Digest: Uncle Sam May Be Spying on Your Money Transfers

Welcome to your weekly digest…my breakdown of the things we’re thinking about and talking about in the Global Intelligence world. 

First up this week, the government is spying on money transfers. 

This week, details emerged of a little-known government surveillance program that tracks money transfer data. 

The program monitors transfers sent through transmitter businesses like Western Union and MoneyGram. Set up in 2014, it gives federal and local law enforcement officials, including small-town police departments, access to data on more than 150 million money transfers valued at $500 or more between people in the U.S. and more than 20 other countries, all without a warrant. 

The controversial program is used to examine transactions of people in the U.S. for evidence of international money laundering. Domestic transfers above the $500 limit are also captured in the data. 

According to the attorney general of Arizona, where the program was established, the scheme does not violate the right to privacy since “courts have held that customers using money transmitter businesses do not have the same expectation of privacy as traditional banking customers.” 

To me, that’s a cop-out.  

No one using money transmitter businesses is told that their data is captured by the government, nor should they expect that it would be. And the idea that any small-town cop could get access to these records without a warrant—including names, amounts, and transfer times—is deeply disturbing.  

This is part of a worrying pattern in the U.S. You may recall a story I reported on in the October issue of the Global Intelligence Letter about the FBI raiding a safe-deposit box company and refusing to return possessions unless people could prove legitimate ownership of the contents. 

That may not sound so bad, but then who has a receipt for grandma’s gold necklace that she bought in the 1930s and bequeathed to you? 

And does Uncle Sam really need to know that you sent $1,000 to your son via Western Union cause he spent his college rent money on beer?  

There is a war on financial privacy in the U.S.  

Federal agencies increasingly believe that they should enjoy full, unfettered access to all your financial transactions and records, without having to talk to a judge first. 

The next step in this could be the launch of the Digi-Dollar, a crypto-version of our currency that would allow the Federal Reserve—or any government agency, really—to see every financial transaction we make at all times. (Whether that actually happens, and what safeguards are put in place, will depend on a huge privacy fight to come.) 

If this potential future makes you uncomfortable, and it should, then I would recommend a course of action I have taken in my own financial life: Safely and legally storing some wealth offshore by owning gold in overseas vaults and certain foreign currencies. 

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Next up…are we already in a (deep) recession? 

Industrial production in the U.S. fell for the third month in a row in December, dropping 0.7% from the previous month.  

This drop was much larger than expected (the market had forecast a mere 0.1% drop). 

The biggest contribution to the fall came from the manufacturing sector, which saw output fall 1.3% in the month. This followed a 1.1% drop in November.  

A 1-percentage-point drop may seem small, but when we talking about the manufacturing output of the entire U.S. economy, those small changes translate into big drops in sales, employment, corporate earnings, and a host of other variables that we will feel in the stock market and our day-to-day lives. 

Coming on the back of a disappointing retail sales report in December, in which sales fell 1.1%, this is yet further evidence that the Federal Reserve has pushed the economy too far in its bull-headed efforts to tame inflation.  

Which means the Fed will have to halt, and then reverse, its interest rate-hiking policy if it is to stave off a long recession. 

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Finally this week, the incredible see-saw of used car prices… 

When COVID disrupted long-standing global supply chains, secondhand vehicle prices went on their biggest tear in history…jumping 45% from June 2020 to June 2021. 

Now, however, used cars are experiencing a price plunge. 

For the year ending December 2022, prices dove 8.8%. That’s the biggest drop since 2009 amid the global financial crisis.  

Last month, the average price of a used car stood at $29,533, down nearly $1,600 from the record high of $31,095 reached last April, according to data from Edmunds. Meanwhile, the price of used cars that are five years or older is down 15% from their 2022 peaks. 

The turnaround in used car prices is a result of two factors: companies sorting out their supply chains and getting more new cars to dealers, and the Federal Reserve hiking interest rates at the fastest pace in four decades. 

That second factor likely means prices have further to fall from here. 

Dealers are warning that high interest rates are making new car leases unaffordable for many, pushing down demand. 

That means, if you’re in the market for a used car, I’d wait at least another six months, if possible, before making a purchase. 

That brings us to the end of this week’s digest. Many thanks for being a subscriber. And if you have any feedback or questions, reach out through the contact form on the Global Intelligence website. 

Enjoy the rest of your Sunday.