US Peak Inflation — US Covid Health Emergency Renewed — Lawyer King — Swiss Central Bank Record Loss — Argentina-China Currency Swap — China-Australia New Relationship — The Forgotten War [01-15-2023]

Direct from BOOM Finance and Economics at the links below

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THIS WEEK’S EDITORIAL

MORE SUPPORT FOR PEAK US CPI INFLATION:  Last week, more data was released indicating that the peak of CPI inflation in the United States is now in the past. The evidence presented was the release of US Core Consumer Prices which showed a rise of 5.7% from a year earlier, compared to a 6.0% rise in the prior month. Core Consumer Prices exclude volatile items such as food and energy.

As a result, BOOM’s hypothesis of falling CPI inflation as indicated by weak consumer demand inside the United States remains intact. Positive price action in the stock and bond markets continues to confirm the hypothesis as do other fundamental economic indicators.

In last week’s editorial, BOOM pointed out that US Natural Gas prices plunged by over 17% in the previous week of trading. That trend has continued with a further 7.84% fall this week. These are extraordinary price declines. Reuters has reported that excessive supply is the cause but BOOM suspects a dramatic drop in demand as well.

Consumer spending accounts for about two-thirds of domestic final spending in the US. It is the primary engine that drives future economic growth. Thus, it is critical to watch what the US consumer is doing.

The next data release for US personal spending for December will be released on 27th January by the US Bureau of Economic Analysis. BOOM has previously suggested marking that date in your diary.

Retail sales numbers for December MoM will be released next Wednesday on 18th January as will retail sales excluding automobiles. Retail sales Year-on-Year for end of December will also be released. Weak numbers for December will support BOOM’s hypothesis.

US HEALTH EMERGENCY RENEWED:  Despite the good news on the CPI inflation front, a dark cloud has again descended upon the US. Last week, Xavier Becerra, the head of the US Department of Health and Human Services (HHS) again extended the Public Health Emergency for Coronavirus for yet another 90 days.

This “emergency” has now been in place for over 3 years — since 27th January 2020 — despite the fact that the President himself recently said on national television that “the pandemic is over”. In fact, his exact words were — “the pandemic is over. If you notice, no one’s wearing masks. Everybody seems to be in pretty good shape.”

However, it is now arguable that the President is no longer the Chief Executive of America. Xavier Becerra is in charge and is effectively a dictator because he and he alone has the sole power to continue this “emergency” every 90 days.

Let’s consider the facts. The data website, Worldometers, indicates that there are approximately 2 million “active cases” of Covid currently in existence in the US. Let’s be brutally frank, that does not mean that 2 million Americans are seriously sick with Covid. They have simply recorded a positive test result. Many, if not most, will have almost no symptoms. The current “case” number is just 0.6% of the total population of the United States with perhaps 0.1% being seriously ill.

BOOM must ask the question. How can 0.6% returning a positive test result and 0.1% being seriously ill be interpreted as a national “Public Health Emergency”? Ask Xavier Becerra.

Again according to Worldometers, over 100 Million Americans have had the SARS CoV2 Corona virus over the last 3 years and recovered fully, most without any active treatment. So where is the “Public Health Emergency”?

THE LAWYER KING:  Xavier Becerra graduated in Law in 1984 and was admitted to the State Bar of California in 1985. For a short time, he worked in community legal aid. However, in 1986, he became a government employee as an administrative assistant for a Democrat California state senator. He was then appointed as the Deputy Attorney General of California while still below the age of 30 years.

In 1990, at the age 32 years, he became a politician. For 2 years, he was a member of the California State Assembly but then moved to the House of Representatives in Washington DC for the next 24 years. In 2017, he became the 33rd Attorney General for California. Four years later, in March 2021, he returned to Washington DC as the 25th Secretary of Health and Human Services, appointed by Joe Biden and taking over from Alex Azar.

BOOM has looked hard at Xavier Becerra’s career but cannot find any knowledge or experience in the areas of health or human services. So, it is clear that he was not appointed because of his expertise. However, he is now the effective health dictator of the United States.

Every 90 days, he gets to decide whether or not to extend the Coronavirus emergency or to institute another one from any other perceived health threat. For example, on November 2nd last year, he extended the Public Health Emergency concerning the “outbreak” of Monkeypox. That disease has caused a grand total of 21 deaths in the US since it began in June 2022. It was declared by Becerra for the first time on August 2, 2022.

BOOM doesn’t quite understand why it continues to be declared as the cause of a national health emergency when so far there have been just 80 deaths from the disease throughout the entire planet which contains 8,000 Million people. Hardly a cause for any great concern but the US national health “emergency” persists because Becerra perceives it so.

On December 22nd, last year, Becerra also extended the Public Health Emergency concerning the Opioid crisis in America. So there are three crises running concurrently in the US at present.

There is nothing to stop the declaration of further crises at the whim of the Secretary of the HHS. He could declare an emergency for the consequences of alcohol consumption, or for the consequences of obesity, or for the consequences of heart disease, or for the consequences of climate change. Whatever.

You get the drift. And remember, those “emergencies” hand a great deal of power to the unelected head of the HHS to do almost whatever he wishes in the circumstances with no formal oversight.

Is this a functioning Democracy? Is Congress aware of this level of unelected executive power being in the hands of the head of the HHS Department? BOOM suspects not to both questions. If the US is no longer a Democracy, then what is it?

Becerra’s statement last week — Quote: “As a result of the continued consequences of the Coronavirus Disease 2019 (COVID-19) pandemic, on this date and after consultation with public health officials as necessary, I, Xavier Becerra, Secretary of Health and Human Services, pursuant to the authority vested in me under section 319 of the Public Health Service Act, do hereby renew, effective January 11, 2023, the January 31, 2020, determination by former Secretary Alex M. Azar II, that he previously renewed on April 21, 2020, July 23, 2020, October 2, 2020, and January 7, 2021, and that I renewed on April 15, 2021, July 19, 2021, October 15, 2021, January 14, 2022, April 12, 2022, July 15, 2022, and October 13, 2022, that a public health emergency exists and has existed since January 27, 2020, nationwide.”

SWISS CENTRAL BANK LOSS:  The Swiss Central Bank, which is called the Swiss National Bank, is also commonly called the World’s largest Hedge Fund. It has bought a huge portfolio of stocks and bonds over the last few years in order to keep the Swiss Franc from rising. As a result, it has now registered a record loss of US$143 Billion on the value of its assets under management AUM.

This is the biggest loss ever in the bank’s 116 year history. The 2022 loss means the Swiss National Bank will not distribute any profits to its owners as dividends. The owners are the Federal government and regional Swiss Cantonal governments. It will be only the second time since its establishment in 1906 that it has not paid its usual dividend pay-out. Last year, it paid a dividend of US$6.5 Billion.

It looks like the SNB will go down in history as the least successful Hedge Fund in history. To make matters worse, there are reports that they are going to begin selling down their asset portfolio just as the US asset markets are set to recover. Perhaps they need to consult with BOOM about this?

ARGENTINA-CHINA CURRENCY SWAP:  Argentina’s second largest trading partner is China. Last week, its central bank announced a large Currency Swap deal between the two nations. The deal will allow Argentinian importers and exporters to use or accept Chinese Yuan as payment to settle trades between the nations or, vice versa, for China to use the Argentinian currency likewise.

This is yet another small step towards a multi-polar currency world of trade settlements which will eventually avoid the use of the US Dollar as the dominant currency of settlement. From little things, big things grow. The swap is reported to be of the order of US$24 Billion equivalent.

CHINA-AUSTRALIA NEW RELATIONSHIP:  China and Australia celebrated the 50th anniversary of the establishment of diplomatic ties last month. The relationship between the two nations had soured over the term of the last Australian government, led by Scott Morrison from 2018 to May 2022. However, with the election of a new government, where control has passed to the Australian Labor Party, things have become less antagonistic. This is a welcome change for both nations.

China’s ambassador to Australia, Xiao Qian said in Canberra last Tuesday that it had been a “positive, constructive and productive” period following the election of the Labor government. He said a “new consensus” was being built and indicated that trade discussions were proceeding “in a constructive manner”.  Xiao Qian also said “This relationship is important for both sides and both sides should work together to improve, to uphold and to develop the relationship”.  “There is such a strong complementarity between the two countries,” he said.

THE FORGOTTEN WAR:  The forgotten war in Yemen is nearly 8 years old. Reports from the Eye for Humanity Centre for Rights and Development based in Yemen have stated that the Saudi Arabia-led international coalition destroyed over 14,300 homes, 12 hospitals, 64 schools, and 22 power stations in Yemen over the last year.

This carnage has sadly not been reported in the Western mainstream media who are obsessed only with the war in Ukraine and the “war” against Covid. The Saudi-led coalition has imposed a comprehensive land, sea and air blockade on Yemen since 2015 to prevent the supply of weapons. However, the blockade also prevents the inflow of essential supplies including food and medicines to Yemen, which is heavily dependent on imports.

The United Nations estimated at the end of 2021, that 70% of all the 260,000 casualties of the war were children under five years of age. According to UNICEF, two million children have dropped out of school in Yemen since the conflict began in March 2015. This tragedy rolls on unfortunately while the West’s eyes are drawn towards Ukraine and yet more fear mongering about Covid.

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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BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY: LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans). https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how global banking systems really work.

AND Watch for 4 minutes, this Bank of England explanation: Money is essential to the workings of a modern economy, but its nature has varied substantially over time. This video describes what money is today.

Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models.  EMAIL: gerry{at}boomfinanceandeconomics.com

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