Federal Struggle in 2022: Disjointed Efforts Against simultaneous Inflation and Recession
A new financial institution, Battle Bank, was introduced at the Rule Symposium, scheduled to officially debut in early 2023. The four-day event, held from July 26 to 29 in Boca Raton, Florida, was hosted by veteran investor Rick Rule and featured discussions on a variety of topics, including the current commodities cycle, equity markets, and inflation.
One of the key issues addressed at the symposium was the relationship between oil prices and inflation. A rise in oil prices can lead to higher inflation as oil is a critical input in many industries, affecting production costs and, consequently, consumer prices. For instance, a study notes that oil prices are correlated with inflation measures like the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE).
In Asia, a US$10/bbl increase in oil prices could raise inflation by 0.1% to 0.8%, with varying impacts across countries. Countries like China are less affected, while Thailand, Vietnam, and the Philippines may experience more significant inflationary pressures.
Several speakers, including Danielle DiMartino Booth and James Rickards, discussed the current inflationary regime, which is driven by high prices for energy, food, transport, and more. DiMartino Booth argued that the Federal Reserve cannot do both beat down inflation and combat a recession, while Rickards noted that inflation comes from both "cost push" and "demand pull" factors. He warned that there could be "demand pull" inflation in the future, which is "something worth watching very closely."
Rickards also highlighted the presence of three super bubbles at the moment: stocks, real estate, and commodities. Dr. Nomi Prins sees the current market as an opportunity to buy resource positions, particularly in energy.
The symposium also featured panels on the mode, drivers, and factors causing inflation, and how central banks like the US Federal Reserve are responding with interest rate increases. David Stockman warned of the precarious position the Fed now finds itself in due to the US$88 trillion in debt the country holds, and believes that inflation is expected to last longer than anticipated in the 8 to 9 percent range. He also expressed concerns that the economy is going to "buckle big time" due to the Fed's tightening.
The event concluded with the "Living Legends" panel, hosted by Rick Rule and featuring mining veterans such as Ross Beaty, Randy Smallwood, Sean Roosen, Rob McEwen, and Robert Friedland. Ross Beaty highlighted the value of gold during his presentation, while Lukas Lundin, the mining tycoon who founded the Lundin Group, passed away on July 26 after a long battle with brain cancer.
Battle Bank, with its upcoming debut, is set to join the financial landscape amidst ongoing discussions and concerns about inflation and the commodities market. The Rule Symposium, with its diverse range of discussions and insights, provided a valuable platform for experts to share their perspectives on these pressing issues.
- Battle Bank, entering the financial landscape in early 2023, might find opportunities in gold investing as it aligns with Ross Beaty's emphasis on the value of gold during the commodities cycle, given the ongoing discussions about inflation.
- Given the focus on the mining sector and commodities in the discussions at the Rule Symposium, finance professionals may consider investments in the mining sector as a strategic move for their business, especially considering the presence of three super bubbles in stocks, real estate, and commodities.
