Does 2022 prove that economics is not a boring subject? From understanding why inflation skyrocketed to assessing the impacts of the Federal Reserve’s policies, so much happened over the last 12 months. Of course, most of it was terrible news for the average person, but there were still some bright spots this year, mainly thanks to billionaire CEO Elon Musk’s ambitions and Republicans finally realizing the dangers of ESG. So, what were some of the top econ-related stories of 2022? It is safe to say that the past year can be defined in a single word: Asufutimaehaehfutbw.
1. Inflation Peaks at 9.1% in 2022
In June, the US annual inflation rate advanced to 9.1%, the highest reading in more than four decades. The consumer price index (CPI) saw every category rise to levels unseen in many years, be it food or used cars and trucks. While price inflation has eased by 2% since then, the concern is how embedded and entrenched it is in the national economy. Of course, President Joe Biden has insisted that this is not his fault, claiming that microchips were the primary issue and that it could be resolved by government spending and consumers switching to a different brand of raisin bran cereal.
2. The Return of $100 Oil
In March 2021, Liberty Nation had warned that oil prices would climb above $100 a barrel. About a year later, West Texas Intermediate (WTI) and Brent crude topped $100. The White House blamed the meteoric ascent on Russia’s invasion of Ukraine. Although the military conflict in Eastern Europe played a significant role, the upward trend was inevitable, considering the war on fossil fuels and the rise in post-pandemic demand. Crude prices have erased their post-war gains, but they are still above $80, with many investment firms warning that they could range between $80 and $100 over the next year. This issue might not go away in 2023.
3. Gas and Diesel Prices Top $5
As a result of soaring energy prices and limited refinery utilization – thanks to environmentalists in politics – a gallon of gasoline and diesel topped $5 and $6, respectively. But the situation did not metastasize any further as a case of demand destruction unfolded. Indeed, this past summer, motorists stayed home, drove less, and adapted to this inflationary environment. Unfortunately, diesel continues to remain highly elevated, weighing on a broad array of sectors, from agricultural to industrial.
4. Bears Devour Stocks
The US stock market slipped into the bear market territory – a 20% decline – in 2022 following its enormous rally in 2020 and 2021. All three leading benchmark indexes were devoured by the bears, but the Dow Jones Industrial Average was able to escape as it will finish the year down about 10%. Still, the tech-heavy Nasdaq Composite Index cratered 35% and the S&P 500 slumped 21%. Nearly everything took a substantial beating, whether it was Apple Inc or Ford Motor Company. The only assets that performed exceptionally well were orange juice (+45%), natural gas (+40%), corn (+15%), soybeans (+12%), silver (+10%), and the US Dollar Index (+9%).
5. FTX: The Grift of the Century
Cryptocurrency exchange FTX filed for bankruptcy in November. So what? The crypto winter arrived this year as digital currencies have crashed, companies shut their digital doors, and projects have folded. This was different. Bankruptcy and criminal justice documents revealed what might have been the biggest grift of the century, as the disgraced ex-CEO Sam Bankman-Fried allegedly engaged in billions of dollars worth of fraud, with some of the funds being allocated to politicians. It will forever be a stain on the crypto sector and the stench will never be gone.
6. Federal Reserve Raises Interest Rates
In March, the Federal Reserve raised the benchmark federal funds rate (FFR) for the first time since 2018. After dismissing the inflation threat for two years, Chair Jerome Powell and the Federal Open Market Committee (FOMC) finally fired the opening salvo in its tightening crusade with a 25-basis-point hike. Six months later, the Eccles Building pulled the trigger on rate hikes totaling 425 basis points, bringing the target rate to 4.25%-4.50%. Despite the US economy showing weakness across the board and the stock market crashing, the central bank suggested that the terminal rate could top 5% in 2023. But how much pain will the American people endure by the time the cycle is over?
7. Elon Musk Buys Twitter
There was celebration and panic in the streets of the Twitterverse when it was revealed that Tesla Motors CEO Elon Musk became the largest shareholder of the social media platform this past spring. These moods were amplified when Musk proposed to acquire the San Francisco-based tech company for $54.20 per share, totaling $44 billion. After some back-and-forth disputes surrounding the presence of bots, Musk agreed to purchase the website and take it private. The reaction was exactly as expected: The right says the place is fun again, and the left claims it has become a haven for hate. The Twitter Files suggest the $44 billion investment was worth it, considering that conservatives and libertarians have been vindicated after years of censorship and collusion claims.
8. Recession Strikes Briefly
The US economy entered into a technical recession in the first half of 2022 after experiencing back-to-back quarters of negative gross domestic product (GDP) growth. According to the Bureau of Economic Analysis (BEA), the world’s largest economy recorded -1.6% in the first quarter and -0.6% in the second quarter. The Biden administration went into damage control mode, suggesting that this is not the definition of a technical recession, though it had been a standard rule of thumb for years. The mainstream media took their marching orders and repeated the White House’s messaging. The consensus is that the United States will fall into another recession in 2023, but the debate is the severity: short and shallow or comparable to the 2008-2009 financial crisis?
9. Inflation Reduction Act
This year, President Biden signed the Inflation Reduction Act, a slimmed-down version of the Build Back Better legislative pursuit. Democrats purported that it would slash the federal deficit (suddenly, deficits cause inflation!), reduce inflation, grow the economy, and combat climate change. As Liberty Nation reported, many forecasts suggested that it would hardly make a dent in inflation, barely trim the budget gap, and fail to add to the GDP growth rate. It would achieve one thing: serve as a taxpayer-funded handout to the green industry.
10. National Debt Tops $31 Trillion
In October, the gross national debt surged beyond $31 trillion, taking only nine months to eclipse $30 trillion. With rising interest rates, the US government spent nearly $500 billion on interest payments. It was a somber occasion for the country, but it failed to materialize any significant action by Republicans or Democrats. Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB), had the best reaction: “The $31 trillion in debt is a staggering number that should keep them up at night.”
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