Denmark-based Saxo Bank has released its 10 Outrageous Predictions for 2023, which focus on a series of unlikely but underappreciated events which, if they were to occur, would send shockwaves across the financial markets as well as political and popular cultures.
#1. Billionaire coalition creates trillion-dollar Manhattan Project for energy
In 2023, owners of major technology companies and other technophile billionaires will grow impatient with the lack of progress in developing the necessary energy infrastructure that would allow them to address the needed energy transition.
They team up to create a consortium codenamed Third Stone, with the goal of raising over a trillion dollars to invest in energy solutions. It will become the largest R&D effort since the original Manhattan Project, which developed the first atomic bomb.
#2. French President Macron resigns
The June 2022 elections saw President Emmanuel Macron’s party and his allies lose their outright majority in Parliament. He understands that he will be a lame duck for the next four years and he will not be able to pass his signature pension reform.
Following the example of Charles de Gaulle in 1946 and 1969, Macron unexpectedly decides to resign in early 2023.
#3. Gold rockets to $3,000 as central banks fail on inflation mandate
Fed policy tightening and quantitative tightening adds a new snag in US treasury markets that forces the introduction of new measures to contain treasury market volatility. With the arrival of spring, China decides to pivot more fully away from its zero-COVID policy.
Chinese demand drives a major new surge in commodity prices, sending inflation soaring, especially in increasingly weak US dollar terms as the Fed’s newly softened stance punishes the greenback. Gold rises to at least $3,000 next year.
#4. Foundation of the EU Armed Forces
In a dramatic move, all EU members move to establish the EU Armed Forces before 2028, to be funded with EUR 10 trillion in spending, backloaded over 20 years.
#5. A country agrees to ban all meat production by 2030
Sweden has pledged to reach carbon neutrality by 2045, while others like the UK, France and Denmark are aiming for 2050.
But a carrot-and-stick approach rarely works, and in 2023, at least one country looking to front-run others in marking out its lead in the race for the most aggressive climate policy plans to ban all domestically produced live animal-sourced meat entirely by 2030.
#6. UK holds UnBrexit referendum
In 2023, Rishi Sunak and Jeremy Hunt manage to take Tory popularity ratings to unheard-of lows as their brutal fiscal programme throws the UK into a crushing recession. Sunak finally caves and calls an election. A Labour government takes power in Q3, promising an UnBrexit referendum for November 1, 2023.
#7. Widespread price controls are introduced to cap official inflation
Inflation will remain a challenge as long as globalisation continues to run in reverse and long-term energy needs remain unaddressed.
In 2023, expect broadening price and even wage controls, maybe even something like a new National Board for Prices and Incomes being established in the UK and the US.
#8. OPEC+ and Chindia walk out of the IMF
Recognising the ongoing weaponisation of the US dollar by the US government, non-US allied countries move away from the currency and the IMF to create an international clearing union (ICU) and a new reserve asset, the Bancor (currency code KEY), using Keynes’ original idea from the pre–Bretton Woods days as a rebuff to the US for leveraging its power over the international monetary system.
#9. Japan pegs USD/JPY at 200 to sort out its financial system
The pressure on the JPY and the Japanese financial system mounts again on the global liquidity crisis set in motion by the vicious policy tightening by the Fed and higher US treasury yields.
Initially, the BoJ and Ministry of Finance deal with the situation by slowing and then halting currency intervention. But as USDJPY rises through 160 and 170 and the public outcry against soaring inflation reaches fever pitch, they know that the crisis requires bold new action. They declare a floor on the JPY at 200 in USD/JPY.
#10. Tax haven ban kills private equity
By some estimates, tax havens cost governments between $500 and $600 billion annually in lost corporate tax revenue. In 2023, the OECD launches a full ban on the largest tax havens in the world. In the US, the carried interest taxed as capital gains is also shifted to ordinary income.
The EU tax haven ban and US change to the carried interest taxation rule jolts the entire private equity and VC industries, shutting down much of the ecosystem and seeing publicly listed private equity firms dealt a 50% valuation haircut.
(Reporting by Sunil S; editing by Seban Scaria)