Month: June 2022

The leaders of some of the world’s wealthiest democracies assembled in the Bavarian Alps on Sunday, where the 48th G7 Summit takes place from June 26 to June 28. The summit kicked off with a series of bilateral meetings on Sunday, before the bloc’s leaders will jointly discuss the most pressing global issues on Monday. That includes the Russian invasion of Ukraine, surging food and energy prices, Covid-19, the world economy as well as the climate crisis at a time not short on global challenges.

While the Group of Seven, as the G7 is officially called, still claims a global leadership role, Statista’s Felix Richter notes that some experts are questioning the bloc’s relevance against the backdrop of a rapidly evolving global economy.

In 2018, Jim O’Neill and Alessio Terzi wrote that the G7, “in its current formulation, no longer has a reason to exist, and it should be replaced with a more representative group of countries.”

They called for a revised G7 group, which would replace Germany, France and Italy with a common Eurozone representative, swap Canada for Brazil and most importantly add China and India, making it more representative economically and in population terms without adding more seats to the table.

As the following chart shows, the G7 countries currently represent 43 percent of the world economy, down from nearly 70 percent three decades ago.

You will find more infographics at Statista

In terms of population, the bloc is even less representative with its member countries accounting for less than 10 percent of the world’s people, according to latest estimates from the UN Population Fund (UNFPA).

Despite these numbers, proponents of the G7 think the group still has value.

“It’s sort of a manageable steering group of the West,” Stewart M. Patrick, Senior Fellow in at the Council on Foreign Relations (CFR) says. “They’re a repository, an embodiment of common values and a similar rules-based approach to world order.”

Authored by Jeff Thomas via InternationalMan.com,

Periodically, I’ll encounter someone who has read one of my essays and has decided not to pursue them further, stating, “You’re one of those ‘End of the world’ guys. I can’t be bothered reading the writings of someone who thinks we’re all doomed. I have a more positive outlook than that.”

In actual fact, I agree entirely with his latter two comments. I can’t be bothered reading the thoughts of a writer who says we’re all doomed, either. I, too, have a more positive outlook than that.

My one discrepancy with such comments is that I don’t by any means think that the present state of events will lead to the end of the world, as he assumes.

But then, neither am I naïve enough to think that if I just hope for the best, the powers that be will cease to be parasitical and predatory out of sympathy for me. They will not.

For any serious student of history, one of the great realisations that occurs at some point is that governments are inherently controlling by nature. The more control they have, the more they desire and the more they pursue. After all, governments actually produce nothing. They exist solely upon what they can extract from the people they rule over. Therefore, their personal success is not measured by how well they serve their people, it’s measured by how much they can extract from the people.

And so, it’s a given that all governments will pursue ever-greater levels of power over their minions up to and including the point of total dominance.

It should be said that, on rare occasions, a people will rise up and create a governmental system in which the rights of the individual are paramount. This was true in the creation of the Athenian Republic and the American Constitution, and even the British Magna Carta.

However, these events are quite rare in history and, worse, as soon as they take place, those who gain power do their best to diminish the newly-gained freedoms.

Such freedoms can almost never be destroyed quickly, but, over time and “by slow operations,” as Thomas Jefferson was fond of saying, governments can be counted on to eventually destroy all freedoms.

We’re passing through a period in history in which the process of removing freedoms is nearing completion in many of the world’s foremost jurisdictions. The EU and US, in particular, are leading the way in this effort.

Consequently, it shouldn’t be surprising that some predict “the end of the world.” But, they couldn’t be more incorrect.

Surely, in 1789, the more productive people of France may have felt that the developing French Revolution would culminate in Armageddon. Similarly, in 1917, those who created prosperity in Russia may well have wanted to throw up their hands as the Bolsheviks seized power from the Romanovs.

Whenever a deterioration in rule is underway, as it is once again now, the observer has three choices:

1. Declare the End of the World

There are many people, worldwide, but particularly in the centres of the present deterioration – the EU and US – who feel that, since the situation in their home country is nearing collapse, the entire world must also be falling apart. This is not only a very myopic viewpoint, it’s also quite inaccurate. At any point in civilization in the past 2000 years or more, there have always been empires that were collapsing due to intolerable governmental dominance and there have always concurrently been alternative jurisdictions where the level of freedom was greater. In ancient Rome, when Diocletian devalued the currency, raised taxes, increased warfare and set price controls, those people who actually created the economy on a daily basis found themselves in the same boat as Europeans and Americans are finding themselves in, in the 21st century.

It may have seemed like the end of the world, but it was not. Enough producers left Rome and started over again in other locations. Those other locations eventually thrived as a result of the influx of productive people, while Rome atrophied.

2. Turn a Blind Eye

This is less dreary than the above approach, but it is nevertheless just as fruitless. It is, in fact, the most common of reactions – to just “hope for the best.”

It’s tempting to imagine that maybe the government will realise that they’re the only ones benefitting from the destruction of freedom and prosperity and they’ll feel bad and reverse the process. But this clearly will not happen.

It’s also tempting to imagine that maybe it won’t get a whole lot worse and that life, although not all that good at present, might remain tolerable. Again, this is wishful thinking and the odds of it playing out in a positive way are slim indeed.

3. Accept the Truth, But Do Something About It

This, of course, is the hard one. Begin by recognising the truth. If that truth is not palatable, study the situation carefully and, when a reasonably clear understanding has been reached, create an alternative.

When governments enter the final decline stage, an alternative is not always easy to accept. It’s a bit like having a tooth pulled. You want to put it off, but the pain will only get worse if you delay. And so, you trundle off to the dentist unhappily, but, a few weeks after the extraction, you find yourself asking, “Why didn’t I do this sooner?”

To be sure, those who investigate and analyze the present socio-economic-political deterioration do indeed espouse a great deal of gloom, but this should not be confused with doom.

In actual fact, the whole point of shining a light into the gloom is to avoid having it end in doom.

It should be said here that remaining in a country that is tumbling downhill socially, economically and politically is also not the end of the world. It is, however, true that the end result will not exactly be a happy one. If history repeats once again, it’s likely to be quite a miserable one.

Those who undertake the study of the present deterioration must, admittedly, address some pretty depressing eventualities and it would be far easier to just curl up on the sofa with a six-pack and watch the game, but the fact remains: unless the coming problems are investigated and an alternative found, those who sit on the sofa will become the victims of their own lethargy.

Sadly, we live in a period in history in which some of the nations that once held the greatest promise for the world are well on their way to becoming the most tyrannical. If by recognizing that fact, we can pursue better alternatives elsewhere on the globe, as people have done in previous eras. We may actually find that the field of daisies in the image above is still very much in existence, it’s just a bit further afield than it was in years gone by.

And it is absolutely worthy of pursuit.

*  *  *

Unfortunately most people have no idea what really happens when a government goes out of control, let alone how to prepare… The coming economic and political crisis is going to be much worse, much longer, and very different than what we’ve seen in the past. That’s exactly why New York Times best-selling author Doug Casey and his team just released an urgent video. Click here to watch it now.

Believe it or not, with inflation nearing 9%, it turns out that one job simply isn’t good enough to cut it anymore.

At least that was the findings of a new study from Insuranks, that found that 93% of working Americans today have a side hustle. Popular side hustles include Uber, Etsy, DoorDash, and Depop, the report says. 

The study found that 50% of people who had a side hustle were women and 49% were men. It surveyed 1,006 full-time and part-time Americans workers about their side hustles and income, and respondents were 49% female, 49% male, and 2% transgender/non-binary. The age range was 18 to 84, with an average age of 37 years old, the report said. 

The study also found that just as many Americans are working two side hustles as they are one. More than 10% of people included in the study said that they had three side hustles, with some participants even disclosing 4 or 5 different side hustles. 

The study found that taking online surveys and selling items online were the two most popular side hustles. It also found that most Americans are working extra “for something to do and a bit of extra cash”. 44% said they are doing it to make ends meet and cover bills.

The study found that men make about $596/month on average from their side jobs, and women make about $378 on average. 90% of those responded say they enjoy it and 41% said they like it more than their full time job. 

Tellingly, 51% of people surveyed said they are considering taking up an additional side hustle due to inflation:

The study concluded:

Working Americans are dedicating an extra 13 hours per week on average to their side hustle. That’s an average hourly wage of $37. 35% have worked a side hustle for more than three years. 20% have worked their side hustle for two years, and 16% have worked their side hustle for over one year. 26% have had their side hustle for less than a year.

Authored by Lorenz Duchamps via The Epoch Times (emphasis ours),

Health officials across 33 countries have received reports of 920 probable cases of severe acute hepatitis of unknown origin in young children, according to the World Health Organization (WHO).

In a press release on Friday, the health agency said the latest update on the outbreak is an increase of 270 cases since it published data last month that revealed 650 cases of severe acute hepatitis were diagnosed in children between April 5 and May 26.

The majority of the cases are in Europe, totaling 460, with 267 from the United Kingdom alone. About one-third of the probable cases are reported in the United States.

The outbreak was first reported in Britain in April and has since then hit dozens of other countries.

Of the 422 cases in which gender and age-related information are available, close to half occurred in males, with most of them under 6 years of age, according to the report.

The WHO said 45 children with acute hepatitis have required liver transplants, and there have been 18 deaths, most of them occurring in the Americas region.

Researchers have been scrambling to determine the cause of the mysterious rise in severe cases of hepatitis—or liver inflammation—in young children. They have also theorized about a possible link to COVID-19.

In a June 24 risk assessment, the WHO said acute hepatitis at a global level is “currently assessed as moderate,” citing several factors.

• The etiology of this severe acute hepatitis remains unknown and is being investigated;

• Limited epidemiological, laboratory, histopathological and clinical information are currently available to WHO;

• The actual number of cases and the geographical distribution may be underestimated, in part due to the limited enhanced surveillance schemes in place;

• The possible mode of transmission of the etiologic agent(s) has not been determined;

• Although there are no available reports of healthcare-associated infections, human-to-human transmission cannot be ruled out as there have been a few reports of epidemiologically-linked cases.

Probable Causes

Health officials in the United States said infection with adenovirus, a common childhood virus called F41, could be the leading hypothesis for most probable cases.

Adenovirus, a viral infection that usually causes the common cold, was detected in 75 percent of confirmed cases tested in the UK in April, according to the UK Health Security Agency (UKHSA).

“The leading hypotheses remain those which involve adenovirus; however, we continue to investigate the potential role of SARS-CoV-2 and work on ruling out any toxicological component,” the UKHSA stated at the time.

The WHO said preliminary reports indicate that adenovirus remains the most frequently detected pathogen among cases with available data.

In the United States, adenovirus infection was detected in 45 percent of cases, while in European regions, it was found in more than half of cases with available results.

Researchers studying a probable link to the CCP virus detected COVID-19 in 15 percent of hepatitis cases of unknown origin in European regions and 10 percent in the United States, according to the WHO report.

Health officials with the CDC and WHO have previously said they do not believe COVID-19 vaccines appear to be linked to the hepatitis cases as many of the children who have developed the condition haven’t received the vaccine. They have also ruled out COVID-19 itself as a cause.

Hepatitis is a term that refers to inflammation of the liver and is generally caused by a viral infection. The viruses hepatitis A, B, and C are commonly associated with the condition, although officials say that liver inflammation can also be caused by long-term or heavy alcohol usage, drug overdoses, prescription drugs, over-the-counter drugs like acetaminophen, and toxins.

Symptoms of hepatitis include jaundice, or the yellowing of the skin or whites of the eyes, as well as nausea, vomiting, diarrhea, dark-colored urine, joint pain, a loss of appetite, fever, and fatigue, according to the Mayo Clinic and other health officials.

A naval mine was found near the second mooring area of the Caspian Pipeline Consortium’s (CPC) Black Sea terminal, according to Bloomberg, citing the facility’s press office and a statement from the port city of Novorossiysk, located on the Black Sea in southern Russia.

The discovery of the sea mine near CPC’s second mooring didn’t shutter operations at the terminal. CPC’s third mooring will continue to operate. Reuters said CPC accounts for “around 1% of global oil trade,” and any disruption at the facility could impact crude oil prices. 

Bloomberg vessel-tracking data shows crude oil tanker “Prometheus Energy” is moored at the terminal. 

Following the discovery of the mine, Novorossiysk has declared a state of emergency in some areas of the Black Sea. It’s believed the mine is from World War II and is expected to be disposed of in the coming days. 

CPC said on June 15 that minesweeping operations at the terminal would begin — there’s no further information on the device’s origins.

Authored by Nick Hubble via FortuneAndFredom.com,

There’s an old adage that central banking is all about having the guts to “take away the punchbowl just when the party gets going”. Unfortunately for history, the man who said it also nicely demonstrated how hard it is to do.

Actually, it’s not very hard at all. You just have to raise interest rates. That’s it.

The challenge is putting up with the burning effigies with your face on them when you do.

Anyway, William McChesney Martin Jr was chairman of the Federal Reserve between 1951 and 1970. So, he had plenty of opportunity to prove his adage. But that’s not how things unfolded.

The year before he took the helm, US inflation sat at 1.26%. The year he took the chair, it soared to 7.88%! That’s almost as high as it is now…

But… that jump was due to the outbreak of the Korean War. And prices soon came right back down.

I wonder if there’s a lesson there for our times…?

Martin stuck around for long enough to get stuck with another war. By 1970 he was dealing with inflation above 5% and Vietnam.

Some argue that the story of US inflation is largely tied to wars.

Why? Because during a war, it’s especially hard to remove the government’s punchbowl. You get accused of a lot of nasty things if you pull away the government’s funding while it’s making the world safe from communism.

Despite Martin’s unimpressive performance in terms of inflation, his adage remains… an adage. And not much has changed.

These days, central banking is all about spiking the punchbowl sufficiently to keep the party going until someone passes out. And then to administer the cure, which happens to be hair of the dog.

But I want to go on a different drug analogy today. Alcohol just doesn’t come close to explaining what central bankers have been up to lately…

And so we’re talking marijuana instead of alcohol. And our question is how high central bankers will manage to get.

The answer is not high enough, and nowhere near high enough to impress prominent marijuana advocate Snoop Dogg.

He’s probably the only central banker out there who could get high enough. However, I had better explain why marijuana is my drug of choice…

The last 40 years of economic policy and financial market action can be understood as a sequence of bubbles and bailouts brought on by central banks. Specifically, they bring on the bubble, and then the bailout too after the inevitable bursting of the said bubble.

It’s always difficult deciding where to begin the explanation of a cycle, but here goes…

The story begins when central bankers are faced with some sort of crisis. They lower interest rates to help the economy and financial markets deal with it. This move gets the next boom going.

But that boom becomes a bubble when the central bankers forget to remove the punchbowl as Martin advised (but failed to do). The bubble eventually overflows into inflation, which makes central bankers tighten rates. This pops the bubble they inflated, triggering the next crisis.

And then central bankers jump back in to save the market with lower interest rates, funding the subsequent bubble, and rounding off the cycle.

That cycle has been repeating since the 1980s. But what is noticeable about it is that it requires a lower peak in interest rates each time to prick the bubble and trigger the crash. And it requires ever lower rates to get the next bubble going again each time.

Alfonso Peccatiello did a better job of explaining this than I can on Twitter:

Peak in Fed Funds before the “something breaks” moment:

2000: 6.50% (Dot-Com)

2008: 5.25% (Real Estate)

2018: 2.50% (Credit/Risk Sentiment)

2023: 4.00% priced in

And indeed quite a few things are breaking already.

So, when bonds?

Source: Alf @MacroAlf

Alfonso only mentioned the last few bubbles which popped, and the peak in interest rates that popped them going back to 2000. The same story applies right back to 1980, but nobody remembers the Asian Financial Crisis (1997-8) or the Savings and Loan Crisis (late 1980s).

But the crucial point is that it takes ever lower interest rate increases to pop the bubble. The reason why is simple. The more debt, the less rate hikes it takes to dish out the equivalent amount of pain. As borrowers are finding out right now…

Another metric to consider is the low starting base. This was wonderfully explained by the most high-profile victim of the current rate hiking cycle, Cathie Wood, who invests other people’s money in tech companies:

Volcker doubled the Fed funds from 10% to 20% in less than a year. Powell’s Fed has increased the funds rate 7-fold in the last year and is pointing to another double from here. Its moves already are more draconian than Volcker’s.

Source: @CathieDWood

As I recently pointed out to the real estate agents trying to sell me a house, central banks have raised interest rates by an order of magnitude. Of course, this is only true because the starting base was so ridiculously low.

From 0.1% to 1% is a ten-fold increase, for example. Which only sounds exciting because 0.1% is so low.

And yet, there is some truth to the story too. People who borrowed at ridiculously low rates do feel that surge as rates rise in multiples. That is especially true for interest-only borrowers. Like companies and governments that never repay their debt, they just keep borrowing more to repay old debt as it comes due.

Anyway, more debt and a low base means that the pain of monetary policy is felt more acutely. Therefore, it doesn’t take as much of a rate hike to pop the bubble.

Now, and this is what Alfonso was getting at, the financial markets are pricing in interest rate hikes to 4% in the US. This would break the cycle of ever lower interest rates popping the bubble in dramatic fashion. It’d be far higher than what popped bubbles in 2018, triggering the worst stock market plunge to that date since the 2008 meltdown.

Alfonso’s real point is that he doesn’t expect interest rates to ever make it anywhere near 4%. He expects something to pop well before then. If it hasn’t done so already.

If something does implode somewhere in the financial system, (or already has done so, and there is no shortage of contenders for what might implode), then central bankers are likely to panic and return to their old playbook. That playbook involves cutting interest rates and quantitative easing (QE – the creation of money out of thin air to buy bonds). The playbook does not involve what has been happening in the recent past – the increasing of rates and quantitative tightening (the opposite of QE).

This would be good for bonds as an investment. Their prices rise as interest rates fall and central banks start buying them up again.

I agree with Alfonso’s analysis. And I think it’s so likely to play out that way that I’m already wondering what happens to inflation in that scenario.

Usually, in a financial crisis, inflation plunges into deflation, which is why central bankers act big to save us all. At least, that’s what they say.

I suspect they are really interested in saving their future and former employers on Wall Street and in the City – that was the originally intended purpose of central banks, after all.

But this is my really important take-away for you from today’s Fortune & Freedom: The motivations for why central bankers take action during a crisis might suddenly matter a lot. That is because they may be forced to choose between saving the financial system and continuing to hike rates because of inflation.

You see, this time, inflation might not come down much when the bubble pops. That is because inflation is being driven, to a great extent, by shortages and disruptions of various sorts.

The irony of this possible future situation is that, if central bankers do decide to take their official job seriously and prioritise inflation over saving their buddies in the local financial district, then they might be hiking rates to no avail. That is why Snoop Dogg could be as effective as Bank of England governor as anyone else.

You can’t fix a supply crisis with tighter monetary policy after all. But you can make it worse…