US CPI Inflation Falling — Saudi Arabia Abandons Dollar — Senator on Covid Failures and NGO Tyranny — Solar Panels of Wood (believe it or not) - [01-29-2023]
Direct from BOOM Finance and Economics at the links below
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THIS WEEK’S EDITORIAL
CPI INFLATION FALLING IN THE UNITED STATES - US CONSUMER SPENDING FALLING – GDP GROWTH WEAK
Inflation Expectations are plunging in the USA. The University of Michigan surveys consumers regularly and their latest data release shows a significant plunge in CPI inflation expectations to 3.90% for the next year. This is the lowest result since April 2021.
US Core PCE inflation, the Federal Reserve’s preferred inflation measure, was released on Friday and showed an increase of 4.4% in December. A year ago, this was at 5.4% and has fallen steadily since then. 4.4% is the smallest annual rise since October 2021 and adds fuel to BOOM’s thesis that the Fed will soon slow down its tightening of monetary policy.
US personal spending declined by 0.2% for the second consecutive month in December. As BOOM said last week — “Consumer reluctance will do the Federal Reserve’s job for them. Interest rates set by the Fed will probably be increased again on 1st February but by a lesser amount than previously expected.” BOOM cannot see any chance for a surprise increase beyond market expectations. The Fed will either stand firm, reduce interest rates or jawbone the prospect of future falls.
US stock and bond prices should then continue on their way higher as further fundamentals confirm the scenario of weak GDP growth combined with a hesitant consumer. Quarter on Quarter GDP Growth expanded by an annualised 2.9% in the final quarter of 2022, following a 3.2% jump in the third quarter.
The Dow Jones Stock Index rose by 1.81% last week. The S & P 500 index rose by 2.47%. The Tech heavy Nasdaq Index rose by 4.32%. When the Nasdaq is late to a party, watch out.
Since BOOM alerted readers in mid-October last year to coming strength in the US stock market, the Dow Index has risen by 17% while the S & P 500 Index has risen by 11%. The Nasdaq index has settled into a horizontal trading range since October. However, last week’s positive buyer sentiment in Nasdaq-listed stocks is a strong indicator of a return of confidence.
SAUDI ARABIA ABANDONS DOLLAR: Saudi Arabia’s Finance Minister, Mohammed Al-Jadaan was interviewed last week and said that the kingdom is open to discussions about trade in currencies other than the US dollar. “There are no issues with discussing how we settle our trade arrangements, whether it is in the US dollar, whether it is the euro, whether it is the Saudi riyal. I don’t think we are waving away or ruling out any discussion that will help improve the trade around the world.”
China has recently stated that it is keen to buy more oil from Saudi Arabia and that settlements in Chinese currency will grow in the future. But that is no secret.
Some commentators have rushed to print stating boldly that “this is the beginning of the end of US Dollar dominance”. Others have been more sensationalist stating “the US Dollar will now collapse” or “the Reserve Currency status of the US Dollar is lost”. BOOM disagrees with such analyses and so does the foreign exchange market. The US Dollar index traded in a fairly tight trading range throughout last week, ignoring the statements from Saudi Arabia and the sensationalist journalists.
BOOM has consistently pointed out that the so-called “Petro-Dollar” concept is a mirage. US Dollar dominance does not hinge on this so-called and much heralded “arrangement” between the US and Saudi Arabia. It is underwritten by Eurodollar volumes. Eurodollars are US dollars that exist outside of the US and outside of any direct influence from the US authorities. They reside on the balance sheets of many banks in many nations but, most importantly, on the balance sheets of tax haven banks as US Dollar denominated loans to corporate borrowers. The actual volume of Eurodollars held in such accounts is a well-kept secret but BOOM can assure readers that it is huge, measured in many Trillions of US Dollars. No other currency comes close.
Foreign exchange holdings by central banks also show that volume is what makes currencies convenient to use in trade settlements, not shady “agreements” from long past periods of Geopolitical time.
The IMF publishes “COFER” – the Currency Composition of Official Foreign Exchange Reserves. The last update was on 23rd December 2022. It showed foreign exchange allocated reserves of US$10,773 Billion ($10.77 Trillion).
· Claims in US Dollars totalled $6,441 Billion – 60%.
· Claims in Euro were $2,118 Billion – almost 20%.
· Claims in Chinese Yuan were $297.8 Billion – 2.76%.
· Claims in Japanese Yen were $566.43 Billion – 5.2%.
· Claims in British Pounds were $497.33 Billion – 4.6%.
· Claims in Australian Dollars were $206 Billion – almost 2%.
· Claims in Canadian Dollars were $264 Billion – 2.45%.
· Claims in Swiss Francs were $25 Billion – almost 0.23%.
· Claims in Other Currencies were $356.47 Billion – 3.3%
Note the Chinese Yuan holdings – just 2.76% of total foreign exchange holdings. It is clear that the biggest threat to US Dollar Dominance is the Euro. No other currency comes close. In this game, Europe is the enemy of the US, not China. That reality has Geopolitical consequences. Note that the current threat of increased warfare and subsequent economic hardship is in Europe, not Eurasia. That fact bears some weight when considering current Geopolitical events.
SENATOR ON COVID FAILURES AND NGO TYRANNY: A powerful statement last week came from an Australian Senator concerning governmental failures in regard to the Covid phenomenon and the creeping threat of tyranny from unelected, trans-national Non-Government Organisations, especially the World Health Organisation. Its message is applicable to all nations and is therefore reproduced here in full:
"If there has been one consistent theme of the COVID-19 pandemic, it’s that the “experts” have consistently been wrong. Initially, the WHO failed to scrutinise China’s role in the outbreak. One can only wonder why?
Then, echoing the advice of the World Health Organisation, the experts were wrong about lockdowns, which dismantled economies and ended more lives than they saved.
They were wrong about the efficacy of masks, the dangers of COVID-19 itself, and the safety and efficacy of the mandatory mRNA injections, which don’t prevent one from catching or transmitting the virus and are linked to adverse events including myocarditis and death.
Now, the World Health Assembly, the WHO’s decision-making body, is seeking to amend its International Health Regulations, which has 194 member states including Australia and create a new international “convention, agreement or other international instrument on pandemic prevention, preparedness and response”, the so-called “Pandemic Treaty”.
These proposed amendments together with the Pandemic Treaty would grant the WHO more power over any future “global health emergencies” it declares, including a future pandemic.
I recently voiced my concerns about the WHO and the decisions that are being made behind closed doors. Some of the proposed amendments include:
· Erasing the words “with full respect for the dignity, human rights and fundamental freedoms of persons” and replacing them with “based on the principles of equity, inclusivity, coherence and in accordance with their common but appreciated responsibilities of the States Parties, taking into consideration their social and economic development.” (Your guess is as good as mine as to what that means).
· Granting the WHO greater access to the personal and private data of citizens in its preparation for and response to a health emergency.
· Potentially allowing the WHO to rely on undisclosed sources for information on health emergencies within member states and granting the WHO the authority to declare health emergencies without obtaining verification from the relevant member state.
· Strengthening its ties to universities, government departments, and social media platforms to ensure that messaging which contradicts its perspective is censored. This even though much of what was deemed “misinformation and disinformation” by the WHO in 2020 is now accepted as fact.
The WHO has also suggested that it should be able to make recommendations to member states with respect to international travel, including the following:
· “require proof of vaccination or other prophylaxis”
· “require vaccination or other prophylaxis”
· “place suspect persons under public health observation”
· “implement quarantine or health measures for suspect persons”
These are sweeping, draconian proposals that, if implemented, could take us further down the totalitarian rabbit-hole.
These amendments are a power-grab, plain and simple. We must raise our collective voices on this issue, or suffer the fate of being ruled by unelected and unaccountable health “experts” with questionable ties to big pharma and foreign adverse interests such as the CCP."
Yours sincerely,
Senator Alex Antic
SOLAR PANELS OF WOOD – BELIEVE IT OR NOT: Some readers objected to this statement made in last week’s article “Green Energy is Not so Green”: “Do you think solar panels are “Green”? Think again. There is nothing green about solar panels. Did you know we clear cut forests, not for panel placement but for the wood needed to produce the panels."
It would appear that such a statement is self-evidently incorrect. However a reader sent this to BOOM:
"It is hard to believe but Solar Panel glass can be made from wood. Researchers at Stockholm’s KTH Royal Institute of Technology have created an alternative to conventional tempered glass used for solar panels. The alternative is made from wood, believe it or not. Wood-based glass involves chemically removing lignin – a brown organic substance binding the cells, fibres and vessels of plant material. When the lignin is removed, the wood becomes beautifully white. But the “glass” can then be rendered “hazy” which is perfect for solar panels. Professor Lars Berglund, from the Wallenberg Wood Science Centre, claims that wood is a good base material for solar panel glass as it is low-cost, readily available and a renewable resource."
In economics, things work until they don’t. Until next week. Make your own conclusions, do your own research. BOOM does not offer investment advice.
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The Fed has tamped inflation down but there are headwinds arriving from labor shortages needing higher compensation. The consumer doesn't see much decline with food, fuel and rents increasing faster than the CPI suggests. That pushes the need for more pay with hopes that spiral can be restrained.
I worry that Russian fuel production will decline as a result of poor maintenance and China returning to work increasing demand as supplies are reduced. The Fed eased a little to see if earlier hikes have been adequate given the lag in effects. I still think they will be happy with 5% rather than 2% until some government spending can get resolved. US future obligations remain an issue but not sure what that means for the UK or EU. I suspect unfunded pensions remain an issue everywhere.
The WHO is way in front of their skis. Hope they can be restrained by wiser heads. The power grab seems insane. WHO do they think they are? Quite agree the experts have really mucked things up and need to be held to account as we emerge from a nightmare.