I was born shortly after the end of World War II, in 1949, in the British occupied zone of West Germany. My parents were both refugees, endangered at or forcibly expelled from their original homes in Soviet-occupied East Germany. As countless others of my generation, then, I was raised by a generation of parents and teachers who had just experienced some horrific military defeat and were then subjected to harsh and often brutal treatment by hostile foreign occupiers.

The latest jobs report in the United States shows strengths and weaknesses. Total nonfarm payroll employment increased by 223,000 in December, and the unemployment rate fell to 3.5 percent. However, the United States job market continues to show negative real wage growth, the employment-to-population ratio is 60.1 percent, and the force participation rate is 62.3 percent. According to the Bureau of Labor Statistics (BLS), both measures have shown little net change since early 2022 and each remain 1.0 percentage point below their values in February 2020.

The International Monetary Fund (IMF) has warned about the optimistic estimates for 2023, stating that it will likely be a much more difficult year than 2022.

Why would that be? Most strategists and commentators are cheering the recent decline in price inflation as a good signal of recovery. However, there is much more to the outlook than just a moderate decline in price inflation rates.

In 2022, central banks will have purchased the largest amount of gold in recent history. According to the World Gold Council, central bank purchases of gold have reached a level not seen since 1967. The world’s central banks bought 673 metric tons in one month, and in the third quarter, the figure reached 400 metric tons. This is interesting because the flow from central banks since 2020 had been eminently net sales.

Why are global central banks adding gold to their reserves? There may be different factors.

[Reprinted with permission of the authors.]

The year 2023 is shaping up to be a challenging one for the Federal Reserve System. 

In 2011, the Federal Reserve invented new accounting methods for itself so that it could never legally go bankrupt. As explained by Robert Murphy, the Federal Reserve redefined its losses so as to ensure its balance sheet never shows insolvency. As Bank of America’s Priya Misra put it at the time: