BALI, Indonesia — Janet Yellen, the secretary of the United States Treasury, stated on Thursday that putting a ceiling on the price of Russian oil will be absolutely necessary in order to help bring inflation down. This week, consumer inflation in the United States reached 9.1 percent, marking a new 40-year high.
Ahead of the beginning of the meeting of the Group of 20 finance ministers and central bank governors in Bali, Yellen said that efforts must be expended to rein in two key economic fallouts from the Russia-Ukraine crisis. These fallouts are high fuel prices and rising food insecurity, both of which are sweeping across the United States and the rest of the world. Yellen’s remarks were made before the meeting began.
She went on to say that the significant increase in the cost of energy was a major contributor to the recent jump in inflation in the United States.
Yellen stated that “we’re seeing negative spillover effects from [the Russia-Ukraine] war in every corner of the world,” specifically in regard to higher energy prices and rising food shortages.
She stated that the United States will continue discussions with other nations to determine “what we can do together to help others around the world impacted by Russia’s war.” She went on to say that this includes devising and enforcing a price ceiling for Russian oil as well as addressing the issue of food insecurity.
“A price cap on Russian oil is one of our most powerful tools to address the pain that Americans and families across the world are feeling at the gas pump and the grocery store right now. A limit on the price of Russian oil will deny Putin revenue his war machine needs.”
The price of oil has skyrocketed as a result of sanctions placed on Russian oil by the United States government and efforts by European nations to reduce their reliance on Russian energy. Following the outbreak of hostilities between Russia and Ukraine in March, the price of a barrel of crude oil climbed to more than $120.
Economists have cautioned that such prohibitions might drive prices as high as $175 per barrel, which would be unsustainable.
The price cap mechanism involved the United States and other countries forming a cartel to buy Russian oil at a low enough price to keep Russian oil production profitable and supply forthcoming, while at the same time denying Russia the ability to fund its war in Ukraine. This was accomplished by keeping the price of Russian oil at a level that was low enough.
Yellen stated that “We’ll build on the historic sanctions we’ve already implemented,” which make it more difficult for Assad to wage his war or grow his economy. “We’ll build on the historic sanctions we’ve already implemented.”
Russia has remained mute on the plan, and other nations that continue to purchase oil from Russia, such as China and India, have also refrained from commenting on it.
“So I’m hopeful that China and India will see that observing a price cap would serve their own interests in lowering the price that they pay for Russian oil, they’re important importers,” Yellen said.
“But even if they don’t observe the price cap, I think it’s certain that many countries that import Russian oil will be affected by the insurance and financial services ban that the EU, and presumably the UK and the U.S. will put into effect.
“We would likely see very much higher global prices because that ban would result in … a significant amount of a shut in for Russian oil.”,” Treasury Secretary Timothy Geithner warned.
SK Hynix of South Korea Will Start A US Chip Facility In 2023.
SK Hynix of South Korea plans to select a US location for its advanced chip packaging plant and break ground there in the first quarter of next year, according to two people familiar with the matter, helping the US compete as China pours money into the burgeoning sector.
The plant, which is expected to cost “several billions,” would begin mass production in 2025-26 and employ approximately 1,000 people, according to one of the sources, who declined to be identified because the plant’s details have not been made public.
According to the source, it would be near a university with engineering talent.
According to one of the sources, the company “hopes to make a site selection and break ground sometime around the first quarter of next year.”
The new plant was announced last month as part of a $22 billion US-based investment package in semiconductors, green energy, and bioscience projects by SK Group, South Korea’s second-largest conglomerate.
The White House announced that $15 billion would be allocated to the semiconductor industry through research and development programs, materials, and the establishment of an advanced packaging and testing facility.
“R&D investments will include the establishment of a nationwide network of R&D partnerships and facilities,” the source said, adding that the packaging facility would combine SK Hynix memory chips with logic chips designed by other US companies for machine learning and artificial intelligence applications.
Following the recent report about the timing of the groundbreaking, the South Korean company confirmed that it plans to select a site for the plant in the first half of next year, but no decision has been made on when construction will begin.
Most basic, low-value chip packaging operations were long ago outsourced to overseas factories, mostly in Asia, where chips are placed into protective frames and then tested before being shipped to electronics manufacturers.
However, new battle lines are being drawn in the race to develop advanced packaging techniques, which involve combining multiple chips with different functions into a single package, enhancing overall capabilities while limiting the added cost of more advanced chips.
“While the United States and its partners have advanced packaging capabilities, China’s massive investments in advanced packaging threaten to upend the market in the future,” the White House stated in a report released in 2021.
According to the report, an executive at China’s top chipmaker SMIC, which was added to a US trade blacklist in 2020, stated last year that Chinese companies should focus on advanced packaging to overcome their weaknesses in developing more sophisticated chips.
The move by SK Group of South Korea comes after Biden signed the CHIPS Act into law this week, which provides $52 billion in subsidies for chip manufacturing and research, as well as an estimated $24 billion investment tax credit for chip plants. According to the sources, both the R&D facilities and the chip packaging plant would be eligible for the funding.
In recent years, chipmakers in the United States have announced a flurry of expansion plans, ranging from Taiwan Semiconductor Manufacturing Co to Samsung Electronics and Intel.
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Social Security Recipients Could Get $1,900 More Next Year Due To Inflation.
The annual cost-of-living adjustment that Social Security recipients receive could see a sizeable increase for the upcoming year, with some experts projecting that the typical recipient could receive an additional $1,900 in 2023 to keep up with inflationary pressures. This could benefit senior citizens and others who receive Social Security benefits.
This year has been difficult for many seniors because their 2022 increase, which was 5.9%, trailed behind the highest inflation rate seen in the previous 40 years. Inflation was 8.5% higher than it was the previous year, despite the fact that consumer prices decreased in July due to a decline in the price of gasoline.
The Social Security Administration calculates the annual cost-of-living adjustment (COLA) by looking at inflation data from July, August, and September. The agency typically makes the announcement of the increase in the middle of October. According to the Older Citizens League, there is a possibility that senior citizens may experience an average monthly increase of 9.6%. The data for one of those three months is now available. If inflation remains on a downward trend, elderly citizens might be eligible for a break in 2023, which would close the benefits gap that many people are currently facing.
According to the findings of the nonpartisan group, assuming that the average monthly benefit will be $1,656 in 2022, an increase of 9.6% would result in a monthly gain of approximately $159 and an annual gain of $1,900.
Mary Johnson, a Social Security and Medicare policy analyst at the Senior Citizens League, said in an email that “a high COLA will be eagerly anticipated to address an ongoing shortfall in benefits that Social Security beneficiaries are experiencing in 2022 as inflation runs higher than their 5.9% COLA.” “A high COLA will be eagerly anticipated to address an ongoing shortfall in benefits that Social Security beneficiaries are experiencing in 2022,”
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is a basket of goods and services that are typically purchased by workers, is the index that the Social Security Administration uses to determine how much of an increase or decrease to make to beneficiaries’ benefits on an annual basis.
The CPI-W saw a 9.1% year-over-year increase in July, according to data released by the Labor Department on Wednesday. It is true that there are still two months of data still to come in, and depending on the course that inflation takes in August and September, the yearly cost-of-living adjustment (COLA) for Social Security might end up being higher or lower. According to Johnson, she is estimating that the COLA will fall somewhere in the range of 9.3% to 10.1%, with 9.6% being the most likely outcome given the most current data.
According to Johnson, the typical senior is missing out on approximately $58 in monthly financial support due to the fact that the average monthly benefit for the current year sits at approximately $1,656.
She went on to say that this may be one reason why more elderly people are turning to government aid programs. In 2021, over 37% of elderly citizens who were questioned by the organization reported that they had received assistance from programs designed for those with low incomes. According to the data from the Census, approximately 16% of older citizens were given help depending on their requirements prior to the pandemic.
After suffering a blow earlier this year as a result of the cost-of-living adjustment for Medicare of 5.9% not keeping pace with inflation, many seniors have now taken another hit as a result of the premium increase for Medicare Part B, which includes coverage for visits to the doctor, outpatient care, and some medications.
The provision of the expensive and highly contentious Alzheimer’s medicine Aduhelm by Medicare led to an increase in the program’s overall expenses. However, Medicare has announced that it will limit the use of Aduhelm, while the drug’s producer has reduced the cost of the medication.
Johnson stated that as a result of these changes, it is feasible that the premiums for Part B may not increase by a significant amount in 2023.
Online Shopping Prices Are Plummeting.
Before the advent of Covid-19, the world of internet purchasing had a long period of time during which it was unaffected by inflation.
In June of 2020, prices on e-commerce websites started going up, marking the beginning of an extraordinary string of 25 consecutive months of price hikes that highlighted the tremendous price pressures impacting the economy of the United States.
That run has at long last come to an end. According to a research that was published on Tuesday by Adobe, online prices decreased by 1% from the previous year in the month of July, putting an end to a run of nearly two years of steady inflation.
According to Adobe, the change is even more obvious when compared on a month-over-month basis, as costs for online purchases fell by 2% in July.
The findings are encouraging in regard to the ongoing inflation situation, as they indicate a potential easing of the pricing pressures that have been putting a strain on consumers and raising fears of a recession.
Adobe noticed that the prices of groceries purchased online are continuing to go up, despite the fact that it may be some time before inflation returns to anything resembling normal levels.
The United States economy is plagued by persistently high levels of inflation.
The year-over-year increase in consumer prices in June was 9.1%, making it the largest annual increase in consumer prices in more than 40 years. It is anticipated that a fresh report that will be released on Wednesday will reveal that inflation decreased in July, although it still remained uncomfortably high at 8.7%.
Even if a slowing of inflation would be a welcome development, the causes that are underlying the shift in price online might not be good news. Adobe attributed this decline to a number of factors, including “waving consumer confidence and a decrease in purchasing,” as well as oversupply on the part of some retailers.
Walmart, Target (TGT), and Best Buy (BBY) have lately issued similar warnings about an inventory glut, which is eating into profitability and prompting price cuts.
According to Adobe, a 9.3% year-over-year drop in the price of electronics led to the deflation in online costs. Electronics are the category in which consumers spend the most money.
In addition to consumer electronics, the prices of toys purchased online dropped significantly by 8.2% in the month of July, according to data provided by Adobe. According to Adobe, prices for garments purchased online increased for 14 consecutive months until experiencing a 0.1% year-over-year decrease in June. This deflationary movement persisted in July, as seen by a 1% year-over-year decline in online garment prices and a 6.3% month-over-month decline in the same prices.
In instance, Walmart (WMT) pointed to the garment industry as one in which the retail industry leader is being compelled to lower prices on existing inventory.
Despite the fact that there has been a return to price deflation in online shopping as a whole, Adobe discovered that prices have risen in the opposite way in a few important areas.
According to the findings of the survey, the average price of groceries purchased online set a new high point in July, increasing by 13.4% on an annual basis. This is a significant increase when compared to the prior records, which stood at 10.3% in April and 11.7% in May.
In a similar vein, Adobe reported that the prices of pet supplies purchased online experienced a year-over-year increase of 12.6%, which not only set a new record but also marked the 27th consecutive month of growing prices.
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