These Are the Boldest Bitcoin Predictions for 2024 — One Calls for a 1,000% Rally to $500,000

After soaring to a two-decade high on the back of the Fed's rate hikes in 2022, the U.S. currency has been largely range-bound this year on the back of resilient U.S. growth and the central bank's vow to keep borrowing costs elevated.

The dollar was on track for a 2% loss this year against a basket of its peers , its first yearly decline since 2020.

The December Fed meeting marked an unexpected shift, after Chairman Jerome Powell said the historic monetary policy tightening that brought rates to their highest level in decades was likely over, thanks to cooling inflation. Policymakers now project 75 basis points of cuts next year.

Falling rates are generally seen as a headwind for the dollar, making assets in the U.S. currency less attractive to yield-seeking investors. Though strategists had expected the dollar to weaken next year, a faster pace of rate cuts could accelerate the currency's decline.

Still, betting on a weaker dollar has been a perilous undertaking in recent years, and some investors are wary of jumping the gun. A U.S. economy that continues to outperform its peers could be one factor presenting an obstacle for bearish investors.

The Fed's aggressive monetary policy tightening, along with post-pandemic policies to boost U.S. growth, "fueled the notion of American exceptionalism and delivered the most powerful dollar rally since the 1980s," said Kit Juckes, chief FX strategist at Societe Generale.

With the Fed set to ease policy, "some of those gains should be reversed," he said.

Getting the dollar right is key for analysts and investors, given the U.S. currency's central role in global finance.

For the U.S., a weak dollar would make exports more competitive abroad and boost the profits of multinationals by making it cheaper to convert their foreign profits into dollars. About a quarter of S&P 500 companies generate more than 50% of revenues outside the U.S., according to FactSet data.

An early December Reuters poll of 71 FX strategists showed expectations for the dollar to fall against G10 currencies in 2024, with the greater part of its decline coming in the second half of the year.

Whether they're right may come down to how the U.S. economy performs compared to its global peers next year and the pace at which central banks adjust monetary policy.

So far, it's been an uneven picture. In the eurozone, a downturn in business activity deepened in December, according to closely watched surveys that show the bloc's economy is almost certainly in recession. Still, the European Central Bank has pushed back against rate cut expectations as it remains focused on fighting inflation. The euro is up more than 3% against the dollar this year.

The "growth slowdown is more entrenched in other economies," said Thanos Bardas, senior portfolio manager at Neuberger Berman, who is bullish on the dollar over the next 12 months. "For the U.S. it will take a while for growth to slow down."

Others, however, see areas of strength, particularly in Asian economies. Paresh Upadhyaya, director of fixed income and currency strategy at Amundi US, says he believes the market is "way too pessimistic" on the outlook for growth in China and India. Accelerating growth could boost the countries' appetite for raw materials, benefiting commodity currencies such as the Australian, New Zealand and Canadian dollars.

China will step up policy adjustments to support an economic recovery in 2024, according to state media reports.

Jack McIntyre, portfolio manager at Brandywine Global in Philadelphia, is counting on U.S. growth slowing while Chinese growth picks up. He has been selling the dollar to fund the purchase of Asian currencies.

"The dollar's bull run is very mature," he said.

The International Monetary Fund in October forecast the U.S. economy would grow by 1.5% in 2024, compared to 1.2% for the eurozone and 4.2% for China.

Of course, the dollar's trajectory could depend on how much Fed easing and falling inflation is already reflected in its price. Futures tied to the Fed's policy rate show investors factoring in more than 150 basis points in cuts next year, about twice as much as Fed policymakers have penciled in.

"If inflation stalls and does not continue to decline that's where the case grows for the Fed to hold off," said Matt Weller, head of market research at StoneX. "That would certainly be a bullish development for the dollar."

US actors Bryan Cranston and Aaron Paul met again in August. This time not for the reunion of the Breaking Bad series, but on the picket line in solidarity protests with other Hollywood actors.

Speaking to the crowd, Cranston said, "We just want them to see reality and fairness and come back to the table and talk to us."

Striking actors started the rally in mid-July, more than two months after screenwriters began protests in their bid to get better pay and working conditions under the influence of streaming services and artificial intelligence.

The celebrity-packed picket lines brought more attention to the so-called Hollywood double strike — writers and actors — unseen in 60 years.

From coast to coast, a wave of strikes has gripped the US throughout 2023, rippling across industries such as logistics and automobiles.

The country's United Auto Workers union began a strike in mid-September against all the Big Three automakers, namely Ford Motor, General Motors and Stellantis. The first-ever strike of all three at once in the union's 88-year history came after failed talks on new contracts.

In the past 50 years across the United States, there has been a massive redistribution of wealth, Vermont Senator Bernie Sanders said at a rally, highlighting the rising salaries of the CEOs of the Big Three automakers.

Against this backdrop, the union had reportedly been negotiating for significantly higher pay and new benefits.

"After the pandemic, the US economy grappled with sluggish growth and encountered intense competition from other countries, presenting challenges for businesses," Wang Zhen, a research professor of international politics at the Institute of International Relations, Shanghai Academy of Social Sciences, told China Daily.

During the pandemic, the US implemented stimulus packages to bolster the economy.

"The fiscal expansion policies led to high inflation and elevated the cost of living for the working class," Wang said. "In addition, technological advancements, particularly artificial intelligence, have encroached upon the traditional interests of corporate workers, prompting them to take to the streets to defend their rights."

The US inflation rate started to grow at a more than 2 percent rate from March 2021 and peaked at 9.1 percent in June 2022 to a 40-year high, according to the US Bureau of Labor Statistics.

To tame inflation, the US Federal Reserve raised its benchmark policy interest rate 11 times since March 2022 from the near-zero level to the current 5.25-5.50 percent range, marking the fastest pace in 40 years.

"The Fed is as aggressive as it has been since the early 1980s," Chris Turner, global head of markets at the Dutch banking group ING, was quoted by CNN as saying.

"They're willing to tolerate higher unemployment and a recession", he said. "That's not good for international growth."

Even though inflation has eased from a peak of 9.1 percent last year, it remains too high for the Fed.

The US central bank said it remains "highly attentive to inflation risks" and that it is strongly committed to returning inflation to its 2 percent goal as it left interest rates unchanged on a Dec 13 meeting, a third pause from September.

The rate-setting group pointed to recent indicators showing that economic activity has slowed in the third quarter.

The high rates have put the banking system under pressure, which has seen the collapse of Silicon Valley Bank and Signature Bank in March, and the failure of First Republic Bank in May. Elsewhere, UBS agreed in March to buy Credit Suisse in a rescue move to avert a banking sector meltdown.

"Ripple effects of US financial system strains could lead to tighter credit, sharper slowdown worldwide," said a report by The Wall Street Journal earlier this year. "Turmoil in the US banking sector isn't just a problem for the US. It also increases the risks of a global recession."

Xu Gao, chief economist at Bank of China International, told China Daily, "After the collapse of the Silicon Valley Bank, the growth rate of credit extended to entities by the US banking system showed a slower pace.

"Once the accumulated liquidity is drained, the impact of subsequent liquidity crunch is expected to manifest in the real economy."

Citing the manufacturing purchasing managers index in the US which has run under 50 since November last year, Xu said, "Although the US economy seems to be doing well this year, its role as a driving force for global economic growth has declined."

The World Economic Outlook published by the International Monetary Fund in October said: "Borrowing costs for emerging (markets) and developing economies remain high, constraining priority spending and raising the risk of debt distress.… The danger is of a sharp repricing of risk, especially for emerging markets, that would appreciate further the US dollar, trigger capital outflows, and increase borrowing costs and debt distress."

In November, European Central Bank President Christine Lagarde told the European Parliament that although she expected the weakening of inflationary pressures to continue, "the medium-term outlook for inflation remains surrounded by considerable uncertainty". She said wages would continue to play a pivotal role in driving domestic inflation.

Tomas Hnyk, a Prague resident, told China Daily that ordinary people face a daily squeeze on their budgets.

"The costs of energy and food and their basic services increased by a lot more than their income," he said.

Energy prices have surged, especially after the Russia-Ukraine conflict, which cast a long shadow on the continent as no quick ending is seen, he said.

"Prices went up for almost everything," he said. "Despite inflation being smaller than it was, it is still a big issue. For people with less money, it is a huge deal."

This frustration is not only felt in the Czech Republic, but also across other European countries, as they have experienced a wave of protests, with citizens demanding concrete steps from the government to ease their economic burden.

In France, people protested against an increase in the retirement age. In Germany, striking transportation workers caused major disruptions at airports and bus and train stations.

The United Kingdom also witnessed pay disputes across sectors, with workers demanding higher wages. Strikes in schools, railways and hospitals have become more frequent, notably in the National Health Service, where health workers staged the largest strike in its 75-year history. The financial strain intensified as Birmingham and Nottingham declared bankruptcy in September and November, respectively.

Meanwhile, Africa suffers from high inflation, as highlighted in the IMF Regional Economic Outlook for Sub-Saharan Africa published in October, which said: "Inflation is still too high. Inflation at end 2023 is projected to stay in double digits in 14 countries."

In its Economic Outlook published in late November, the Organization for Economic Cooperation and Development said it expected the global economy to slow down slightly in 2024 as a result of the tightening of monetary policy, weaker trade and dipping consumer confidence.

It projected a global GDP growth of 2.9 percent in 2023, followed by a mild slowdown to 2.7 percent in 2024 and a slight improvement to 3 percent in 2025. Asia is expected to continue to account for the bulk of global growth in 2024-25, as it has done this year.

Observers noted a recent trend of de-globalization, spearheaded by the US, resulting in disruptions to global supply chains.

The US and its Western allies "have been the biggest beneficiaries "of world economic integration and globalization since the end of the Cold War, Wang from the Shanghai Academy of Social Sciences said.

However, since former US president Donald Trump assumed office in 2017, a shift toward anti-globalization policies has been evident, initiating trade and technology wars aimed at curbing the ascent of developing countries, Wang said.

"These policies, among others, failed to achieve the 'manufacturing reshoring' advocated by US policymakers, and have increased the operation costs for enterprises. This, in turn, burdens people across the globe, and poses a challenge to the world economic recovery after the pandemic."

The so-called decoupling or de-risking undeniably leads to disruptions to the global supply chains, said Xu from the Bank of China International. "The potential hurdles and risks associated with this trend raise valid concerns about the overall stability and interconnectedness of the global economic landscape."

Commenting on economic security, Pascal Lamy, former director-general of the World Trade Organization, said: "You cannot do anything just by waving your flag of national security. This would destroy the multilateral trading system. So we have an issue which I think necessitates better attention."

As the US monetary tightening cycle nears an end, there is a real risk of recession for the US whose economy stands at a "precarious crossroads", Xu said, pointing to challenges to global economic recovery.

"Although overall if I look at these three engines — technology, ideology, and peace or geopolitical tensions or conflicts — I still believe that these engines will keep pushing for globalization," Lamy told a recent event hosted by the Center for China and Globalization.

2024 will be a pivotal year for elections worldwide, coupled with the Russia-Ukraine conflict and the Gaza crisis, which will add to uncertainties across the globe, Wang said.

Although headwinds abound, Wang remains cautiously optimistic about the potential growth.

"It is still possible for the international community to maintain overall peace. After the pandemic, the willingness of countries around the world to strive for economic development has not waned, and the momentum of technological change has not stalled," he said.

"Additionally, the negative repercussions of the Fed's rate hikes will be absorbed gradually, and it is widely anticipated that the Fed will pivot to monetary easing next year. These factors combined will bring new impetus and hope to the recovery of the world economy."

The 2023 Chinese Central Economic Work Conference (CEWC), an annual meeting mechanism of the Communist Party where the economic direction of the nation for the upcoming year is deliberated and agreed upon by key stakeholders, recently concluded on December 12, and the readout from the meeting stresses a stability-oriented pathway for the Chinese economy in 2024. Overall, the line of action seems pretty clear, at least from the CEWC deliberations - moving away from export-led to domestic demand-led growth, expanding high-quality production process, achieving self-reliance in critical tech but collaborating with trade partners as necessary, and ensuring financial discipline alongside stability of funds and liquidity. Needless to say, many of these goals have been repeated in the past few years, but some of them require intense structural reform, including by means of abandoning long-held beliefs and practices of the Chinese party-state.

To begin with, the 2023 CEWC acknowledged that China is indeed leaving behind three years of tumultuous economic policy planning during the COVID-19 Pandemic, concentrating now on economic recovery in key areas.

The first key area, in this regard, is dual circulation. As global demand has continued to decline amidst heightened sentiments of protectionism and ‘de-risking', thereby leaving overcapacity in China's manufacturing sector unaddressed, the country is now looking inwards to boost domestic consumption and only allow for a complimentary relationship with international demand. The Chinese President Xi Jinping has referred to this as the "New Pattern of Development," and is an ambitious structural reform for a country known as the world's manufacturing hub. Hence, it is likely that going forth, the country shall lay increased emphasis on domestic demand as the mainstay of economic growth, with international demand only complimenting it.

The turn to domestic demand has now accentuated the concept of "high-quality" growth of the economy, i.e. growth which is only backed by quantitative success and not superseded by it. For the CPC, addressing the primary economic and developmental contradiction of the century is key to ensuring domestic legitimacy, and under Mr. Xi, the principal contradiction is between unbalanced and inadequate development and the people's ever-growing needs for a better life. Naturally, the need for a better life has become the foundation for high-quality growth, alongside the necessity to focus resources on specialized self-reliance, which is being fuelled by U.S.-China geopolitical contestation and declining exports.

The focus is also now on vitalising research and development in sectors requiring high-quality growth, such as high-technology and sustainable manufacturing, while little provisions have been made for low-end manufacturing segments in the CEWC readout. Agriculture, however, has continued to receive attention, given that the sector continues to contribute about 7.3% to the Chinese GDP, and about 5% to GDP growth (both as of 2022). Moreover, agriculture-linked incentives align with other policy goals such as "rural revitalisation" and food security. At the same time, the economic plan also aims to technologically advance agriculture through the establishment of "agriculture innovation centers."

Self-reliance in core technologies has continued to be a repeated and explicit goal for the revival of the Chinese economy, in the backdrop of intensifying tech-related export controls placed by the U.S. and its issue-based and treaty-based allies (such as the Netherlands and Japan respectively) against China. Although, the language of the CEWC readout has changed from "self-improvement" in high-technology in 2022 to "strength" in 2023. Speculatively, it may be so that the shift from self-improvement to strength demonstration is a factor of boosted confidence of the CPC in the past year, amidst developments such as the development of a 7 nanometer chip by Semiconductor Manufacturing International Corporation (SMIC), a Chinese fabrication company, just a few months ago, as well as other strides in the application of Artificial Intelligence technology in defence. It could also mean that there is now a focus on strengthening innovation and advancement in core technologies in China has already demonstrated capabilities in.

Domestically, the stance on financial policy has remained the same, which is, following a "prudent monetary policy" and a "proactive fiscal policy." The latter was also reiterated at the Central Financial Work Conference that took place just a month ago and has now become part of the implementational mandate of the newly established Central Finance Commission led by Premier Li Qiang. Under ‘proactive fiscal policy', in the past year, China has mobilised tools such as tax rebates for medium and small enterprises, as well as interest rate discounts for local governments. This is to enable them to alleviate some of the debt stress and continue to invest either in keeping employees on a regular payroll (which applies to MSEs) or in unhindered development of infrastructure (which is applicable to local governments).

The idea of easing local government finance vehicle (LGFV) debt, for example, was broached at the Politburo meeting held in July this year, where it was declared that a debt-relief package was essential at the local and regional governments' level. By October, the Standing Committee of the National People's Congress approved a special bond issuance worth CNY 1 trillion to select local governments in the aftermath of several natural disasters like floods and typhoons, so that their post-disaster recovery and infrastructural resilience plans continue as normal. This was, of course, not a direct LGFV bailout, but provided room above-budget for funding-impaired local governments that also faced the brunt of disaster recovery.

But at the same time, the 2023 CEWC readout has issued a fair warning to local authorities, that they have to become accustomed to frugality. This has been coupled with a warning notice on strict supervision of financial discipline. It is no secret that amidst flailing domestic private investment which gave a boost to provincial government funds for their infrastructure projects, the debt burden on local authorities has increased. Although numbers differ, the recorded LGFV debt in China is somewhere around $60 trillion. This debt is inclusive of loans, bonds, and shadow bank borrowing. And so, the highlight of the economic policy in this regard will not be bailouts, but mere "fiscal sustainability."

The monetary policy is to follow a similar approach, where the levels of liquidity in the economy are to be stabilized, and excessive infusion of liquidity is to be avoided. This is unlike what was promised by former Chinese Vice Premier Liu He at the Davos Forum at the very beginning of this year, where he vowed to give a "blood transfusion" to the economy. This is, however, not to say that the attention on stability isn't prudent, given that Yuan has depreciated 8% against the dollar in 2023. The sentiment was different in January when the currency peaked in the aftermath of the scrapping of the Zero-COVID policy. Moreover, critical factors such as lack of income confidence, increasing unemployment against rising age dependency ratio, stagnation of household savings at a high point, and capital outflows exacerbated by geopolitical hostility, all indicate that injecting more liquidity will do no good as overall investment and borrowing sentiments are in decline.

Finally, to alleviate some of the economic concerns caused by capital flight and geopolitical competition, in addition to reiterating self-reliance and domestic consumption-led growth, the 2023 CEWC has made the interesting provision to "promote balanced trade" to "increase international demand." It seems from this statement that China is willing to take some of the fences down vis-a-vis access to its market for its key trade partners (especially the European Union, which is now increasingly emphasizing "de-risking"). In doing so, trade may become more "balanced" and not necessarily lop-sided in China's favour. It not only helps China to continue on the path to "opening-up," which has been called for many times in the CEWC readout, but also fulfills the two-pronged goal of enabling China's high-quality growth and circumventing any real decoupling. At the same time, it allows China to focus its crunched resources on self-reliance in key verticals such as high technology and food insecurity, where geopolitical contestation with the U.S. is unlikely to let up anytime soon.

Next year marks the 110th anniversary of a global financial crisis that shaped the world. The crash of 1914 was the biggest systemic crisis that the City, the centre of imperial rent extraction, had faced. It was also, at the time, a largely unremarked upon event. The unprecedented closure of the London Stock Exchange did cause headlines, with this paper noting that the shutdown left brokers swarming outside like "ants around the destroyed heap". In the summer of 1914, however, Britons could be forgiven for being preoccupied by a life-and-death struggle emerging on the continent.

What makes the episode historically significant is the UK government's unprecedented scale of spending to save the City. In 1914, the Bank of England invented quantitative easing by purchasing bad loans from the banks in order to support the economy. Britain's declaration of war on Germany effectively rendered banks bust, since international bills of exchange, bills of trade and other financial instruments issued by enemy nations were unenforceable and hence in default. Since these were traded in London, the losses began to pile up in the City's finance houses. Something had to be done.

Richard Roberts, in his book Saving the City, calculates that about £200m – 9% of GDP – was provided to the banks by the state. When the first British effort to raise funds for the war by selling bonds failed, gilts worth £38bn in today's money were instead bought up by the Bank. Freed from the gold standard, it simply conjured money out of thin air, a trick it was to repeat almost a century later. Globalisation's first financial crisis went unnoticed perhaps because no major City institution failed. Instead, the chancellor David Lloyd George, once the scourge of the rich, was accused of excessive generosity towards them.

These events revealed the dominance of the City and that its rescue was necessary whatever the cost. As Britain's comparative advantage moved farther away from manufacturing to services, financial capitalism was increasingly threatened by geopolitical tensions. British bankers facilitated global trade and investment and relied on profits from the economic growth of rivals France, Germany and the US. Many UK manufacturers, by contrast, feared German trade competition and agitated for protection. Such interests dominated Edwardian Britain, whose political class was protected from the consequences of extreme income inequality by disenfranchising all women and 40% of poorer men.

The first era of globalisation probably undid itself. Germany's successful industrialisation fuelled a military caste's appetite for greatness. Established powers were nervous as capital flows and technology transfer helped Russia converge on their position. States feared being unable to raise a fighting force as labour costs rose. Britain worried that a continental power would challenge its supremacy at sea and hasten the end of its empire. Vibes matter in international relations.

Monetary technology has transformed the world today. After the end of the first world war, America and Britain competed for control of key industries and services – and, crucially, the global oil supply. The second world war established American hegemony. The US now heads a world system dominated by the dollar. It has gigantic external and fiscal deficits without a run on its currency or escalating debt-servicing costs that would lead to a crippling domestic economic crunch. Paul Tucker, a former deputy governor of the Bank, wrote in his 2023 book Discord that "if the contemporary hegemon has an unknowing headquarters, it is the Federal Reserve building in Washington".

China provides a present-day parallel to events 100 years ago, with Beijing offering an alternative vision of the kind of world we could live in. Like Britain and Germany, it has been undergoing rapid industrialisation and is dependent on international trade. Like France and US in the 1920s, it engaged in currency manipulation to remain competitive. The return of industrial policy will see a contest over corporate competition, the global division of labour and the distribution of economic power. The green transition risks conflict. Countries know that if they get locked into a high-carbon future, they hazard becoming quickly uncompetitive. If China feels shut out of key markets, the world could become a significantly more dangerous place.

Neither the war in Ukraine nor that in Gaza was inevitable. But that both territorial disputes could turn deadly and have huge geopolitical ramifications was unsurprising. Interdependence, like that before the first world war, seems to be increasing the scope for friction between countries. Attacks on commercial shipping by the Iran-backed Houthis from Yemen's ports threaten global trade through the Suez canal, a familiar pre-1914 theme. But the world now is substantially changed too. The proposed seizure of $300bn of Russian central bank assets weaponises the modern financial system. The US-led move makes holding large dollar reserves more risky and raises the question of what would happen if a rival nation with a rival currency claimed jurisdiction over trades denominated in it.

The current world system relies on the dollar, just as the pre-1914 system relied on the pound. Today, however, the dollar's exorbitant privilege comes with a heavy burden of duty. US consumers and businesses get benefits in exchange for Washington providing a security guarantee to friends and being the de facto lender of last resort to the world. If Washington rejected these costs, it would erode demand for its currency, and so its leadership role.

Today's system appears to be sowing the seeds of its own destruction. Since the 1980s, US-led financialisation has seen rising inequality. The UN was right this year to worry about the gap between rich and poor, and to say that reducing it should be a priority. Rising disparities in countries heighten trade conflicts between them. In many nations, the underlying political struggle is between the owners of financial assets and ordinary households – between the very rich and everyone else. Ordinary workers, says the UN, have been losing out since 2000. They are being deprived of purchasing power, and hoodwinked by rightwing opportunists into being pitted against each other. Trade wars, like territorial disputes, have a nasty habit of leading to armed strife.

The decades after the first world war saw the international economic order collapse, leading to conflict, revolution and genocide. The world is not yet experiencing anything like that level of disruption. But that is no reason for complacency.

The Federal Reserve's ability to tame America's monetary bubble remains the biggest factor in the global economic outlook. The US central bank made an unexpected dovish turn at the latest Federal Open Market Committee meeting but has already had to walk some of that back.

The Fed is on schedule to trim its balance sheet by another US$1.1 trillion next year. There will, without doubt, be financial incidents and an erratic Fed would only make things worse. This could be the biggest threat to the global economy in 2024.

The US bond market nearly met with disaster in October. Surging bond yields raised doubts over whether the US government could continue to borrow trillions to fund itself. It could be that Washington did something special on the side to calm the market. Certainly, the episode demonstrated the increasing difficulty for the United States to tame inflation, maintain growth and ensure government funding.

The US government borrowed US$2 trillion from the public in the 2023 financial year. The Congressional Budget Office predicts a fiscal deficit of at least 6 per cent of GDP every year over the next 10 years. The expectation of declining interest rates will help the government to borrow enough to keep things running, which was probably the primary motivation behind the Fed's change of tune.

The US market welcomed news of the Fed's dovish stand. If the current bubble expands for a few months, inflation is sure to become a more serious issue. Rising paper wealth will lead to more spending. This is a constraint on what the Fed could say. It had to turn around and pour cold water on the market. The Fed needs to ensure the bubble is not too hot or too cold to maintain a stable and growing economy.

The US is a bubble economy. The most revealing indicator of this is the rising ratio of paper wealth to GDP. The driving force of a macro bubble is always excessive money supply. The Fed's balance sheet is a giveaway in that regard – it expanded it by about US$4 trillion, from about US$900 billion in 2008, to support the financial system during and after the 2008 financial crisis and added another US$4 trillion during the Covid-19 pandemic.

The second part was a mistake. The pandemic disrupted the supply side and monetary stimulus couldn't do anything about the disruptions. Instead, it just added fuel to the bubble. The Fed has yet to correct this mistake. Its balance sheet has been trimmed by about US$1.2 trillion so far, but the cental bank's balance sheet might never be normalised. Much of the monetary overhang will be absorbed by inflation.

It was bizarre for the Fed to signal that the inflation fight was over. A tight labour market, elevated food prices and rent, strong wage growth, spreading unionisation and low productivity all point to an inflation-prone economy. There were temporary factors, such as supply chain disruption and surging energy prices, fuelling high inflation beforehand.

A nice, parabolic inflation chart becomes visible as these factors fade. Some might conclude from this that the recent spell of inflation was just a fluke. If the Fed thought that was the case, it would cut interest rates aggressively. The market would then become white hot, followed by a violent burst, like in 2000 and 2008. The Fed is clearly not that foolish.

The world has experienced a massive monetary bubble on the yuan-US dollar peg. The US and China account for about 40 per cent of the global economy. The peg guarantees that the currency market cannot exert pressure on their monetary policy.

The large monetary expansion stoked a massive property bubble in China and a similar bubble in the US stock market. The Chinese bubble led to overinvestment and overcapacity while that in the US led to overconsumption. They were balanced in their excesses and remained stable.

China's property bubble has been deflating for two years, while the US has kept its bubble going with massive fiscal deficits. A one-legged global economy isn't a stable situation. If the US wants to carry on in this way, its fiscal deficit will become bigger and bigger. As a result, the US bond market will become the engine for the global economy. Would the world have the confidence to put all its money in this basket?

The current trend is bad for the US in the long term. The yuan-dollar peg is keeping the US currency overvalued as other currencies have to try to stay competitive against the yuan. A shrinking manufacturing sector and rising trade deficit are symptoms of an overvalued dollar. This is why, despite rising subsidies, US manufacturing is crumbling. The economy is becoming increasingly dependent on government deficit spending.

US bond yields have to be high to attract enough money to fund the government deficit. If people expect declining interest rates, they will be more willing to put money in the market. The Fed would want to engineer expectations of rate cuts, but not its actual realisation. How long could such a situation last? However long the world remains dumb to the fact, that's to the Fed's benefit. If people wake up, though, all bets would be off.

Britain's economy probably will avoid a recession in 2024 and strengthen in the second half of the year as consumers benefit from falling inflation and the easing of a lengthy cost-of-living crisis.

In aggregate, the 52 economists surveyed by Bloomberg believe the Treasury and the Bank of England (BOE) will engineer a soft landing for the economy next year, with growth of 0.3% and a recession averted.

If the economy is to decide the outcome of the election, which must be called by January 2025, Prime Minister Rishi Sunak's best chance is to wait until the summer, judging by forecasts for the year ahead. While those readings signal Britain will join Germany at the bottom of the Group of Seven (G7) growth table, next year also is expected to deliver an advance in real incomes for consumers after the worst inflation shock in three decades.

"The outlook is far rosier for 2024 than expected 12 months ago," said Barret Kupelian, chief economist at the consulting firm PwC.

No issue matters more to voters than the economy, with polls by YouGov and Ipsos showing concerns about slipping living standards outranking those about health and immigration. The forecasts show the government's may benefit from waiting until the summer to call a vote.

Sunak and Chancellor of the Exchequer Jeremy Hunt have been laying the groundwork for a growth-enhancing consumer boom, scheduling a budget statement on March 6 to highlight the centrepiece of their agenda.

The starting point for the economy is ugly. Revisions to gross domestic product for the second and third quarters of 2023 suggest the UK may have fallen into recession at the end of this year. Official estimates published on Dec 22 show the economy shrank 0.1% in the third quarter (3Q) as consumers tightened their belts.

Almost a third of the economists who submitted quarterly forecasts to the Bloomberg survey expect a contraction in the final three months of 2023. That would put the UK in recession under the common definition of two consecutive quarters of negative growth.

Early 2024 will be touch-and-go as well, according to Dan Hanson, senior UK economist at Bloomberg Economics. The UK will "tread a fine line between stagnation and contraction in the first half," he said.

The backdrop will improve from the summer. In the second half, growth picks up to 0.2% a quarter in the Bloomberg survey. The outlook is for consumer comes to come to the rescue thanks both to government decisions and good luck, according to Simon French, head of research at Panmure Gordon.

At last month's Autumn Statement, Hunt announced a 9.8% increase in the minimum wage for those aged 21 and over, an 8.5% increase in the state pension and a 6.7% increase in working age benefits. The up-ratings take effect from April.

At that point, Deutsche Bank chief UK economist Sanjay Raja expects headline inflation to be little more than 2%. For 20 million Britons, it will mean a big, immediate improvement in living standards, French said.

By then, 33 million workers will already be benefitting from the 2% cut in National Insurance from January, which Raja estimates "will add nearly £10 billion (RM58.89 billion) to disposable incomes in 2024."

An improving outlook would help Sunak and Hunt's argument that they've piloted the UK through a difficult patch following the pandemic and war in Ukraine, which sent inflation soaring.

In a budget scheduled for March 6, Hunt is expected to put more money in the pockets of consumers by lopping 1% off income tax, handing households £7 billion a year from April.

Sunak and Hunt may also get lucky. The typical household energy bill is on track to fall 14% from £1,928 a year in January to £1,660 in April, according to Cornwall Insight. Raja estimates energy bills will "cost households £10 billion less than they did in 2023."

Consumer price inflation is dropping faster than expected, helping the poorest households the most. That trend has shifted the debate about interest rates away from further increases and toward cuts starting from the middle of next year. Investors are pricing in five quarter-point reductions in the key rate, which at 5.25% now is at the highest level since 2008.

That sentiment alone is a big help to mortgage borrowers, about 20% of whom will have to refinance their loans next year. With markets tilting towards rate cuts, those whose low-cost deals are ending are facing a much less severe hit than analysts had warned of.

"We are back on the path to healthy, sustainable growth," Hunt said this month after the surprisingly sharp fall in inflation from to 3.9% for November from 4.6% the month before.

Living standards still have some way to go to make up ground lost during the pandemic and cost-of-living crisis, but, for the first time since 2018, households may feel noticeably better off.

"I expect there will be quite a sizeable increase in real household disposable incomes at the back end of next year," French said.

Charles Goodhart, a former BOE ratesetter, is equally optimistic. "My expectation is that 2024 will look very nice because we're having a reversal of the upsurge in energy prices," he told the Financial Times in mid-December.

Investors are buying into the positive story. The FTSE 100 jumped in the final weeks of 2023. House prices, so often a determinant of consumer confidence, will continue to tread water next year despite the huge rise in interest rates from 0.1% to 5.25% in the past 24 months, mortgage lenders Halifax and Nationwide both reckon.

The UK's resilient labour market will also help. A surge in unemployment, currently at 4.2%, would destabilize the economy but the Bloomberg survey showed that 24 of the 26 economists who provided responses think joblessness will remain below 5% next year.

Households still have some excess savings that were set aside in the pandemic, and "private sector balance sheets are healthy," said Raja, referring to both households and businesses.

Even so, the outlook remains unusually uncertain. Growth forecasts for 2024 by the economists surveyed range from minus 0.7% to a positive 1.9%, reflecting the risks that remain.

A flare up of the war in Ukraine or regional expansion of the Israel-Gaza conflict could drive up energy prices once more. Supply chains are at risk of disruption after Houthi rebels attacked commercial shipping in the Red Sea, prompting the US to intervene.

Hanson said "the main risk is that the economy holds up and inflation proves more stubborn than we expect" so the BOE is unable to provide the anticipated stimulus of rate cuts.

The economists who provided an inflation forecast for the survey were sanguine, however. The median prediction was 3% and the highest 3.8%.