Jan 3, 2023
Peter Schiff, an economist and gold bull, is known for having a lot to say. This past week, during an interview, Schiff explained that he believes the United States will face a financial crisis that is worse than the so-called “Great Recession” of 2008. Schiff explains that the United States currently carries a much larger debt burden than it did back then. He further asserts that the current economic downturn in the United States “will be a much bigger crisis when the defaults start.”
The United States government and Saudi Arabia, which serves as the de facto leader of OPEC, have been engaged in a verbal battle ever since OPEC+ decided to reduce production by 2 million barrels a month ago. This decision sparked a barrage of accusations from both sides. The United States sees the decision as explicit support for Russia in its war with Ukraine; however, Saudi Arabia and its allies insist that their decision was based on market dynamics and was not politically motivated.
Regardless of whether or not political considerations drove the decision, it will not be without impact on the politics and markets of the world.
The Saudi Foreign Ministry emphasized in a statement that all 23 members of the OPEC+ group agreed unanimously to the decision and that the outcomes are based solely on economic considerations that take into account maintaining a balance of supply and demand in the oil markets as well as limiting volatility. The statement was issued in response to a question regarding whether or not the decision was unanimously approved.
Officials from Saudi Arabia have also dropped hints that their country may join BRICS shortly. BRICS is an organization comprised of a group of emerging economies, specifically Brazil, Russia, India, China, and South Africa. When a country joins BRICS, it is considered a sign of belonging to a globe expanding beyond the traditional dominance of the West.
Following OPEC’s decision, President Biden announced that he would authorize releasing 15 million barrels from the Strategic Petroleum Reserve. This draw brings the plan to release a total of 180 million barrels, announced earlier this year, to its conclusion.
Biden is optimistic that the 15 million barrels will contribute to the maintenance of stable gas prices. Despite this, many industry experts believe that the measure won’t be able to counteract the consequences of OPEC reduction. Others have warned that depleting the United States’ Strategic Reserves is risky and might easily have unintended consequences.
However, the decision was made at a crucial time because the amount of US Strategic Reserves was already 33% lower than it was a year ago and was at its lowest level since 1984 when the decision was made.
Rickards, the author of several best-selling books on economics and finance, was asked about the current state of the economy and stated, “It may or may not be worse, but it’s fairly terrible.”
Recently, the price of oil increased as investors anticipated a relaxation of China’s stringent COVID-19 controls. However, gains were limited by concerns that OPEC+ would maintain production levels at their meeting.
“The prospect of a return to normalcy in an economy that is the world’s largest oil importer was enough to make oil prices jump in the first significant price rebound of the last two weeks,” said ActivTrades analyst Ricardo Evangelista.
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