The Big Picture

The Korean government is proposing to use tax-payer money to pay down personal debt of newlyweds that have babies. Why?

Korea is facing an impending population crisis with a fertility rate of 0.8, the world's lowest. For contrast, in 2022, the fertility rate was 1.492 and 1.782 in Canada and the U.S., respectively.

The Korean government's proposal is similar to a program that was implemented in Hungary in 2019, one that offered newlyweds a low interest rate loan of $26,800, with half of this forgiven for the birth of one baby, and the entire amount forgiven for 3 babies.

Why are many countries facing a downward trajectory in population size? The most obvious cause is the rising cost of living, primarily housing.

A recent study out of South Korea indicates that with 2022 prices, it would take about 126 years for the average Korean in their 20s to buy an apartment in Seoul.

Mainstream media does little to understand and explain the root causes of financial hardship being felt globally.

The big picture is this:

The world has become a battleground between 2 major entities:

1. The West, led by the United States, Western Europe, and its allies.

2. Eurasia, mostly an alliance of China and Russia.

Lying outside of these 2 entities are many sovereign states - including Arab nations, all of Africa, countries throughout Southeast Asia, India, and Brazil - that have not pledged allegiance to either side, but have much of what these 2 entities need and covet, including:

- Skilled workers that make products and offer services at affordable wages.
- Natural resources including cobalt, lithium, nickel, copper, natural gas, oil, and coal.

Eurasia would like the world to move way from using the USD as the world reserve currency for global trade. Their stance is simple: why should they continue to accept only USD for their natural gas, oil, and other products that require great manpower to produce when the U.S. Central Bank prints trillions of USD with a few strokes of their keyboard to buy said goods with?

Since the war in Ukraine began, President Putin of Russia has moved away from accepting USD or EUR for oil and gas purchases.

In December of 2022, President Xi of China told Arab leaders that going forward, China would work to buy oil and gas in yuan rather than USD.

In wanting to preserve world reserve currency status for the USD, the Biden adminstration has called on Arab leaders to limit ties with China, and join the west in applying sanctions against Russia, but Arab leaders have defied both requests, and have gone on to sign several economic and strategic deals with China that are in the best interests of the Middle East.

What's the bottom line?

1. Central banks, led by the U.S. Federal Reserve, have printed too much money to keep their nations afloat amid unsustainable debt at all levels of society.

2. The resulting inflation has made the cost of living unaffordable for billions around the globe, including the average Korean citizen in Seoul.

3. Sovereign states that don't benefit from freely printed USD, EUR and other widely used fiat currencies are moving toward other forms of money to carry out global trade.

4. The U.S. Central Bank, desperate to maintain world reserve currency status for the USD, is maintaining their stance to stop their money printing and reach a target interest rate of over 5% in 2023.

5. Higher interest rates are destroying economic activity, decreasing revenue for corporations and all levels of government, and leading to increasing layoffs.

6. The U.S. will maintain their current path until a major credit market freezes up, at which point they will be forced to reverse course and begin lowering interest rates and resume printing money - when this pivot happens, the money supply will begin re-inflating, causing real estate, public equity, and other asset prices to rise again.

Key Takeaways:

Until the U.S. Central Bank pivots on interest rates and money printing, the safest asset will remain the USD primarily because the entire world needs USD to trade for goods and services, and secondarily because banks are now paying around 3.8% interest on savings.

Natural gas companies in the United States and Qatar will thrive, as countries in Western Europe have turned to liquified natural gas imports from the States and Qatar to replace what they can no longer get from Russia.

Going forward, many countries will be returning to nuclear energy plants to meet their needs, so it stands to reason that uranium - the main fuel for nuclear reactors - will be in high demand in the coming years.

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Why do I share macroeconomic and geopolitical updates with our readership from time to time? Because none of us can be optimally healthy without being financially healthy. And to be financially healthy, as unholy as it might seem to some, it's essential that we take time to understand the fundamentals of finance.

My mom who is 77 can only gasp when she sees that a head of lettuce trades for $7. My aunt and uncle spent their entire working lives saving up $100,000 thinking that this amount plus $2000 monthly pension checks from the government will be enough to meet their needs over the next 30 years. I have colleagues that I graduated with in 1997 who still have $200,000 in student loans who feel their only hope for freedom is the government stepping in to "forgive" student debt. All could benefit from a greater understanding of finance.

One of my goals is to help our readers who don't have a background in finance better understand the fundamentals of macroeconomics, and how evolving geopolitical and demographic factors influence shifting monetary policies of leading central banks, policies that ultimately determine how much we have to pay for food, fuel, and shelter. With such knowledge, we become more capable of managing our income and savings in a way that preserves and even increases our purchasing power in the days ahead.