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Alasdair Macleod: Inflation, recession, and declining U.S. hegemony
By Alasdair Macleod
GoldMoney, Toronto
Thursday, December 22, 2022
In the distant future we might look back on 2022 and 2023 as pivotal years.
So far we have seen the conflict between America and the two Asian hegemons emerge into the open, leading to a self-inflicted energy crisis on the western alliance. The 40-year trend of declining interest rates has ended, replaced by a new rising trend, the full consequences and duration of which are as yet unknown.
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The Western alliance enters the New Year with increasing fears of recession. Monetary policy makers face an acute dilemma: Do they prioritize inflation of prices by raising interest rates, or do they lean toward yet more monetary stimulation to ensure that financial markets stabilise, their economies do not suffer recession, and government finances are not driven into crisis?
This is the conundrum that will play out in 2023 for the U.S., U.K., E.U., Japan, and others in the alliance camp.
But economic conditions are starkly different in continental Asia.
China is showing the early stages of making an economic comeback. Russia's economy has not been badly damaged by sanctions, as the Western media would have us believe. All members of Asian trade organisations are enjoying the benefits of cheap oil and gas while the Western alliance turns its back on fossil fuels.
The message sent to Saudi Arabia, the Gulf Cooperation Council, and even to OPEC+ is that their future markets are with the Asian hegemons. Predictably, they are all gravitating into this camp. They are abandoning the American-led sphere of influence.
The year 2023 will see the consequences of Saudi Arabia ending the petrodollar. Energy exporters are feeling their way toward new commercial arrangements in a bid to replace yesterday's dollar. There's talk of a new Asian trade settlement currency.
But we can expect oil exports to be offset by inward investment, particularly between Saudi Arabia, the GCC, and China. The most obvious surplus emerging in 2023 is of internationally held dollars, whose use value is set to drop away, leaving it as an empty shell.
It amounts to a perfect storm for the dollar, and all those who sail with it.
Those of us who live long enough to look back on these years are likely to find them to have been pivotal for both currencies and global alliances. They will likely mark the end of Western supremacy and the emergence of a new, Asian economic domination. ...
... For the remainder of the analysis:
https://www.goldmoney.com/research/inflation-recession-and-declining-us-hegemony?gmrefcode=gata
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