Welcome to your June 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…
Microsoft Wants to Move Finance onto the Blockchain
You very likely know that I’m an unwavering fan of crypto and the blockchain technology that underpins it. The recent bear market in crypto doesn’t overly concern me because I see the vast—vast—upside as Web3 (the emerging, immersive version of the internet built on blockchain technology) replaces the current internet.
From that evolution, a tremendous amount of wealth will be unleashed and will accrue to those who are today’s early adopters.
I’m bolstered in my beliefs by stories such as a recent one in Cryptopolitan—an online crypto news website—that highlighted Microsoft’s new effort at advocating for the development of a financial blockchain. (Blockchain is the unhackable ledger technology that forms the backbone of crypto networks.)
Microsoft’s effort is aimed at bringing together various players within the traditional finance space in order to reduce the cost and increase the efficiency of the current financial system.
By way of example, I recently made some trades in a retirement account, and moving money around took two days. Then, executing the trades required another two days for the purchases to actually clear.
On the blockchain, both of those would have happened within minutes, if not seconds.
As such, we are rapidly heading toward a world in which all stocks and bonds will become digital tokens on a blockchain. Buying and selling will happen instantly. There will be no need to wait two days for trade clearance, which will make the process more efficient for investors, brokerage firms, and market exchanges.
Frankly, we very well could end up in a world where there’s no need for brokerage firms or exchanges like we know them today. Trades could happen in a trustless environment through a decentralized exchange controlled by no one. Costs would plunge. Transaction times would be instantaneous.
In fact, hints of that world are here today.
For a while now, Currency.com has allowed investors to trade more than 1,000 different stocks—Apple, Tesla, Ford, etc.—as tokenized securities on the blockchain. The benefit is that investors can buy as little as $1 worth of Apple or Berkshire Hathaway—rather than having to buy a full share that costs hundreds of dollars.
Soon, this is how all assets will be traded, from stocks and bonds to real estate and art.
Next up… the media finally catches on to a major trend, albeit late as usual.
More and More Americans Are Retiring Overseas
Entrepreneur magazine recently posted a story highlighting the fact that more Americans are retiring abroad, and they’re doing so “without a massive nest egg.”
It’s like Entrepreneur hasn’t been reading anything I’ve been writing for years!
Frankly, the story is barely even superficial. And the data is wrong. The story claims that “at the end of 2021, nearly 450,000 retirees received their Social Security benefits outside the U.S., an uptick from 307,000 in 2008.”
Alas, not entirely accurate…
Social Security Administration data for May 2023 shows that more than 702,000 Social Security recipients are overseas, of which about 455,000 actually receive payments internationally. The remainder are living overseas but are collecting their Social Security checks through direct deposit into U.S. banks.
Back when I first started writing about this issue in 2011 or 2012, those numbers were in the 500,000 to 600,000 range. So, data flub aside, at least Entrepreneur is on the right scent, because it’s clear that increasing numbers of Americans are bidding adieu to Uncle Sam in retirement and launching new adventures abroad.
And the real crux of the Entrepreneur story highlights a point I’ve long made: Retiring abroad is not expensive and, in fact, is a great way to actually save money.
Indeed, Entrepreneur quotes a Wall Street Journal story that itself quotes several retirees who made the leap from America to Portugal and Spain. Their savings levels ranged from just $70,000 up to $1.8 million. At the low end, that’s not nearly enough money for a rich and fulfilling retirement in America.
But in the many countries I’ve visited around the world, Social Security alone will cover monthly costs, meaning a nest egg as small as $70,000 is a meaningfully large buffer a retiree may never need to touch.
So, kudos to Entrepreneur (and my old employer, The Wall Street Journal) for picking up on a trend that is increasingly defining retirement Americana. Those publications are late to the party, but at least they made it.
Remaining outside the U.S. for a beat longer…
King Dollar Is Losing its Crown… Spelling Trouble for the U.S.
I’ve been writing to you for many months now about a potentially disastrous trend for America and her currency: The move by China and Russia to form a new global reserve currency that would challenge the dollar’s dominance. (Full details in your January issue here.)
Clearly that idea resonates with an increasing number of countries as a backlash brews against the dollar hegemony America has enjoyed for nearly eight decades now. A chart in the above linked story tells a sad tale for the greenback.
Since 2000, usage of the dollar as a reserve currency has fallen sharply, down to less than 60% from more than 70%. And it’s primed to fall farther as an increasing number of countries opt to abandon the dollar as the global currency of trade and adopt their own currencies.
Brazil and China are now transacting with each other in their own currencies on a limited basis. So too are South Korea and Indonesia… as are India and Malaysia. Even France is now conducting some trade with China directly in yuan.
Overall, this is bad news for Americans, though I believe most will fail to grasp the impact this sea change promises to have on their lives.
As these countries conduct trade between each other in non-dollar currencies, there will be reduced demand for dollars, which due to supply and demand, means the price for dollars versus other world currencies must fall.
Falling dollar prices means the prices for every imported good must rise, thereby creating near-permanent inflation in America. And it means reduced demand for U.S. Treasury debt, which Uncle Sam absolutely must sell in order to keep the lights on at home.
To sell enough debt, the U.S. will have to offer higher interest rates… raising the cost of servicing America’s current debt, which means having to sell more and more debt just to pay the higher interest payments on existing debt.
Put simply, America is spiraling toward an ugly monetary crisis later this decade.
And, sadly, it’s a self-inflicted wound.
Because the dollar has long been the currency of global trade and finance, America has used the greenback as a weapon against countries and political regimes it wants to change. That has angered the world—and the world is responding by collectively saying, “We don’t need your money!”
This is going to end in a very ugly crisis for America. If you don’t own gold, you should rethink that position. If you do own gold… buy more.
Let’s keep with this pending dollar disaster for a moment…
The End of the “Petrodollar” Era
As I noted above, the world has relied on the dollar as the lubricant of global trade since just after World War II, when the Bretton Woods accord of 1944 established the greenback as the world’s only reserve currency.
Spinning out of that, the dollar in the 1970s emerged as the only currency used in the global oil trade. That’s when oil giant Saudi Arabia effectively created the so-called “petrodollar” by agreeing to only accept dollars for the oil the country pumped from beneath its sands… no matter which country was buying it.
Now, however, a movement is afoot in Saudi Arabia and neighboring United Arab Emirates to begin pricing oil in yuan as well as dollars. An op-ed in Eurasia Review points to exactly what this arrangement would mean to the U.S. dollar if this comes about.
In short… pain on the home front for America.
The world consumes more than 100 million barrels of oil per day. As I write this, a barrel of oil is priced in the $70 range. That’s about $7 billion per day in demand for U.S. dollars.
That is all very rough, of course, since countries have reserve supplies of oil they can call upon, and they’re not necessarily buying oil daily. Still, it serves the broader point that the world spends a vast amount of dollars buying oil.
If the Saudis and the Emiratis decide to start pricing oil in yuan, then some level of demand for dollars goes away as countries start paying for the oil they need by using China’s currency.
Again, we end up in the same situation as above: As demand for dollars declines globally, the impacts ripple across the American economy and the American household. A weaker dollar means higher oil prices in America—not to mention higher gasoline prices at the pump—along with higher interest rates on mortgages, credit cards, home-equity lines of credits, and auto leases.
To be clear, this is a different form of attack on the greenback. The rise of a China/Russia-based reserve currency is focused on reducing the dollar’s role in global trade for everything from Indian rice to South Korean TVs.
But what the Saudis and the Emiratis are considering specifically reduces the dollar’s relevance to the entire petrochemical market.
This double-pronged attack will change the way the world economy works, and potentially spark a war as the U.S. tries to maintain its preeminent position as top dog, even as a bunch of smaller dogs grow larger and more fearsome with their bite.
Finally, the truth about the strong employment figures…
Is This Economy a “Dead Man Walking”?
The U.S. recently reported another strong employment report, adding some 366,000 jobs to the economy. Cheerleaders crowed, as did the White House. However, maybe it’s not all leprechauns and unicorns beneath the surface.
Widely respected economist David Rosenberg says “Don’t believe the hype! This economy is a dead man walking.”
That link takes you to an hour-long YouTube video, which (though the video is interesting) I know is a bit too long.
So, I will summarize for you.
According to Rosenberg, America is heading for a hard-landing later this year, not the soft-landing—or even “no landing” —that some of the more punch-drunk commentators chirp about.
Rosenberg asserts that “because of hubris [the Federal Reserve will] crush the economy—we haven’t seen the full effects of tightening yet.”
To be clear, I don’t point out Rosenberg’s bearishness because I am down on America. I point it out because I want you to see all sides of the argument over America’s direction going forward. Cheerleaders and naysayers are battling it out in the media these days, and there are solid arguments on either side of the fight.
Yes, 366,000 jobs is a strong number that would seem to say America’s economy is steaming along brilliantly… but when the bulk of those jobs are lower-wage service sector jobs, so how strong is that number really?
Yes, Wall Street is happy with the economic data. The S&P 500 has risen about 10% or so this year… but only five companies are responsible for the bullishness: Apple, Microsoft, Amazon, Nvidia, and Alphabet—the AMANA stocks.
That quintet is up a combined 56% this year. Without them, the S&P is up just 1.5% in 2023—decidedly milquetoast, really.
What I’m saying is, beware the glad tidings of this economy.
The leprechauns are just illusions, and the unicorns are ponies with an ice cream cone taped to their head.
Which brings me back to a point I made above: Make sure your portfolio is insulated from any potential trouble ahead by owning gold, bitcoin, and safe-haven foreign currencies like the Swiss franc.
And with that, we’ve reached the end of this month’s Wire. If you have any feedback or topics you’d like me to address in a future issue, you can reach me through the contact form on the Global Intelligence website.
Thanks for reading and for being a Global Intelligence subscriber.
