Welcome to your May issue of the Global Intelligence Wire.
This is the monthly digest exclusively for Global Intelligence Lifetime Circle members, in which I cut through the media chatter and highlight five underreported news stories from recent weeks.
First up this month…
America Risks Falling Behind in the Crypto Race
America isn’t just a big country in terms of population, it’s the global leader in all kinds of ways.
Alas, that size and leadership has led to an arrogance that threatens the country’s position in the emerging technology that will define the next several decades. I’m talking, of course, about blockchain tech and the crypto revolution it’s fostering.
While the whole of Europe and individual countries like Singapore are designing forward-thinking policies to embrace a blockchain future, America looks like it’s moving backwards.
A leaked memo reveals the Democrats plan to treat all cryptocurrencies as securities. In doing so, their aim is to essentially derail crypto since it’s a threat to the dollar.
Crypto makes businesses more efficient and allows global transactions to occur in seconds rather than days, and outside the bounds of the U.S. dollar… which is a huge threat to the greenback’s hegemony.
The problem that American politicians like Sen. Elizabeth Warren haven’t yet grasped is that the U.S. is decidedly not the Big Dog when it comes to crypto… it’s the back of the pack.
America is already losing companies and brainpower to the rest of the world as crypto entrepreneurs and developers flee these fruited plains for Europe, Asia, and other locations where governments are not just friendlier to crypto but are outwardly courting this technology.
America could ban crypto, but it cannot ban other countries from using crypto. Which just means America will miss out on the economic opportunities this technology represents.
I mean, imagine if the U.S. had banned the internet. Where would America be today? Where would PayPal and Google and other internet giants be based? Likely Europe, India, Australia, and all over Asia.
Indeed, in the wake of the European Union recently formalizing prudent, pro-crypto rules, the continent has seen an influx of venture-capital dollars to fund crypto businesses.
Like I said—the arrogance of size poses a threat. I don’t think these crypto rules will come to pass. But just in case, maybe someone can share this with Democrat leadership and remind them that schoolyard bullies always end up as life’s biggest losers.
Next up… an opportunity for European citizenship.
Interest in This European Golden Visa Program Is Set to Skyrocket
If you’ve thought about obtaining a passport and second citizenship through one of Europe’s so-called Golden Visa plans, well you might want to turn up the heat on your pursuit…
Wealthy Chinese investors are expected to start pouring tons of money into Greece in pursuit of Greek passports, which are European Union passports that give the holder access to live and work in any of the 27 EU countries.
Golden Visas are essentially a scheme through which foreigners invest a specific sum of money in local real estate or a business and, in turn, are given a residence visa to live locally, or are given an outright passport. These plans have proven incredibly popular in the European countries that offer them.
So popular, in fact, that Portugal and Ireland announced earlier this year that they are killing off their Golden Visa plans. For Portugal, in particular, the Golden Visa program was so successful that it drove real estate prices too high in Lisbon, Porto, and the hugely popular beach communities in the Algarve region along the country’s southern coast.
Because Golden Visa plans are closing elsewhere in Europe, expectations are that Chinese money is going to begin rushing into Greece, where a Golden Visa scheme is still operational.
Which means that if you’re in the market for a European Golden Visa, you might want to get moving on Greece before Chinese money drives up real estate values.
Greece requires a minimum spend of €250,000 ($272,000) on a property, or a combination of properties, to qualify for a Golden Visa. While that number isn’t likely to change soon, the reality is that Greek real estate prices are quite likely to rise as demand for quality properties heats up, and as Greek real estate sellers realize they can price their properties higher because wealthy Chinese investors will pay higher sums simply to get an EU passport.
So, it’s time to act if you want a European Golden Visa.
Moving on to…
Corporate Bankruptcies are Soaring
Many months ago, long before anyone was paying attention, I said that the Federal Reserve’s interest rate mismanagement was going to bash the American economy over the head.
The Fed spent a couple of decades keeping interest rates literally on the floor while also printing bajillions of dollars. Then, as the inflation they helped stoke ticked up, they lost their heads and raced to jack up rates into the stratosphere at the fastest pace in history.
The result: An alarming number of corporate bankruptcies, according to S&P data.
Through April, 236 U.S. corporations have failed… a level not seen since 2010 in the wake of the Great Recession and 2x the level seen during the same period last year.
There is no way this wasn’t to be expected.
American companies—and American families—have used low-rate debt as a crutch over the last 20 years. When debt costs next to nothing, piling it on to buy whatever you want has very little impact.
But when debt is suddenly magnitudes more expensive because of the Federal Reserve’s panicked response to inflation… well, then, the impact on the corporate budget and the family budget is far more painful.
Which is why corporate bankruptcies are soaring… as are personal bankruptcies, which rose 17% in March alone, according to the American Bankruptcy Institute.
Unless the Fed relents, this is going to get a whole lot worse, leading to a significant economic crisis, before it gets better.
Moving on to real estate…
Some States Could Experience Localized Housing Crashes
Real estate has played the role of “good cop, bad cop” in America for the last 20 years.
The early 2000s saw a housing boom that wrongly convinced people that real estate prices only ever go up. And then along came the 2007 real estate crash to disabuse them of that notion.
The COVID pandemic saw real estate prices soar yet again as Americans rushed to expand or improve their nest, or as they dumped property in bigger cities in order to buy property in smaller cities from which they could work remotely.
Alas, prices ran up too quickly and now with the Federal Reserve attempting to destroy the housing market with painfully higher interest rates, U.S. real estate once again is looking precarious.
New research from GoBankingRates.com indicates that the current economic/interest rate environment fosters “conditions that can cause individual states to experience housing crises.”
The site looked at a variety of housing statistics that could indicate a particular state is on the cusp of a potential housing crisis.
I won’t list all the states potentially in trouble—you can read about them in the link above. I will only note that real estate investment is not a cure-all remedy, even in inflationary times. We could (and will) continue to see inflation gnawing at the nation, but that doesn’t mean real estate prices will also rise.
In fact, I’d argue the greater risk is a decrease in prices.
The pandemic gave us years of price advances in a compressed period. And every interest rate hike makes a house increasingly more unaffordable.
A potential buyer has a limited income, and thus a limited amount they can afford in terms of a monthly mortgage payment.
As the interest portion of mortgage payments rise with escalating interest rates, the principal portion has to decrease out of necessity, in order to keep the overall payment within the buyer’s affordability range.
Which means the value of the house that a buyer can afford has to decrease… thus home prices are likely to weaken, not rise amid an inflationary period.
Finally, this month…
The Biggest Rice Shortage in 20 Years Is Driving Inflation Higher
I’ve been saying for many a month now that the Federal Reserve has limited control over the root causes of today’s inflation: war in Ukraine, the green movement that is wrongly insisting on the premature death of fossil fuels, and Mother Nature.
As to the latter, CNBC notes that the global rice shortage the world is now experiencing is “set to be the biggest in 20 years.”
Rice supplies are collapsing from China to the U.S. to the European Union. India, one of the world’s most important rice-growing nations, banned export of certain types of rice a few months ago.
The thing is, rice is the most consumed grain in the world. Export bans and Mother Nature’s meteorological whims have very real impacts on global inflation.
As rice supply shrinks, rice prices rice. But since not everyone can afford the rice they need as prices rise, they must switch to other food products… which causes unexpected demand and pushes up the cost for that commodity.
Like I said, the Fed simply has no control over this. Raising interest rates in America does not flow through to rice supplies in Asia or anywhere else. Mother Nature doesn’t magically realize that rates are up in the U.S. so “I better provide ideal rice-growing weather in China this year!”
Inflation is a long-tailed phenomenon that promises to be with us for many more years. While it has come down in the U.S. in recent months, it’s still more than 2x higher than the Fed’s 2% target rate.
I look to the 1960s and ’70s as the analog to today. Inflation heated up, then cooled slightly, and remained off and on for several years before the real inflation slammed the country in the late ’70s. My bet is that the late 2020s are going to be quite the inflationary period for America.
With that, we’ve reached the end of this month’s Wire. If you have any feedback or any topics you’d like me to address in a future issue, you can reach me through the contact form on the Global Intelligence website.
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