The most influential political decision makers in -2-
Jerome Powell has had to guide the US central bank through the upheaval caused by the pandemic, and it has been a difficult journey. Some say Powell, who is not an economist by training, will go down in the history books for all the wrong reasons. Chief among them was his stubborn refusal to abandon the “transitional” scenario as US inflation hit its highest level in 40 years. He refused to change US monetary policy for months because he thought the price hike would be temporary. Mohamed El-Erian, Allianz’s chief economic adviser, called it “probably the worst inflation call in Fed history.” Economist Stephen S. Roach has drawn comparisons to Arthur Burns, who led the Fed with an iron fist from 1970 to 1978 but failed to prevent the worst episode of “stagflation” in history the United States. How Powell will ultimately be remembered will depend on his ability to bring inflation under control without plunging the United States into a deep recession. Falling stock markets and soaring interest rates suggest that investors and traders have lost some of their faith in Powell.
Vladimir Putin’s decision in February to invade Ukraine shook global markets. The Russian president’s decision to go to war fueled inflation by helping to push oil prices above $100 a barrel for parts of the year. Rising energy prices and Western sanctions against Russia are putting particular pressure on European economies that depend on Russian oil and gas. Putin withdrew energy supplies from Europe to help drive up prices, undermining Germany’s growth model and hammering the euro. The war has disrupted wheat exports in a region that produces a quarter of the world’s supply, causing food prices to spike temporarily, further contributing to global inflation that central banks have tried to combat. Putin’s war has also moved the world economy away from globalisation, a potential far-reaching impact on markets. Its threat to use tactical nuclear weapons is, among other things, now a serious market risk.
Senator Kyrsten Sinema of Arizona nearly sank her fellow Democrats’ Cut Inflation Act – before saving it. The $750 billion health care, tax and climate bill passed the Senate with its support in August, but only after a provision that would have ended the so-called saying a carried interest loophole that benefits private equity managers. As a result, Sinema’s influence on private market investing will reverberate for years to come. Like fellow Democratic maverick Joe Manchin, Sinema has posed a major hurdle in the equally divided Senate for President Joe Biden’s agenda. But with Sinema’s backing, the IRA – which also includes a 1% tax on corporate stock buybacks and a 15% minimum tax rate on large corporations – was approved by the Senate and passed. signed into law by Biden on August 16.
Fired by Amazon (AMZN) after leading a protest against coronavirus-related working conditions at the start of the pandemic, Chris Smalls has returned to lead his former Staten Island warehouse to become the first Amazon warehouse to vote to unionize. Dismissed as not smart or “articulate” by an Amazon executive in a leaked memo, Smalls is now president of Amazon’s new union, which is trying to organize other Amazon warehouses and has become one of the most important names in a booming job. movement. Smalls has testified before lawmakers on Capitol Hill, met with President Joe Biden and is traveling across the country to speak with other labor leaders as companies like Amazon and Starbucks (SBUX) continue to face pressure of their workers and shareholders. Just a year after taking office, Amazon CEO Andy Jassy has faced constant questions about Amazon’s labor issues. (At Starbucks, the chief operating officer who was responsible for the company’s response to organizing efforts has left the company.)
In early 2021, when virtually everyone viewed US inflation as transitory, Larry Summers was pounding the table with nonconsensual warnings: that President Biden’s $1.9 trillion COVID-19 relief package would “trigger inflationary pressures of a kind we haven’t seen in a generation” and that the Federal Reserve was “dangerously complacent” about the risk of upside prices. Slowly in 2022, markets rallied to Summers’ view as his warnings came to fruition. The inflation rate in the United States reached 9.1% in the 12 months ended June 2022, the fastest pace in four decades. As a result, the US central bank changed its policy to deal with inflation, and the delayed response risked tipping the world’s largest economy into recession. A former US Treasury secretary and White House economic adviser, Summers spoke with Biden in 2022 and widely shared his thoughts on economic policy and pushed for a strong Fed response to inflation, including a unpopular call for soaring unemployment to curb rising prices. .
Liz Truss spent only 44 days as British Prime Minister, but her impact on the markets was felt strongly. Just two years ago, Truss was best known in the UK for a clumsy promotion of cheese at a political conference. But Truss steadily rose through the ranks of the Conservative Party to become foreign secretary in Boris Johnson’s government, then won a battle to become prime minister in September 2022 after Johnson’s outrageous departure. Propelled into the global spotlight following the death of Queen Elizabeth II two days into her term as Prime Minister, Truss and new Chancellor Kwasi Kwarteng have come under scrutiny from financial markets after their so-called mini-budget was caused the pound sterling to fall to a record low and UK bonds to fall. that the Bank of England had to intervene. Facing criticism from Britain’s central bank, the International Monetary Fund and her own political party, Truss abandoned her tax cut plans and resigned in October. His short tenure serves as a model for the kinds of country-specific problems lurking beneath the surface of these financial markets, and the tensions between governments and central banks that currently exist.
Janet Yellen was a trailblazer as the first female Fed chair and now the first female Treasury secretary. Earlier this year, Yellen admitted she hadn’t anticipated the surge in inflation. “I think I was wrong then about the path inflation would follow,” Yellen said in May of his previous insistence that rising prices were a short-term consequence of pandemic shocks. Yellen denied having spoken of his intention to leave the Biden administration before the next presidential election. Few officials in the United States have his vast experience in managing the economy or his close contacts with world leaders as the rest of the world enters a perilous post-pandemic era. But first, “I think getting inflation down is key,” Yellen said in a recent NPR interview.
Not so long ago, it might have seemed inconceivable that a comedic Ukrainian leader could have a big impact on global markets. But in 2022, markets latched onto every word of Volodymyr Zelensky as traders watched developments in Russia’s invasion of Ukraine. It did not go as Moscow hoped. On March 28, for example, when Russia gave the first indication that it might be willing to accept less than full control of Ukraine, financial markets cheered. Ironically, progress on the Ukraine front sent US investors home the next day as efforts by central bankers to respond to runaway inflation led to the first 2s Treasury spread reversal. /10s has been closely followed since Aug. 30, 2019. Zelensky shocked the world with charismatic leadership that rallied Western support and Ukraine’s robust downfall counteroffensive in its south and east. Ukraine’s success on the battlefield has had massive implications for energy and food markets, and beyond.
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