War economy and creation of new reserve currency
Saxo Bank’s list of predictions for 2023 focuses on the emergence of the so-called “war economy.” Earlier, the bank stated that the times of low interest rates had passed. Now, building a harmonious world built on democratic values may be quite difficult. According to Saxo Bank, in 2023 countries around the world could focus on their sovereign economic gains and self-reliance at the expense of globalization. As part of this paradigm shift, countries in the Asia-Pacific region could create a new international reserve currency, the bancor, under the ticker name KEY. This currency would be held by OPEC+ member states and would be used to settle international trades.
Joint EU armed forces
Saxo Bank predicts that in 2023 EU member states could agree on creating joint European armed forces. The unified European military would be fully established by 2028 and would be responsible for defending the European Union on land and sea and in the air and space. The EU would spend about €10 trillion on its military, raising money by issuing EU bonds. These investments would also help the euro recover, the bank’s analysts said.
UK rejoins the European Union
In the new year, the UK could hold a referendum on rejoining the EU amid rising inflation and the looming threat of recession. Saxo Bank’s analysts noted that 80% of young Britons opposed Brexit, and it could tip the balance towards rejoining the European Union. Such a referendum could be held by the Labour Party, which could form a new government after winning a snap parliamentary election in the third quarter of 2023.
Emmanuel Macron resigns
France could face political turmoil in 2023, as right-wing forces led by Marine Le Pen would face off the left wing parties. Caught in the crossfire, French President Emmanuel Macron would unexpectedly resign and leave politics. However, Macron could still return to the political scene later, Saxo Bank predicts.
New US energy megaproject
According to Saxo Bank, the US could start a new international energy project in 2023. Codenamed Third Stone and spearheaded by a consortium of major tech companies with the support of billionaires, this megaproject would be the biggest R&D effort since the Manhattan Project, which developed the first atomic bomb. An estimated $1 trillion will be spent on realizing the potential of current and groundbreaking new energy technologies.
Gold surges to $3,000
In 2023, central banks around the world are expected to continue their fight against inflation. The Federal Reserve’s monetary tightening could jeopardize the US Treasury bond market, forcing the Fed to enact quantitative easing policies to normalize the situation. This in turn will weigh down on the US dollar. Saxo Bank predicts that in this situation, countries around the world will invest into traditional safe haven assets, particularly gold. As a result, the precious metal will break above $2,075 per ounce and jump to $3,000 per ounce in 2023.
Meat production ban
According to Saxo Bank, at least one country in the world may ban all production of animal-derived meat by 2030. Some countries will follow suit as part of their commitments to fight climate change. The bank’s analysts noted that it would involve the energy and food sectors. Beginning in 2025, countries will introduce higher taxes on meat production, and by 2030 will completely abandon its production and switch to plant-based substitutes. Some analysts believe that annual meat consumption will be reduced to 24 kilograms per person by 2050.
Price control in the UK and the US
Saxo Bank’s experts predict that governments of many countries will establish price controls to fight galloping inflation amid the deteriorating geopolitical situation. As countries shift into war economy mode, they will strive to establish total control over prices and even wages. According to Saxo Bank, both the UK and the US could establish a National Board for Prices and Incomes. However, such regulation would reduce the standards of living due to the misallocation of resources and investment.
USD/JPY hits 200
Japan will not escape the currency wars in 2023, and the Bank of Japan could be forced to abandon its ultra-dovish policy of negative interest rates. With FX reserves falling two-fold, triggering protests in the country, the central bank could be forced to increase interest rates to 1%. As a result, the Japanese yen will hit the level of 200 against the US dollar, analysts conclude.
Tax havens are banned
The final prediction on Saxo Bank's list is the tax haven ban. Amid the energy crisis and skyrocketing defense spending, numerous countries would make a move against tax havens, which cost them between $500 and $600 billion annually in lost corporate tax revenue. In 2023, the OECD is predicted to launch a full ban on the largest tax havens in the world such as the Cayman Islands, Bermuda, The Bahamas, Mauritius, and the Isle of Man. The US is likely to follow suit and adjust its carried interest taxation rule, severely affecting private equity and venture capital industries, Saxo Bank's analysts say.
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