Welcome to your December 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…the Rocket Man creates his own metaverse experience.
A Music Icon Enters the Metaverse
Proving that old dogs can in fact learn new tricks, 75-year-old Sir Elton John has launched a metaverse experience. The Rocket Man has teamed up with Roblox—a popular virtual universe that has attracted the likes of Nike, Walmart, and Ronald McDonald House, among others—to create an immersive experience showcasing his work.
This doesn’t seem like such whizbang news, but it underscores a reality I have been writing about for well over a year now: The metaverse is our future. When we see iconic entertainers and major corporations invading the metaverse, that should serve as an alarm bell in our brains telling us that something consequential is taking shape.
To remind you…the metaverse is basically Web 3.0, a new iteration of the internet that will see it morph from a static 2D experience into an engaging, all-encompassing 3D version in which the web exists all around you. It’s where we will shop, hang out with friends, attend sporting events and concerts, tour museums in cities we can’t afford to travel to, and do so much more.
As Sir Elton said: “As I finish touring, Roblox and the metaverse are perfect for this next stage of my life; it’s a new, innovative way for me to express my love of music, fashion, and the limitless creativity that comes from both.”
He’s got that right. The metaverse is the innovative next stage of life for all of us.
Keeping with crypto technology for a beat longer…
Italy Plans to Use Crypto Tech in Its Banking and Insurance Industries
Italy recently selected a crypto project known as Algorand to support an innovative new platform that will apply blockchain technology to banking and insurance guarantees. The platform is set to launch early next year and will mark the first time a European Union country has used crypto technology in this way.
The guarantees offered by insurance companies are agreements in which an institution pledges to cover losses if a borrower defaults on a loan. Algorand will create a fast, efficient, and low-cost network that will serve to protect insurance companies against fraud by bringing the process onto the blockchain. (Blockchains are decentralized, unhackable digital ledgers that form the basis of all crypto projects.)
This story highlights why I remain so bullish on crypto.
I continue to see stories from big-name observers disparaging crypto as nothing more than a fad, similar to the Beanie Babies boom and bust of the ‘90s. However, the extensive list of governments and global corporate giants moving onto the blockchain proves otherwise.
I mean, Walmart has moved into the metaverse and applied for patents and trademarks on NFT-based products it wants to sell there. Does anyone truly believe Walmart is just having a bit of childish fun spending tens of millions of dollars pursuing this venture? Isn’t it more likely that Walmart realizes that Web3 is where the internet is headed and that this is where the world will be shopping in the not-too-distant future?
There’s a phrase you’ve undoubtedly heard in crime dramas: Follow the money. I apply that same logic in my 40,000-foot analysis of crypto. I follow the money, not the loud talking heads.
When governments like Italy, the U.K. (which is currently looking to develop a digital wallet for citizens to use with a forthcoming digital pound), and others are actively moving into crypto…and when companies like Walmart, Nike, JPMorgan, McDonald’s, among others are investing in NFTs, crypto, and the metaverse…it says more about the future of this technology than the musings of technophobes who spout off about something they don’t understand.
Now, for someone who does know what he’s talking about…
We Are in a New Economic Era: Allianz Chief Adviser
Ezra Klein, at The New York Times, recently posted a podcast in which he chats with Mohamed El-Erian, the chief economic adviser at Allianz and president of Queens’ College, Cambridge.
Back in the day, when I was a scribe at The Wall Street Journal, I occasionally chatted with El-Erian in his former role as chief investment officer at investment firm, PIMCO. I don’t always agree with El-Erian, but I do give him lots of credit for being a deep thinker on investment and economic matters. He’s good at connecting dots, or at least at identifying the dots we should be paying more attention to.
In the podcast, El-Erian explains the signals he sees that indicate we’ve entered a new economic era. He sees “a deeper structural shift in the very nature of the global economy” taking place right now, and it’s going to define the rest of this decade and beyond.
He’s talking about the same trend that I’ve been writing to you about over the last year or so. It’s the idea that inflation is entrenched this time around for reasons well beyond the Federal Reserve’s control…and that the dollar (and, really, most Western currencies) is in trouble because of more than a decade of exceedingly loose monetary policy that was used to paper over weak economies and poor monetary decisions.
His takeaway, reflective of my own, is that “parts of the global financial system [are] at risk of melting down today,” which threatens to domino across the world’s financial and monetary markets. That’s why I continue to believe a fiscal/monetary/debt crisis is probably going to hit the world before the 2030s arrive.
Which brings us to the Fed…
The Fed’s Losing Battle Against Inflation
In a recent newsletter, the Dutch investment-banking giant ING shares some thoughts about the Fed being stuck between a rock and a hard place.
ING rightly notes that even as the Fed continues whistling its off-pitch tune about raising interest rates and keeping them elevated for longer than expected, the reality is that the financial markets are pricing in a recession, while a weakening dollar (which I previously told you to expect) is keeping consumer prices elevated since imported goods are costing more in dollar terms.
I get what the Fed is up to. It wants to crush inflation and return the U.S. economy to an inflation rate of 2%—an entirely arbitrary number that somehow became globally accepted as the correct, healthy figure after New Zealand parliamentarians adopted it in a rushed vote just before Christmas back in 1989.
Yet, in reality, 2% has precisely zero to do with whether an economy is healthy or not. However, the Fed has long been wedded to this number and it’s fighting tooth and nail to get back to it.
That, however, is a problem. The inflation we see today is vastly different than the inflation in the 1970s. Moreover, America’s current debt structure is very different. The Fed cannot apply the same medicine used in the late ‘70s without crushing the American economy. Which is why the Fed’s efforts to pinch off inflation thus far have yielded tepid results. Inflation north of 8% has, after five larger-than-normal rate hikes, only cooled by about one percentage point.
ING expects the Fed to “stick with the hawkish messaging until it is confident inflation is beaten.” And that might well prove true. Personally, I think the Fed is sounding more hawkish than its actions will ultimately reveal. Like an angry father, it needs to sound authoritative in order to bend the markets to its will. But in the end, the markets know the Fed only has so much bite left.
My bet: Rate hikes slow to a more normal 0.25% per Fed meeting until interest rates reach 5%, at which point the Fed stops.
By then, we’re likely to be deep into a recession, and at some point in 2023, the Fed will have to reverse course and start cutting rates again.
Next up, we’re going to sunny Portugal…
Portugal’s Digital Nomad Visa Creates Opportunities for Americans
I write a lot about Portugal in my daily Field Notes dispatches and in my work for International Living magazine.
The country is gorgeous. The food and wine are incredible. And it’s a place my wife and I are now considering for a potential relocation away from Prague. So, I pay attention to stories that pop up about expats in the country.
One that recently popped up centers on a California-based money coach who is moving her life to Portugal to fulfill her dreams of owning a home and preparing more easily for a comfortable retirement.
Delyanne Barros is now in the final stages of moving from San Diego to Portugal’s sunny Algarve region, in the far south of the country. The 40-year-old is using Portugal’s newly introduced digital nomad visa, which allows her to live and work in the country for one to five years, depending on which version she chooses. The one-year version is continually renewable. After five years, Barros will be able to apply for Portuguese citizenship and a Portuguese passport, which is a European Union passport that will give her unfettered access to live, work, and travel anywhere in the 27-member union.
I point out this story because it dovetails with the many other stories about the pocketbook challenges facing increasing numbers of Americans as they save for, or enter retirement. And I’m talking about Americans of all ages—from 20-somethings just starting in the workforce to 60-somethings wondering how they’re going to make ends meet when they hang up their lunch pail for the last time.
Portugal is emerging as one of the very best options thanks to its low cost of living, laidback lifestyle, high-quality medical care, and a tax structure that allows for savers to stash away lots more money than they otherwise could.
I’ve visited Portugal several times—twice this year in fact. And I know why Barros has her eyes set on living in the Algarve. It’s basically a misplaced piece of Southern California…and the move is going to save her a ton of money so that she can better prep for retirement. If you’re interested in learning more about how to relocate to Portugal, I’d encourage you to check out the excellent, practical advice on moving to the country offered by the experts at International Living, if you haven’t already done so.
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.
Thanks for reading and for being a Global Intelligence subscriber. I hope you have a fabulous holiday season.
