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March 20: Food Shortages, China Encourages Collapse Of Dollar, Inflation To Get Worse (Recap ep167)

In this week’s recap, Marcello talks about how the ongoing conflict between Russia and Ukraine is going to affect the surge of supplies to harvest and produce food; Saudi Arabia is now in talks with China to create yuan-priced oil contracts, which will discourage the use of US dollars, thus worsening inflation.

The Labor Department stated Tuesday that wholesale inflation in the U.S. shot up +10% last month from a year earlier in another sign that inflationary pressures remain intense at all levels of the economy. Producer price index rose 0.8% from December, in line with forecasts. Excluding volatile food & energy prices, wholesale inflation rose +0.2% from January & +8.4% from February 2021.
U.S. Federal Reserve Wednesday increased its baseline interest rate range, launching the 1st in may be a series of rate hikes this year meant to fight inflation. The federal funds rate will go up by 0.25% to a range of 0.25% to 0.50%. The federal funds rate is the benchmark interest rate banks charge on loans to each other & is used to set borrowing costs on credit cards, automobile loans & mortgages. Officials signaled for months they would hike rates & begin pulling back simulative interest rates in March.
Talks with China over yuan-priced oil contracts have been ongoing for 6 years, but have accelerated this year as the Saudis have grown increasingly unhappy with longstanding U.S. security guarantees to defend the kingdom. Saudi Arabia is now in active talks with China to price some of its oil sales to China in yuan, a move that will begin the end of U.S. dollar’s dominance as a global reserve currency of the world petroleum market & marking another shift by the world’s top crude exporter toward Asia.
Major banks in Russia report a surge in demand for gold, as citizens rush to invest in bullion & coins to protect their savings. The rise in demand began after Russia invaded Ukraine, in the last week of February & the 1st 2 weeks of March. Russia’s central bank has announced that it is halting its official gold purchases from local banks in order to leave existing inventory for regular consumers.
Argentina’s monthly inflation surged +4.7% in February vs the +4% projected, the state statistics agency said Tuesday, the highest rate since March 2021. The annual inflation rate was already running at over +50% when Russia’s invasion of Ukraine super-charged global commodities costs, a major problem for the government ahead of general elections next year. Prices jumped +8.8% year-to-date & the 12-month rolling inflation at +52.3%.
A strong 7.3 magnitude earthquake struck off the coast of Fukushima in northern Japan Wednesday evening, triggering a tsunami advisory & over 2M homes in the Tokyo area to be without power. The region is part of northern Japan that was devastated by a deadly 9.0 quake & tsunami 11 years ago that also triggered nuclear plant meltdowns, spewing massive radiation that still makes some areas uninhabitable.

Major obstacles still stand in the way of an agreement between Russia and Ukraine; Berkshire Hathaway’s share price reached $500,000 for the first time; China’s industrial production increased 7.5% year-on-year in January and February; China is battling its biggest wave of COVID-19 since the start of the pandemic; Germany completely changes its foreign economic policy towards Russia.

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