- Kitco: War is plunging the West's commodity trade into turmoil
- Degussa: Inflation is one of the main enemies of the investor
- MonetaryMetals: New rules of the global financial economy
Kitco: War is plunging the West's commodity trade into turmoil
21.3.2022
"The war in Ukraine is changing how money works," saysZoltan Pozsar, a Credit Suisse investment strategist and former official at the U.S. Federal Reserve and Treasury.
The current currency system has begun to wobble as G7 countries froze Russia's foreign currency reserves in response to the invasion of Ukraine. According to Pozsar, it is not possible to impose sanctions that would be an effective punishment for Russia without undermining the stability of the West.
Western sanctions target the world's largest commodity producer, which sells almost everything. This has caused chaos, as non-Russian commodities are more expensive. Right now, the ball is in the hands of the Chinese central bank, as it can sell bonds or engage in quantitative easing to buy Russian commodities. The war in Ukraine will increase inflation regardless of how things progress. It will leave the dollar even weaker.
Degussa: Inflation is one of the main enemies of the investor
17.3.2022
The U.S. Federal Reserve has finally raised interest rates by 0.25% and indicated that rates will be increased in the coming months as well. However, it is not certain that the Fed will end its inflation-boosting, loose monetary policy.
Consumer goods price inflation surged by 8% compared to last year. For this reason, the Fed had to show the public that it is still reliable. However, the real interest rate in the United States is still at a record low: -7.7%. Restoring interest rates to normal levels (around 2-3%) could collapse the entire financial system: stock, bond, and real estate prices would plummet, and the losses for investors, companies, and private actors would be enormous. Limiting new investments would also cost jobs. The United States would plunge into a severe recession that would spread to the rest of the world.
Are the Fed and central banks ready to defend the purchasing power of their currencies by cutting production and jobs? Unfortunately, the most likely answer to this is "no," speculates the report's author. They can raise short-term interest rates to reassure investors that inflation is being taken seriously. However, it is very unlikely that inflation will be brought down to 2% in the near future.
The ongoing conflict in Ukraine favors central banks, as they can allow inflation to continue to rise. But this means that both the dollar and the euro will further devalue, and inflation will continue to be one of the main challenges for investors.
Investors can protect their portfolios in several ways. One of them is to buy physical gold and silver, as monetary policy cannot destroy their value and they do not carry default risk. The current economic and political climate is a strong justification for owning gold and silver.
MonetaryMetals: New Rules of the Global Financial Economy
21.3.2022
We are in the midst of the greatest economic paradigm shift of our lives, claimsDavid H. Smith, the analyst of the Morgan Report. Right now, no one knows what the future holds or what kind of journey it will be.
The current paradigm of the global economy, or "operating system," is based on a global and local buying/selling exchange economy. It has been under severe strain due to poor practices, indebtedness, pandemic measures, and increasing sociopolitical movements. Now, the economic turmoil surrounding the war in Ukraine has wiped away the assumptions that previously led to predictability, security, and economic growth.
The world is changing, and everyone now has to figure out the new rules for how to best apply them and what kind of results they can produce. The assumptions of the financial markets are changing rapidly: for example, the price of nickel has risen by 250% in two days, and the value of crude oil futures has approached €118 per barrel. It can be assumed that the prices of nearly all commodities will rise by 15 or even 25 percent.
In summary, the article recommends that now is not the time to wait for the situation to stabilize, but to protect your assets with gold and silver.
Image: Pixabay
