ECONOMIC UPDATE: Death of the Dollar Becomes Clearer
When the U.S. Federal Reserve signals an end to rising interest rates, the dollar will decline sharply, which will signal the beginning of the death of the dollar.
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Equity markets in the U.S. are rising as fear of a recession diminishes and corporate profits continue to increase.
But while the expectations for economic growth keep rising, the value of the dollar keeps falling. Sinking to a one-year low on anticipation that the Federal Reserve will, at best (or worst) raise interest rates just another 50 basis points and then start lowering them, last week the dollar had its worst week of the year… and the downward trend line continues.
Not only is a cheaper dollar, which is down some 13 percent from its September high, good news for U.S. companies that export products—because as foreign currencies go up it is cheaper for overseas nations to purchase American goods—when the U.S. companies convert their foreign currencies to dollars they rack up more gains.
On the downside, the deeper the dollar falls, the more it costs Americans to buy foreign products, thus adding another level of inflation to their daily living expenses.
As we have continually forecast, U.S. GDP would increase during the summer months as people are in a summer state of mind. We had noted that they would be spending more in the service sector—travel, restaurants, hotels, etc.—and less on retail items. Today, while economists polled by Dow Jones had forecast retail sales in June would rise 0.5 percent, they increased just 0.2 percent month-over-month.
TREND FORECAST: As we have long forecast, when the U.S. Federal Reserve signals an end to rising interest rates, the dollar will sharply decline and it will signal the beginning of the death of the dollar. And being that gold is dollar-based, as the dollar weakens and foreign currencies rise, gold prices will keep rising since it is cheaper to buy for overseas investors and central banks.
Over There
As we had forecast, when China launched the COVID War in January 2020 during its Lunar New Year, “The Year of the Rat,” and kept the country locked down for some three years with its zero-COVID policy, it would destroy the lives and livelihoods of hundreds of millions.
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Indeed, the damage of the COVID War is truly incalculable: the businesses that have been put out of business that will not come back; the Office Building Bust that has permanently changed a once commuting-to-go-to-work society to a work-at-home culture; all the businesses that depended on commuters that have gone out of business; the mental and physical toll on society… the list goes on.
While we had forecast that because the business of America is war and the business of China is business—the 20th century was the American century and the 21st century would be the Chinese century—Beijing’s three-year COVID lockdowns have dealt a heavy blow to its economy… and it will be many years before it recovers.
The facts are in the numbers. With its real estate crisis worsening, retail sales weakening—up 3.1 percent in June compared to a 12.7 percent rise in May—and exports falling 8.3 percent compared to last year… China’s Gross Domestic Product grew by just 0.8 percent in the second quarter of this year. For the year, China’s GDP is up 6.3 percent, a full point below the 7.3 percent increase that Reuter’s poll had forecast.
Indeed, as we had long noted, when China was officially brought into the World Trade Organization in September 2001, its economy—and especially the real estate sector—boomed… a boom that as with all over speculated sectors is now facing a bust… a bust made worse by its three years of zero-COVID policy.
With consumer confidence far below pre-COVID War levels and consumers holding on to nearly $2 trillion in savings in the first half of this year, indeed they are spending less in the retail and service sector as their cash holdings are up 15 percent compared to last year. Foreseeing a dark economic future, the Global Entrepreneurship Monitor report, as published in The Wall Street Journal, found that in 2022 only 6 percent of “Chinese aged 18 to 64 intended to start businesses within three years, down from 21 percent in 2021 and below the global average of 22 percent.”
As Goes China
In June, China’s exports to the U.S. fell 20 percent compared to last year while sales slumped 17 percent to South Asian nations and were down 13 percent to the EU.
Feeling the global economic pain, last month Taiwan, Vietnam, and South Korea exports fell 23 percent, 11 percent and 6 percent, respectively.
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Beyond the export market, again, the damage done by the COVID War is devastatingly incalculable. With Europe officially in recession, today, a Wall Street Journal front-page article notes that Europeans are facing “a new economic reality” of becoming poorer with “consumption spending in free fall.”
And with real wages adjusted for inflation declining in Germany by 3.5 percent, down 3 percent in Italy and Spain and 6 percent in Greece… purchasing power is in decline. Making a bad situation worse, with their ramping up the Ukraine War and taking defensive positions against China, governments are raising taxes and giving the public less as they increase defense spending.
Office Building Bust
As we have long forecast—since March 2020 when governments began locking down their countries and imposing draconian COVID War mandates such as forcing people to work-from-home—there would be an Office Building Bust. Ignoring our forecast for three years, we made Office Building Bust one of our Top Trends for 2023 since we had noted that this would be the year the mainstream media—and the real estate industry—would begin to realize the dire implications.
Indeed, in San Francisco, the city in America that was/is heavily Geek populated and the first major U.S. city to lock down at the start of the COVID War, the socioeconomic consequences are dire. Among 63 North American cities, San Francisco came in last, with its traffic down 78 percent of pre-COVID War levels according to a University of Toronto study, as reported by the Canadian Press.
And among the top 10 cities, the U.S. office vacancy rates are near 20 percent.
It gets worse.
The U.S. Government Accountability Office (GAO) reported that office buildings that house 24 federal agencies have just 20 percent of employees occupying them each week.