Welcome to your Weekly Digest!
First up this week is that container ship crash in the Suez Canal.
I’m sure you’ve seen the images. A ship the length of the Empire State Building got turned sideways going through that crucial, extremely narrow waterway linking East and West…blocking any ships from passing.
Last I checked, it was holding up an estimated $9.6 billion in goods every day, according to shipping data. The backlog will reportedly take weeks to clear.
Of course, the mainstream news media has been fixated on the incidentals of the story—how it happened, who owns the ships, how will it be refloated, etc., etc.
Seriously, who cares?
What I’m interested in is how it impacts you and me. Because it will affect us. Or rather it’s part of a wider trend that is already impacting us on a daily basis.
You see, even before this highly consequential maritime snafu, global shipping was stretched to near breaking point.
At the outset of the pandemic, shipping slowed to a crawl as factories and businesses were shuttered. Then, suddenly it came roaring back as people, particularly American and European consumers, started spending massive amounts online.
Shipping companies presumed the lull in trade would continue for some months, so they’d canceled voyages, furloughed crews, and allowed empty containers to build up in all the wrong places.
Then demand for shipping skyrocketed.
Getting trade moving again has proved costly. The average global cost to ship an industry-standard 40-foot container soared from $1,040 in June last year to $4,570 on March 1, according to S&P Global Platts. That’s a massive 340% increase.
At the moment, a lot of these costs are hidden in supply chains. Companies are absorbing them. But don’t expect that to last.
Soon, they’ll start passing these costs on to you and me, the ordinary consumer. In fact, it’s already happening.
In January, the prices of goods imported into the U.S. saw their biggest monthly spike since March 2012. And it’s going to get worse from here.
I expect the price of imported goods to rise much further in the months ahead. Some categories will certainly be more affected than others. Think: spoilable goods like food, for instance. (Costco already announced in March that it’s having trouble getting imported cheeses because of global shipping woes.) And this shipping crisis is going to pile more inflationary pressure on an economy that has been showered with $6 trillion in COVID-relief spending.
Overall, I expect prices to rise by at least 4% to 5% this year, much more in some sectors.
All of which means it’s time to protect our nest eggs from this coming rise in inflation. I have a big recommendation on how to do just that in the April issue of the Global Intelligence Letter. Check out the upcoming issue for that…
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The other big story in the news this week came out of Germany…
For my money, it’s one of the most significant financial developments in ages, though I’m not surprised if you didn’t hear about it. It was not widely reported in the mainstream media.
Let me explain…
Recently, Germany’s central bank, the Bundesbank, teamed up with the country’s debt agency, and a bunch of big international banks for a special project. It wanted to allow people to buy and sell securities on the blockchain in return for “real” money, i.e. euros.
Blockchain, as you know, is the technology behind cryptocurrencies like bitcoin and Ethereum. It’s a decentralized database…a way to store, share, and collect information that is basically unhackable and controlled by no one. It’s how bitcoin and all other cryptos can be bought and sold safely.
While only a test with fake money, the German project allowed participants to trade a bond on the blockchain, and then receive payment in their account at the Bundesbank. For the test, a 10-year government bond was used and traded by six banks, including Citibank and Goldman Sachs.
This test project showed that the world of blockchain and the world of fiat currencies like euros and dollars can be linked…and without too much trouble. According to the Bundesbank, the technology could be scaled up to the entire eurozone shortly.
So, what does all this mean for you and me?
Well, I’ve often written about how all sorts of things are going to end up on the blockchain, from stocks and bonds to concert tickets and even our vote.
This test shows that major global governments are well on the way to making this happen. Securities will be first and then all the rest will follow.
Once securities are tradable on the blockchain, the world of personal finance is going to change faster than you can imagine.
Already, projects are popping up that allow you to own shares of stock—Apple, Tesla, others—as assets on the blockchain. A new project just launched this month that is bringing money-market accounts to the blockchain. And for many months now, I’ve been earning 10% on my dollars on the blockchain—safe, stable, unmoving dollars, not bitcoin or Ethereum or other volatile crypto. (I’m working on a special project right now that will show you how to do the same.)
Tomorrow is here. The Bundesbank is telling that to anyone who will listen.
That brings me to the conclusion of this edition of our Weekly Digest. I hope you found it informative and if you have any feedback or questions, send me an email anytime at jopdyke@globalintelligenceletter.com.
