Day: February 7, 2022

Ray Dalio compares political risks in the US with recent economic growth in China

China is winning the economic competition against the United States, according to Ray Dalio, the founder of the world’s largest hedge-fund firm, Bridgewater Associates.

The US is in “relative decline,” while “China has been rising,” Dalio said on Monday during a wide-ranging interview with Bloomberg. He noted that the US Federal Reserve has been “behind the curve” on monetary policy, adding that “rising interest rates means all other assets have to adjust.”

Dalio contrasted political risks in the United States with recent economic growth in China, saying there’s a “reasonable chance” neither major US political party will accept the results of the 2024 election.

“There is a worry that one should have about the divisiveness and what it means for each other,” he said.

The billionaire has long predicted that the Chinese economy will overtake the US in size to become much more powerful.

Earlier this month, Dalio praised China’s drive for common prosperity while urging nations including the US to narrow wealth gaps.

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Ukraine-related penalties may include the banning of Russian arms sales as well as curbing energy exports

The US is reportedly trying to convince its allies to impose new sanctions against Russia if a war with Ukraine breaks out. These would target arms and energy exports, costing Moscow around $50 billion, German tabloid Bild reported citing unnamed sources.

The drastic step was reportedly proposed by William Burns, the head of the CIA, during his visit to Berlin. US officials reportedly asked the German government to ban imports of Russian raw materials and block the launch of the Nord Stream 2 pipeline.

Berlin assured the US that in the event of an invasion of Ukraine, Russian gas would not go through the Nord Stream 2 pipeline, the sources told the media. However, the chancellor’s office voiced doubts over completely abandoning the vital pipeline. The remark caused irritation in Washington, Bild reported.

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Over the past few months, a wide range of Western media outlets, along with multiple US officials, have been spreading speculation about an imminent Russian invasion of Ukraine. Washington and some of its allies threatened the Kremlin with a new round of ‘crippling’ sanctions if this happens, citing the movement of Russian troops within the country’s vast Western territory as evidence of the plan. Moscow has consistently rejected the accusations, saying it has a right to carry out military maneuvers as it pleases within its borders.

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Coffee giant’s decision to reverse vaccine requirement for employees sparks backlash from some patrons and workers

The world-famous coffee giant Starbucks has come under fire for scrapping the Covid-19 vaccine mandate, with calls to ‘boycott Starbucks’ flooding social media.

Both customers and Starbucks baristas say they refuse to support a place, no matter how iconic, which does not require employee vaccinations.

“Who wants unvaccinated people handling your food and drinks?” wrote one Twitter user, while others bitterly joked with the idea of “Starbucks now serving Covid-19 with that delicious hot coffee.”

The public reaction was sparked by Starbucks’ decision to go back on its previously announced plan to require all its US workers to be vaccinated against Covid-19 by February 9 or submit to weekly testing. The company scrapped the plan after the Supreme Court earlier this month ruled against the vaccine mandate proposed by President Joe Biden’s administration for large businesses. Without the mandate, firms are left to decide how to counter the spread of the pandemic internally.

“We respect the Court’s ruling and will comply,” John Culver, head of Starbucks in North America, said in a note to employees on Tuesday. Culver noted, however, that Starbucks workers are still encouraged to get vaccinated. He added that the “vast majority” of Starbucks’ roughly 200,000 US employees have been fully vaccinated already, but did not give specific numbers.

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The firm’s employees have not been happy with management’s decision, staging a walk-off earlier this month over “Covid-19 safety concerns that the company rebuffed” at a Starbucks in Buffalo, New York, the company’s first unionized store. The union – Starbucks Workers United – formed just last month, representing two Buffalo-area Starbucks stores. It slammed the company’s reversal on the vaccine mandate, stating that the decision was made without employee feedback.

Starbucks declined to comment on the public backlash regarding the mandate decision when asked by Yahoo Finance. The company introduced a number of Covid-19 safety protocols this week, including the requirement for workers to wear three-layered medical grade masks and the expansion of self-isolation policy. Starbucks also continues to offer two hours of paid leave for employees getting vaccinated.

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Global financial markets are pricing in geopolitical risk amid US claims of rising tensions between Russia and Ukraine

NATO announced this week it was putting forces on standby and reinforcing Eastern Europe with more ships and fighter jets, as the US continues to accuse Russia of gearing up to invade Ukraine. Moscow has repeatedly denied planning to attack its neighbor, with the Kremlin insisting Russian forces are not preparing for war. 

1. How are global markets reacting to the crisis?
   Volatility has gripped the global equity markets, which saw a widespread sell-off this week, as fears of conflict rattled investors. European stocks suffered double-digit losses on Monday, tumbling by 3.8% to their lowest levels since October. Some £53 billion ($71.5 billion) has been wiped off the value of the UK’s blue-chip share index. US stocks were sold off in a tumultuous Wall Street session, while Asian markets were also being dragged lower. “I think we will see a tug of war in the market for this week,” Carlos Casanova, senior economist at UBP, was quoted as saying by Reuters.
   
2. How has the crisis affected the Russian & Ukrainian economies?
   Media reports of rising tensions have hit both economies. Russian stocks and bonds took a further hit this week, with the ruble falling to a one-year low, dropping 2.5% to more than 79 rubles to the US dollar. The Bank of Russia said it was halting purchases of foreign currency in an attempt to ease pressure on the domestic currency. Ukraine’s currency, the hryvnia, has also weakened to a more than one-year low, plunging 4.5% since the beginning of 2022. According to the Bloomberg index, Ukraine’s foreign bonds have lost 7.5% this year in dollar terms, the worst performance in emerging markets after Argentina.
   
3. Where do international investors seek safety?
   Investors rushed to safe-haven assets such as the US dollar and the Swiss franc, which hit a six-year high against the euro. Another safe-haven currency is the Japanese yen, which firmed a bit against the dollar, but later weakened 0.01% versus the greenback at 113.69 per dollar. The price of the traditional safe-haven gold has also been rising.
   
4. How’s the crypto world coping?
   The sell-off in risk assets also hit cryptocurrencies, with Bitcoin hitting a six-month low of about $33,000, less than half its all-time high of $69,000 reached last November. Other cryptos also slumped, with the second-largest digital coin, Ether, down 13% to $2,202, its lowest since July 27.  “Bitcoin will face headwinds going back up until the macroeconomic conditions change,” Mark Elenowitz, president of Horizon Fintex, told Euronews.
   
5. What’s happening with commodities?
   Tough sanctions against Russia will rattle commodity markets and prices will soar. Russia is a commodities powerhouse, with it being a key supplier of energy, metals, and agriculture. Energy prices have also been elevated, with the wholesale day-ahead cost of UK gas jumping 17% and the price of crude reaching a seven-year high near $90 per barrel. Russia is a critical route for oil and gas flows to Europe. Prices for Russian Urals crude, which ships via Ukraine, have increased from $68.35 per barrel on December 2 to $87.25/b as of January 21, according to Platts. European gas prices, which have surged on winter demand, continue to rise further as Ukraine is an important transit country for Russian energy supplies to the continent. Benchmark European gas contract TTF DA is up more than 300% year on year in January and experts say that any conflict impacting gas supplies to Europe would have a knock-on impact on power, causing a spike in electricity and heating prices.
   
6. What else is weighing on the global economy?
   The key driver behind the global markets’ turmoil is the deepening geopolitical crisis amid reports that the situation along the Russia-Ukraine border is worsening. However, the persistent worries about policy tightening from the US Federal Reserve against the backdrop of high inflation and the ongoing Covid-19 pandemic also weigh heavily on risk trends.
   
7. What lies ahead?
   The magnitude of the global sell-off suggests that the reported tensions between Russia and Ukraine aren’t fully priced into the markets, analysts have said, warning of more profound losses lying ahead if the crisis deepens. The situation presents substantial uncertainties for foreign currency markets. In the financial sector, the risk is concentrated in Europe, according to calculations by JPMorgan. It said the tensions risked a “material spike” in oil prices, warning that a rise to $150 a barrel would reduce global GDP growth to just 0.9% annualized in the first half of the year, while more than doubling inflation to 7.2%.

 

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Company that began as an aircraft engine maker powers car that transforms into a plane

A car that can transform into a small aircraft has been awarded with an “official Certificate of Airworthiness” by the Slovak Transport Authority. According to Klein Vision, the company behind the AirCar, 70 hours of “rigorous flight testing,” including over 200 takeoffs and landings, have been completed. All of that was compatible with European Aviation Safety Agency (EASA) standards.

“The challenging flight tests included the full range of flight and performance maneuvers and demonstrated an astonishing static and dynamic stability in the aircraft mode,” Klein Vision said in a press release on Monday.

The AirCar is powered by a 1.6-liter BMW engine, and runs on “fuel sold at any gas station,” Anton Zajac, co-founder of Klein Vision, told CNN. The vehicle can fly at a maximum operating altitude of 18,000 feet, he added. It takes two minutes and 15 seconds to transform from car into aircraft. The wings and tail fold away automatically for road driving.

A spokesperson for Klein Vision also said that a pilot’s license is required to fly the hybrid vehicle. He has expressed hopes of having the AirCar commercially available within 12 months.

In June, the flying car completed a 35-minute test flight between airports in Nitra and the capital Bratislava in Slovakia. After landing, the aircraft converted into a car and was driven to the city center.

“AirCar certification opens the door for mass production of very efficient flying cars. It is official and the final confirmation of our ability to change mid-distance travel forever,” the AirCar’s inventor Stefan Klein said as quoted by Top Gear Magazine.

BMW started as an aircraft engine producer, but after WWI Germany was forbidden to make airplanes or engines for them (for five years). So, the company switched to making motorcycles and cars. In 1924 they resumed the production of aircraft engines, and ultimately stopped in 1945. The iconic logo with the four colored quadrants represents a spinning airplane propeller.

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