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    Goldman Sees Risk Fed Will Tighten at Every Meeting From March

    The Goldman Sachs economists led by Jan Hatzius said in a weekend report to clients that they currently expect interest-rate hikes in March, June, September and December and for the central bank to announce the start of a reduction in its balance sheet in July.But they said inflation pressures mean that the “risks are tilted somewhat to the upside of our baseline,” and there is a chance officials will act “at every meeting until the inflation picture changes.” “This raises the possibility of an additional hike or an earlier balance sheet announcement in May, and of more than four hikes this year,” the economists said. “We could imagine a number of potential triggers for a shift to rate hikes at consecutive meetings.”Chair Jerome Powell and colleagues meet this week amid expectations they will signal a willingness to lift rates from near zero in March.Among potential spurs for even tighter policy would be a further increase in long-term inflation expectations or another surprise on inflation, the Goldman Sachs economists said. They noted they had already been made more concerned about the inflation outlook by the arrival of the omicron variant and continued strength in wage growth.©2022 Bloomberg L.P. More

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    Global wealth: asset inflation decouples rich from GDP

    The world, according to McKinsey, has never been wealthier. Planet Earth, even when wracked by a pandemic and lockdowns, keeps on ringing up the tills. Totting up the value of real assets — buildings, machinery and so forth — and financial assets for 10 of the biggest countries, gives a global balance sheet of $1,540tn.That, says McKinsey Global Institute, an offshoot of the management consultancy, is a fourfold increase on 2000. Net of liabilities this wealth equates to about six times gross domestic product also sharply higher than the multiple of 4.5 times two decades ago.Where has the new wealth come from? Unsurprisingly, the two biggest countries brought in the bulk of the growth in net worth: half from China and almost a quarter from the US. Economist Thomas Piketty is right: at a household level, the rich are getting richer. The top 10 per cent in both countries own more than two-thirds of the wealth. In avowedly capitalist America, the bottom half share out just 1.5 per cent; in China — a country in pursuit of “common prosperity” — the comparable figure was 6 per cent in 2015. Household wealth is split in roughly equal parts, between real estate and financial assets like savings and equities. But there are huge variations: France and Australia favour land and buildings; Americans pensions and equities. The Japanese have never lost their yen for deposits, which account for more than a third of total household assets.Those portfolios have fuelled a rise in net worth in the household sector from 4.2 times GDP in 2000 to 5.8 times last year. Low interest rates and easy money also helped.MGI believes rising asset prices have broken the traditional link between growing GDP and rising net worth. The former has been lacklustre in developed economies. Savings searching value wind up in real estate, two-thirds of net worth.The anticipated end of easy money should help bring GDP and net worth back into closer sync. Signals from falling bond markets and Chinese asset prices point to that realignment. That may be irksome for the wealthy in the short term — but good for them at a political level. Harvesting gains from state economic support is not a popular get-rich-quick strategy, no matter how unintentionally it has been pursued. More

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    Parking Infinity: The First Parking Game on Blockchain. What We Know So Far

    Now, the parking genre is set to return, this time in the crypto world. Parking Infinity is a blockchain game featuring NFTs and the play-to-earn model. So far, only the tokenomics have been established, with Binance Smart Chain acting as the main blockchain. For those who are interested, here’s where you can view the whitepaper. As for the gameplay, nothing has been shown yet, though the developers mentioned several bullet points about it in the same document. They claim that: Players can park cars in parking spaces in different areas and earn unequal income based on the real-time APR of different parking spaces
    The statement is not completely clear though. Moreover, it’s still unknown whether this is going to be an action game, a simulator, or some kind of strategy game with a parking thematic. Personally, I would like to commend the unique idea, and the developer’s bravery to revive the slumbering genre, and using blockchain technology at that. On the other hand, they haven’t exactly made it clear what the game will be like, thus so far, the project seems quite raw. How it will pan out in the end remains to be seen. EMAIL NEWSLETTERJoin to get the flipside of cryptoUpgrade your inbox and get our DailyCoin editors’ picks 1x a week delivered straight to your inbox.[contact-form-7]
    You can always unsubscribe with just 1 click.Continue reading on DailyCoin More

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    Eurozone economic recovery is surviving Omicron wave

    The Omicron variant is causing far less damage to the European economy than previous waves of Covid-19, an FT analysis of high frequency data shows, thanks in large part to high vaccination rates and society’s improved ability to live with the virus.Although infection rates across the eurozone have risen to their highest levels since the pandemic began, cinema ticket sales, hotel bookings, job postings and mobility data have fallen far less than in previous surges caused by the coronavirus.This time last year, visits to shops, bars and restaurants had dropped more than 40 per cent below pre-pandemic levels. This year, by contrast, visits have dropped by less than half that amount, according to Google mobility data.“The economic impact of the pandemic is fading by the wave,” said Bert Colijn, economist at ING. “The relatively high levels of mobility are positive for economic activity.” This is reflected in economists’ growth predictions. Silvia Ardagna, economist at Barclays, forecasts that despite Omicron the bloc’s economy will still have expanded around 0.2 per cent during the last quarter of 2021 and again in the first quarter of this year. She also expects “solid growth in 2022-2023 driven by domestic demand”.There is also little sign that Omicron has significantly hurt the jobs market, according to data from Indeed, a job search website. Eurozone unemployment had already dropped in November to below its pre-pandemic, 2019 average.Unemployment is “going to fall to levels that we haven’t seen before” in the eurozone, said Claus Vistesen, economist at Pantheon Macroeconomics, who expects that tight labour markets combined with economic recovery may boost inflation, which hit a record high for the bloc of 5 per cent in December.Even so, the exponential rise in infection rates has hurt economic activity, as restrictions have forced people to self-isolate and limited public gatherings. That has especially hit consumer services.In the first weekend of January, European cinema revenues in the EU’s four biggest economies were about 20 per cent below the same period in 2020, according to Mojo data, a US website that tracks global box office sales. German restaurant bookings were also 30 per cent lower in mid-January than at the same time in 2019.Likewise, tourism and international travel remain weak. Flight numbers are down 35 per cent compared to 2019’s pre-pandemic rates. Hotel bookings have also fallen back to levels last seen in the spring of 2021, according to Sojert data, a digital marketing platform.Nonetheless, that is a marked improvement on this time last year, when bookings fell by far more.Analysts say one difference with this wave is that restrictions — such as the Covid-19 passes required in countries such as France and Italy to access hospitality and leisure venues — largely target the unvaccinated and those who have not already fallen ill. As they constitute a minority, the rest of the economy can remain open.“Covid cases have risen across Europe, restrictions have been applied and mobility has fallen,” said George Buckley, economist at Nomura. “Still, there are reasons to be optimistic” he added, forecasting a rapid recovery in the spring.Analysts said that another reason for the smaller hit to economic activity this year was that hospitalisation and death rates are rising far less than infections. In 2021, much lower infection rates dragged the eurozone into recession.Jack Allen-Reynolds, economist at Capital Economics, expects “the current wave of infections caused by Omicron will burn out more rapidly than previous waves, allowing restrictions to be eased in February”.Indeed, this week France said it would start to ease Covid-19 restrictions from next month as the wave of infections had peaked in the Paris area and were expected to do the same soon in the rest of the country.Better times are forecast for manufacturers, as well. Daily German data on truck mileage, a proxy for industrial production, has risen above November levels, a signal that China’s zero-Covid policy has not yet affected global manufacturing supply chains.Even if there are supply disruptions, higher inventory levels mean factories should be able to ride out any shortages more easily than before, said Paul Donovan, chief economist of UBS Global Wealth Management.“Overall, Omicron is likely to be a lot less disruptive than previous waves of the pandemic,” he said. “People have learned to adapt and that minimises a lot of the damage.” More

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    Russia and China’s plans for a new world order

    The western alliance has threatened the Kremlin with “massive” and “unprecedented” sanctions if Russia attacks Ukraine. But, as the Ukraine crisis reaches boiling point, western efforts to isolate and punish Russia are likely to be undermined by the support of China — Russia’s giant neighbour. When Vladimir Putin travels to Beijing for the beginning of the Winter Olympics on February 4, the Russian president will meet the leader who has become his most important ally — Xi Jinping of China. In a phone call between Putin and Xi in December, the Chinese leader supported Russia’s demand that Ukraine must never join Nato. A decade ago, such a relationship seemed unlikely: China and Russia were as much rivals as partners. But after a period when both countries have sparred persistently with the US, Xi’s support for Putin reflects a growing identity between the interests and world views of Moscow and Beijing. According to the Chinese media, Xi told Putin that “certain international forces are arbitrarily interfering in the internal affairs of China and Russia, under the guise of democracy and human rights”. As Xi’s remarks to Putin made clear, the Russian and Chinese leaders are united by a belief that the US is plotting to undermine and overthrow their governments. In the heyday of communism, Russia and China supported revolutionary forces around the world. But today Moscow and Beijing have embraced the rhetoric of counter-revolution. When unrest broke out in Kazakhstan recently, Putin accused the US of attempting to sponsor a “colour revolution” — a term given to protest movements that seek to change the government — in a country that borders both Russia and China. Senior Chinese ministers echoed those remarks.Washington’s hidden handAs Russia and China see it, the uprising in Kazakhstan fitted a pattern. The Kremlin has long argued that the US was the hidden hand behind Ukraine’s Maidan uprising of 2013-14, in which a pro-Russian leader was overthrown. China also insists that foreign forces — for which, read the US — were behind the huge Hong Kong protests of 2019, which were eventually ended by a crackdown ordered from Beijing. An estimated 100,000 Russian troops have amassed along Ukraine’s border © APBoth Putin and Xi have also made it clear they believe that America’s ultimate goal is to overthrow the Russian and Chinese governments and that local pro-democracy forces are America’s Trojan horse.In 1917, President Woodrow Wilson of the US talked of “making the world safe for democracy”. In 2022, Putin and Xi are determined to make the world safe for autocracy. The ambitions of Russia and China, however, are far from being wholly defensive. Both Putin and Xi believe that their vulnerability to “colour revolutions” stems from fundamental flaws in the current world order — the combination of institutions, ideas and power structures that determines how global politics plays out. As a result, they share a determination to create a new world order that will better accommodate the interests of Russia and China — as defined by their current leaders.Two features of the current world order that the Russians and the Chinese frequently object to are “unipolarity” and “universality”. Put more simply, they believe that the current arrangements give America too much power — and they are determined to change that.“Unipolarity” means that, after the collapse of the Soviet Union, the world was left with only one superpower — the US. Fyodor Lukyanov, a Russian foreign-policy thinker who is close to President Putin, believes that unipolarity “gave the United States the ability and possibility to do whatever it saw fit on the world stage”. He argues that the new age of American hegemony was ushered in by the Gulf war of 1991 — in which the US assembled a global coalition to drive Saddam Hussein’s Iraq out of Kuwait.The Gulf war was followed by a succession of US-led military interventions around the world — including in Bosnia and Kosovo in the 1990s. Nato’s bombing of Belgrade, Serbia’s capital, in 1999, has long formed part of Russia’s argument that Nato is not a purely defensive alliance. The fact that Nato bombs also struck the Chinese embassy in Belgrade has not been forgotten in Beijing. After the 9/11 terror attacks on New York and Washington, Nato invoked Article 5 — its mutual-defence clause — and invaded Afghanistan. Once again, according to Lukyanov, America had demonstrated its willingness and ability to “forcefully transform the world”. But America’s defeat in Afghanistan, symbolised by the chaotic withdrawal from Kabul in the summer of 2021, has given the Russians hope that the US-led world order is crumbling. Lukyanov argues that the fall of Kabul to the Taliban was “no less historical and symbolic than the fall of the Berlin Wall”.Influential Chinese academics are thinking along similar lines. Yan Xuetong, dean of the school of international relations at Tsinghua University in Beijing (Xi’s alma mater), writes that “China believes that its rise to great-power status entitles it to a new role in world affairs — one that cannot be reconciled with unquestioned US dominance.” Like Lukyanov, Yan believes that “the US-led world order is fading away . . . In its place will come a multipolar order”. President Xi himself has put it even more succinctly with his often repeated claim that “the east is rising and the west is declining”.For Russia and China, the making of a new world order is not simply a matter of raw power. It is also a battle of ideas. While the western liberal tradition promotes the idea of universal human rights, Russian and Chinese thinkers make the argument that different cultural traditions and “civilisations” should be allowed to develop in different ways. Vladislav Surkov, once an influential adviser to Putin, has decried Russia’s “repeated fruitless efforts to become a part of western civilisation”. Instead, according to Surkov, Russia should embrace the idea that it has “absorbed both east and west” and has a “hybrid mentality”. In a similar vein, pro-government thinkers in Beijing argue that a fusion of Confucianism and communism means that China will always be a country that stresses collective rather than individual rights. They claim that China’s success in containing Covid-19 reflects the superiority of the Chinese emphasis on collective action and group rights.Fyodor Lukyanov, right, a foreign-policy thinker close to Putin, believes the collapse of the USSR gave the US permission to do what it liked on the world stage © Mikhail Klimentyev/TASSBeijing and Moscow argue that the current world order is characterised by an American attempt to impose western ideas about democracy and human rights on other countries, if necessary through military intervention. The new world order that Russia and China are demanding would instead be based on distinct spheres of influence. The US would accept Russian and Chinese domination of their neighbourhoods and would abandon its support for democracy or the colour revolutions that might threaten the Putin or Xi regimes.The crisis over Ukraine is a struggle over the future world order because it turns on precisely these issues. For Putin, Ukraine is culturally and politically part of Russia’s sphere of influence. Russia’s security needs should give it the right to veto any Ukrainian desire to join Nato, the western alliance. Moscow also demands to act as the protector of Russian speakers. For the US, these demands violate some basic principles of the current world order — in particular, the right of an independent country to define its own foreign policy and strategic choices. The Ukraine crisis is also about “world order” because it has clear global implications. The US knows that if Russia attacks Ukraine and establishes its own “sphere of influence”, a precedent will be set for China. During the Xi era, China has built military bases all over contested areas of the South China Sea. Beijing’s threats to invade Taiwan — a self-governing democratic island that China regards as a rebel province — have also become more overt and frequent. If Putin succeeds in invading Ukraine, the temptation for Xi to attack Taiwan will rise, as will the domestic pressure on the Chinese leader from excitable nationalists, sensing the end of the American era.Russia and China clearly have similar complaints about the current world order. There are also some important differences between the approaches of Moscow and Beijing. Russia is currently more willing to take military risks than China. But its ultimate goals may be more limited. For the Russians, the use of military force in Syria, Ukraine and elsewhere is a way of repudiating the claim made by former US president Barack Obama that Russia is now no more than a regional power. Dmitri Trenin of the Carnegie Center in Moscow argues that, “For the country’s leaders, Russia is nothing if it is not a great power.” But while Russia aspires to be one of the world’s great powers, China seems to be contemplating displacing the US as the world’s pre-eminent power. Elizabeth Economy, author of a new book called The World According to China, argues that Beijing is aiming for a “radically transformed international order” in which the US is in essence pushed out of the Pacific and becomes merely an Atlantic power. Since the Indo-Pacific is now the core of the global economy, that would essentially leave China as “number one”. Rush Doshi, a China scholar working in the White House, makes a similar argument in his book, The Long Game. Citing various Chinese sources, Doshi makes the case that China is now clearly aiming for American-style global hegemony.A bid for global supremacyThe difference in the scale of the ambitions of China and Russia reflects the difference in their economic potential. Russia’s economy is now roughly the size of Italy’s. Moscow simply does not have the wealth to sustain a bid for global supremacy. By contrast, China is now, by some measures, the world’s largest economy. It is also the world’s largest manufacturer and exporter. Its population of 1.4bn people is roughly ten times that of Russia. As a result, it is realistic for China to aspire to be the most powerful country in the world.But while the differences in the economic potential of Russia and China makes Xi ultimately more ambitious than Putin, in the short term it also makes him more cautious. There is something of a gambler’s desperation in Putin’s willingness to use military force to try to change the balance of power in Europe. Trenin argues that, having seen Nato expand into much of what was once the Soviet bloc, Putin sees Ukraine as his “last stand”. In Beijing, by contrast, there is a strong feeling that time and history are on China’s side. The Chinese also have many economic instruments for expanding their influence that are simply not available to the Russians. A signature project of the Xi years is the Belt and Road Initiative, a vast international programme of Chinese-funded infrastructure that stretches into Central Asia, Africa, Europe and the Americas.

    As America has become more protectionist, China has also used its trading power to expand its global influence. This month has seen the launch of the Regional Comprehensive Economic Partnership, a vast new free-trade area in the Asia-Pacific that includes China and several American strategic allies, such as Japan and Australia — which the US is not taking part in. Granting or withholding access to the Chinese market gives Beijing a tool of influence that is simply not available to Moscow.But will gradualism work? Or do Russia and China need some kind of dramatic moment to create the new world order that they seek?History suggests that new governing systems for the world generally emerge after some kind of seismic political event, such as a major war. Much of the security and institutional architecture of the current world order emerged as the second world war was closing or in its aftermath, when the UN, the World Bank and the IMF were set up and their headquarters were situated in the US. The General Agreement on Tariffs and Trade (Gatt) came into force in 1948. Nato was created in 1949. The US-Japan Security Treaty was signed in 1951. The European Coal and Steel Community, the forerunner of the EU, was also founded in 1951. After the end of the cold war, rival Soviet-backed institutions such as the Warsaw Pact collapsed and Nato and the EU expanded up to the borders of Russia. China joined the World Trade Organization in 2001, the successor to the Gatt.The question now is whether Russia and China’s ambitions for a “new world order” will also need a war to come to fruition. A direct conflict with the US is simply too dangerous in the nuclear era and will not happen unless all sides miscalculate badly (which is always possible). Iranian, Russia and Chinese warships on a military drill in the Indian Ocean last year. Will Russia and China’s ambitions for a ‘new world order’ need a war to come to fruition? © Iranian Army office/AFP/Getty ImagesRussia and China may, however, feel that they will be able to achieve their ambitions through proxy wars. An unopposed Russian victory in Ukraine might signal that a new security order was emerging in Europe, involving a de facto Russian “sphere of influence”. A successful Chinese invasion of Taiwan would be widely read as a sign that the era of American dominance of the Pacific was over. At that point, many countries in the region that currently look to the US for their security, such as Japan and South Korea, might choose to accommodate themselves to a new China-dominated order.Alternatively, a new world order might emerge through tacit acquiescence from Washington. That outcome does not seem likely with the Biden administration in power, unless there are some dramatic last-minute concessions from the US over Ukraine. But Donald Trump could return to the White House in 2024. At least rhetorically, he seems sympathetic to aspects of the Russian-Chinese world view. The former US president sometimes denigrated Nato and suggested that America’s allies in Asia were free-riders. His “America First” philosophy eschewed traditional language about an American mission to support freedom around the world. At times, Trump was also frank in expressing admiration for both Xi and Putin. And, as a self-proclaimed dealmaker, Trump is sympathetic to ideas of spheres of influence. The ever closer Chinese-Russian alliance will ensure the threat to the US-led world order will not disappear any time soon © Greg Baker/AFP/Getty ImagesYet Russia and China do not seem inclined to sit back and wait for Trump to return to the White House. They know that even Trump’s Republican party includes many hawks, intent on confrontation with both Russia and China. In any case, a great deal can happen between now and the next presidential election in November 2024.Russia’s impatience is clear from Putin’s willingness to force a crisis over Ukraine. The prospects for a new world order that is more congenial to Russia may depend on whether his Ukrainian gamble works. But even if Putin fails to achieve his goals in Ukraine, the threat to the US-led world order will not disappear. A rising China, led by an ambitious President Xi, will make sure of that. More