profits and Pay Workers More

Guest Writer, February 12 2022

Neil Irwin reminded us yesterday morning that a lot of hopes are riding on inflation easing this year. But it hasn’t happened yet—or over the last year.

Consumer prices surged more than expected over the past 12 months, suggesting a bleak outlook for inflation and increasing the likelihood of more than a few interest rate hikes this year.

The CPI (all urban index) rose 7.5% in January over a year ago, the Labor Department reported yesterday—the highest since February 1982. Economists were expecting an increase of 7.2%.

The so-called core CPI, which excludes volatile food and energy prices, increased 6%, compared with the estimate of 5.9%—its highest since August 1982.

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WAGE GROWTH VS. MORE JOBS Does the Reward Outweigh the Risks?

Guest Writer, February 9 2022

The surprising pace of recent job growth may be catching recent headlines. But, as Neil Irwin points out, other details contain the biggest implications for markets in the months ahead; namely, wage growth.

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WILL FED TIGHTENING CAUSE A RECESSION? - Only Gold Knows for Sure

Guest Writer, February 5 2022

Last week’s article highlighted the World Gold Council’s outlook for gold this year. All in all, things look potentially promising from their vantagepoint. So, hang in there.

In its own 2022 Outlook, too big to fail Goldman Sachs gives the probability of a recession this year as a modest 10%.

In coming to that conclusion, GS looks at three factors that have caused recessions in the past:

  • Overly aggressive tightening by the Federal Reserve;
  • Imbalances in the economy (e.g., a housing bubble); and
  • Unpredictable shocks to the economy (like the pandemic or Russia’s invasion of Ukraine).

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NEW STUDY CHARTS POST-GREAT RECESSION ECONOMY (Lack of) Employment Remains a Major Problem

Guest Writer, February 2 2022

The nonpartisan Center on Budget and Policy Priorities (CBPP) is out with the “Chart Book: Tracking the Post-Great Recession Economy.”

This ongoing study is a comprehensive, insightful look at how our economy has fared since the financial crisis that began in late 2007.

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2021 GOLD DEMAND UP 10% - The Stage Is Set for a Fine 2022

Guest Writer, January 29 2022

Global demand for gold skyrocketed to a two and a half year high in the 2021’s 4th quarter, resulting in a 10% full-year increase over 2020.

According to the World Gold Council’s latest report, total 2021 demand for gold (excluding Over the Counter) increased to 4,021 tons (502,625 oz.).

Thanks for that goes largely to 4th quarter demand jumping nearly 50%, and the result was the recovery of much of the pandemic-related losses of 2020. 

The WGC noted that demand for gold in the consumer-driven jewelry and technology sectors recovered throughout the year — in line with economic growth and sentiment.

Global central bank buying also was far ahead of 2020’s pace. Investment demand was mixed because of high inflation competing with rising yields for investor attention. 

The year ended similar to how it began, with interest rates and inflation jockeying for attention as the key driver of gold. 

But unlike the 1st quarter, inflation was a more dominant factor than interest rates as 2021 came to a close. “This helped gold make up some of the ground it had lost in the early part of the year," the report said.

Neils Christensen added, “The gold market has once again proven itself that it is a global market that is more robust than just investment demand.”

Here are some of the report’s highlights:

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WITH INFLATION AND VOLATILITY STAYING HIGH, SOME EXPECT GOLD TO HIT $2,000 VERY FAST

Guest Writer, January 26 2022

After a trading day that saw the steepest drop in the S&P 500 since 2008, briefly dropping into correction territory with a big sell-off — and then saw it actually close UP 0.3% — the word that comes to mind, besides Whew, is Volatility.

A lot of it.

Since the beginning of the year, the CBOE VIX Volatility Index is up about 74% — having risen from a more modest 17.60 to 29.90 at the close today.

In fact, over the past two years, market volatility has more than doubled, and that is something precious metal investors should be paying attention to.

Without getting too technical, the VIX signals the level of fear or stress in the stock market — using the S&P 500 index as a proxy for the broad market — and thus is widely known as a “Fear Index.” 

The higher the VIX, the greater the level of fear and uncertainty in the market; levels above 30 indicate a lot of investor fear and enormous uncertainty.

Five years ago, Meera Shawn wrote in Market Realist, “Notably, we often see that an increase in volatility can lead to a rise in gold.” 

Other studies also confirm a positive correlation between the VIX and gold prices but are too detailed to summarize in this article (e.g., Gorbel & Jeribi 2021, Klein et al 2018, Bauer & Lucey 2010).

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THE RICHEST KEEP GETTING RICHER…The World’s 10 Richest Have More Than Doubled Their Wealth During the Pandemic

Guest Writer, January 22 2022

As the persistent pandemic has raged on, the world’s richest have only got richer, while tens of millions of people, most of them living outside the U.S., have taken a dive into poverty.

In a new report released Sunday, called “Inequality Kills,” Oxfam details how the wealth of billionaires increased more than ever before over the past two years

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IMMIGRATION HIATUS & RETIREMENTS DRIVE U.S. LABOR SHORTAGES

Guest Writer, January 19 2022

The nation’s worker shortage “has become a flywheel of doom, messing up our lives and society writ large,” according to Emily Peck. 

“And many of the underlying problems that led to this breakdown are bigger than the pandemic.”

Because of increased restrictions on immigration and travel that began with the pandemic in early 2020, the net inflow of immigrants into the U.S. has for all intents and purposes been in a 2-year hiatus. 

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