FED Will Cut by July
Hyper-globalization is the period that I define as the era of the fall of the Berlin Wall, along with the collapse of the Soviet Union. In one fell swoop, the Russians were dumping enormous quantities of cheap commodities onto the world just as the European Union was forming, Chinese urbanization was supplying a stream of never-ending labor to meet the consumer demand, and the internet was getting off the ground.
It could not be better if you wanted it to be, in terms of the catalysts to greater economic expansion.
The abnormal period of perpetual growth and intricate global supply chains was bound to end, though. It’s just not normal for everyone to work together and for countries that have nothing to offer in order to prosper, seemingly without effort.
But end it did.
On the first sign of demographic weakness in 2011, when America’s top geopolitical strategists and experts realized China’s working pool had peaked, Obama was early to point out that America had set its sights on the South China Sea, knowing that if China’s population peak was imminent, then any military expansion they were contemplating had to have been done immediately.
Trump wasn’t any different.
He knew China was racing against the clock and that their window to reach the pinnacle of their achievement was cutting it thin, so he applied maximum pressure.
For a short while, it was working, but the Black Swan that was the Covid-19 pandemic changed everything.
Courtesy: U.S. Global Investors
In front of you is the clearest trend in motion, which is that the economic order of the past 80 years has been eclipsed by a new one, which is seeking to author the rules for the 21st century.
Demographically and economically speaking, the United States is still top dog and possesses a healthy growth in population, but because the baby boomers’ retirement pace is quicker than the speed at which millennials and zoomers can be trained to take over their jobs, we have an acute and set-in-stone labor shortage.
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By definition, it cannot get better, since we can see exactly how many retirees will join the ranks of the pension system and how many working-age people can replace them, and it’s not enough.
BRICS currency bloc now poses a real threat to dollar hegemony for the first time in 80 years, and it doesn’t help that the FED is essentially forced to cut rates between now and July, since the flow of money from the banks to money-market accounts is historic.
The FED can’t cut rates by much, but every time they will, the dollar will weaken and gold will appreciate.
If this was a chess match between the dollar and gold; I’d say gold has taken the dollar’s queen and is zooming in on the king.
It won’t take much to topple the dollar and see some headlines of a dollar bear market.
I will keep saying it: We live in an inflationary world, whether the FED is aggressive or not. All it can do is smooth out the volatility of inflation, but it cannot change these big unstoppable trends.
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