Transcription
The United States went to make an MOU with Iran, which caused the dollar to strengthen significantly. The Consumer Price Index and Producer Price Index in America actually slowed down. The Japanese market also dropped by over 1,800 points. If it escalates to the extent of a major war in the Persian Gulf, and the Houthis and others join in, threatening to close the Strait of Hormuz and the Red Sea, it will severely impact trade between Asia and Europe. The world will be severely shaken, and inflation will likely surge again because logistics costs, oil prices, and various other costs will increase. If that happens, there is no way the Fed can keep interest rates frozen. It doesn't depend on the Fed Watch; it depends on how Trump acts against Iran.
>> This is the system [singing sound] feed [music] throughout the market. This part, Maxfli con >> Fuel cost management system [music] without hidden fees, with benefits and Max Points. Hello, Professor Somphot. >> Hello, Khun Thani. >> Dr. Somphop is here today. He has honored us with his presence. We will discuss many topics, especially the Iran-US war. Recently, I heard that the US stock market rebounded due to Donald Trump's statement that Iran contacted him wanting to make a deal. I've heard this for the 40th time, Professor. This statement caused the stock market to rebound. They say they are not interested in conflict; they are interested in hope. What does that mean? The possibility of reducing tension rather than waiting for the outcome. It means the stock market is hoping for the future that the 4th wave, 5th wave, 6th wave will end with negotiations as before. So the stock market rebounded in the past period.
>> And coupled with that, Kevin War has also spoken on many issues. I would like the Professor to analyze a bit about the US economy, interest rates, gold, the stock market, and inflation. Professor, after Kevin spoke?
>> Most recently, both the Fed and the President of the New York Fed have spoken. The New York Fed is the largest of the 12 branches in America, and New York is the most important. James Bulliard also spoke, saying that the Consumer Price Index for June has clearly decreased, and the Producer Price Index has also decreased. Therefore, the necessity for the Federal Open Market Committee, or FOMC, to raise interest rates as feared will likely disappear to a great extent. This is one piece of news that has made the US money and capital markets quite stable, not as chaotic as when Trump ordered the strike on Iran, which many feared would escalate. But why did the US stock market actually rise? However, at the same time, the Japanese stock market fell heavily today, dropping over 1,800 points in the first half of the morning. It even dropped by over 3%, but is now down by over 2%, which is still a lot. So, we can see that many variables. Why did the Consumer Price Index and Producer Price Index in America actually slow down? In the latest month, June, it was only 3.5%, compared to 4.2% in May. This CPI, the retail price index or consumer price index, is the measure of inflation for consumers. Why did it decrease significantly? It's due to two variables. First, when the United States made an MOU with Iran, it caused oil prices to plummet sharply and rapidly. As oil prices plummeted sharply and rapidly, to the point where they were about to return to the period before the conflict between America and Iran, and even threatened to fall further. What is it? It's that there must be selling, forward selling of oil contracts. Those who bought have sold them out due to fear that prices will continue to fall. Or some people sell forward because if they sell forward today and buy in the future, if they expect oil prices to fall further, they will profit by buying at a lower price for future delivery. That's the first reason. I believe it's a key variable that caused the Consumer Price Index and Producer Price Index in America to decrease as seen. And the second variable is that the dollar has strengthened significantly since the MOU was signed. This is different from the period before. If we look at the Dollar Index, it remained in the 90s for many months. But recently, it has risen above 100, indicating that the US dollar has strengthened against most world currencies. Therefore, when the dollar strengthens, when you import goods to sell in America, the prices will decrease because the dollar is strong; you can buy more. And importantly, when prices decrease, who benefits? First, consumers benefit if the product is a consumer good that people buy and use. It also benefits producers, as raw materials and various other imports will become cheaper because the dollar is strong. These two variables are the ones that caused the slowdown in inflation. But with Trump's recent history, as we've seen, the calm water has been stirred up again. Naturally, oil prices will rebound again as we see now. Although not yet at the high rates seen before, recently Brent crude has risen to $84-85 per barrel, and WTI is around $80 per barrel, give or take. This is a rather rapid increase. It's not at $70 per barrel as it was before Trump's action against Iran. This indicates a very rapid increase. Therefore, this variable will affect the variables that caused the slowdown in US price indices. It might slow down less, or it might expand again if oil prices rebound sharply, for example, reaching $100 per barrel or even higher. And after that, it will affect the money and capital markets as well. Therefore, how long will Trump's action of stirring the pot continue? We have to wait and see.
>> Professor, Kevin War has spoken strongly on many issues. He said that price is important, and inflation stability is something he must closely monitor to ensure there are no more inflation problems, possibly using various tools. What do you think Kevin War will decide next, to freeze or raise interest rates?
>> It depends on Trump, on how Trump acts against Iran. If it escalates to the extent of a major war in the Persian Gulf, and the Houthis and others join in, and they threaten to close the Strait of Hormuz and the Red Sea, which when they close the strait, it doesn't just affect oil prices or oil transportation. It will severely impact trade between Asia and Europe, because most of it uses the Suez Canal, which goes through the Red Sea. When this variable occurs, it is certain that the global economy will be severely shaken, both the real economy and the financial sector. And inflation will certainly surge again because logistics costs, oil prices, and various other costs will increase. And if that happens, there is no way the Fed can keep interest rates frozen. Because before, there were rumors, right? That in September, at the Fed meeting, in July, there would be no change, but you should not underestimate September, where 70-80% of analysts in America believe the Fed's committee might have to raise interest rates. So, it all depends on Trump. If Trump can find a way down from this latest conflict with Iran, and cause oil prices to slow down, and cause the dollar to remain strong, at least not weaken to the 90s as in the past period, it will make it easier for the Fed to raise interest rates. Because why? Because there is no reason to do so, because the consumer and producer price indices are being contained. So, it doesn't depend on the Fed Watch; it depends on Trump.
>> They say there is a very low chance of raising interest rates, meaning a 83% chance of freezing rates. But because of the Iran war, the Iran war is a key variable that could lead to interest rate hikes if the war escalates and oil prices continue to rise non-stop, especially if the Strait of Hormuz is closed. If that happens, I think the world will be shaken. So, inflation has a high chance of rising. Professor, I still have one thing I'm curious about. The Senate has spoken about a law called the Clarity Act, which states that China should not be allowed to win. This law will help the United States have an advantage. I'm confused why this law would give America an advantage in digital assets or even AI. It's a significant step for the US. What is the importance of this law?
>> Oh, they want to legitimize stablecoins to increase their stability. Currently, the stablecoins that Trump has written about only have legal implications in practice; they don't have legal support yet. In fact, this law is strongly pushed by people like [name of person, likely referring to a deceased individual] who recently passed away. This law is another one that they want to push.
>> So, Trump will likely continue to push for the legal status of stablecoins to be established by the government. If it is enacted and can be regulated, its negative performance will make stablecoins become digital dollars. This will not only increase the dollar's liquidity and allow for more forward buying but also boost US government bonds, improving their prices. Because when any company, large corporations, or banks in America wants to issue their own stablecoin, they need reserves. The main reserves are direct US dollars and US government bonds. These bonds can be used as reserves. This will increase demand for US government bonds and demand for dollars, thus maintaining the dollar's status as the primary currency, rather than fearing the emergence of multiple digital dollars or dollar sell-offs as feared. Therefore, this law is important as it leads to the establishment of legal backing for stablecoins.
>> Regarding cryptocurrencies, it is said that the Fed actually pays attention to cryptocurrencies or stablecoins. Does the Fed take measures to make them flourish, or is it someone else's responsibility to make stablecoins beneficial to the economy?
>> During Jerome Powell's time, he was not very supportive of crypto, and this is something that made Trump unhappy.
>> Oh.
>> And Trump is very afraid that the Fed will do it themselves.
>> Just like the Chinese central bank did.
>> Yes.
>> Because now, the central bank has its digital currency, the yuan.
>> The central bank issued it, right? And it has been quite successful in making the yuan more easily internationalized, as it is now. The People's Bank of China has agreed with central banks worldwide to collaborate on digital currencies, allowing them to issue their own currencies, such as local currencies, and engage in trading and exchange using digital currencies as intermediaries. The Fed, acting as the central bank, does not want another entity to have too much control over the money supply. Because normally, the Fed is not directly responsible for determining money matters; many of these are the responsibility of the Treasury Department. The Fed's main responsibility is to ensure economic stability, whether it's inflation, deflation, or employment issues. Therefore, the Fed likely sees that issuing this currency will make controlling the money supply more difficult, unlike other central banks. The US Fed actually only has a few responsibilities, but these few responsibilities have a significant impact. First, adjusting the Fed Funds Rate, or the policy interest rate, which not only affects the US economy but also has a global impact, as seen by speculators and currency traders who follow its direction.
>> Actually, are stablecoins issued by US private entities and guaranteed by the Treasury Department?
>> Both can issue them. The Treasury Department can also issue them.
>> Oh, they can issue them independently, with no one guaranteeing anyone else. Yes, issuing them is easier, isn't it? Because you have US Treasury bonds.
>> The US Treasury is already selling bonds, right? They are already buying and selling bonds.
>> Yes.
>> Therefore, they can proceed with various operations as I mentioned. But at the same time, it's not just the government that can issue them.
>> They allow private entities, anyone, to issue them, as long as they meet the qualifications.
>> And the law that is enacted will define those qualifications, who can issue their own stablecoins. For example, American banks, JP Morgan, even Blackstone, and so on.
>> And what if it fails? Who is responsible?
>> Oh, if it fails, it's like the dollar failing. [Laughter] If there is legal backing.
>> But America says, "The dollar is ours, but the problem is yours." This is what America has been proclaiming since they floated the currency in President Nixon's era.
>> Yes.
>> "The dollar is ours, but the problem is yours." You want to suffer greatly, etc., because you benefit from the dollar's suffering.
>> Are stablecoins guaranteed by the US Treasury? That's why the dollar can't fail.
>> They are not guaranteed. Because even the US dollar used today is not guaranteed, as its value is floating.
>> Oh, really?
>> It's not a fixed currency because it has reserves.
>> Yes.
>> It uses the credit of the US government as a guarantor, the guarantor of America. Stablecoins will likely be the same.
>> Okay, this is difficult to understand, Professor. I'll have to study it more carefully and then we can discuss it again.
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