US troops land near Poland-Ukraine border amid tensions with Russia

 The announcement of the American soldier arrivals comes after Pentagon spokesman John Kirby stated on Wednesday that 2,000 personnel from Fort Bragg, N.C., will be sent to Poland and Germany in the days ahead, with another 1,000 troops relocating via Germany to Romania.

The mobilization and positioning of soldiers is intended to strengthen the NATO military coalition's abilities in the region. The news comes as hostilities among Russia and Ukraine continue to rise, with the latter amassing more than 100,000 forces in the area to Ukrainian border. The world community continues to be afraid that Russia is going to invade the ex Soviet country, despite Russia's denials.

GDP Grew at a 6.9% Pace to Close Out 2021, Stronger than Expected Despite Omicron Spread

America's GDP closed out 2021 much stronger than was expected by analysts.  The estimate which was stated was 5.5%, but the actual GDP sat at 6.9%.  The reason that this increase was so surprising was due to the fact that the Omnicron variant of COVID-19 increased its number of cases greatly.  Typically, this would lead to less workers and less consumption due to people staying in their homes.  The 1.4% difference was obviously much higher than anyone thought it would be.  Leading the way for the greater increase was consumer activity and business spending.  These categories helped make 2021 the best full year of GDP since 1984.  Unfortunately, the jobless claims stayed high at 260,000 and long-lasting goods orders hit their lowest point since April 2020.  This likely signaled the end of the year slow down.  Despite the signs that GDP acceleration slowed down at the end of the year, sizable boosts in inventory and consumer spending made sure that the US economy would stay strong.  Along with the GDP, the sum of all goods and services increased.  One thing that actually decreased was the pace of government spending which led to a slightly lower GDP.  With all this news of strong gains in GDP, the stock market benefitted greatly.  The stock futures posted gains which showed the solid grounds that the stock market stood on due to the increased GDP.  The only problem with this high GDP is the high inflation rate that has accompanied it.  Interest rates are likely to increase as well due to the high inflation rate.

https://www.cnbc.com/2022/01/27/gdp-grew-at-a-6point9percent-pace-to-close-out-2021-stronger-than-expected-despite-omicron-spread.html

Caution From OPEC+ Producers to Keep Oil Prices High

 OPEC look to stick closely to the set amount of oil output of barrels per day even as demand rises sharply given the increased consumption by industry and travel as the world economy recovers from the pandemic. This has led to drastic increases in gas prices as US drivers are paying almost a dollar more per gallon as compared to a year ago. The high prices have pressured non producing countries like the US to tap national reserves and increase supply, however this has done little to stem rising prices. Prices have also been impacted by the tensions in eastern Europe where the threat of sanctions against Russia could impact supply as well. While high prices benefit the producing countries budget they would be cautious to let them climb too high as this would negatively impact demand.

https://www.usnews.com/news/business/articles/2022-02-02/opec-decides-oil-output-amid-concern-over-russia-ukraine

Consumers Are Pivoting Spending to Services Like Dining and Travel

 

During the pandemic, the consumers shifted from spending on services to goods but now it appears to be reversing as the infection rate is waning. Consumers shopped more online in the pandemic, and they bought things for homes such as furniture and computers so that they could work from home, and the spending on goods was aided by federal stimulus. According to a corporate economist with Navy Federal Credit Union, the falling infection rates help people feel more comfortable socializing in person, and he also predicts that the demand for services such as travel, and dining should recover soon. This could be important for inflation as high demand for goods along with supply-chain disruptions have kept the prices high. Prices for furniture and appliances rose 10.7% in December, whereas services inflation for costs such as rent, and airline fares were up a more moderate 3.7%. Therefore, if consumer spending shifts back to services, the upward pressure on goods prices should dissipate.

 

 

https://www.wsj.com/articles/consumers-are-pivoting-spending-to-services-like-dining-and-travel-11643797808

India about to export $375m BrahMos Missiles to Philippines

 India and Phillipppines have signed a contract over an export deal. The $375 million deal would allow India to export its shore-based anti-ship missile system, the BrahMos, to the Philippines. 

For India, the export of the missile system would increase net exports, increasing its national income. For Phillippines, the import of missiles should result in a hit to its GDP. However, an argument can be made that Phillippines can have more bargaining power in the Pacific region due to the presence of missiles that have a range of around 290 km.

Link - https://economictimes.indiatimes.com/news/defence/india-philippines-ink-375-million-deal-for-brahmos-missiles/articleshow/89188501.cms

U.S. Stocks Suffered Through a Volatile January

     Now that January 2022 is coming to a close worried economists and traders look to the rough numbers put up by U.S. stocks and wall street over the course of the month. The Nasdaq, a tech heavy market had it's worst start to a year since 2009, during the last recession, which lasted from 2007 - 2009. If not for a late month gain in performance the Nasdaq would have surpassed its worst January performance. The S&P 500 is tracking index that tracks the stock performance of the 500 largest companies in the U.S. had it's worst overall month since the start of the COVID-19 pandemic in March 2020. The poor performance of these markets can be contributed to a couple of factors. A new variant of COVID-19 broke out across the world in January impacting global business. The FED also announced in January that interest rates would be increased more aggressively than markets initially thought. The U.S. threatening economic sanctions on Russia, over geo-political issues. And wages are rising around the U.S. could decrease revenues of companies. 

    Theses factors led to the slowing of trading in the S&P 500, and the Nasdaq. It was also noted that tech companies in the Nasdaq have come under scrutiny as investors have accused many tech companies of trading at lofty valuations. Which impacted the Nasdaq more than the S&P 500. Hopefully the markets can recover in the month of February, as trading can resume at normal levels. But I suspect most traders are waiting on the specifics on the FEDs interest rate hikes before resuming normal levels of trading, which will most likely come in March.

https://www.reuters.com/business/nasdaq-futures-edge-higher-end-turbulent-month-2022-01-31/

The Fed says its raising interest rates. What does that mean for inflation?

 The federal reserve chairman Jerome Powell, announced Wednesday, Jan 26th,  that central bank is prepared to raise short term interest rates in March. But what about inflation? We are currently at a 40 year record high. As we all know, generally, interest rates and inflation are inversely related meaning usually when one increases then the other is likely to decrease. So will raising the interest rates help bring down the inflation? Well when they increase the interest rates it will become a major financial decision for those who don't have the means to pile up this debt. Because as we know, the interest rate is the price to borrow. These rates are likely to rise considering they were lowered because of the pandemic and people losing their jobs and such. Now that most places are opening back up, the vaccine is out, etc. We are likely to see that rate shoot back up especially with inflation being as high as it is. So, with interest rates increasing that will decrease borrowing throughout the economy. However, this doesn't mean that it will help solve our supply chain issues and it won't mean much for the shortage for certain things so prices are likely to still stay high compared to before the pandemic because retailers want to make that profit. Concluding, raising interest rates can be very constructive but maybe not as much in this case. 

https://www.marketwatch.com/story/the-fed-says-its-raising-interest-rates-will-that-mean-much-for-inflation-11643313174?mod=inflation

Ringing in the New Year with Minimum Wage Hikes

  With the new year around the corner a total of 25 states that includes 83 jurisdictions and 57 cities are all preparing and planning a minimum wage increase. As a result of increasing the minimum wage we see how it helps many workers and employees and along with that we see how it hurts small businesses. A report released and noted by the nonpartisan Congressional Budget Office (CBO) shares that increasing the minimum wage will eliminate 2.7 million jobs. Another result of increased minimum wage is increased cost of goods and services. “Higher wages would increase the cost to employers of producing goods and services,” shares the CBO. “Employers would pass some of those increased costs on to consumers in the form of higher prices, and those higher prices, in turn, would lead consumers to purchase fewer goods and services.” 

In another study done they have found that an increased minimum wage would mostly affect ages 16-24. Particularly those in the entertainment, recreation, and food services. CNBC shares that 54% of small businesses oppose the minimum wage raise to 15$ an hour. Another 20% of small businesses share that they will be forced to lay off workers if the minimum wage was raised. Others share their options are very limited to eliminating positions, cutting employee hours, reducing benefits, automating or outsourcing jobs, or closing down.”

Ringing in the new year with minimum wage hikes. Information Station. (2021, December 15). Retrieved February 1, 2022, from https://informationstation.org/kitchen_table_econ/ringing-in-the-new-year-with-minimum-wage-hikes/

Canada Says Trucker Vaccine Mandate Hasn’t Dented Border Crossings

 On Jan. 15, Canada began requiring fully vaccinated U.S. as well as other foreign truckers to obtain admission into the nation, and for a limited period, unvaccinated Canadian truckers were permitted to enter the country but were needed to quarantine for 14 days. The United States implemented a similar ban on Jan. 22, prohibiting unvaccinated Canadian truckers from transporting products across the border. Trucking and industry associations have warned of potential shortages of commodities as a result of Canada's trucker immunization mandate. It provoked a demonstration in downtown Ottawa by several drivers and their supporters, who demanded that the Liberal government repeal all vaccine requirements and social restrictions.

The demonstration, which is jamming Ottawa traffic, is in its fourth day, and the key organizers have pledged to stay in Ottawa until vaccination mandates are repealed. Since the demonstration began on Friday, there were no injuries or violent events, according to police. On Monday, some 500 protestors strolled around stalled trucks and down a nearby sidewalk, many holding Canadian flags and handwritten banners asking for an end to vaccine requirements. According to US trade data, merchandise trade between the US and Canada was more than $600 billion in 2019, one of most recent full year in which data is available. According to the Canadian exporting and transportation industries, vehicles transport about 80% of such items.

Myanmar in war

 People of Myanmar are in desperate need of help as the citizens go on a war with the military, which is very one-sided. It has been a year since the military coup in Myanmar, and now the National Unity Government is calling for help. There has been extreme brutality and atrocity against the population. The new generation in the country has been revolting against the military and is not ready to accept this regime. There have been attacks on protestors, civilians, and political activists. It began with tear-gassing and beatings but now there are air assaults, villages are being burned down, and people are being shot. Political activists are being put into prison for years. Zin Mar Aung, a political activist said that things have worsened from the past military regimes, the torture that used to be done behind the bars is now being done publicly. It has been reported that more than 1500 people have been killed since the military coup. People are scared to share this on media because they fear they will be the next target. 

What is the world doing about this and why the international media has not picked up on it is still a question to me. Political activists say that if international authorities won't help and step in, this will continue. Myanmar is in need of help now more than ever. I really wonder what will happen if nothing is done about it. 

January Jobs Data Will Show the Health of the Labor Market in 2022

Numbers came out earlier this month to show that almost 200,000 jobs were created in December.  That number, along with November and October's revised numbers, brought the 3-month average to 365,000; this is a slowdown from earlier in the year with the average going over 500,000. A large factor in this decrease is that COVID, specifically the new Omicron variant, has increased its spreading, squeezing an already tight labor force.

The increase in wages has almost doubled since 2020 hitting 4.5%. This, unfortunately, has helped fuel inflation at an uncomfortable pace.  Some workers have had the benefit of a wage increase exceeding inflation; the leisure and hospitality industry saw a 13.5%.  With the Federal Reserve getting ready to raise interest rates to combat inflation, labor markets are anticipated to drop. 

Incoming numbers on job creations and ADP's monthly survey of employers will answer some questions, although it is likely the labor market will be taking a hit and, overall, jobs were lost in the past month.  

https://www.usnews.com/news/economy/articles/2022-01-31/january-jobs-data-will-show-the-health-of-the-labor-market-in-2022

Winter Olympics will only burden China's economy

 Usually, big events like the Olympics and winter Olympics are good for the economy because tourism increases as well as consumption. But this time winter Olympics will only burden China's economy because of the new Covid variant, Omicron. If there are no viewers, it will mean that the tourism will be really low as well as consumption which China usually experiences when hosting these games. Beijing is having increasing Covid cases, which have risen to 96 cases since mid-January. With China's Covid Zero policy, it is likely that this event will bring no economic boom, rather a burden on the economy. 

China is requiring its citizens, who want to buy anti-fever medication, to get covid test beforehand. It is also requiring people to test for inbound travels. With such harsh policies, the management of such a big event will be very difficult. Authorities have put a hold on selling tickets to the public and might only allow a few special guests to watch the games. The games are still planned to be held in China and they are not delaying them. The effects may not increase the consumption demand this time but it is thought that the burden on the economy, in the long run, won't be as much as expected. Only time will tell what the effects will be in the long run. 

IMF sees higher inflation as supply chains and Omicron slow economic growth

    Recently IMF, The International Monetary Fund, has seen that global growth will fall from 5.9% in 2021 to 4.4% in 2022. Then following that 2023 would dip down to 3.8%. The Omicron variant took a toll on the end of 2021. It led to increased mobility restrictions and financial market volatility. This is increasing inflation and made it more broad-based than we expected. We anticipate, by the end of the year, for the past unfortunate health outcomes to fall in most countries as we distribute the vaccine and the boosters.

    The mess the pandemic left behind a total disturbance to global trade and this had brought us  shortages all over the globe, increasing prices for imported consumer goods. Just from the supply shortages that is supposed to decrease 0.5-1% points off the global GDP 2021. This increases the inflation and keeps making it more broad-based, and adding a point. The year 2022 is basically starting closer to the bottom and we have to build our economy back up.

Article:

https://www.weforum.org/agenda/2022/01/imf-economic-outlook-inflation-covid19/

Inflation Causes Wholesale Price Increase

     This year, the inflation rate has risen causing many changes for consumers and producers. Many prices have risen because of inflation, causing an overall decrease in consumer spending. However wholesalers are also affected by inflation. In December alone, there was a 0.2% increase in producer price, which was less than expected. Overall, in 2021 there was an increase in producer price index of 9.7%, the biggest since 2010.  Over this year, CPI rose 7%, the biggest increase since June 1982. Many of these numbers have been steadily increasing and making records since March of 2020, the beginning of the pandemic. Many of these numbers were expected because of the conditions the market. 

https://www.cnbc.com/2022/01/13/wholesale-prices-up-0point2percent-in-december-less-than-expected-but-still-a-new-12-month-record.html

Job openings drop but people are still quitting at an alarming rate.

     Recently Americans have been quitting their jobs at an unusually high rate and this has been dubbed "The Great Quit" by many. Although, the rate of quitting isn't as high was it was at the start of this movement, the rate still grew from October to November at a clip of 3% which is .2% higher than the previous month. Alongside the increase in quitting rate, the number of job openings decreased as well. The job openings rate in November was 6.6%, down from 7% in October. This is an interesting trend to see, quitting increase and job openings decrease. Job openings per seeker fell as well to 0.778 in November from 0.860(this was a record high) in October. This makes sense to see a slight drop considering number of job openings decreased. When it comes to specific breakdowns of sectors in terms of job openings leisure and hospitality takes the cake at 8.7%. This would be expected though due to the current climate and Covid19, getting workers for those sectors is exceptionally challenging. The following two are professional business services at 7.8% and education and health care at 7.7%. Highest quit rates also coincide with the sectors with the most job openings. Overall, it seems as if "The Great Quit" has slowed down from the start but the quitting rates are still increasing, along with job openings decreasing most likely caused by companies being unable to support those positions in the current economic climate.

https://www.aier.org/article/private-sector-job-openings-fell-in-november-but-quits-surged/ 

Retail Sales Drop in December as High Prices Caused Consumers to Spend Less

 Due to the surging Omnicron cases and high prices, retail sales took a dip.  In early December it was projected that retail sales would drop by 0.1%, however, it fell much more than that as the monthly sales report showed a decline of 1.9%.  Most categories saw a decrease this December, Online spending taking the biggest decline of 8.7%.  Only two categories seeing an increase, miscellaneous store retailers and building materials and gardening centers.

Also, import prices fell 0.2%, the first negative number since August, due to the 6.5% fall in import fuel prices.  That fall provides some hope that the inflation surge could be slowing, even though much of the fall came from the drop in. petroleum prices.

The Federal Reserve has been stressing the importance of stopping inflation and saying that policymakers expect to see a rise in interest rates as early as March.  The Central Bank and the Biden Administration blame the rise in prices on pandemic-related factors, such as the supply chain issues and the high demand for specific goods.  Though the price surge has come following cash injections from both monetary and fiscal policy.

President Biden meets with Emir of Qatar regarding natural-gas supply concerns amid elevated tensions with Russia

 Today, on the 31st, the US President with Emir Sheikh Tamim bin Hamad Al Thani of Quatar at the white house to discuss matters related to the global energy market, with special emphasis being placed on potential substitutes to Russian natural gas in the event of a Russian invasion of Ukraine.

According to the article, Russia supplies 40% of Europe's natural gas, which means that any sanctions triggered by the possible invasion of Ukraine would lead to oil and gas shortages throughout the world, which would therefore lead to energy prices creeping higher. There appear to be many that echo these sentiments, as Natural Gas Futures prices surged in weeks prior, signaling market fears regarding potential conflict.

The US may have an intention to secure a substantial amount of natural gas from Quatar for the aforementioned European nations, in order to lessen the potential economic ramifications of a reduced natural gas supply from Russia.

https://www.marketwatch.com/story/biden-meets-with-emir-of-qatar-as-u-s-aims-to-allay-european-concern-about-natural-gas-supply-amid-elevated-russia-tension-01643660960

GDP grew at a 6.9% pace to close out 2021, stronger than expected despite omicron spread

The US GDP grew at a 6.9% pace to close out 2021. This was unexpected and strong especially in regards to the omicron spread. This was due to sizable boosts in inventory and consumer spending. This increase was well above the unrevised 2.3% growth in the third quarter and came despite the Covid omicron case outbreak which slowed down hiring and production. It propelled the US economy to its strongest full year since 1984. However, jobless claims remained elevated at 260,000 while orders for long lasting goods hit their lowest point since April 2020. The acceleration likely tailed off at the end of the year. Stock futures were posting gains while government bond yields were mixed. Fed officials believe they have achieved both ends of their employment and inflation mandate. They are ready to start raising rates and tighten monetary policy. 

 https://www.cnbc.com/2022/01/27/gdp-grew-at-a-6point9percent-pace-to-close-out-2021-stronger-than-expected-despite-omicron-spread.html

Consumer Welfare Standard

Since the 1980's, there have been arguments over which of two schools of thoughts our antitrust legislation should be based on. The school that has won out thus far is based on the belief that antitrust legislation should be made in defense of consumer ideals and welfare. However, there has recently been a shift towards the idea that antitrust legislation should be preventing monopolistic control so that companies cannot be big enough to corrupt politics. Significant reforms are most definitely needed to the current competition-based legislations, since many obvious antitrust cases have been difficult to win due to strict standards. However, modifying the basis of antitrust laws to the size of firms rather than how they affect consumers will cause consumer defense to starkly fall and will likely prevent technological innovation and competition since most large tech companies only have monopolies in one or two aspects of their overall field and many apps are even free to download and use. Rather than destroying the expanse of certain firms or specific parts of the industry, companies that are already large should be flagged and have to prove that any mergers are in the interest of the consumers. 

https://www.economist.com/leaders/2022/01/29/in-defence-of-the-consumer-welfare-standard

Economic Growth Despite Omicron

 The economy has been through a lot these last two years. The coronavirus has caused an increase in inflation and a decrease in GDP (Gross Domestic Product). Therefore, we would have expected another decline in GDP after the appearance of the new COVID-19 variant, Omicron, at the end of 2021. This new variant caused a lot of new COVID cases and could have hurt the economy. However, according to the Commerce Department, the GDP increased at a 6.9% annualized pace from October to December of 2021. This is even more than economist Dow Jones had been looking for, namely an increase of 5.5%. The 6.9% growth is a big improvement from the unrevised 2.3% growth in the third quarter of that year. But what caused this economic growth? The growth is caused by an increase in all the following sectors: private inventory investment, personal consumption, export, and business spending. Ass well as that import increased in the last quarter, which made the net export increase. In these three months, the personal consumption increased by 3.3% and the business spending and inventory investment increased by 32%. This last quarter of 2021 contributed to a 5.7% increase in annualized GDP of 2021. This is the highest pace since 1984.

https://www.cnbc.com/2022/01/27/gdp-grew-at-a-6point9percent-pace-to-close-out-2021-stronger-than-expected-despite-omicron-spread.html 

Which Economies Have Done Best and Worst During the Pandemic?

 In this article, they look at 23 rich countries and determine which countries have done the best/worse during the pandemic using 5 measures. The measure that they studied were GDP, Household Incomes, Stockmarket performance, Capital spending, and Government indebtedness. They found that the speed of the bounceback is surprisingly fast and has shocked many economic forecasters. The average unemployment across the 23 countries was 5.7%, and the aggregate household income was above the pre-covid level. Although the majority of the countries are better than before the pandemic there are definitely uneven effects of the pandemic across countries, and some have not performed as well. Britain, Germany, Italy, and Spain are among some of the struggling countries. The struggles of these countries have been caused by travel bands in the countries that rely heavily on tourism, high levels of death that led to low consumer spending, and not preserving jobs nor compensating the losers. Other countries that have performed better during the pandemic strategies were to make up for the people's lost labor income by sending them vast amounts of money in the form of topped-up unemployment benefits and stimulus checks. Also when they looked at the companies' performances during the pandemic they used the stock market performance as an indicator and found that companies were not nearly as affected as households. Capital spending during the pandemic has increased in some countries with entrepreneurs looking at the opportunities created by the pandemic and other companies spending big money for technologies to make working from home more efficient. The last measure that they looked at was public indebtedness and found that the OECD predicts that the combined GDP of the three highest-ranked covid performing countries to be 5% higher than their pre-pandemic level and output for the wort performers is expected to only be 1% higher than pre-pandemic levels. They have concluded that across the countries that they have studied there is uneven effects of the pandemic, and these will continue to affect the lower-performing countries for more time to come.

https://www.economist.com/finance-and-economics/which-economies-have-done-best-and-worst-during-the-pandemic/21806917

The FED's Frankenstein

 Around two years ago the FED administered their emergency bond buying back program and currently it is a big part of the overall issue that is the current housing market.  Monthly, the FED has over $40 billion mortgage backed securities purchases which is the equivalent of the entire new home market last year, with over 750,000 new homes built and an average price of $453,700.  In addition, talks of potentially increasing interest rates are already affecting a rise in mortgage rates, but with the housing market being about 40% of CPI it will not be enough to deter the exuberantly high home prices.  

The sustainability of these rising home prices comes into question, homes are rising at nine percent a year which is almost doubled than a rate that could be called sustainable.  Furthermore, the rents of apartments and other markets are seeing increases of ten percent or higher every year which is also almost doubled the usual rate.

Since the FED owns a significant portion of these treasury and mortgage markets we cannot expect to see much change until they reduce their own economic footprint, as their balance sheet grows larger the best solution they have given is to slowly let these bonds reach maturity and sell them off in a quantitative tightening manner.  

This is where the Frankenstein idea comes into play because knows almost nothing about what it has created, QT is meant to decrease liquidity within the economy so if this happens then consumers will have less buying power right as soon as supply starts to increase.  Estimating it would take roughly five years for the FED to sell its bonds, but who knows if we even have five years.

https://www.barrons.com/articles/housing-market-fed-frankenstein-51643401022

The U.S. and Russia: Pertinant Political Problems Presenting Possible Penalties

     Tensions between the US and Russia have been high since the World Wars, but now we are facing another standoff. This potential economic crisis is, for once in the past three years, not a problem related to Covid. What's essentially going on is that the Biden administration has been threatening to hit Russia with extremely heavy sanctions. These sanctions would undoubtedly have a significant negative effect on the Russian people themselves, and it is unknown how much of an impact it will have on the European economy. In addition to causing a lot of economic strife, these actions could also add to anti-American propaganda in Russia or cause retaliation by Russia by limiting the global oil/gas supply.

    The reason the US would make such threats that could cause problems for our economic problems or add to the resentment between our two countries isn't trivial either. The Biden administration is threatening these sanctions to dissuade Russia from invading Ukraine. At the moment, it is unclear if the US will enact these sanctions even if Russia does go through with it. The government is in a hard position at the moment because the sanctions would have devastating effects, but not following through on the threat might weaken the US's bargaining power with other countries on top of the inherant consequences to Ukraine.

So for the time being we just have to hope that the threat of sanctions will suffice in preventing actions that would lead to the US having to decide if they will enact them or not.

https://www.nytimes.com/2022/01/29/us/politics/russia-sanctions-economy.html 

As the Pandemic Lightens, The Affects of Brexit Become More Apparent

 Although we are far from moving past the Covid Pandemic, we have come a long way in the last two years. Just before the onset of the pandemic in 2020, the UK had made the unprecedented decision to leave the European Union. Now, the effects from "Brexit" are starting to differentiate themselves from those of the pandemic. One of the biggest impacts of the pandemic has been the the tight supply chains that have delayed the transportation of goods for weeks. Unfortunately for the UK, trade will only become more limited as, in July, Britain plans to finish implementing the rest of the trade deal that they have with Australia. By September 2021, British trade had dropped about 11.2% or 8.5 billion pounds than what it would have been in the E.U. But, that's not where the economic change ends for the UK, in 2025 they will have introduced extra 29 billion pounds of taxes. Economists also predict that by this time, Brexit will have cost more that 30 billion pounds in public finances. The optimism surrounding Brexit and the opportunities it might bring is quickly fading as GDP is predicted to drop 4-7% once all of the trade deals are in place. However all hope is not lost for the economic future of the UK. With emerging markets such as AI and robotics showing promise, Britain has the opportunity to capitalize here and prepare to be a frontrunner in a new market with tons of potential. 

Article:

https://www.theguardian.com/commentisfree/2022/jan/31/covid-easy-scapegoat-economic-disruption-brexit-biting 

US economy

 According to the data from Commerce Department, the US economy grew by 5.7%. It is the highest rate since 1984. However, this rate might slow down due to the scale of stimulus spending and the rise of interest rates. Other factors that can influence the growth rate are inflation and the new Covid variant. The World Bank predicts a 3.7% growth rate in 2022. Consumer spending and government stimulus helped power the rebound from 2020. The labor market has regained 19 million of the 22 million jobs lost amid the shutdown that year. President Biden said that he is not surprised, it is a result of the government's recovery effort. On Wednesday, Federal Reserve Chairman Jerome Powell pointed out that the central bank would raise its key interest rate in March for the first time since 2018, claiming that the economy no longer required the extra-low borrowing costs imposed in 2020 to help it grow. The US faced the highest inflation rate in nearly 40 years. As a result of the fears, US stock markets have dropped for three weeks in a row, with more recent data showing a slowdown similar to what Omicron experienced in December and January. "Today's figures measure GDP up until the end of December 2021, excluding some of the recent surges in Covid-19 cases," said Richard Flynn, managing director at Charles Schwab UK. "Indeed, there's been weakness across US stock indices in the first weeks of 2022, as investors digest some of the risks facing the economy: receding monetary and fiscal liquidity, persistent effects from the pandemic, and a rise in inflationary pressures."

Effect of Covid-19 on Economic Growth

This article discusses the projected impact of the pandemic on economic growth in 2022. According to the article, the World Bank projects that global economic growth will be lower than it was in 2021, falling from 5.5% to a predicted 4.1%. Although the past year marked some economic recovery, the article states that this recovery will be stunted as a result of resurging waves in the pandemic. Furthermore, the World Bank predicts that “output is expected to be weaker and inflation is likely to be hotter than previously thought” (Rappeport 2022). As prices continue to rise and supply chains continue to be impacted by spikes in cases, the pandemic will take an especially harsh toll on developing countries. 

The article also underlines how this public health crisis is heavily impacting areas of the world where economic inequity is very apparent. In a report on the effects of the Covid-19 crisis, World Bank president, David Malpass, described how the pandemic has undone many years of work towards poverty reduction. Income inequality is continuing to widen between countries as well as within them. Additionally, the World Bank reports that most developing markets outside of East Asia and the Pacific would return to their pre-pandemic levels. 

As the recent waves in the pandemic continue to slow down economic recovery, the World Bank predicts that many less advanced countries will suffer from ‘substantial scarring’ in their economic output. Furthermore, the possibility of increasing interest rates and decreasing fiscal support could also negatively impact these already vulnerable countries. In order to bring aid to these countries, the World Bank is recommending an increase in debt relief initiatives. Some additional methods for helping to spur growth in lesser developed countries are to increase investments in infrastructure and distribution of Covid vaccines. In the world’s larger economies, such as the US and China, the article states that economic growth will be moderate, but these larger nations will find it difficult to witness significant growth. For example, pandemic restrictions are curbing consumer spending and investment. 

With the resurgence in Covid-19 cases due to the rise of the Omicron variant, it seems likely that 2022 will be yet another year of slow economic growth. As the World Bank has projected, it is very likely that this year could do more damage than help in the fight against economic inequality, as lesser developed countries continue to suffer from the effects of the pandemic.

https://www.nytimes.com/2022/01/11/business/world-bank-2022-growth.html

Fed tries to thread the needle by raising rates without endangering economy

 As inflation continues to rise and affect the economy, the Fed must look for a way to counter it while keeping prices stable. Powell and the Fed have been working diligently to address the various concerns of the economy, but as prices continue to increase there will be no simple quick fix. The clear option for countering the record-high inflation we are currently facing is to increase the interest rates, but there are various outcomes that could arise from doing so. If the Fed raises the interest rates too much and too quickly then we could see our economy enter another recession. If interest rates are raised too little, then inflation will continue to wreak havoc on our economy and force higher prices. 

Fed Chairman, Jerome Powell, has ensured that increasing the interest rates will not be like what happened in 2015 when the central bank waited nearly a year to raise interest rates after the first increase. Powell plans to instead take a gradual approach when raising interest rates and may raise them at each of the remaining Fed meetings this year.

As for other aspects of the economy, such as unemployment, officials believe there may be some obstacles. As firms are excepting more and more employees back, many have chosen not to return. This is due to many workers demanding higher pay and incentives in order to keep up with rising prices and expenses. As the economy continues to open up it will be interesting to see how the Fed will implement changes in order to tame the high growth and inflation.

Source: https://www.washingtonpost.com/us-policy/2022/01/30/fed-powell-rates-economy/

China and Their "Zero-Covid" Policy Could Cause Economic Problems

     China has now taken a "Zero-Covid" policy approach to the ongoing pandemic as they approach the future. Zero-Covid refers to attempts to completely eliminate the virus via public health measures such as lockdowns, mass testing, and border quarantine. With the evolution of COVID-19 and it's new strains forming rapidly, China could see a lockdown for years if all it takes is one case to keep it on lockdown. This will be detrimental to their economy as being closed means being closed to production, trade, employment opportunity, and so much more as we know. China has been moving to boost its economy amid slowing growth. Last Wednesday the country’s central bank, the People’s Bank of China, lowered its benchmark lending rates, lowering corporate and household loans. Will this "Zero-Covid" Policy do just the opposite to the economy? Very likely. Last Thursday, China’s mainland health commission had reported a total of 73 new confirmed cases. It has a seven-day average of 129 cases. Going forward we must monitor how China does with covid cases, while also monitoring their economic performance. 

Article : https://www.cnbc.com/2022/01/21/imf-chinas-zero-covid-policy-a-burden-to-domestic-and-global-economy.html

Federal Reserve Points to Interest Rate Hike Coming in March

 On Wednesday, the FED provided a clear hint that interest rates were going to rise in March.  They predict that there will be a quarter percentage point increase to its benchmark short-term borrowing rate.  If this does occur, it will be the first rise in in interest rates since December 2018.  The reason for these high interest rates is because of the highest inflation rate that the U.S. has seen in 40 years.  Due to all of these factors, the FED has indicated that the Central bank's bond buying will end in March at the same time as the interest rate increase.   Currently, the FED is likely to reduce their bond holdings.  They hold over $9 trillion which has bloated its balance sheet greatly.  Unfortunately, the FED does not meet in February which is why we will not know the interest rate increase until March.  The markets will likely react to the foreshadowed increase in interest rates.  

Fed decision January 2022: Federal Reserve points to interest rate hike coming in March (cnbc.com)