Economists polled by the Wall Street Journal had expected manufacturing to rise to 51.8 in October and for the service sector to rise to 49.7.
Key details: In the service sector, the downturn was fueled by the rising cost of living and tightening financial conditions.
New orders in the manufacturing sector fell back into contraction territory in October. Output remained resilient due to firms eating into backlogs of previously placed orders, S&P Global said.
While price pressures picked up a bit in the service sector, the pace of the gain in inflation in the manufacturing sector was the slowest in almost two years.
Big picture: Talk of a recession sometime in 2023 has picked up in the last week. Many economists are sounding more bearish on the outlook, especially since the Federal Reserve is now seen raising its benchmark rate to 5%. However, on Monday, economists at Goldman Sachs said that talk over a recession was overblown.
What S&P Global said: “The US economic downturn gathered significant momentum in October, while confidence in the outlook also deteriorated sharply,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
“Although price pressures picked up slightly in the service sector due to high food, energy and staff costs, as well as rising borrowing costs, increased competitive forces meant average prices charged for services grew at only a fractionally faster rate. Combined with the easing of price pressures in the goods-producing sector, this adds to evidence that consumer price inflation should cool in coming months,” he added.
LONDON — Rishi Sunak will be appointed U.K. prime minister Tuesday after his last remaining rival Penny Mordaunt dropped out of the Tory leadership contest.
Sunak, the former chancellor, won the public support of almost 200 of his Conservative MP colleagues to succeed Liz Truss, who resigned last Thursday after a chaotic six weeks in office.
It caps a remarkable political comeback for Sunak, who only last month was defeated in a head-to-head leadership contest with Truss and was subsequently excluded from her top team. He faces a formidable in-tray, however, with the U.K. in the grip of an economic crisis, Conservative poll ratings in the doldrums, and the party riven by in-fighting.
“I am humbled and honored,” he said. “It is the greatest privilege of my life to serve.”
Mordaunt, who trailed Sunak in terms of support from her parliamentary colleagues, announced her withdrawal from the contest just as MPs’ nominations closed at 2 p.m. on Monday. Her decision avoids the need for a vote among the wider Conservative Party membership, who would have been balloted this week for a final decision.
“This decision is an historic one and shows, once again, the diversity and talent of our party,” Mordaunt said, hailing the man who will now become the U.K.’s first British-Asian prime minister. “Rishi has my full support.”
Sunak, 42, will become prime minister Tuesday lunchtime after meeting King Charles III. Truss, who remains prime minister until the formal handover of power, will chair her final Cabinet at 10.15 a.m. Tuesday, before making an exit speech on the steps of Downing Street and traveling to Buckingham Palace to make the transfer of power official.
Sunak, who has barely spoken in public since his defeat to Truss was confirmed on September 5, made a brief address to the nation on Monday afternoon, in which he paid tribute to Truss for serving under “exceptionally difficult circumstances” — but warned the U.K. now faces “a profound economic challenge.”
“I pledge that I will serve you with integrity and humility,” he said, “and I will work day in, day out to deliver for the British people.”
Although Sunak faces intense pressure from the opposition Labour Party to call a general election following weeks of political turmoil, under the U.K.’s parliamentary system he will be under no obligation to do so until January 2025, as he now commands the confidence of the largest party in the House of Commons.
Sunak’s coronation also follows a decision by Boris Johnson to pull out of the contest. The former prime minister, who was ousted in July, had been mulling a second tilt at the job after a weekend spent canvassing Tory MPs.
But Johnson said on Sunday evening that it was “not the right time” for him to attempt a comeback and suggested he would not be able to govern effectively without “a unity party in parliament”.
Critic of ‘fairytale’ economics
Sunak was chancellor for over two years following his appointment in February 2020, and steered the U.K. economy through the coronavirus pandemic before resigning in the summer in an act that helped bring down Johnson’s premiership.
He stood in the Tory leadership race that followed but was defeated in a final head-to-head contest with Truss, who secured 57.4 percent of votes from the party grassroots.
Throughout the contest Sunak was a vocal critic of Truss’ controversial economic program, using a live TV debate to tell her: “Borrowing your way out of inflation isn’t a plan, it’s a fairytale.” He warned repeatedly — and presciently — that Truss’ debt-funded tax cuts would push up interest rates and send mortgage payments climbing.
He will now be tasked with turning Conservative Party fortunes after the precipitous drop in the polls that followed Truss’ disastrous economic program — much of which has already been abandoned.
Sunak’s most notable endorsement Monday might have been the drop in gilt yields that followed the announcement he is to take over. But the pound still came under selling pressure after a key economic survey showed a worsening downturn in the U.K.
Labour’s Deputy Leader Angela Rayner said Sunak had been appointed to the U.K.’s top job “without him saying a single word about how he would run the country, and without anyone having the chance to vote.”
She repeated the opposition’s call for a general election, adding: “Rishi Sunak has no mandate and no idea what working people need.”
TOKYO — Global shares were mixed, while Hong Kong’s benchmark plunged 6.4% on Monday as dismay over a lack of fresh policy initiatives from a Chinese Communist Party congress overshadowed a report that the No. 2 economy grew at a faster pace in the last quarter.
The dollar rose to nearly 150 yen, a day after the Japanese central bank reportedly again moved to stem the yen’s decline.
Britain’s FTSE 100 slipped 0.7% to 6,918.15 after former Prime Minister Boris Johnson announced he will not run to lead the Conservative Party. Former Treasury chief Rishi Sunak is now the favorite to replace Liz Truss, who quit last week after her tax-cutting economic package caused turmoil in financial markets.
France’s CAC 40 rose nearly 0.6% in early trading to 6,068.71. Germany’s DAX added 0.6% to 12,807.23. The future for the Dow industrials was down 0.4% and that for the S&P 500 shed 0.5%.
Beijing’s report that the Chinese economy gained momentum in the last quarter was better than expected and up from the previous quarter’s 0.4%, but that was among the slowest expansions in decades as the country wrestled with repeated closures of cities to fight virus outbreaks.
There were no new market-boosting initiatives from the Communist Party congress, where Xi Jinping, the most powerful leader in decades, gained a free hand in setting policy. The ruling party named a seven-member Standing Committee made of Xi’s allies and dropped supporters of free enterprise like Premier Li Keqiang, the party’s No. 2 before the party’s once in five years congress.
Xi wants a bigger Communist Party role in business and technology development. That has prompted warnings tighter control of entrepreneurs who generate jobs and wealth will depress growth that already was in long-term decline.
The 6.4% plunge in Hong Kong’s Hang Seng index, to 15,180.69, took it to its lowest level since 2006.
The Shanghai Composite index shed 2.0% to 2,977.56.
Xi also gave no sign of plans to change the severe “zero-COVID” strategy that has crimped business and trade. He indicated no changes in policies straining relations with Washington and Asian neighbors.
Japan’s benchmark Nikkei 225 added 0.3% to finish at 26,974.90. Australia’s S&P/ASX 200 gained 1.5% to 6,779.40. South Korea’s Kospi gained 1.0% to 2,236.16.
Wall Street ended last week with a broad rally, with technology stocks, retailers and health care companies powering a big share of the gains.
The S&P 500 rose 2.4%, notching a weekly gain of 4.7%, its biggest such gain since June. The Dow climbed 2.5% and the Nasdaq composite added 2.3%. The Russell 2000 index rose 2.2%.
Investors have been focusing on corporate earnings as they search for clues about how inflation and rising interest rates are shaping global economies.
The Federal Reserve is expected to raise interest rates another three-quarters of a percentage point at its meeting in November. That’s triple the size of the Fed’s usual move.
In currency trading, the U.S. dollar rose to 149.28 Japanese yen from 147.65 yen. The Bank of Japan was reported to have intervened Friday to prop up the yen after the dollar rose above the 150 yen level. The dollar fell after the reported intervention but bounced back.
The euro cost 98.25 cents, down from 98.62 cents.
The dollar has gained in strength as the U.S. Federal Reserve has raised interest rates to fight inflation. Its growing strength against the yen and other currencies has added to inflationary pressures in those countries by pushing up the costs of imports and of debt repayments.
In energy trading, benchmark U.S. crude fell $1.32 to $83.73 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, declined to $1.29 to $92.21 a barrel.
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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama
Dubai, UNITED ARAB EMIRATES — In nearly every corner of the globe, people are spending more on food and fuel, rent and transportation.
But inflation isn’t affecting people equally. For migrants with relatives relying on money they send back, higher prices are pinching families twice: at home and abroad.
Migrant workers who send cash to loved ones overseas are often saving less because they’re forced to spend more as prices rise. For some, the only option is hustling harder, working weekends and nights, taking on second jobs. For others, it means cutting back on once-basic things like meat and fruit so they can send what’s left of their savings to family back home, some of whom are struggling with hunger or conflict.
“I used to save something, about $200 weekly. Now, I can barely save $100 per week. I live by the day,” said Carlos Huerta, a 45-year-old from Mexico working as a driver in New York City.
Across the Atlantic, Lissa Jataas, 49, sends about 200 euros ($195) from her desk job in Cyprus to family in the Philippines each month. To save money, she looks for cheaper food at the grocery store and buys clothes from a charity shop.
“It’s about being resilient,” she said.
Economies reeling from the shocks of the COVID-19 pandemic and effects of climate change were hit again by Russia’s war in Ukraine, which sent food and energy prices soaring.
Those costs plunged 71 million more people worldwide into poverty in the weeks following the February invasion, which cut off critical grain shipments from the Black Sea region, according to the United Nations Development Program.
When food and fuel prices shoot up, the money people can send to relatives doesn’t go as far as it once did. The International Monetary Fund estimates that global inflation will peak at 9.5% this year, but in developing countries, it’s much higher.
“Poorer people are spending far more of their income on food and energy,” said Max Lawson, head of inequality policy at anti-poverty organization Oxfam.
He said inflation is “pouring fire” on inequality: “It’s almost like poor people are kind of like a sponge that are meant to absorb the economic shock.”
Mahdi Warsama, 52, came to the U.S. from Somalia as a teenager. An American citizen who works for the nonprofit Somali Parents Autism Network, he sends anywhere from $3,000 to $300 a month to relatives in Somalia, sometimes borrowing money to send what relatives need for medical bills and other emergencies.
Warsama, who splits his time between Columbus, Ohio, and Minneapolis, estimates he sent $1,500 last month to help his relatives pay for necessities like food and water for themselves and their livestock.
Thousands of people have died in a drought gripping Somalia, with the U.N. saying half a million children are at risk of death due to malnutrition or near famine.
“Just as we have inflation in the United States, in Somalia, it’s even worse,” he said, adding that sacks of rice, sugar and flour that once cost $50 are now $70.
He’s changed his spending habits, is looking for ways to earn more and monitors interest rate hikes and inflation — something he never did before this year.
“I am more determined to work harder and make more money,” Warsama said. “I have to be more mindful, the fact that I have to help my relatives back home.”
In New York, Huerta has been living apart from his wife and kids for nearly 20 years, picking up jobs from washing dishes to driving executives — whatever it takes to earn enough.
He said he sends about $200 a week to his wife and mother in Puebla, Mexico. Huerta also learned to paint houses, so if there’s no demand for a chauffeur, he can still earn around $150 a day.
With earnings of about $3,600 a month and rent for his Queens apartment going up, Huerta said he’s switched out steak for chicken, eats less fruit as prices skyrocketed and canceled his cable.
For Jaatas, who has lived in Cyprus for almost two decades, the six relatives she supports in the Philippines are not only facing rising costs but are reeling from the aftermath of a typhoon that knocked out water and electricity.
“We really like to help our family back home regardless of whatever disaster or shortcomings,” she said.
Analysis by the Carnegie Endowment for International Peace says the Philippines is the most food-insecure country in emerging Asia due to its reliance on imported food.
Ester Beatty, who heads a chapter of the European Network of Filipino Diaspora in Cyprus, said it’s common for Filipinos to work Sundays in the Mediterranean island nation as they seek extra income to support relatives back home struggling to afford staples like rice and sugar.
In developing countries, it’s estimated that lower-income families spend over 40% of their household earnings on food even with government subsidies, said Peter Ceretti, an analyst tracking food security at risk advisory firm Eurasia Group.
Ali el-Sayyed Mohammed, 26, came to the United Arab Emirates in February after several years searching for work in Egypt.
“Life is expensive and wages don’t cover enough so I took the step of leaving,” he said. “It was a hard decision at first, but the situation left me with no choice.”
With his father deceased, Mohammed is the family’s breadwinner, supporting three sisters and his mother. He hails from Beheira, a Nile Delta province that has seen many of its young men leave, sometimes embarking on deadly voyages across the Mediterranean Sea in search of work in Europe.
With around $1,000 saved up, Mohammed came to Dubai and crashed with friends until he landed a job at one of the city’s most popular Egyptian restaurants, Hadoota Masreya.
The rising cost of living in Egypt, though, has made his goals of saving enough to help his sister get married next year or secure his own future even harder. Egypt’s inflation has climbed to about 16% as the currency’s value has dropped, making life for millions of Egyptians living in poverty even more difficult.
“I have a lot of staff whose families rely on the income they make from the restaurant and a big portion of their incomes are sent back home so people there can live,” said Mohamed Younis, manager at Hadoota Masreya.
The restaurant recently increased wages to keep up with the rising cost of living, he said.
Younis said growing numbers of Egyptian men are reaching out in search of work. Younis manages a YouTube channel called “Restaurant Clinic” that gives advice in Arabic on succeeding in the restaurant industry. He warns that moving to the UAE comes with risks because finding a job takes time and money.
Back in Minnesota, 36-year-old school bus driver Mohamed Aden says he moonlights as an Uber driver to support his wife, children and siblings who fled Somalia for Kenya due to violence in his homeland.
With no work authorization in Kenya, his family relies on the money he sends — nearly half of his $2,000 in monthly earnings.
But he’s paying more for gas, and food prices are higher in Kenya, so the money doesn’t go as far.
Aden tries to visit Kenya each December during the cold Minnesota winter.
“This year, I can’t because of inflation,” he said. “I’m the only one here, feeding the family … but I will go back when I get the money.”
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Ahmed reported from Minneapolis, Torrens from New York and Hadjicostis from Nicosia, Cyprus.
Arkhom Termpittayapaisith, Thailand’s finance minister, speaks at the meeting of finance ministers of the Asia-Pacific Economic Cooperation in Bangkok on Oct. 20, 2022.
Andre Malerba | Bloomberg | Getty Images
Asian economies are well-equipped to withstand economic headwinds next year, the U.S. Treasury said following the conclusion of the APEC Finance Ministers’ Meeting in Thailand last week.
During the two-day meeting, finance ministers in Asia-Pacific also pledged not to adjust exchange rates for competitive purposes,recognizing that “excessive volatility or disorderly movements in exchange rates can have adverse implications for economic and financial stability.”
Many Asian currencies have crumbled against the U.S. dollar as the Federal Reserve persists with interest rate hikes in an effort to combat inflation. Last week, the Japanese yen weakened past 150 against the U.S. dollar crossing a psychological level for the first time since August 1990.
Despite sluggishness in China and the the diversity of economic strengths among countries, Asia is well placed to tackle downturns ahead, U.S. Deputy Treasury Secretary Wally Adeyemo said during a press conference in Singapore on Friday.
“Ultimately, I have come away from APEC with a sense that the economies in this region have the tools to manage through the headwinds that they face,” Adeyemo said following the APEC meeting.
“Spending time in Asia is the best possible reminder of the vitality of the region’s economy as well as its increasing centrality.”
Adeyemo said in line with the Indo-Pacific Economic Framework, he had used his time in Asia to move toward the U.S.’s goal of being more economically integrated with Asia. He added that U.S. legislation such as the CHIPS Act could help the region generate economic activity.
“Put simply, we are positioning the U.S. to be the preferred economic partner for countries like Singapore and others who have joined IPEF as well as for other economies in the world,” he said.
“Ultimately I have come away from with a sense that the economies in this region have the tools to manage through the headwinds that they face”: Wally Adeyemo
Bloomberg | Bloomberg | Getty Images
On IPEF — the U.S.-led framework for economic and trade matters in the region — Adeyemo said he has had discussions with various countries which have agreed to participate in some of the framework’s four modules of trade, supply chain, clean economy and fair economy.
During the APEC meeting, member countries also agreed to use all available policy tools including monetary, fiscal and structural to manage inflationary pressures, the chair’s statement said.
Some economies acknowledged the importance of improving debt transparency while others pointed to the impact of tightening economic conditions that could lead to debt distress.
This is an opinion editorial by Leon Wankum, one of the first financial economics students to write a thesis about Bitcoin in 2015.
Prologue
This article is the second in a series in which I aim to explain some of the benefits of utilizing bitcoin as a “tool.” The possibilities are endless. I selected three areas where bitcoin has helped me. This article describes how bitcoin has made me more optimistic about the future because it allowed me to efficiently manage my money and build savings. I’ve developed a lower time preference, meaning I value the future more, which leads me to act more mindfully in the present. All of this has had a positive impact on my mental health.
The Horrors Of Inflation
When money loses value, it negatively affects a society. This process can be observed in countries with high inflation. A tragic historical example is the hyperinflation in the Weimar Republic, the government of Germany from 1918 to 1933. Germany lost World War I and was forced to pay massive reparations. Germany then slid into a financial crisis. In order to stimulate the economy and pay the reparation debts, the German national bank, the Reichsbank, printed vast amounts of money. Their money was devalued so massively that people lost all their savings and the country went into an economic crisis. In 1922, a loaf of bread cost around 160 marks, by the end of 1923, it cost 200,000,000,000. By November 1923, one U.S. dollar was worth 4,210,500,000,000 German marks.
As a result of the inflation, Germans went into despair. The population was frustrated, and the resulting inequality led to a rise in populism. Adolf Hitler took advantage of this distress and manipulated the masses into believing that he and his Nazi henchmen could restore Germany to its former glory. His reign in Germany was marked by atrocities and ended in one of the most brutal wars of annihilation in human history. This makes it clear that the devaluation of money leads to the devaluation of society and ultimately to the devaluation of everything — including human lives as the crimes in Germany, the horrors of World War II and the Holocaust have shown.
Monetary inflation leads to societal decay.
That was the case in the Weimar Republic and is still the case today. Financial uncertainty and monetary inflation around the world are making it increasingly difficult to save, build wealth and plan for the future. An epidemic of despair and fear is sweeping the world. One might think that central banks have learned from the past, but that is unfortunately not the case. A tragic example is Lebanon: The Banque du Liban, Lebanon’s central bank, has circulated a surplus of Lebanese currency in recent years in response to a deepening economic crisis that has plagued the country since 2019, plunging three-quarters of its population into poverty. As expected, excessive money printing has made matters worse. The inflation rate in 2021 was 154%. The inflation forecast for 2022 is 178%. Even though people have more money at their disposal, everything is getting more expensive in real terms.
With the state running out of money and afraid of a bank run, it restricted citizens’ access to the banking system. In response, on September 14, 2022, Sali Hafiz, a young Lebanese activist, robbed a Beirut bank to demand her own savings so she could pay for treatment for her ill sister, which the bank apparently refused to hand over to her. This brings up the question: How can it be that a young woman in the prime of her life is forced to rob a bank? Fear of the future torments the mind.
Bitcoin And Mental Health
The cause of the problem is the state monopoly on money. Historically, when governments or central banks fail with their monetary policy, they cling to power by printing money to continue funding their activities. The population then suffers from currency devaluation, price inflation and the resulting uncertainty. Bitcoin works differently. Bitcoin is produced at a rate which was defined when the system was created and which is known to the public. There will never be more than 21,000,000 bitcoin. This certainty carries over to other aspects of life, for example, you can be certain that if you choose to save the fruits of your labor in bitcoin, you will be rewarded in the future because Bitcoin was designed to be disinflationary. With bitcoin, you can provide for your future self, your kids and your loved ones. When you’re old and less productive, you have savings with which to live. More importantly, no authority can prevent you from owning, storing or sending bitcoin. The absolute ownership that we have in bitcoin is unprecedented and a cause for great hope.
Bitcoin is a monetary constant. Like other constants in the universe, it creates a foundation upon which humanity can interpret information to look forward to the future with confidence. Ideally, money should give a sense of certainty about the future. Bitcoin does that. Yes, the bitcoin price is volatile, but accepting greater uncertainty in the short term is worth gaining greater certainty in the long run. Bitcoin can make us optimistic about the future.
Dr. Saifedean Ammous has written about the impact of soft and hard money on time preference and how that core monetary instinct can spread to other behaviors like choosing what to eat, how to build and the value of art and culture. A society that is using soft money is subconsciously infused with the realization that value melts away and must be spent quickly. It will favor immediacy, sacrificing the future in search for gratification now. For example, from its inception, the euro’s operating philosophy was to predictably lose 2% of its purchasing value annually.
Bitcoin offers an alternative as it is inherently disinflationary. Money that cannot be inflated at will rewards good behavior, low time preference, high savings, planning and responsibility. Bitcoin offers a world that promotes saving for your future self and family; a world that will allow you, your family and your community to plan for generations. “Bitcoin promotes human potential through its emotionless enforcement of consensus-based rules that give us predictability, and by extension, reliability.”
Most importantly, as so eloquently described by John Vallis in a conversation with Peter McCormack on the “What Bitcoin Did” podcast, Bitcoin causes us to have a more hopeful vision of the future. Vallis explains how many people are more optimistic with “a greater felt sense of freedom because of the qualities of bitcoin and what using it allows for is causing people to: 1. Take more responsibility and 2. See a different future on the horizon than they had seen before.”
Later in the episode, Vallis said:
“How much of anxiety in life comes from a job, a career, money and all that kind of stuff? For most people a lot … When you’re put in a state of relative deprivation, you’re more susceptible to being corrupted because of your needs, because of your wants, because of all that kind of stuff. But if you’re in a lesser state of deprivation, and that can be a financial deprivation, spiritual, psychological, all that kind of stuff. If you’re healthy, more broadly speaking, I think you’re less susceptible. There is a smaller probability of being corrupted.”
Bitcoin allows us to ascend to a higher version of ourselves, because we feel a level or certainty and are less scared of the future. With a bitcoin standard, these qualities will change society.
Most Bitcoiners I know, including myself, have experienced a transformation since embracing bitcoin. Like most people around me, I used to worry about the future. Today, I feel optimistic about my future self because I know bitcoin will reward me. I can now concentrate on doing what I love, which allows me to bring the greatest value to the outside world. Learning how to utilize bitcoin’s potential has allowed me to focus on what I believe is truly important. This has brought a new level of consistency to my life that keeps me grounded and energized.
Dr. Ammous explained how Bitcoin has the potential to change people on his podcast “The Bitcoin Standard” in a conversation with Tarek El Diwany and Allen Farrington in a way that resonated with me because it reflects my personal Bitcoin journey:
The value of bitcoin allowed me to value myself more. For years now, I haven’t drank or partied and instead put that money into bitcoin. With that refocus, my time preference has completely changed. Instead of valuing things that bring short-term satisfaction, I value things that will make me happy in the long term. Instead of partying every weekend, I understand the value of using my time during the week. I don’t use the weekend to escape my week, I now use it as an extension to accomplish my goals. As Dr. Ammous says in the podcast, Bitcoiners have grand visions of dynasties and building generational wealth.
Many people with fiat mindsets don’t think that far out. Interestingly, those with a fiat mindest don’t understand Bitcoin. They have a very short time preference and only see the day-to-day price fluctuations and not the long-term gains. Fiat people are running on a treadmill that does not allow them to see past the next weekend because there is no easy way for them to provide for the future. With bitcoin, there is. With bitcoin, time preferences lengthen and people can value the future, which allows us to value the present. Whether you agree or disagree with this, I have met a few Bitcoiners that have gone through major mental changes after holding bitcoin for at least five years.
Conclusion
Bitcoin can be a tool to find optimism, if we are willing to use it accordingly. This self-responsibility is at the core of Bitcoin’s philosophy. The first step is to accept that the current economic model we live in is not the best one possible. The next step is to actively use and research bitcoin. This makes you face yourself because you begin to actively engage with the reality you live in and you start to question your own actions. The beginning of the Bitcoin journey might be hard, because of bitcoin’s volatility, which contrasts with the perceived safety of the current system and might be unsettling at first. However, as time goes by (and bitcoin increases in price), satisfaction and security sets in. This can have a positive impact on mental health as there is less tension and worry, which can lead to a more optimistic view of the future.
With bitcoin, you have to learn to deal with uncertainty. Something that actually belongs to being human, but is seen as bad by the existing system. We are used to high time preference. Everything needs to happen fast. A system like Bitcoin, which takes time to evolve, creates angst. However, that is a lesson that teaches you how to be more patient, financially responsible, self-determined and independent — virtues that we don’t necessarily learn through our existing financial system.
Currency crises and political unrest will sooner or later force everyone to get involved with bitcoin, because it offers a better alternative. I hope this article will inspire you to get involved with bitcoin before you are forced into it.
This is a guest post by Leon Wankum. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
Biden is trying to be everything to everyone. But that’s making it hard for him to say he’s focused on any single issue above all others as he tries to counter Republican momentum going into the Nov. 8 elections.
“There’s no one thing,” Biden said Wednesday when questioned about his top priority. “There’s multiple, multiple, multiple issues, and they’re all important. … We ought to be able to walk and chew gum at the same time. You know, that old expression.”
Biden’s exhaustive to-do list is a recognition that the coalition of Democratic voters he needs to turn out Election Day is diverse in terms of race, age, education and geography. This pool of voters has an expansive list of overlapping and competing interests on crime, civil rights, climate change, the federal budget and other issues.
The Republican candidates trying to end Democratic control of Congress have a far more uniform base of voters, allowing them to more narrowly direct messaging on the economy, crime and immigration toward white voters, older voters, those without a college degree and those who identify as Christian.
In the 2020 election, AP VoteCast suggests, Biden drew disproportionate support from women, Black voters, voters younger than 45, college graduates and city dwellers and suburbanites. That gave Biden a broader base of support than Republican Donald Trump and it also is a potential long-term advantage for Democrats as the country is getting more diverse and better educated.
But in midterm elections that normally favor the party not holding the White House, it requires Biden to appeal to all those constituencies.
“Coherence and cohesion have always been a challenge for the modern Democratic Party that relies on a coalition that crosses racial, ethnic, religious and class lines,” said Daniel Cox, a senior fellow in polling and public opinion at the conservative American Enterprise Institute. “It takes considerable political talent to maintain a coalition with diverse interests and backgrounds. Barack Obama managed to do it, but subsequent Democrats have struggled.”
Biden devoted his public remarks this past Tuesday to abortion, Wednesday to gasoline prices, Thursday to infrastructure and Friday to deficit reduction, student debt forgiveness and historically Black colleges and universities. In most of his public speeches, Biden says he understands the pain caused by consumer prices rising 8.2% from a year ago and that he’s working to lower costs.
Cox said there are signs that Biden’s 2020 coalition is fracturing, with younger liberal voters not that enamored with him, and he does not appear to have done much to shore up Hispanic support.
But compared with 2016, when Trump won the presidency, Biden made relative progress with one prominent bloc that generally favors Republicans: white voters without a college degree, as he won 33% of their votes compared with 28% who supported Hillary Clinton in 2016, according to a 2021 analysis by the Pew Research Center.
Keeping those voters in the Democratic coalition could be essential for maintaining control of the Senate.
Biden has traveled repeatedly to Pennsylvania, campaigning on Thursday for Senate nominee John Fetterman with the goal of picking up a seat in the state. Fetterman, with his sweatshirts and shorts, exudes a blue-collar image, a contrast with the Republican nominee, Dr. Mehmet Oz, who rose to fame as a TV show host.
“Democrats need to hold on to as much of that bloc as possible, especially in key whiter states like Pennsylvania, Ohio and Wisconsin,” said William Frey, a senior fellow at the Brookings Institution.
The test for Democrats is how to address broader concerns about the economy and inflation that affect everyone, while also highlighting the specific issues that could energize various segments of their base.
That can involve trade-offs.
As Republicans have made crime a national issue, Biden’s message that he backs the police could help with those white voters. But it could also turn off younger voters in Senate races in Georgia and Florida who believe the police are part of the problem on civil rights, said Alvin Tillery Jr., a professor at Northwestern University and director of its Center for the Study of Diversity and Democracy.
Tillery said he doesn’t know how the president can bridge those differences, though Biden could be in a better position to focus on the policing overhaul that Democrats tried to negotiate with Republicans — only to be unable to reach a consensus that would be able to clear a GOP filibuster.
“Maybe they’ve blunted some Republican attacks, but they’ve also softened support for people who turned out for them in the 2020 election,” Tillery said. “I don’t know how they solve for that, except to say they need to be more vigorous in saying the things they wanted to achieve were blocked in the Senate.”
Tillery added the overarching challenge might be that people view inflation as a domestic phenomenon, rather than a global one. Republicans are blaming high prices on Biden’s $1.9 trillion coronavirus relief from 2021, whereas recent months have also shown that inflation is a worldwide trend driven in part by the aftermath of the pandemic and Russia’s invasion of Ukraine, causing prices for energy and food to rise.
“The reality is — like all presidents — he is a victim of things beyond his control,” Tillery said. “Inflation is a problem globally. It’s much worse in other parts of the world, but he can’t message that way.”
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LONDON — In Romania, protesters blew horns and banged drums to voice their dismay over the rising cost of living. People across France took to the streets to demand pay increases that keep pace with inflation. Czech demonstrators rallied against government handling of the energy crisis. British railway staff and German pilots held strikes to push for better pay as prices rise.
Across Europe, soaring inflation is behind a wave of protests and strikes that underscores growing discontent with the spiraling cost of living and threatens to unleash political turmoil. With British Prime Minister Liz Truss forced to resign less than two months into the job after her economic plans sparked chaos in financial markets and further bruised an ailing economy, the risk to political leaders became clearer as people demand action.
Europeans have seen their energy bills and food prices soar because of Russia’s war in Ukraine. Despite natural gas prices falling from record summer highs and governments allocating a whopping 576 billion euros (over $566 billion) in energy relief to households and businesses since September 2021, according to the Bruegel think tank in Brussels, it’s not enough for some protesters.
Energy prices have driven inflation in the 19 countries that use the euro currency to a record 9.9%, making it harder for people to buy what they need. Some see little choice but to hit the streets.
“Today, people are obliged to use pressure tactics in order to get an increase” in pay, said Rachid Ouchem, a medic who was among more than 100,000 people that joined protest marches this week in multiple French cities.
The fallout from the war in Ukraine has sharply raised the risk of civil unrest in Europe, according to risk consultancy Verisk Maplecroft. European leaders have strongly supported Ukraine, sending the country weapons and pledging or being forced to wean their economies off cheap Russian oil and natural gas, but the transition hasn’t been easy and threatens to erode public support.
“There’s no quick fix to the energy crisis,” said Torbjorn Soltvedt, an analyst at Verisk Maplecroft. “And if anything, inflation looks like it might be worse next year than it has been this year.”
That means the link between economic pressure and popular opinion on the war in Ukraine “will really be tested,” he said.
In France, where inflation is running at 6.2%, the lowest in the 19 eurozone countries, rail and transport workers, high school teachers and public hospital employees heeded a call Tuesday by an oil workers’ union to demand salary increases and protest government intervention in strikes by refinery workers that have caused gasoline shortages.
Days later, thousands of Romanians joined a Bucharest rally to protest the cost of energy, food and other essentials that organizers said were sending millions of workers into poverty.
In the Czech Republic, huge flag-waving crowds in Prague last month demanded the pro-Western coalition government resign, criticizing its support of European Union’s sanctions against Russia. They also slammed the government for not doing enough to help households and businesses squeezed by energy costs.
While another protest is scheduled in Prague next week, the actions have not translated to political change so far, with the country’s ruling coalition winning a third of the seats in Parliament’s upper house during an election this month.
British rail workers, nurses, port workers, lawyers and others have staged a string of strikes in recent months demanding pay raises that match inflation running at a four-decade high of 10.1%.
Trains ground to a halt during the transit actions, while recent strikes by Lufthansa pilots in Germany and other airline and airport workers across Europe seeking higher pay in line with inflation have disrupted flights.
Truss’ failed economic stimulus plan, which involved sweeping tax cuts and tens of billions of pounds (dollars) in aid for household and businesses’ energy bills without a clear plan to pay for them, illustrates the bind that governments are in.
They “have very little room for maneuver,” Soltvedt said.
So far, the saving grace has been a milder than usual October in Europe, which means less demand for gas to heat homes, Soltvedt said.
However, “if we do end up with unexpected disruption to the supply of gas from Europe this winter, then, you know, we’ll probably see an even further increase in civil unrest, risk and government instability,” he said.
There’s really nothing nice to say about inflation when it comes to your bottom line.
It’s hard on your wallet. It’s hard on your savings because it reduces the buying power of the dollars you socked away. And it’s hard on your paycheck, because chances are your last raise did not keep pace with headline inflation, which the latest reading puts at 8.2%.
But that same high inflation has led to a couple of changes that might offer youa little relief. And every little bit helps.
Starting next year, your paycheck could be a little bigger thanks to inflation adjustments that the Internal Revenue Service will make to 2023 federal income tax brackets and other provisions.
The net effect of those adjustments is this: More of your 2023 wages will be subject to lower tax rates than they were this year. And you may be able to deduct higher amounts of income.
When you save money in a tax-deferred workplace retirement plan like a 401(k) or 403(b), you can reduce your taxable income because you get a deduction for your contribution the year you make it. The more you save, the more you cut your tax bill.
Starting next year, you will be allowed to contribute up to $22,500into your 401(k), 403(b), most 457 plans or the Thrift Savings Plan for federal employees.
That’s $2,000 – or roughly 9.8% – more than the current $20,500 federal contribution limit, a direct result of higher inflation. Those are the biggest adjustmentsmade to the contribution limit in decades.
More about those changes and changes to IRA contribution limits can be found here.
Social Security recipients will receive an annual cost-of-living adjustment of 8.7% next year, the largest increase since 1981.
The spike will boost retirees’ monthly payments by $146 to an estimated average of $1,827 for 2023.
No one will be living large on that amount, but the extra cash will offset some of the higher prices for everyday expenses that seniors incur.
Here’s more on the coming boost to Social Security checks, along with welcome news that there will be a drop in Medicare Part B premiums next year.
Many Americans are hoping for wage gains to offset the hottest inflation in 40 years, but there are a number of factors that could impact your take-home pay in 2023. And because inflation is rising so sharply, the IRS and other agencies are changing many rules to account for the increase in prices.
For instance, the tax agency on Tuesday said it’s boosting its 2023 tax brackets by 7% because of inflation, a move designed to avoid “bracket creep” — when people get pushed into higher tax rates because of cost-of-living salary adjustments although their standard of living hasn’t changed. The IRS is also increasing the standard deduction by the same percentage, which will benefit most taxpayers who use this tax break.
“Inflation adjustments to tax brackets mean that it will be harder for taxpayers to hit those higher brackets, and therefore will have more income taxed at lower rates next year,” noted Tim Steffen, director of tax planning with Baird, in an email.
The interplay of these changes is complex, but the upshot is that low- and middle-income taxpayers may be able to trim their taxes as a result. The outlook is more complicated for higher-income workers because of an inflation-adjusted boost in the cap for Social Security taxes.
Below are five inflation-related changes that could impact your paycheck next year.
An annual raise — good but maybe not enough
For 2023, employers plan to offer their workers an annual raise of 4%, according to a recent survey from Salary.com. That’s roughly in line with the median pay bump employees got in 2022.
The problem is that inflation this year has been running at about twice that rate, with prices rising 8.2% in September from a year ago. Economists at the Federal Reserve expect inflation to subside later this year and into 2023, although the central bank has been criticized for its call last year that the sharp rise in prices was “transitory.“
If the Fed is correct in predicting that inflation will decline to 2.8% next year, that will restore some purchasing power for consumers in 2023. So far, though, inflation has remained stubbornly sticky.
More generous tax brackets
As mentioned above, the IRS is boosting its taxable income thresholds for its seven tax brackets, which range from 10% to a top rate of 37%. The higher limits could result in tax savings for some people, with Baird’s Steffen estimating that a married couple earning $200,000 in both 2022 and 2023 could save $900 in taxes next year.
The IRS on Friday said it is boosting the 2023 contribution limits for 401(k) plans by a record $2,000 due to inflation, which will allow workers to save more money in 2023.
Individuals will be able to save up to $22,500 in their 401(k)s next year, an increase of almost 10% from the current year’s limit of $20,500, the agency said. The new cap also applies to other types of defined contribution plans, including 403(b), most 457 plans and the federal government’s Thrift Savings Plan.
It’s the biggest inflation adjustment since 401(k) plans began indexing to inflation in 2007. Typically, the IRS has increased the contribution limit by either $500 a year or kept it at the same level since the plans began instituting cost-of-living increases 15 years ago.
The IRS said the contribution limit for IRAs will increase to $6,500 next year, a boost of 8.3% from the 2022 limit of $6,000.
However, the catch-up contribution for people over the age of 50 will remain at $1,000, because that rule isn’t subject to an annual adjustment for inflation, the agency said.
Raising the cap for Social Security tax
The Social Security Administration taxes wages to fund the program, but it caps the amount of individual earnings that can be taxed within a calendar year. That cap changes every year to align with the national average wage index.
Because of inflation, the taxable maximum will rise to $160,200, an increase of almost 9% from the current cap of $147,000. That means higher earners will pay a Social Security tax of 6.2% on that additional $13,200 of income next year.
“The increase in the Social Security wage base will work against taxpayers, though, as more of their wages will be subject to the 6.2% tax,” Steffen said. “For someone whose income exceeds that threshold next year, it will feel like a tax increase of over $800.”
Setting aside more pre-tax dollars for health care
Workers with access to Flexible Spending Accounts and Health Savings Accounts can set aside more pre-tax dollars next year due to inflation adjustments.
In 2023, employees can put away as much as $3,050 in a FSA, an increase of about 7% from the current tax year’s cap of $2,850. Meanwhile, single workers who want to fund an HSA can save up to $3,850 next year, a 5.5% increase from 2022, while families can save up to $7,750, up 6.2%.
That could give you more tax savings, although the money you set aside must be used for health care expenses.
HERNDON, Va. — Treasury Secretary Janet Yellen is promoting Biden administration policies as the key to advancing the nation’s “long-term economic well-being” in the lead-up to the midterm elections.
The former Federal Reserve chair visited a Virginia research and development business park with Democratic Sen. Tim Kaine on Friday and talked up administration efforts to revitalize America’s manufacturing capacity, spur computer chip production and upgrade the country’s infrastructure. Rep. Gerry Connolly, D-Va., was also in attendance.
Yellen’s visit is part of the Treasury leader’s ongoing tour of the U.S., as she and other administration officials try to quell the impact on Americans of persistent high inflation. Republicans say the administration’s outsized pandemic spending and other domestic policies have contributed to high inflation.
Voters have made clear that price increases are a top concern. A June Associated Press-NORC Center for Public Affairs Research poll showed that 40% of U.S. adults specifically named inflation in an open-ended question as one of up to five priorities for the government to work on in the next year.
Democrats want to retain their control in Congress and will need to convince voters they can wrangle inflation, which accelerated in September. In Virginia, Yellen talked about how a boost in domestic industrial manufacturing will be one of the solutions.
“Our government’s failure to invest in innovation has had wide-ranging impacts on our long-term economic well-being,” Yellen said during her speech. “At the most fundamental level, it impacted our productive capacity.”
She said that over the past year, President Joe Biden’s administration “has begun to reverse that trend.”
“We have advanced an economic plan that finally puts innovation and technology at the forefront of our national agenda,” she said.
Kaine said Virginia “was a laggard in clean energy even up to five or 10 years ago.” But with investments from the new federal climate and health care law and other programs “we’re now positioned to lead the United States in offshore wind,” he said.
Yellen also attended a roundtable with local entrepreneurs and people representing Virginia colleges who are focused on semiconductors, advanced manufacturing and other emerging technologies.
“Together, our efforts are raising our economy’s aggregate production capacity,” Yellen said. “And in turn, we are raising America’s long-term economic outlook.”
Early voting is underway in many states, including Virginia.
Leading fast moving consumer goods (FMCG) player Hindustan Unilever emerged strong out of a whirling inflationary cycle in the July-September quarter. The Mumbai-headquartered company managed to grew its top-line and bottom-line by healthy double digits, gaining market share in majority of its categories, irrespective of inflationary pressure that grew heavier in recent months.
Led by its two of the larger categories – home care and beauty & personal care – HUL’s net sales grew 16 per cent year-on-year (YoY) to Rs 14,872 crore from Rs 12,812 crore same quarter last year. It’s consolidated net profit grew 11.7 per cent YoY to Rs 2,670 crore from Rs 2,391 crore.
While its home care business surged 34 per cent to Rs 5,142 crore from Rs 3,838 crore. Largest segment beauty & personal care surged 11 per cent to Rs 5,595 crore – up from Rs 5,026 crore.
According to Reetesh Tiwari, Chief Financial Officer at HUL, superior performance by two of its key home care categories – fabric wash (detergents) and dishwasher – helped it post healthy growth. While premiumisation and market development activities led to high double-digit growth in fabric wash category, dishwasher products (Vim) grew in similar fashion. Its foods business grew by double digits too, led by categories like ice cream and coffee. Health food drinks, represented by brand Horlicks, continued to gain market share and penetration on the back of focused market development actions, the company said.
While its volume offtake grew by low-single digit – by 4 per cent – in the quarter, it remained well ahead of market trends. As per Nielsen, volumes in the FMCG market in India shrank by 6 per cent during the September quarter as both urban and rural markets remained in red. HULs top-line growth performance too exceeded the broader market, which grew 6 per cent by value compared to HUL’s 16 per cent
Steep inflation, however, impacted its bottom-line performance and reduced its margins. According to Sanjiv Mehta, the company’s net material inflation for HUL surged by a whopping 22 per cent in September 2022 quarter – double of that in the same quarter last year – putting pressure on its margins.
Depreciation of the Indian rupee has further added to its woes. According to the company, crude oil costs grew grown 35 per cent, soda ash by 55 per cent and skimmed milk prices have surged by 30 per cent on a YoY basis. Only respite in recent months, it has witnessed is from cut in palm oil prices, which it has passed on to consumers to certain extent by reducing soap prices.
Mehta, however, said he remains cautiously optimistic about the near term. “Demand environment remains challenging with inflation impacting consumption. However, with softening in some commodities and monetary and/or fiscal measures taken by the government, we are cautiously optimistic in the near-term,” he said.
LONDON — It was a revolution 11 long years in the making.
For a small but vocal band of right-wing libertarians, Liz Truss’ appointment as U.K. prime minister on September 6 seemed the triumphant end point of an epic and improbable march that led them from the fringes of British politics to Whitehall’s grandest corridors of power.
In the course of just over a decade, a group of little-known politicians, fringe think tanks and outspoken media figures had helped drag the Tory Party, and the nation it led, from David Cameron’s vision of so-called compassionate Conservatism — hugging huskies and all — to a Brexit-backing, free-market embracing, low-tax juggernaut.
It took them four Tory prime ministers, four general elections and an era-defining referendum to do it — but with Truss in charge, they were finally living their dream. The country was to be remade in their image.
It lasted 44 chaotic days, and no more.
“They felt their moment had come at last,” said Tim Bale, professor of politics at Queen Mary University London. “This would prove that Brexit hadn’t been a ghastly mistake, but a fantastic opportunity. But of course, as it was always based on fantasy, it was always bound to collide with reality.”
Truss was elected Conservative leader — and so U.K. prime minister — last month on the votes of just 81,000 party members, a group large enough to defeat her more centrist opponent, Rishi Sunak, but still small enough to fit comfortably inside Wembley stadium, home of the England football team.
This band of true-blue believers had been wooed by her heady promises of a low-tax, low-regulation state that would embrace the opportunities provided by Brexit.
But as soon as PM Truss started to put her promises into action — via a ‘mini-budget’ on September 23 which included tens of billions of pounds in unfunded tax cuts alongside a massive energy subsidy scheme — the markets began sliding into turmoil. Within days it was clear Truss had triggered an economic crisis — and one that sent the Conservative poll ratings tumbling along with the value of the pound.
Her MPs, facing electoral oblivion, were terrified.
In the weeks that followed, Truss was forced to sack her Chancellor Kwasi Kwarteng and U-turn on most of their economic program in a desperate bid to stabilize the markets. This week her home secretary, Suella Braverman, followed Kwarteng out the door. Her MPs became mutinous, some publicly demanding her head. Support rapidly drained away.
Truss was forced to sack her Chancellor Kwasi Kwarteng and U-turn on most of their economic program in a desperate bid to stabilize the markets | Jeff J Mitchell/Getty Images
Truss’ disastrous six weeks in power were an abject humiliation for the prime minister herself, of course — but also for the libertarian right of the Conservative movement that had fought its corner for years.
Winners and losers
“I’m pretty distraught about it,” said Mark Littlewood, director general of the Institute for Economic Affairs (IEA), one of the right-wing Westminster think tanks that inspired the Truss agenda. (He, like most of the interviewees for this article, was speaking after the abandonment of Truss’ economic program earlier this week, but before she finally resigned Thursday afternoon.)
“It did actually appear as if we had a new government that, in very broad terms, shared the IEA analysis of the problems with our economy, and it not being market-oriented enough.”
But Truss botched the “political execution” rather than economic thinking, Littlewood insisted, lamenting that “if the execution goes badly wrong, it has a rebound effect on the ideas.”
Indeed, Conservative libertarians explain the Truss debacle in various ways: She was not clear enough about what she was doing and the reasons for it; she made the announcements in the wrong sequence; she refused to match her tax cuts with spending restraint; and she failed to produce independent proof that her plans would work. There is certainly little sign of remorse.
“The position we’re in now is that these reforms basically have not been tried,” Littlewood insisted. “Her attempts to implement change were too hurried; too rushed; not thought through; naïve in some regard.”
Former UKIP leader Nigel Farage was another right-wing libertarian who had been advocating for low-tax, small-state ideals for decades.
“I think the hope was that the Kwarteng budget was going to mark a very significant moment,” Farage said. “That now appears to be dead. And I would have thought dead for a very, very long time. The people in the Conservative Party that I talk to, who think on my wavelength … have pretty much given up.”
But Tories opposed to the libertarian agenda are delighted at its failure — if not the disastrous fallout, for country and party alike. “The mild flirtation with Tea Party libertarianism has been strangled at birth, and I think for the general good fortune of the Tory Party that has to be seen as a good thing,” Tory backbencher Simon Hoare told the BBC.
One serving Cabinet minister added: “[The libertarians] are going to have to adjust to reality like the rest of us. They can’t buck the market.”
Former UKIP leader Nigel Farage was another right-wing libertarian who had been advocating for low-tax, small-state ideals for decades | Peter Summers/Getty Images
Nicky Morgan, a former Cabinet minister who previously co-chaired the centrist ‘One Nation’ caucus of Tory MPs, said her party must now return to its former broad-church approach.
“The task for the ‘One Nation’ wing of the party is almost to ignore the libertarian right and get on with reasserting one-nation politics, and prove to everyone from Liz Truss downward that if we want to stay in power, then being sane and sensible in the middle ground is a much stronger place to be,” she said.
The long march
For some on the conservative right, so-called Trussonomics was the inevitable end point of a march toward deregulation that began with the Brexit movement in the early 2010s. Farage was one of a number of Brexiteer thinkers who wanted the U.K. to leave the EU in a bid to drive up business competitiveness.
Bale said the libertarian strain in the Conservative Party had in fact been present for decades, but that the Brexit cause emboldened it and brought it to the fore.
The turning point came in 2011, when a number of right-wing Conservative MPs — many of them newly-elected the previous year — rebelled against then-Prime Minister David Cameron and voted in support of a referendum on EU membership. “That was the first time they realized their strength,” Bale said.
Across the country, anti-EU sentiment was rising, fueled by the eurozone crisis and soaring levels of immigration.
“There was a ‘push me, pull you’ going on,” Farage said. “The stronger UKIP got, the more emboldened the Tory Brexiteers got. 2011 was the moment when UKIP suddenly started coming second in by-elections. This group in the Tory Party, and this group outside the Tory Party — namely my group — always had very similar policy goals.”
Cameron was spooked, and the pressure from within and without his party forced him to agree a referendum on Britain’s EU membership. It was won by the Leave-supporting side in 2016, cheered on by a highly vocal section of the right-wing U.K. press which also supports low taxes and deregulation.
“The referendum allowed them all to coalesce around a single issue,” said David Yelland, a former editor of the Rupert Murdoch-owned, Brexit-backing Sun newspaper, who now speaks out against the influence of right-wing media.
“The right of the Conservative Party and their supporters in the media and the think tank world knew they had one go at this. They had to win Brexit, otherwise they were finished. And they did. And since then that has emboldened them.”
Keep pushing on
With Cameron forced from office, the group’s next battle was with his successor Theresa May, a euroskeptic Remainer who tried to negotiate a less drastic form of Brexit which would have left Britain tied to many of Brussels’ rules and regulations.
Farage said the “loose relationship” between pro-Brexit libertarians inside and outside the Tory Party maintained its hold over the new Tory leader, ultimately blocking her proposed Brexit deal in Parliament and forcing her resignation.
Theresa May was a euroskeptic Remainer who tried to negotiate a less drastic form of Brexit | WPA pool photo by Henry Nicholls/Getty Images
Boris Johnson then emerged as the next prime minister, a genuine ‘Vote Leave’ campaigner who was able to push through the hard-nosed form of Brexit the group had dreamed of. But his personal brand of domestic politics was less to their taste — a sort of high-spending boosterism which appealed to millions of Tory and pro-Brexit voters, if not to the libertarian right.
“The core Brexiteers were not ultra-libertarians,” explained former Tory MP Stewart Jackson, who lost his job as a ministerial bag carrier to vote with the pro-Brexit rebels in 2011.
“There were a few that wanted [London to become] Singapore-on-Thames … but the bulk of Brexiteer MPs and definitely Brexiteer voters were much more what I would call communitarian.”
But Jackson said the vacuum of ideas about how best to respond to Brexit, even among many Brexiteers, left space for the libertarians to fill. “They were the only game in town in terms of a new intellectual concept that the U.K. could consolidate on, being outside the European Union,” he said.
With Johnson’s departure in July following a series of personal scandals, the likes of Littlewood — as well as his brothers in arms at neighboring think tanks the Taxpayers Alliance and the Adam Smith Institute — found themselves in the ascendance.
Their ideas found favor with Truss — who despite not being a Brexiteer at the referendum, was a follower of the libertarian cause — and her Chancellor-to-be Kwarteng. The ambitious pair were among colleagues who wrote a now infamous 2012 pamphlet named “Britannia Unchained” offering radical right-wing solutions to Britain’s economic problems.
Less than two months after Johnson’s departure, their economic prospectus was finally put to the test — and exploded on impact.
The arc of history
As Truss and Kwarteng look back at the ashes of their brief Downing Street careers, the pro-Brexit right is licking its wounds and wondering where it goes next.
Shanker Singham, another libertarian thinker who is close to Truss and the IEA, insisted it was too soon to tell whether the low-tax, ultra-competition agenda is too damaged by the Trussonomics experiment to resurface in the near future.
Brexit supporters march in Fulham in the final leg of the March To Leave Rally on March 29, 2019 | Dan Kitwood/Getty Images
“It’s a very febrile atmosphere, and things have to settle down,” he said. “There’s a big arc of history here, and Liz Truss’ mini-budget does not suddenly transform the arc of history.”
Littlewood insists there will be another chance to implement libertarian policies in less than a decade, given the structural economic problems Britain faces.
“Had this [mini-budget] gone as smoothly as I had imagined it in my dreams, rather than as badly as it has gone in my living nightmare, I think we could have got quite a lot of this done now,” he said. “Unfortunately, a large amount of it is off the table now, but I think it will have to be returned to.”
Brexiteers of a different persuasion — of which there are many — are hoping for an urgent change of direction, however.
“The vision of Brexit as ‘Davos on Thames’, only ever held by 10 percent of the Conservative electorate, is dead,” wrote Matthew Goodwin, an academic who has charted the rise of the populist right. “The only way forward for the Conservative Party now is to get back to what Brexit was really about for the 90 percent, and to reconnect with their 2019 electorate.”
But Bale, of Queen Mary University, believes the libertarian strain among Conservatives will forever lurk just beneath the surface, insisting their radical solutions to the nation’s ills have still not been properly tried.
“When the spaceship doesn’t arrive,” he said, “the cultists simply say ‘we got the date wrong’, and that it will be coming in two years’ time.”
Additional reporting by Annabelle Dickson.
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London CNN Business
—
Twelve days from now, the Federal Reserve will meet again, and expectations for the central bank’s next moves are firming up. The consensus among investors: Persistently hot inflation means the Fed will need to continue with its string of aggressive interest rate hikes, which is unprecedented in the modern era.
What’s happening: Markets see a 99% probability that rates will rise by another three-quarters of a percentage point, reaching a range of 3.75% to 4%.
A hike of that magnitude is now “a given,” Quincy Krosby, chief global strategist for LPL Financial, told clients on Wednesday. “Concern is now focused on December, and whether the Fed is prepared to transition to smaller rate hikes.”
That’s up from a 60% probability one month ago. So what changed?
Inflation, mainly. The US Consumer Price Index rose 8.2% in the year to September after rising 8.3% annually in August. While CPI peaked at 9.1% in June, that reading was still uncomfortably elevated and higher than economists had expected.
The 6.6% annual uptick in shelter costs was of particular concern. It takes longer for housing expenses to come back down than some other categories, since renters tend to sign leases for 12-month periods. The monthly rise in core services costs (excluding energy) was the largest gain in three decades.
The data underscored the need for the Federal Reserve to stay tough — while a strong jobs report for September will deliver confidence the central bank can do so without causing undue harm to the US economy.
Fed officials have said as much. In an interview with Reuters on Friday, St. Louis Fed President James Bullard said inflation had become “pernicious,” which means that “frontloading” larger rate hikes is logical.
The market impact: The S&P 500 kicked off the week with a 3.8% rally before dropping 0.7% on Wednesday. It’s still plodding along in a bear market, about 23% below its January peak. So long as the Fed signals its intention to keep the pressure on, boosting the odds of a US recession, volatility is expected to persist.
Even relatively solid corporate earnings may not be sufficient to change the direction.
“So far, the results are decent, but they’re being compared to consensus estimates that have been persistently lowered since early summer,” noted strategists at Charles Schwab.
Tesla
(TSLA) posted a solid quarter of earnings and record revenue, but now says it will likely fall short of its target for a 50% growth in the number of cars it sells this year.
Quick rewind: As recently as July, the company said it was still aiming for a target of 50% growth from the 936,000 cars it delivered in 2021.
But with two quarters of disappointing deliveries caused by supply chain issues and Covid-related shutdowns in China, that goal has looked increasingly out of reach, my CNN Business colleague Chris Isidore reports.
CEO Elon Musk said that the electric carmaker is not struggling with demand.
“We expect to sell every car that we make, for as far in the future as we can see,” he said on a call with analysts on Wednesday.
Instead, the company said it would “just” miss its target due to complications with delivery of cars from its factories to customers at the end of the year.
Shares are down 5% in premarket trading on Thursday. They’ve dropped 37% year-to-date, compared to a 22.5% fall in the S&P 500.
“This quarter was not roses and rainbows,” said Dan Ives, tech analyst for Wedbush Securities. “Competition is increasing. There are some logistical challenges.”
America’s business leaders are becoming more pessimistic. The Conference Board recently reported a slide in its CEO confidence index, which it said had hit levels not seen “since the depths of the Great Recession.”
Of the 136 CEOs who were surveyed, 98% said they were preparing for a US recession over the next 12 to 18 months — and 99% said they were bracing for a recession in Europe.
Notably, the business community is not being quiet about its concerns.
Amazon founder Jeff Bezos tweeted Tuesday that “the probabilities in this economy tell you to batten down the hatches.”
He was responding to a clip of an interview with Goldman Sachs CEO David Solomon, who told CNBC that “it’s a time to be cautious.”
“You have to expect that there’s more volatility on the horizon now,” Solomon said. “That doesn’t mean for sure that we have a really difficult economic scenario. But on the distribution of outcomes, there’s a good chance that we have a recession in the United States.”
American Airlines
(AAL), AT&T
(T), Dow, Nucor
(NUE) and Quest Diagnostics
(DGX) report results before US markets open. CSX
(CSX), Snap
(SNAP) and Whirlpool
(WHR) follow after the close.
Also today:
Initial US jobless claims for last week post at 8:30 a.m. ET.
Existing home sales for September follow at 10 a.m. ET.
Coming tomorrow: Earnings from American Express and Verizon.
BANGKOK — Global stock markets declined Thursday as the British prime minister faced demands to quit and Japan reported its 14th straight monthly trade deficit.
London and Frankfurt opened lower and Shanghai, Tokyo and Hong Kong declined. Oil rose more than $1 per barrel.
British Prime Minister Liz Truss faced demands to resign following chaotic scenes in Parliament during a vote on a fracking ban. Truss has been defiant despite financial market turmoil caused by multiple policy U-turns.
Truss “precipitated this political crisis by triggering the market crisis,” said Michael Every of Rabobank in a report. Britain is “deep in an emerging-market rut.”
In early trading, the FTSE 100 in London was off 0.2% at 6,914.12 and the DAX in Frankfurt fell 0.7% to 12,655.08. The CAC 40 in Paris was little-changed at 6,041.18.
On Wall Street, the future for the benchmark S&P 500 index was off 0.3%. That for the Dow Jones Industrial Average was up less than 0.1%.
On Wednesday, the S&P fell 0.7%, breaking two days of gains. The Dow slipped 0.3% and the Nasdaq composite sank 0.9%.
In Asia, the Nikkei 225 in Tokyo tumbled 0.9% to 27,006.96 after September imports ballooned 46% over a year earlier due to a surging oil prices and a weak yen. The Japanese currency is trading at a 32-year low against the dollar.
The yen weakened to 149.82 to the dollar from Wednesday’s 149.81 yen.
The dollar has gained against other currencies following repeated interest rate hikes by the Federal Reserve, which increases the return on assets valued in dollars. Investors also see the U.S. currency as a stable haven amid global uncertainty.
“Rising U.S. yields and the strong U.S. dollar are the sledgehammers pounding global equities lower,” said Stephen Innes of SPI Asset Management in a report.
The Shanghai Composite Index lost 0.3% to 3,035.05 and the Hang Seng in Hong Kong fell 1.4% to 16,280.22.
The Kospi in Seoul retreated 0.9% to 2,218.09 and Sydney’s S&P-ASX 200 sank 1% to 6,730.70.
On Wednesday, Wall Street pulled back as investors reviewed earnings and Treasury yields climbed to multiyear highs.
Netflix soared 13% and United Airlines rose 5% after releasing quarterly results. Abbott Laboratories, M&T Bank and others sank.
The yield on the 10-year Treasury, which influences mortgage rates, climbed to 4.13%, its highest level since June 2008. It was at 4.02% late Tuesday.
The yield on the two-year Treasury, which responds to expectations of future Fed action, rose to 4.54% from 4.43%.
The Fed and central banks in Europe and Asia have been raising interest rates to cool inflation that is at multi-decade highs. Investors worry they might tip the global economy into recession.
Inflation in Britain hit a 40-year high of 10.1% over a year earlier in September.
In energy markets, benchmark U.S. crude rose $1.56 to $86.08 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the price basis for international oil trading, advanced $1.34 to $93.75 per barrel in London.
The euro gained to 97.83 cents from Wednesday’s 97.68 cents.
Stubbornly high inflation is pushing more than half of American workers to consider taking a second job, according to a new study from technology company Qualtrics.
The survey of more than 1,000 adults with full-time jobs found that 38% have looked for a second job, while another 14% plan to do so, the company said. That means “more than half of working Americans have considered holding multiple jobs to pay for their living expenses,” the company said in a statement.
Interest in gig work and so-called side hustles has picked up during the past year as inflation soared to a 40-year high. At the same time, wage growth hasn’t kept pace, which translates into dwindling purchasing power for workers. That’s prompted some to cut back on everyday expenses, while others are planning to trim their holiday spending this year, according to recent MassMutual research.
“With budgets tightening, workers are searching for ways to meet the rising cost of living, including finding new jobs,” said Qualtrics chief workplace psychologist Dr. Benjamin Granger in the statement.
The financial pressures are even worse on workers with children, according to the poll, which surveyed workers in August and September. About 7 in 10 working parents said their pay isn’t keeping up with the cost of living. And about 47% have looked for a second job, compared with 38% of workers overall, the analysis found.
Inflation remains hot despite the Federal Reserve’s regime of interest rate hikes this year, which are designed to temper rising prices. For instance, a key measure of price increases hit a 40-year high last month, with core inflation rising to 6.6% — the highest since 1982.
To cope with higher costs, some workers are seeking more shifts or hours from their employers, while others say they’re looking for a higher-paying job, noted Qualtrics, a maker of business management software. Almost 6 in 10 want the chance to work overtime or extra shifts, while about 4 in 10 have searched for a new job with higher pay.
Meanwhile, more Americans are putting expenses on credit cards as their wages lag inflation. Almost 40% of consumers told financial services company Primerica they are taking on more credit card debt, a 6 percentage-point increase since June.
But accruing credit card debt carries more financial risks than a year ago. Because of the Fed’s rate hikes, credit card companies are charging much higher interest than in 2021. That could lead to a snowball effect if consumers can’t pay down their balances and incur higher interest rates.
London — British inflation jumped back above 10 percent in September on soaring food prices, official data showed Wednesday, with the country gripped by a cost-of-living crisis bedeviling the government. The Consumer Prices Index accelerated to 10.1 percent on an annual basis, up from 9.9 percent in August, the Office for National Statistics said in a statement.
The September rate matched the level in July and is the highest in 40 years as a result also of sky-high energy bills.
“I understand that families across the country are struggling with rising prices and higher energy bills,” Britain’s new finance minister Jeremy Hunt said in a separate statement. “This government will prioritize help for the most vulnerable while delivering wider economic stability and driving long-term growth that will help everyone.”
The government has been rocked by chaos in markets in the wake of a budget that pledged tax cuts that would have been funded by state debt. Most of those measures have since been reversed, leaving Prime Minister Liz Truss fighting to save her job.
Britain’s Prime Minister Liz Truss looks down during a press conference in the Downing Street Briefing Room in central London, October 14, 2022, following the sacking of the finance minister in response to a budget that sparked chaos in the financial markets.
DANIEL LEAL/POOL/AFP/Getty
Following widespread criticism over the budget, Truss sacked Hunt’s predecessor, Kwasi Kwarteng, after less than six weeks in the role.
Analysts said Wednesday’s data would put pressure on the Bank of England to keep raising its main interest rate by sizeable amounts. Capital Economics noted that the BoE could hike its rate by as much as one percentage point to 3.25 percent at its next meeting in November.
People walk past the Bank of England in London, September 28, 2022.
Frank Augstein/AP
Victoria Scholar, head of investment at Interactive Investor, said inflation was “the most pressing economic problem facing the Bank of England as well as the government.
“Without price stability, the cost-of-living crisis will continue to weigh on the economy by squeezing household budgets and dampening business margins.”
In a bid to help households, the government has capped domestic energy bills until April. However, the original plan was for a cap until late 2024, which Truss pulled earlier this week.
Markets were left spooked that a budget of tax cuts and a costly energy-price cap would add massively to British debt that had already ballooned on government support during the COVID-19 pandemic.
Her budget sent the pound plunging to a record-low against the dollar and caused yields on government bonds to soar – forcing Truss into a huge budget U-turn that has calmed markets.
Following Wednesday’s data, the pound was down against the dollar and euro, while London’s FTSE 100 shares index steadied at the open.
John Dickerson reports on confusion over voter fraud arrests in Florida, protests in France for higher wages due to inflation, and a possible link between uterine cancer risk and hair-straightening products.
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