Tag: Global Economy

Ep. 622 – Empty Stomachs Bring Revolutions

The Kapital News
The Kapital News
Ep. 622 - Empty Stomachs Bring Revolutions
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The FAO Food Price Index report for February 2022 was recently released and it has hit a new all-time high. The previous high was back in February of 2011 – which was also the beginning of the Arab Spring. Coincidentally, oil prices are back to 2011 levels as well. The cause of increase in world food prices is multi-faceted. There is of course the major fiscal and monetary policies that were implemented over the past two years and continue to this day – their very actions are inflationary by definition. Global supply chain disruptions persist adding chokepoints and contributing to upward price pressures. Growing conditions and crop production is also of concern – the FAO cites issues with corn production in Argentina and Brazil. Corn is not just used for human consumption, but also for livestock and ethanol – thus contributing to further downstream price increases. Lastly, the uncertainties that exist due to the Russia-Ukraine conflict. These two nations account for 25 percent of global wheat production and 20 percent of global corn production. Ukraine exports the bulk of their exports to Asian and Middle Eastern nations – as such, the stage is set for a redux of the Arab Spring – as bread is a main staple of the diet in the region. The conflict is also leading to some countries beginning to hoard their food production and limit or halt entirely the export of foodstuffs – Hungary just halted all grain exports. Other countries may very well follow suit and others, such as China, may go on a buying binge to obtain and store as much as possible in fear of continued rising prices – which if happens, such buying will continue to put upward price pressure on agricultural commodities. Further, in retaliation to economic and financial sanctions that have been placed on Russia, President Putin is retaliating by telling Russian fertilizer firms to stop exporting their products. This will have huge ramifications as Russia and Belarus, an ally of Russia, are two of the world’s top producers and exporters of fertilizers. In addition to this, natural gas prices have been rising, which is an input good and thus a cost to manufacturing fertilizers. It is easy to connect the dots and realize that higher food prices are likely the norm for the foreseeable future.

US gasoline prices are now averaging over $4 per gallon, a level not seen since 2008. The price increase is also the largest increase over a 10-day period, where the prior 10-day record high occurred following Hurricane Katrina in 2005. Transportation costs have already been on the move higher through the pandemic and rising fuel prices will only exacerbate the concerns. Stay diversified, stay vigilant, and stay with The Kapital News. #Inflation #FoodPrices #Revolution #USA #Russia #Ukraine #Gold #Silver #Wheat #Corn #Oil #Commodities #Protests #Liberty #Peace #Stagflation

Ep. 621 – Weekly Wrap Up

The Kapital News
The Kapital News
Ep. 621 - Weekly Wrap Up
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Global markets continue to be rattled by the ongoing conflict between Russia and Ukraine. However, this is the easy scapegoat for what truly ails the markets – easy money. Governments and central banks injected trillions of dollars into the world economy. Their excuse then, and justification for such actions was the pandemic. Now as the pandemic is seemingly coming to an end, they have a boogeyman to blame for supply chain disruptions, higher prices, etc – Russia. It is almost too coincidental, don’t you think? Several major global stock markets have given back all of their pandemic gains. It only takes a few short months, sometimes even weeks, to erase a year or years of gains. This is a direct result of markets having been juiced by cheap money. It wasn’t real. It was a bubble. As such, it can collapse easily and that is what is unfolding now. However, governments, central bankers, and other policymakers are not going to take responsibility for their actions. Thus, they will look for any and all excuses possible. Now, it’s the pandemic and Russia. What will be next?

As is highlighted in today’s podcast, global trade is discussed and how countries the world over will likely engage in hoarding their goods that are typically exported. This past week, Hungary announced that they are stopping the exports of grain products. Russia and Ukraine account for nearly 25 percent of the world’s wheat production and 20 percent of global corn production. Also this week, President Putin of Russia, reached out to fertilizer companies, basically instructing them to slow or stop the export of fertilizers. Russia and Belarus, an ally of Russia, are two of the largest fertilizer producers in the world. If they were to stop exporting, global food prices, which are already at or near all-time highs, will get even higher. Revolutions are fought on empty stomachs. We witnessed the Arab Spring only a decade ago. Rising global food prices were a major factor in that movement. Now with even more debt, higher food prices, a pandemic, and energy prices at levels also not seen for several years, sets the stage for a lot to go wrong in short order. Such protests, riots, strikes, revolutions, should they occur, will only exacerbate the current situation. Further disruptions to supply chains, less production of goods, fewer exports due to restrictions and/or lack of production – all of which translates into higher prices for the basic necessities. Stay diversified, stay vigilant, and stay with The Kapital News. #Commodities #Gold #Silver #Recession #Peace #FoodPrices #Revolution #Protests #Russia #Ukraine #USA #Liberty #Stagflation #Inflation

Ep. 619 – End the Pandemic, Start the War

The Kapital News
The Kapital News
Ep. 619 - End the Pandemic, Start the War
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Out of the frying pan and into the fire. Just when you thought two weeks to end the spread was bad because it turned into two years – now we find ourselves on the doorstep of war. And not war with a small country that we typically after, but one with nukes. Yes, I mean Russia. Today, Russia decided to invade Ukraine and they did so on all fronts. The Russian stock market crashed over 30 percent, the Ruble hit an all-time low against the US dollar, and western nations set into place further sanctions against Russia. The blame game can wait. What we need to know is if this has staying power and if it’s a distraction. A distraction from the pandemic and all the draconian measures that followed. A distraction from a weakening economy being destroyed by inflation. A distraction from financial markets that appear to be ready to buckle under the weight from a decades long artificial intervention. There are many questions to ask, but the most important one may simply be to ask, why? Is this really the best we can do as the human race? Be prepared for the ensuing economic fallout and the political instability that will follow. Stay diversified, stay vigilant, and stay with The Kapital News. #War #Peace #Russia #Ukraine #Gold #Silver #Economy #FoodPrices #Recession #Protests #Revolution

Ep. 618 – The Fed’s Trapped, Here’s Why

The Kapital News
The Kapital News
Ep. 618 - The Fed's Trapped, Here's Why
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Tame inflation or keep the markets up – what to do, what to do? This is the position the Federal Reserve, along with some other major central banks, are contending with. It’s been an open secret for years that the Fed is beholden to the credit and stock market. However, the Fed now finds the economy in an inflationary environment. One way to combat inflation would be to raise interest rates significantly to match or exceed the current rate of inflation, which is at 7.5 percent. Doing so, however, will surely bring down the credit markets and with it the stock market. Yet, not contending with inflation, will only make the inflation that much worse and will last that much longer. Inflation is a regressive and hidden tax that impacts the most economically vulnerable among us the worst. This also ties into massive wealth inequality that is one for the record books. So coupled together with persistent and high inflation along with massive wealth inequality sets the stage for massive political instability, protests, and revolutions, which will be experienced the world over. This is not just a problem for the USA, but for the world. Stay diversified, stay vigilant, and stay with The Kapital News. #Inflation #Stagflation #Recession #Depression #Protests #Revolution #FoodPrices #InterestRates #Liberty #Freedom #Oil #Gold #Silver

Ep. 617 – Inflation Nation

The Kapital News
The Kapital News
Ep. 617 - Inflation Nation
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I step aside for a few months and all hell breaks loose – exactly how I told you it would. Inflation has proven not to be transitory and the solutions that exist to combat inflation are not popular and will bring the entire economy to a screeching halt. Those trillions upon trillions of dollars in fiscal and monetary stimulus came with a price tag – and everyone is now paying that price – inflation! Stay diversified, stay vigilant, and stay with The Kapital News. #Inflation #Stagflation #Recession #Depression #FoodPrices #Oil #Gold #Silver #Liberty #Freedom #Protests #Revolution

Ep. 605 – May Jobs Report

The Kapital News
The Kapital News
Ep. 605 - May Jobs Report
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The official unemployment rate is now 5.8 percent, this is according to the Bureau of Labor Statistics, BLS, as they released the jobs report this morning. For the month of May, 559,000 jobs were added to the roles. This figure was below market expectations, which was looking for a gain of 650,000. Recall that last month, analysts were looking for jobs gains near one million and fell way short of that number. The April figure was revised upward by 12,000 and now stands at 278,000. It would stand to reason that markets would be looking once again for a one million figure or close to it, considering more parts around the country have been re-opening. If one million was good enough for April, then it should have been good enough for May. This was not the case, however, and this was most likely due to the fact that analysts were so far off target in April. And not wanting to make the same mistake twice, they collectively lowered their estimates. It is a joke of an economy and it is a joke of markets. We are in a first world banana republic where the numbers seemingly do not even matter anymore. All that matters is how much central bank liquidity is being thrown into the system. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Inflation #Gold #Silver #Protests #FoodPrices #Revolution #Liberty #USA #Leadership #EndTheFed #bananarepublic #FireCongress #Bailouts #Debt #Spending

Ep. 604 – An Economic Quagmire

The Kapital News
The Kapital News
Ep. 604 - An Economic Quagmire
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From one economic figure to the next, it is never really good enough. At least not for the Federal Reserve and other major central banks to truly begin normalizing their respective balance sheets, let alone even discuss the topic. They are concerned how tapering and/or any subsequent increase to interest rates will impact global equity, bond, and currency markets. And rightly so. The Fed attempted to taper and increase interest rates only a few short years ago and it ended with equity markets dropping nearly 20 percent in the fourth quarter of 2018. The economy and equity markets could not digest a Fed’s balance sheet below $4 trillion or the Federal Funds Rate just north of 2 percent. Fast-forward to a balance sheet near $8 trillion and the FFR at the zero bound, and you can surely see their predicament. Equity and bond prices have been able to increase over this pandemic period for one reason and one reason only and that is due to the major liquidity injections by central banks and federal government programs. Remove these items and prices are nowhere near these levels. Policymakers are trapped, they know it, and they are getting more and more nervous by the day.

Initial jobless claims came in at 385,000 for the week ending 29 May. This is the lowest figure since 14 March of 2020 when the number was 256,000. The number from last week was revised slightly lower by 1,000 to now stand at 405,000. In aggregate, some 15.4 million Americans continue to claim some form of unemployment insurance. This gives a de facto unemployment rate of 11.1 percent. The official unemployment rate is currently 6.1 percent. The May jobs report will be released tomorrow morning by the Bureau of Labor Statistics, BLS, and it will be watched closely by global markets. Analysts are looking for nearly 1 million jobs having been added to the roles for the month of May. A recent report released by ADP has stated that 978,000 private sector jobs were added in the month of May. Recall that last month, expectations were for nearly 1 million job gains for April, however, the official statistic came in at 266,000. Will May be a repeat of April or more in alignment with market forecasts?

The Federal Reserve’s balance sheet has hit another all-time and now currently stands at $7.935 trillion. This is a week-over-week increase of some $32 billion. It is somewhat laughable how the Fed stated only yesterday that they will begin to taper their holdings of corporate bonds, which amount to $14 billion. And even this is supposed to be a process that could take until the end of the year. Meanwhile, they added $32 billion to their balance sheet in one week alone! The Fed also remains committed to their QE policy of purchasing at least $120 billion per month in US Treasuries and mortgage-backed securities. M1 and M2 money stock has also been updated and both currently stand at all-time highs, as of April. Coming in at $18.935 trillion and $20.109 trillion, respectively, really puts things into perspective, especially when considering that M1 was at $4 trillion prior to the pandemic and M2 was at $15.5 trillion. So what exactly did we get for all of this funny money? Because we can assure you that this is no free lunch. Jay Powell, Chair of the Fed is expected to speak tomorrow. Most likely this will be some form of damage control for the jobs report whether the number is good looking or ugly. These markets need continued hand-holding in order to grind higher. Talk about a command and control economy. Land of the free, eh? Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #FoodPrices #Gold #Silver #Protests #Riots #Liberty #USA #Leadership #Revolutions #EndTheFed #bananarepublic #FireCongress #Jobs #Bailouts #Debt

Ep. 601 – Debt Distorts Reality

The Kapital News
The Kapital News
Ep. 601 - Debt Distorts Reality
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With politicians and central bankers attempting to solve or alleviate the impact from the pandemic, they are in actuality making the problem worse. This is because one cannot expect to solve a global debt crisis by adding record amounts of debt onto the system. Furthermore, the massive printing press operation that is being conducted globally does not translate into productivity. Rather, it translates into inflation, which is an increase in the money supply. Sure, printing presses can print currency, but they cannot print productivity, jobs, or innovation. Yet, what will result from all of this, and it is already being felt across the world, are higher prices. Whether it is in energy, commodities, food, housing, transportation, medical expenses, or more, prices are moving up and will likely stay there for some time. The Kapital News believes that we will be entering a period of structural inflation – meaning that the effects of inflation, higher prices, will be sustained due to central bank and federal government policies, supply-chain disruptions, and geopolitical events.

In fact, much of this is already well underway and many smaller nations are suffering from high rates of inflation. This will lead, if it has not already, to political fallout, protests, riots, conflicts, and revolutions. These events will likely first take root in weaker economies, but will make their way to more developed and diversified economies as well. Inflationary policies can greatly distort reality whereby people think that rising asset prices means that there is a strong underlying economy causing such price movements. However, nothing could be further from the truth. It is not a growing economy that is leading to such price increases, but rather a growing money supply. Another way of looking at it, is to say that it is a weakening currency or a devaluing of the US dollar that is causing prices to rise. Meaning it takes more dollars to purchase the same amount of goods because those dollars have been devalued. This does not occur in a strong economy, but rather a weak one.

If one wants to look at some of the distortionary effects of these policies, then look no further than US retail sales. The trend line has been completely decimated. It can be understood when looking at this data series that there would be a downward deviation to retail sales during the GFC and during the pandemic. However, there is a notable difference when comparing these two time periods. In the former, during the GFC, retail sales peaked in late 2007 and did not recover to that peek until early 2011. This makes intuitive sense that it would take awhile to regain the previous trend. Yet, when we review the pandemic, we see a massive drop-off in retail sales, which makes sense given the lockdowns and restrictions. However, we see a huge V-shaped recovery back to where retail sales were prior to the pandemic in only a few short months, and beyond this, we now see retail sales well above the previous trend. In fact, even if we were to remove the GFC and pandemic deviations, we would likely still not be at the high levels we are currently witnessing. Peak sales prior to the pandemic were around $525 billion in early 2020. In March, the most recent data point, now stands at $620 billion. What this data series suggests is that a couple to a few years’ worth of spending has been pulled forward to today! This is all thanks to Uncle Sam spending money that we do not have and the Federal Reserve printing up the money out of thin air like some 3rd world banana republic. In essence, future growth and prosperity has been stolen from the future in order to make today look better than what it actually is. This is the moral of the story on how debt distorts reality. This is completely unsustainable and when the bottom falls out, it will cause tremendous amounts of damage across the spectrum and around the globe.

Initial jobless claims for the week ending 22 May came in at 406,000. This is the lowest figure since the pandemic began and is a continuation of trend with falling claims figures. The prior week saw no change, thus remaining at 466,000. The Pandemic Unemployment Assistance program saw 93,000 filing, thus taking the total to just shy of 500,000. In aggregate, some 15.8 million Americans continue to claim some form of unemployment insurance. This gives us a de facto unemployment rate of 11.4 percent. The official unemployment rate stands at 6.1 percent. The May jobs report will be released on the first Friday in June. The Federal Reserve’s balance sheet came down by $19 billion and now stands at $7.903 trillion. The Fed remains committed to their QE policy whereby they are purchasing at least $120 billion per month in US Treasuries and mortgage-backed securities. Their balance sheet is likely to make new all-time highs on a near weekly basis. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #Jobs #Gold #Silver #FoodPrices #Housing #Debt #Bailouts #Protests #Liberty #USA #Revolution #EndTheFed #bananarepublic #FireCongress #Spending #Commodities

Ep. 600 – A Financial Storm A Brewin’?

The Kapital News
The Kapital News
Ep. 600 - A Financial Storm A Brewin'?
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Global markets have been distorted for a long time, but never before have we witnessed such obvious market manipulation alongside the implementation of distortionary policies. What this ultimately translates into is a system that is over-indebted, over-leveraged, and extremely fragile. It can take the slightest of pin-pricks to burst one bubble after the next. The causes of the bursting of the bubbles are near limitless. They can arise from within the financial and economic systems or they can take the form of an exogenous shock to the system. In any event, one bursting bubble will trigger the bursting of others. The economic, financial, political, and societal fallout will be enormous. In such an event, the blame game and finger pointing will ensue almost immediately.

The reason for today’s discussion is due to the ever-changing and shifting narrative that we hear from the mainstream media and policymakers alike. The Kapital News believes this to be a somewhat coordinated effort to distract the people from the bigger picture. Best to keep the people occupied with circuses than the actual truth of what is actually happening around the globe. In this vein, it is quite evident that the narrative around COVID-19, the Chinese, and their Wuhan laboratory are making headlines. Last year, such connections and questions were not allowed to be asked, otherwise you were labeled a conspiracy theorist. Today, it is front page news. So what shifted? What has changed? While The Kapital News does not specifically know the reasoning or the cause behind the sudden change in narrative, we do question why now and may this be used as part of an excuse as to why markets may breakdown? This is a serious question and it needs to be pondered. Because it may provide the perfect cover for policymakers to put the blame on China, thus deflecting any scrutiny of themselves and the asinine and criminal policies that they have been implementing. There will be more to come on this situation. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #Gold #FoodPrices #Housing #Silver #Debt #Spending #Protests #Liberty #Riots #Leadership #Revolution #EndTheFed #bananarepublic #FireCongress #Bubbles

Ep. 599 – Higher Housing Prices + Lower Sales

The Kapital News
The Kapital News
Ep. 599 - Higher Housing Prices + Lower Sales
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The S&P/Case-Shiller US national and 20-city home price indexes, saw year-over-year increases of 13.2 percent each. These types of increases have not been since either 2013 or prior to the GFC in 2005. Now while mortgage rates have also ticked up with housing prices, they are still near all-time lows. However, due to such rapidity in housing price increases, buyers are stepping away from the market. They simply cannot afford to purchase these homes. Furthermore, builders are reluctant to sign offers from buyers because they are concerned with the rapid rise of construction material costs. Should they sign a deal and then costs continue higher, their margins will take a hit and it could be significant. This in turn reduces sales.

Yet despite all of this, we are constantly told that there is no inflation and that the Federal Reserve continues to purchase $40 billion per month in mortgage-backed securities. These monthly purchases are a part of the Fed’s QE program which came about during the GFC. So let us understand this, the purchasing of MBS during and after the GFC was done because it was an “emergency” due to housing prices falling. Now we have prices at all-time highs and they continue with QE and the purchasing of MBS. How does this make sense? They buy when prices are falling and they buy when prices keep going up. Something does not make sense and it is likely that a massive correction in housing and/or construction materials is on the horizon. However, the Fed will do everything in their power to prevent this from happening or at least cushion the blow. And not only is this an economic story, but also a political and social story because home-ownership is a very emotional topic. So if prices should continue higher and more and more people are priced out of the market, while at the same time also having to contend with rising rents, and other cost increases, then something is likely to break and give way. Expect political movements, protests, and the like because of this reality. Stay diversified, stay vigilant, and stay with The Kapital News. #Housing #Inflation #Gold #Economy #Silver #EndTheFed #bananarepublic #Debt #Liberty #USA #Leadership #Commodities #Protests #FoodPrices #Revolution #FireCongress