+ Reply to Thread
Page 3 of 4 FirstFirst 1 3 4 LastLast
Results 41 to 60 of 64

Thread: Financial flows: moves, changes and significant events

  1. Link to Post #41
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    President Xi of China made some interesting statements about Blockchain and digital currency on Thursday (24 October 2019) at the 18th collective study of the Political Bureau of the Central Committee in Beijing.

    Quote President Xi Says China Should ‘Seize Opportunity’ to Adopt Blockchain

    William Foxley
    Oct 25, 2019 at 11:12 UTC Updated Oct 25, 2019 at 11:46 UTC
    NEWS

    Xi Jinping, President of the People’s Republic of China and General Secretary of the Communist Party of China, said the country needs to “seize the opportunity” afforded by blockchain technology.

    Speaking as part of the 18th collective study of the Political Bureau of the Central Committee on Thursday in Beijing, Xi said blockchain technology has a wide array of applications within China, listing topics ranging from financing businesses to mass transit and poverty alleviation.

    “We must take the blockchain as an important breakthrough for independent innovation of core technologies,” Xi told committee members.

    “[We must] clarify the main direction, increase investment, focus on a number of key core technologies, and accelerate the development of blockchain technology and industrial innovation.”

    The Chinese president’s statements on blockchain are believed to be his first in-depth remarks on the technology.

    Xi further said it would be “necessary to implement the rule of law network” into existing and future blockchain systems. To this end, Xi argued for a top-down approach concerning implementation, calling for guidance and regulation. Xi said testing of the tech should be widespread, including the investments in training platforms and “innovation teams” before implementation.

    His speech also called for the creation of “Blockchain+,” a platform alluding to personal development such as education, employment and food and medicinal safety, among other basic needs.

    Since a 2017 decision by the People’s Bank of China, cryptocurrencies are banned in the country, although a digital renminbi is being developed by the central bank and likely to launch soon.
    From: https://www.coindesk.com/president-x...opt-blockchain

    It sounds like a top-down, government driven, blockchain-enabled system that orchestrates the delivery and provision of social services is in the works.
    *I have loved the stars too dearly to be fearful of the night*

  2. The Following 3 Users Say Thank You to Cara For This Post:

    Bill Ryan (26th October 2019), Dennis Leahy (29th November 2019), Hervé (28th October 2019)

  3. Link to Post #42
    Canada Avalon Member
    Join Date
    23rd September 2017
    Posts
    711
    Thanks
    74
    Thanked 2,493 times in 606 posts

    Default Re: Financial flows: moves, changes and significant events

    A recent talk by Danielle Dimartino Booth on the demise of price discovery on Wall Street. And other things:

    https://youtu.be/gh16UlreKfo

  4. The Following 4 Users Say Thank You to TomKat For This Post:

    Bill Ryan (28th October 2019), Cara (27th October 2019), Dennis Leahy (29th November 2019), Hervé (28th October 2019)

  5. Link to Post #43
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    This is a rather stark graph showing rising levels of debt.

    *I have loved the stars too dearly to be fearful of the night*

  6. The Following 5 Users Say Thank You to Cara For This Post:

    Bill Ryan (28th October 2019), Dennis Leahy (29th November 2019), Hervé (28th October 2019), Jayke (6th November 2019), Richard S. (28th October 2019)

  7. Link to Post #44
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    An alternative to SWIFT emerges:

    Quote Russia, China & India to set up alternative to SWIFT payment system to connect 3 billion people
    28 Oct, 2019 11:48 / Updated 1 day ago

    Members of the BRICS trade bloc Russia, India, and China have decided to connect their financial messaging systems to bypass the SWIFT international money transfer network.

    Russia’s financial messaging system SPFS will be linked with the Chinese cross-border interbank payment system CIPS. While India does not have a domestic financial messaging system yet, it plans to combine the Central Bank of Russia’s platform with a domestic service that is in development.

    The new system is expected to work as a “gateway” model when messages on payments are transcoded in accordance with a certain financial system.

    According to Izvestia, the parties involved will work on a single platform, without experiencing any difficulties with transactions.

    Russia began development of SPFS in 2014 amid Washington’s threats to disconnect the country from SWIFT. The first transaction on the SPFS network involving a non-bank enterprise was made in December 2017.

    “We have an opportunity to connect both foreign banks and foreign legal entities to the SPFS. Today, about 400 users are participating in the system. Agreements have already been concluded with eight foreign banks and 34 legal entities,” Alla Bakina, the director of the Bank of Russia’s national payment system, was cited as saying by Vesti.

    Bakina explained that traffic through the system has been growing and currently accounts for around 15 percent of all internal traffic, up from 10-11 percent last year.

    The EAEU (Eurasian Economic Union) countries are currently working with the Bank of Russia on technical options for connecting to the SPFS. Iran, which has officially joined the Russia-led free-trade zone (EAEU) this month also seeks to develop a joint alternative to SWIFT. Last year, SWIFT cut off some Iranian banks from its messaging system.SWIFT is based in Belgium, but its board includes executives from American banks with US federal law allowing the administration to act against banks and regulators across the globe.

    Instead of SWIFT, a system that facilitates cross-border payments between 11,000 financial institutions in more than 200 countries worldwide, Moscow and Tehran will use their own domestically developed financial messaging systems to conduct trade.
    From: https://www.rt.com/business/472016-r...mpression=true
    *I have loved the stars too dearly to be fearful of the night*

  8. The Following 5 Users Say Thank You to Cara For This Post:

    Bill Ryan (31st October 2019), Dennis Leahy (29th November 2019), Jayke (31st October 2019), Richard S. (31st October 2019), silvanelf (30th October 2019)

  9. Link to Post #45
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    China planning to be the first state to issue sovereign digital currency:

    *I have loved the stars too dearly to be fearful of the night*

  10. The Following 5 Users Say Thank You to Cara For This Post:

    Bill Ryan (31st October 2019), Dennis Leahy (29th November 2019), Jayke (31st October 2019), Richard S. (31st October 2019), silvanelf (1st November 2019)

  11. Link to Post #46
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    One view of the different banks involved in the bullion market:

    *I have loved the stars too dearly to be fearful of the night*

  12. The Following 4 Users Say Thank You to Cara For This Post:

    Bill Ryan (2nd November 2019), Dennis Leahy (29th November 2019), Jayke (6th November 2019), Richard S. (2nd November 2019)

  13. Link to Post #47
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    Hungary’s central bank seems to signalling an exit of the eurozone:



    I do not have access to the Financial Time article but here is a comment on that article:

    Quote Hungarian central bank governor calls for eurozone exit mechanism
    November 4, 2019

    EU member states part of the bloc’s common currency zone should be allowed to leave in coming decades, while those countries that remain in the eurozone, should build a “more sustainable global currency” in the future, György Matolcsy, the governor of the National Bank of Hungary (NBH) has said.

    In an editorial published by the Financial Times, Mr Matolcsy argues that two decades after the euro was launched, “most of the necessary pillars of a successful global currency”, which include a common state, a budget covering at least 15-20 per cent of the eurozone’s total GDP, a eurozone finance minister and a corresponding finance ministry “are still missing”.

    “The time has come to seek a way out of the euro trap,” the Hungarian central bank governor stressed, adding that the common currency was not the right way to fasten Europe’s integration since none of the necessary preconditions were met.

    According to him, most eurozone member countries were in a better situation before they adopted the common currency. Citing a recent study from the Centre for European Policy, he said that euro had created both winners and losers, with Germany being the biggest winner.

    “The common currency was not needed for European success stories before 1999 and the majority of eurozone member states did not benefit from it later,” he continued, noting that most eurozone states were badly hit by the 2008 financial crisis, resulting in the piling up of “huge government debts.”
    From: https://emerging-europe.com/news/hun...xit-mechanism/
    *I have loved the stars too dearly to be fearful of the night*

  14. The Following 5 Users Say Thank You to Cara For This Post:

    Bill Ryan (6th November 2019), Dennis Leahy (29th November 2019), Jayke (6th November 2019), Richard S. (6th November 2019), silvanelf (7th November 2019)

  15. Link to Post #48
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    And some parties in Germany seem to be flying a “weather balloon” to test response to the idea of a centralised European deposit insurance scheme:

    Quote Germany’s Scholz Gives Ground On Eurozone Banking Union Plan (FT)
    Last Modified: 04:01 PM, Tue Nov 05, 2019
    Sam Fleming and Jim Brunsden in Brussels and Guy Chazan in Berlin

    FT.com. 05 November 2019
    Finance minister says Berlin should support common deposit insurance scheme

    Germany’s finance minister has offered hope of a breakthrough in plans to create a full eurozone banking union by ending Berlin’s opposition to a common scheme to protect savers’ deposits.

    Olaf Scholz said that Europe’s global role would be undermined if it failed to complete the integration of the eurozone’s financial sector. The plan to centralise oversight of eurozone banks was conceived seven years ago in response to the region’s deep sovereign debt crisis.

    “The need to deepen and complete European banking union is undeniable. After years of discussion, the deadlock has to end,” Mr Scholz wrote in an opinion article for the FT.

    He said that Brexit, which would see the EU losing the City of London — its largest financial centre — also meant it was time for the bloc to promote better integration of its banks.

    The European Central Bank and EU chiefs in Brussels have long urged governments to end political divisions over further banking union. They have argued that the project is vital to ensure that bankrupt banks can be safely wound down without the need for large taxpayer bailouts, and to make the eurozone more resilient to economic shocks.

    The most surprising element in Mr Scholz’s proposals is his plan for a common EU scheme to shield depositors during a banking collapse. Germany has previously rejected such plans amid public hostility to any perceived attempt to put taxpayers on the hook for shaky banks in other countries.

    The reinsurance system would act as a backstop to national funds, helping to ensure that governments can honour their legal obligation to protect deposits of up to €100,000 in the event of a banking collapse.

    Accepting some form of common European deposit insurance mechanism was “no small step for a German finance minister”, Mr Scholz wrote.

    However, his proposals come with heavy caveats and conditions, which are bound to spark concern in EU member states with weaker finances or fragile banking sectors.

    They will also be contentious within Germany. Officials in Berlin emphasised that the initiative — in a so-called non-paper, for discussion only — was Mr Scholz’s alone and had not been co-ordinated with German chancellor Angela Merkel. It remains uncertain whether she will back the plans.

    Past efforts to shift the debate in Germany foundered on the opposition of conservatives in Ms Merkel’s Christian Democratic Union, as well as the Sparkassen, or savings banks, which have their own, jealously-guarded deposit insurance scheme.

    “Europe will not move closer together by shifting burdens on to others,” Helmut Schleweis, president of the German Association of Savings Banks (DSGV), said in September. “It is not the right moment to communitise deposit insurance schemes.”

    However, there have been signs of a change of heart within the German finance ministry as the banking union project stalls.

    Mr Scholz said that Brexit and the risk of dependency on China and the US compelled the EU to make headway.

    He has coupled his offer on deposit insurance with tough reform demands to help maintain discipline in bank supervision and resolution, and minimise the risk that Germany could be saddled with the costs of bank failures elsewhere in Europe.

    These conditions are likely to be unpopular in many other EU countries, especially those with weaker banking systems such as Italy.

    His demands include amending EU capital rules to remove incentives for banks to buy up large quantities of their home country’s sovereign debt; further action to reduce bad debts in the EU banking system; and the establishment of common European rules on calculating companies’ taxable profits.

    Mr Scholz also wants the EU to harmonise bank insolvency law, saying a patchwork of national rules undermines EU attempts to make sure senior creditors share the cost of dealing with bank failures.

    Copyright (C) 2019 The Financial Times Ltd. All rights reserved.
    From: https://archive.infodesk.com/item/c1...N=2&CU=imf5992
    *I have loved the stars too dearly to be fearful of the night*

  16. The Following 4 Users Say Thank You to Cara For This Post:

    Bill Ryan (7th November 2019), Dennis Leahy (29th November 2019), Jayke (7th November 2019), Richard S. (7th November 2019)

  17. Link to Post #49
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    The digital payments sector continues to expand. China expects to play this game too:

    Quote Posted by Cara (here)
    China’s TenCent extends WeChatPay to foreigners:

    *I have loved the stars too dearly to be fearful of the night*

  18. The Following 3 Users Say Thank You to Cara For This Post:

    Bill Ryan (7th November 2019), Dennis Leahy (29th November 2019), Richard S. (7th November 2019)

  19. Link to Post #50
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    The ratings agency Moody’s has downgraded their outlook on some Indian institutions. I do think ratings agencies are political so this may not be entirely about financial and economic prospects. It may well be a move to “persuade” someone / people to cooperate with something.

    Quote Moody’s downgrades outlook on SBI, HDFC Bank, Infosys, TCS and 17 others - The Economic Times
    Nov 08, 2019, 04.13 PM IST

    NEW DELHI: After downgrading India’s sovereign outlook, Moody’s Investors Service on Friday downgraded its view to 'negative' from 'stable' on many top Indian companies, including SBI, HDFC Bank, TCS, Infosys, BPCL, NTPC, NHAI and GAIL.

    Moody’s has downgraded outlook on companies belonging to information technology, infrastructure as well as oil and gas sectors. In total, the rating agency on Friday cut outlook on 21 Indian firms.

    Other financial institutions that have seen a downgrade are Exim Bank, Hero FinCorp, Hudco and Indian Railway Finance Corporation (IRFC).

    However, the agency kept rating and outlook unchanged on Bank of India, Canara Bank, Oriental Bank of Commerce, Syndicate Bank and Union Bank of India.

    Ratings of the above-mentioned financial institutions are unlikely to be upgraded in the next 12-18 months, Moody’s said.

    The agency also downgraded the outlook on eight non-financial corporates to negative from stable. They are BPCL, HPCL, Indian Oil, ONGC, Oil India, Petronet LNG, Infosys and Tata Consultancy Services.

    It also downgraded outlook on a number of sovereign-linked infrastructure companies. They include NTPC, NHPC, NHAI, GAIL, Power Grid, Adani Green and Adani Transmission.

    In case of Exim Bank, Hudco, IRFC and SBI, Moody’s Investors Service said close links between these four companies and the government is the key reason for their downgrade. Moody’s believes that these companies will receive government support in times of need.

    For HDFC Bank, it reasoned that due to the “strong linkages between a bank's business and the sovereign credit profile, including by way of large direct exposure to government debt and exposure to common underlying operating conditions, the Baseline Credit Assessment (BCA) of a bank is capped at the sovereign rating of the country that it operates in”.

    “Moody's does not have any particular governance concern for all the issuers impacted by today's rating action. Moody's does not apply any corporate behavior adjustment to the banks and views their risk management framework as consistent and commensurate with their risk appetite,” the New York-based rating agency said in a release.

    "Ratings for Infosys and TCS are constrained to no more than two notches above the sovereign rating. Therefore a sovereign rating downgrade will also result in downgrade of the A3 ratings of Infosys and TCS," says Kaustubh Chaubal, a Moody's Vice President -- Senior Credit Officer.

    Moody’s earlier downgraded India’s outlook from ‘stable’ to ‘negative’. The rating agency said its outlook partly reflects lower effectiveness of the government and policy in addressing long-standing economic and institutional weaknesses than it had previously estimated. This is leading to a gradual rise in debt burden from already high levels.

    Meanwhile, Moody's has also upgraded the Baseline Credit Assessment (BCA) of GAIL to ‘baa2’ from ‘baa3’, based on its expectation that the company will maintain strong financial metrics over the next 2-3 years; a situation which is more consistent with a baa2 standalone profile.
    From: https://m.economictimes.com/markets/...mpression=true
    *I have loved the stars too dearly to be fearful of the night*

  20. The Following 3 Users Say Thank You to Cara For This Post:

    Bill Ryan (10th November 2019), Dennis Leahy (29th November 2019), Richard S. (10th November 2019)

  21. Link to Post #51
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    Italian court finds some bankers guilty:



    The article:
    Quote Italian court convicts DB, Nomura in Monte Paschi derivative trial
    Nov 9, 2019 — 7.33am

    Milan | An Italian court has convicted 13 former bankers from Deutsche Bank, Nomura and Monte dei Paschi di Siena over derivative deals that prosecutors say helped the Tuscan bank hide losses in one of the country's biggest financial scandals.

    The verdict, read in court on Friday by lead judge Lorella Trovato, also ordered fines and asset seizures worth a total of €68 million ($109 million) from Deutsche Bank and €91.5 million from Nomura.


    Monte dei Paschi's former chairman Giuseppe Mussari, one of five former executives from the Tuscan bank on trial, was given the heaviest sentence of seven years and six months in jail. Bloomberg
    Monte dei Paschi reached a settlement with the court over the case in 2016 at a cost of €10.6 million.

    The case centres on two complex derivatives transactions - known as Alexandria and Santorini - that Nomura and Deutsche Bank arranged for Monte dei Paschi in 2009.

    Prosecutors said the deals helped Monte dei Paschi, which was founded in 1472 and is Italy's fourth biggest lender, hide more than €2 billion of losses racked up after the costly acquisition of a smaller rival in 2008.

    "We are disappointed with the verdict. We will review the rationale for it once it is published," Deutsche Bank said in a statement.

    Nomura also said it was disappointed. "After thoroughly examining the content of the judgment, the company will consider all options, including an appeal," it said.

    The scandal, together with more losses suffered by Monte dei Paschi during the euro zone debt crisis, threatened to destabilise Italy's financial industry and forced the Siena-based lender to seek an €8 billion state bailout in 2017.

    In the trial, which started in Milan in December 2016 and took 100 hearings to complete, the three banks and 13 defendants faced allegations of false accounting and market manipulation between 2008 and 2012.

    Monte dei Paschi and its former top managers were also accused of misleading regulators.

    All defendants have always denied wrongdoing and none of them will serve time in jail before the lengthy appeals process is exhausted.

    Monte dei Paschi's former chairman Giuseppe Mussari, one of five former executives from the Tuscan bank on trial, was given the heaviest sentence of seven years and six months in jail.

    Deutsche Bank and Nomura were both convicted as institutions for failing to prevent wrongdoing by their employees.

    All six defendants linked to Deutsche Bank and the two who once worked for Nomura were handed jail terms.

    They include sentences of four years and eight months each for Ivor Dunbar, former co-head of Global Capital Markets at the German bank, Michele Faissola, its former head of Global Rates, and Michele Foresti, its former head of Structured Trading.

    Nomura's former chief executive for the EMEA region, Sadeq Sayeed, was also given a sentence of four years and eight months while Raffaele Ricci, the former head of the bank's EMEA Sales, was handed a sentence of three years and 5 months.

    Lawyers for the defendants said they expected to appeal the verdict once the full ruling is released.
    From: https://www.afr.com/world/europe/ita...social_twitter
    Last edited by Cara; 11th November 2019 at 04:37.
    *I have loved the stars too dearly to be fearful of the night*

  22. The Following 5 Users Say Thank You to Cara For This Post:

    Bill Ryan (10th November 2019), Dennis Leahy (29th November 2019), Franny (11th November 2019), Hervé (10th November 2019), Richard S. (10th November 2019)

  23. Link to Post #52
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    Central bank of Tunisia launches blockchain based digital currency. The currency was developed by a Russian company, Universa (https://universablockchain.com/):

    Quote Central Bank of Tunisia Announces It’s Blockchain-based Digital Currency

    The Central Bank of Tunisia has issued for testing, a Central Bank Digital Currency (CBDC) “E-dinar.” Russia-based Universa has created the blockchain for the E-dinar. According to Universa, it is the first Central Bank in the world to convert a part of its reserves into digital currency.

    The CBDC will be issued online as well as through 2000 kiosks that open throughout Tunisia. It can be used to make payments in restaurants, cafes, shops, etc. by scanning a QR code. It has also planned to make international payments, thus bypassing the US dollar.

    Users will have a digital wallet that they can top up via a browser application. A mobile app is planned for the future.

    Universa’s CEO, Alexander Borodich, explains why CBDC is not a cryptocurrency. It is not a separate currency; it is the digital version of fiat currency. Further, he says that as CBDC will run on blockchain technology, it means,

    Quote Electronic banknotes cannot be faked – each such banknote, like the paper version, is protected by cryptography… And the production of such a banknote is 100 times cheaper than wasting ink, paper, electricity for the printing press.
    The major difference between Cryptocurrency and CBDC is that cryptocurrency uses cryptography to secure transactions, while CBDC uses cryptography to secure electronic banknotes. Quantity of CBDC is linked with fiat currency, and hence, it cannot be mined like a cryptocurrency. CBDC is akin to stablecoin as every electronic banknote will be backed by physical fiat currency.

    Universa cannot see transactions, nor can it access encryption keys. It claims that Malaysia, Argentina, Brazil, and China could also convert a part of their reserves into CBDC.
    From: https://www.namecoinnews.com/central...mpression=true
    Last edited by Cara; 11th November 2019 at 09:31.
    *I have loved the stars too dearly to be fearful of the night*

  24. The Following 5 Users Say Thank You to Cara For This Post:

    Bill Ryan (12th November 2019), Dennis Leahy (29th November 2019), Franny (11th November 2019), Richard S. (11th November 2019), silvanelf (11th November 2019)

  25. Link to Post #53
    Croatia Administrator Franny's Avatar
    Join Date
    3rd January 2011
    Location
    Island Time
    Posts
    1,039
    Thanks
    13,536
    Thanked 5,211 times in 897 posts

    Default Re: Financial flows: moves, changes and significant events

    Nice way to put it:

    Quote It is not a separate currency; it is the digital version of fiat currency.
    A million galaxies are a little foam on that shoreless sea. ~ Rumi

  26. The Following 4 Users Say Thank You to Franny For This Post:

    Bill Ryan (12th November 2019), Cara (11th November 2019), Dennis Leahy (29th November 2019), Richard S. (11th November 2019)

  27. Link to Post #54
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    The UK’s Financial Times tweeted:

    “Benoît Cœuré will head a new unit of the Bank for International Settlements charged with finding public alternatives to private digital currencies such as Facebook’s Libra”



    From Wikipedia:
    Quote Benoît Georges Cœuré (French: [bənwa kœʁe]; born 17 March 1969[1]) is a French economist who was appointed to the Executive Board of the European Central Bank (ECB) in 2011.
    *I have loved the stars too dearly to be fearful of the night*

  28. The Following 3 Users Say Thank You to Cara For This Post:

    Bill Ryan (12th November 2019), Dennis Leahy (29th November 2019), Richard S. (11th November 2019)

  29. Link to Post #55
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    This video is of a discussion held at the Institute of International Finance (IFF) annual meeting in Washington D.C. in October 2019.

    The participants are Tim Adams, President and Chief Executive Officer, IIF (Moderator) and Raymond Dalio, Founder, Co-Chairman and Co-Chief Investment Officer, Bridgewater Associates.

    An article by Ray Dalio was posted previously by Jayke here in The Changing / Emerging Global Landscape

    A couple of quotations from the conversation:

    'We're in a situation in which truth, rationality, is not being brought to bear on what I believe is our biggest problem.'

    'Next downturn we will not have monetary policy as we know it.'



    The agenda for the IFF meeting:
    *I have loved the stars too dearly to be fearful of the night*

  30. The Following 5 Users Say Thank You to Cara For This Post:

    Bill Ryan (12th November 2019), Dennis Leahy (29th November 2019), raregem (26th November 2019), Richard S. (14th November 2019), TomKat (13th November 2019)

  31. Link to Post #56
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    The growth of Fintech continues. Google wants to be a bank. So they aim to control both information and money (which in some ways is a kind of information).

    Quote Google wants to be your bank and will soon offer accounts
    7 hours ago
    News
    Silicon Valley continues to invade your wallet.

    Google plans to offer checking accounts to customers starting in the US next year, a source familiar with Google's plans told CNN Business.

    Google is partnering with Citigroup and a credit union at Stanford University for the initiative.


    Google is getting into banking (Supplied)

    "We're exploring how we can partner with banks and credit unions in the US to offer smart checking accounts through Google Pay, helping their customers benefit from useful insights and budgeting tools, while keeping their money in an FDIC or NCUA-insured account," a company spokesperson said.

    But Google doesn't plan to take center stage on the checking accounts.

    Instead, the financial institutions' brands will be put on the accounts and banks will be responsible for the financial plumbing and compliance.

    Partner banks and credit unions will offer these smart checking accounts through Google Pay.

    Google also hasn't decided whether the accounts would charge fees.

    The push into checking accounts is the latest instance of a Big Tech company moving into the financial services space.

    Amazon also wants to introduce checking accounts for customers.

    Facebook announced its Libra cryptocurrency project earlier this year.

    And Apple has teamed up with Goldman Sachs to launch a credit card, while its Apple Pay service has become a go-to payment method for many iPhone customers.

    Google is attempting to deepen its relationship with consumers by entering into finance, Dan Ives, managing director of equity research at Wedbush Securities, told CNN Business.

    "The company has an unmatched position within the consumer life cycle and now they're trying to leverage where they are," Ives said.

    Facebook hope the currency could drive more e-commerce on its services and boost ads on its platforms. (Supplied)
    Google already offers smart home devices like Nest and Google Assistant and just entered into health and wellness world with its planned acquisition of Fitbit.

    "The missing piece is banking," said Ives.

    Ives said Google's initiative probably won't cause big banks any concern for now, but Big Tech's ongoing expansion of its financial footprint will likely pose a competitive threat in the future -- especially as it shows no signs of letting up

    "This is just the tip of the spear in terms of where [tech giants are] going," said Ives.

    Politicians in Washington, who are already investigating the dominance of big tech companies, will probably review Google's move closely.

    Google's effort could draw scrutiny given Washington's distaste for both Big Tech and big banks, Jaret Seiberg, an analyst at Cowen and Company, said in an analyst note.

    "We have trouble seeing how combining the two is going to produce an outcome that either Democrats or Republicans will embrace," Seiberg said.

    There's no release date set for Australia at this time.
    From: https://amp.9news.com.au/article/996...mpression=true
    *I have loved the stars too dearly to be fearful of the night*

  32. The Following 4 Users Say Thank You to Cara For This Post:

    Bill Ryan (15th November 2019), Dennis Leahy (29th November 2019), raregem (26th November 2019), Richard S. (15th November 2019)

  33. Link to Post #57
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    This is more for reference than an update. These are papers from a recent conference on how central banks can address and incorporate blockchain technologies.

    Quote Digital currencies, central banks and the blockchain: policy implications

    October 25, 2019, Oesterreichische Nationalbank, Vienna

    According to many experts and media commentators the world is currently undergoing a digital transformation. This notion refers to the economic and social effects brought about by digital technologies, digital data and the internet. The OECD in a recent report lists the increase in computing power, the blockchain, artificial intelligence, big data, cloud computing, 5G networks and the internet of things as the most important technologies driving this transformation. In public discussions on the digital transformation it is often expected that money, a key component in economic activity, must adapt too to serve an increasingly digital economy. Central Bank Digital Currencies (CBDC) are often believed to play an important role in the adaption to a digital economy. In this workshop we want to contribute to the debate by discussing various issues related to central bank digital money and the implications of new, digital technologies for the monetary and financial system of the future.

    Downloads

    Program (PDF, 87 kB)

    Presentations
    Itai Agur – Designing Central Bank Digital Currencies (PDF, 387 kB)
    Beat Weber – Designing Central Bank Digital Currencies (Discussion) (PDF, 904 kB)
    Dirk Niepelt – A Central Bank Digital Currency in Our Monetary System? (Discussion) (PDF, 766 kB)
    Rainer Böhme – The technology behind CBDCs: state of the art, design options, and implications (PDF, 2 MB)
    Tarik Roukny – Vertically Disintegrated Platforms (PDF, 1018 kB)
    Julien Prat – Vertically Disintegrated Platforms (Discussion) (PDF, 1.1 MB)
    Raphael Auer – Embedded supervision: how to build regulation into blockchain finance (PDF, 1.2 MB)
    Maarten van Oordt – Embedded supervision: how to build regulation into blockchain finance (Discussion) (PDF, 577 kB)
    Linda Schilling – Cryptocurrencies, Currency Competition and the Impossible Trinity (PDF, 215 kB)
    Paul Pichler – Cryptocurrencies, Currency Competition and the Impossible Trinity (Discussion) (PDF, 188 kB)
    From: https://www.oenb.at/en/Monetary-Poli...urrencies.html
    *I have loved the stars too dearly to be fearful of the night*

  34. The Following 3 Users Say Thank You to Cara For This Post:

    Bill Ryan (19th November 2019), Dennis Leahy (29th November 2019), Richard S. (19th November 2019)

  35. Link to Post #58
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    This is an interesting article in that it covers a change in both sentiment and policy about the importance of gold holdings for central banks.

    Admittedly, it is written by a gold proponent but - whether or not you believe gold to have any special significance as an asset class - it is useful as a signal of how some of those with money and power are reading and responding to the current world situation.

    Quote German Central Bank: Gold Is the Bedrock of Stability for the International Monetary System
    Jan Nieuwenhuijs

    European central banks are slowly preparing for plan B: gold.


    Deutsche Bundesbank [CC BY-NC-ND 2.0 (https://creativecommons.org/licenses/by-nc-nd/2.0/)]

    Written by Jan Nieuwenhuijs, formerly known as Koos Jansen.

    It was long believed in the gold space that Western central banks are against gold, but things have changed, for quite some years now. Instead of discouraging people from buying gold, or convincing them that gold is an irrelevant asset, many of these central banks are increasingly honest about the true properties of this monetary metal. Stating that gold is the ultimate store of value, that it preserves its purchasing power through time and is a global means of payment. Such statements, combined with actions that will be discussed below, reveal that more and more central banks are preparing for plan B.

    The Bundesbank (the German central bank) published a book last year named Germany’s Gold. In the introduction, written by the President of the Bundesbank Jens Weidmann, the view of this bank leaves no room for interpretation. Weidmann writes (emphasis mine):

    Quote Ask anyone in Germany what they associate with gold and, more often than not, they will say that it is synonymous with enduring value and economic prosperity.

    Ask us at the Bundesbank what our gold holdings mean for us and we will tell you that, first and foremost, they make up a very large share of Germany’s reserve assets ... [and they] are a major anchor underpinning confidence in the intrinsic value of the Bundesbank’s balance sheet.

    The Bundesbank produced this publication to give a detailed account, the first of its kind, of how gold has grown in importance over the course of history, first as medium of payment, later as the bedrock of stability for the international monetary system.


    For Keynesians these comments might read like the Bundesbank (BuBa) is a “goldbug.” Its remarks, however, are simply common sense. Gold has enduring value. The world over it is associated with economic prosperity. Every reserve currency in the world today is underpinned by vast gold reserves. Otherwise, monetary authorities wouldn’t trust holding the respective currencies, next to holding their own gold reserves. Gold truly is the bedrock of stability for the international monetary system.

    Central Banks and Exter’s Pyramid

    What springs to mind when reading Weidmann’s statement is Exter’s Inverse Pyramid. John Exter was an American economist that in the 1960s conceived an upended pyramid of financial assets. Underneath the pyramid is gold that forms the base of most reliable value; all asset classes within the pyramid on progressively higher levels involve more risk. Exter would sometimes refer to his model as the debt pyramid; hence, he positioned gold outside of it as it’s the only asset that has no liability against it.


    Exters Pyramid by Voima

    Tellingly, when Exter addressed the Economic Society of South Africa in Johannesburg on November 16, 1966, he said (source):

    Quote Gold is the hard core of our international monetary system.
    “Bedrock” (Weidmann) and “hard core” (Exter) are similar, and both point to gold’s strength and what it can carry. An essential element of capitalism is investing—directly, indirectly, through bonds or equity—that involves risk. The higher the risk, the higher the return. The lower the risk, the lower the return. What falls outside of the investment realm has zero risk and no return, but provides the base that carries the debt system. This safe haven is gold, the only asset refuge that has no counterparty risk.

    In the Balance of Payments and International Investment Position Manual (BPM6) drafted by the International Monetary Fund (IMF), we read:

    Quote Financial assets are economic assets that are financial instruments. Financial assets include financial claims and monetary gold held in the form of gold bullion … A financial claim is a financial instrument that has a counterpart liability. Gold bullion is not a claim and does not have a corresponding liability. It is treated as a financial asset, however, because of its special role as a means of financial exchange in international payments by monetary authorities and as a reserve asset held by monetary authorities.
    The IMF considers all financial assets to have counterparty risk, except gold.

    On page 112 of BPM6 the IMF lists all international reserve assets by descending order. Crowning the lineup is physical gold, followed by cash, debt securities, equity, and finally derivatives. Nearly an exact copy of Exter’s Pyramid.


    IMF reserve assets gold

    Another appearance of the pyramid can be found on the website of the Dutch central bank, De Nederlandsche Bank (DNB). Since April 2019 DNB’s gold information page reads:

    Quote A bar of gold always retains its value, crisis or no crisis. This creates a sense of security.

    Shares, bonds and other securities are not without risk, and prices can go down. But a bar of gold retains its value, even in times of crisis. That is why central banks, including DNB, have traditionally held considerable amounts of gold. Gold is the perfect piggy bank—it’s the anchor of trust for the financial system. If the system collapses, the gold stock can serve as a basis to build it up again. Gold bolsters confidence in the stability of the central bank’s balance sheet and creates a sense of security.
    Exter’s pyramid all over. Kindly note the similarity between DNB’s and BuBa’s comments on gold providing essential confidence in their balance sheets. It goes to show these two central banks have a long history of cooperating.

    I tweeted about DNB’s candid approach last April (a few months later, it went viral).

    Let’s continue with another quote, this time from the Bank of Finland (BOF):

    Quote Gold – The basis of a monetary system

    Gold is called the eternal payment instrument and has been used as a medium of exchange for thousands of years. Gold is a genuinely global means of payment that has maintained its value throughout history.
    One more, from the Banque de France (BDF):

    Quote Key facts

    Gold is a highly sought-after precious metal, considered to be the ultimate store of value.
    All central banks quoted agree gold preserves its purchasing power through time.

    Preparing for Plan B

    Next to strong statements by central banks, they’re acting accordingly. Shortly after the Great Financial Crisis (GFC), central banks as a sector became net buyers; and Germany, the Netherlands, Austria, Hungary and Turkey, among others, repatriated gold. Mainly from the Bank of England in London and the Federal Reserve Bank of New York.


    World Total Official Gold Reserves 80

    According to BuBa, their repatriation scheme had three objectives: cost efficiency, security, and liquidity. Cost efficiency is about the storage costs in every location. Security involves the safety of the vaults and where those vaults are. The current trend is to have a significant fraction of gold on home soil due to the geopolitical environment. Liquidity is about owning bars that adhere to prevailing industry standards and are located in liquid marketplaces such as London, i.e., to make payments in times of changes in the financial system. This latter aspect deserves special attention.


    Storage locations Germany’s official gold reserves.

    As we’ve seen, Western monetary authorities mention gold to be, “the anchor of trust for the financial system,” “the bedrock of stability for the international monetary system,” and, “a genuinely global means of payment.” They’re also saying that “if the system collapses, the gold stock can serve as a basis to build it up again.” One wonders if these entities are preparing for a new type of international gold standard. They see it as one possible outcome, as in recent years, several central banks have upgraded their gold reserves to current gold industry standards, also referred to as London Good Delivery.

    Throughout history, bars of different purities were traded in wholesale markets. By 1954 every new bar accepted in the London Bullion Market—the center of gold trade since the 18th century—was required to be at least 995 parts per thousand fine and weighing in between 350 and 430 fine troy ounces. Although not every old bar was promptly upgraded. Some remained as they were, in vaults in London and other places. These bars now trade a at discount, usually equal to the cost of upgrading and, if necessary, transporting them to London.

    After the GFC many central banks were holding bars that were cast before 1954, which are currently not liquid in wholesale markets. In response, the French, Swedish and German central bank, that I know of, have upgraded their gold reserves to solve this liquidity issue.

    From the Banque de France:

    Quote Since 2009, the Banque de France has been engaged in an ambitious programme to upgrade the quality of its gold reserves. The target is to ensure that all its bars comply with LBMA [London Bullion Market Association] standards so that they can be traded on an international market.
    From the Swedish Riksbank:

    Quote To ensure that the Riksbank has the most liquid gold reserve possible, in 2017 the Riksbank upgraded the part of its gold reserve that did not meet the LGD [London Good Delivery] standard by replacing these bars with new gold bars that do meet the standard.
    I don’t have a quote from BuBa itself on their upgrade operation. However, connecting a few dots uncovers when and how they did it. BuBa released a bar list in 2015 disclosing all their gold to be 995 fine or higher. In the book Germany’s Gold, a bar is displayed on page 110 with the subscription:

    Quote In the course of the relocation [repatriating] of gold holdings in 2013 and 2014, this bar … was melted down from old bars stored at the Fed and newly manufactured. The remelting served to obtain a detailed picture of the fineness of bars which were produced by various refiners in different years. They are among the Bundesbank’s newest gold bars.

    Germanys Gold page 110

    While BuBa states this bar was melted for assaying purposes, in reality, it was part of making their entire stack at least 995 fine. One, because it doesn’t require melting a whole bar for assay testing. Two, on November 11, 2017, the Financial Times published an article on how BuBa repatriated its gold. The article states:

    Quote more than 4,400 bars transferred from New York were taken to Switzerland, where two smelters remoulded the bullion into bars that meet London Good Delivery standards for ease of handling.
    Just like that one bar wasn’t melted to ‘obtain a detailed picture of the fineness,’ an additional 4,399 bars weren’t melted ‘for ease of handling.’ They were all refined for one reason: to meet London Good Delivery criteria and make Germany’s gold reserves wholly liquid.

    Conclusion

    According to John Exter, when the debt pyramid has grown in excess and becomes unstable, bubbles burst. Investors, seeking safety, will run down the ladder until they find solid ground (the bedrock). This foundation is gold, which can’t default or be arbitrarily devalued.

    The GFC was caused by too much debt (a credit binge). When Lehman fell, and the house of cards came crumbling down, the quickest solution authorities could think of, ironically, was more debt. We went from “extend and pretend” to “delay and pray.” Central bank intervention can be effective, for a while, until the underlying problem resurfaces with a vengeance. Presently the world is more in debt than before the GFC. The Institute of International Finance estimates global debt to GDP is now 320%.

    When reading the mainstream media, one can be persuaded to think all central banks are willing to “print” money to infinity and lower interest rates as far as they can—or launch a variety of the same—pushing us further into the abyss. Some of them, though, aren’t that ignorant and are actively preparing for when paper currencies are forced to be devalued by the weight of debt issued in said currencies.

    There’s one more development at a Western central bank I like to share. The Banque de France—whose vaults were a vibrant part of the global gold market during the classical gold standard—has not only upgraded its metal but also enhanced its entire vaulting infrastructure since the GFC. From BDF:

    Quote Since the 2008 financial crisis, there has been renewed interest in gold from reserve managers.

    As well as upgrading its stock, the Banque de France is taking various other steps to ensure it meets LBMA criteria [these standards apply for trading across the globe] … The renovation of the historical vaults housing the gold reserves has nearly been completed: the floor will be able to support heavy forklift trucks, and intermediary shelves have been inserted between the existing shelves to ensure the gold is only stacked five bars high, making handling easier. Other storage facilities will be available soon: either strong rooms for storing bare bars on shelves or large vaults to store sealed pallets, facilitate handling, transportation and auditing. By the end of the year, a new IT system will be in place to improve our ability to respond to market operation needs and other custody services.
    So, after the GFC, not only have Western central banks changed the way they talk about gold—that is, they have become more honest regarding gold’s function as a safe haven—but, as a sector, central banks have also become net buyers. Many central banks have redistributed their gold, carefully considering all possible future risks and developments. A few central banks have upgraded their gold to current industry standards to be able to trade frictionless in international markets. One central bank, BDF, has even enhanced its entire vaulting infrastructure. And this is just based upon publicly available information.

    We’re all too familiar with central banks in the East openly buying gold, stimulating citizens to buy gold, setting up new gold exchanges, and de-dollarizing. In the West, these subjects are more sensitive for political reasons. As a result, since the GFC, Western central banks gently started moving towards gold, not to cause any shocks in the market. In 2015, I called this “the slow development towards gold,” and it’s continuing still.

    It’s beyond the scope of this article to discuss every probable international monetary development and attribute a percentage chance to each of them. I think it’s clear though, that many central banks are preparing for gold to play a resolving and pivotal role in future global finance. Why else buy, redistribute and upgrade gold, next to enhance trading facilities, increase transparency and then advertise gold’s financial features? Keep in mind what Pericles said around 500 BC, “the key is not to predict the future but to prepare for it.”

    Currently, Exter’s Pyramid has grown too big and is unstable. The moment the pyramid falls, “gold will do its job.” History teaches us gold protects its owners through all types of weather, and central banks know this. Ever wondered why virtually every central bank owns gold? Because gold is physical. Immutable, yet divisible. Independent and without counterparty risk. It is the ultimate store of value—as it retains its purchasing power through time—and works as an eternal payment instrument.
    From: https://www.voimagold.com/insight/ge...mpression=true
    *I have loved the stars too dearly to be fearful of the night*

  36. The Following 4 Users Say Thank You to Cara For This Post:

    Bill Ryan (26th November 2019), Dennis Leahy (29th November 2019), raregem (26th November 2019), Richard S. (26th November 2019)

  37. Link to Post #59
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    Another country’s central bank - this time Poland - is repatriating gold reserves:

    Quote Poland brings home 100 tons of gold from Bank of England
    26 Nov, 2019 09:11

    Poland, which has been rapidly boosting its bullion reserves over the past two years, has repatriated around 100 tons of gold from the Bank of England’s vaults in London.

    Around half of Warsaw’s holdings in the UK were transferred back to the National Bank of Poland (NBP), the central bank’s governor, Adam Glapinski, announced on Monday.

    “The gold symbolizes the strength of the country,” Glapinski told reporters. Some photos and videos emerged online showing the official holding a gold ingot in front of a bank vault.

    While half of Poland’s reserves are still stored in England, the country’s central bank said that it may continue to repatriate the precious metal if the “reserve situation is favorable.”

    Poland could generate “multi-billion” profits from selling its bullion holdings, but currently no plans to do so, Glapinski said.

    Poland has become the 22nd biggest bullion holder in the world; it purchased about 125 tons in 2018 and 2019, increasing its gold reserves to 228.6 tons. The bullion stockpile is now worth around $10.8 billion, according to the NBP.

    Also on rt.com Bullish on bullion: Serbia joins global gold-buying spree, adding more of the precious metal to its coffers
    Central banks around the world have been on a gold-buying spree, pushing total bullion demand to a three-year high in the first half of 2019, according to the World Gold Council. While Russia, China, and Turkey are the top bullion purchasers, Poland, Hungary, and Serbia are also adding to their stockpiles as they seek to diversify their reserves amid global economic uncertainty.
    From: https://www.rt.com/business/474325-p...mpression=true
    *I have loved the stars too dearly to be fearful of the night*

  38. The Following 3 Users Say Thank You to Cara For This Post:

    Bill Ryan (27th November 2019), Dennis Leahy (29th November 2019), Richard S. (27th November 2019)

  39. Link to Post #60
    Administrator Cara's Avatar
    Join Date
    12th February 2014
    Location
    Dubai, United Arab Emirates
    Language
    English
    Posts
    1,403
    Thanks
    9,264
    Thanked 6,939 times in 1,311 posts

    Default Re: Financial flows: moves, changes and significant events

    The following article is about the programme of debt monetisation and its effects on the economy.

    Quote The Next Wave of Debt Monetization Will Be a Disaster

    Commentary

    According to the International Monetary Fund (IMF) and the Institute of International Finance (IIF), global debt has soared to a new record high.

    The level of government debt around the world has ballooned since the financial crisis, reaching levels never seen before during peacetime. This has happened in the middle of an unprecedented monetary experiment that injected more than $20 trillion in printed money into the economy and lowered interest rates to the lowest levels seen in history.

    The balance sheet of the major central banks rose to levels never seen before, with the Bank of Japan at 100 percent of the country’s GDP, the European Central Bank (ECB) at 40 percent, and the Federal Reserve at 20 percent.

    If this monetary experiment has proven anything, it’s that lower rates and higher liquidity aren’t tools to help deleverage debt, but to incentivize it. Furthermore, this dangerous experiment has proven that a policy that was designed as a temporary measure, due to exceptional circumstances, has become the new norm.

    The so-called normalization process of raising interest rates lasted only a few months in 2018, only for asset purchases and rate cuts to resume.

    Despite the largest fiscal and monetary stimulus in decades, global economic growth is weakening, and the productivity growth of leading economies is close to zero. Money velocity, a measure of economic activity relative to money supply, thus, goes down.

    It’s been explained many times why this happens. Low rates and high liquidity are perverse incentives to push the crowding-out of the private sector by government; they also perpetuate overcapacity, due to endless refinancing of nonproductive and obsolete sectors to lower rates, and the number of zombie companies—those that can’t pay their interest expenses with operating profits—rises.

    More Spending

    We are witnessing in real-time the process of zombification of the economy and the largest transfer of wealth from savers and productive sectors to the indebted and unproductive.

    However, as monetary history has always shown, when central planners face the evidence of low growth, poor productivity, and higher debt, their decision is never to stop the monetary madness but to accelerate it.

    That’s why the message that the ECB and IMF are trying to convey is that there’s a savings glut, and the reason why negative rates aren’t working as expected is that economic agents don’t believe rates will stay low for much longer, so they’re holding on to investment and consumption decisions.

    This is complete nonsense. With household, corporate, and government debt at still elevated levels and close to pre-crisis highs, the notion of excess savings is ludicrous.

    What informs such a misinformed opinion? The often-repeated “there is no inflation” fallacy. If money supply is high and rates are low but inflation doesn’t creep up, then surely there must be a savings glut. False. There’s massive inflation in financial assets and housing, but there’s also a clear rise in inflation in non-replicable goods and services versus replicable ones, which means that the official consumer price indices (CPI) misrepresent the true cost-of-living increase.

    That’s the reason why there are demonstrations all over the eurozone against the rising cost of living, while at the same time, the ECB is repeating that there’s no inflation.

    When central planners blame economic agents for a nonexistent savings glut and repeat that there’s no inflation when there’s clearly a lot, they also tend to add a conclusion: If households and corporations are unwilling to spend or invest, then the government must do it.

    This is, again, a false premise. Households and corporations are spending and investing. There’s no evidence of a lack of capital expenditure, let alone solvent credit demand. The private sector simply isn’t investing and spending as much as governments would want them to, which, among other reasons, is because the private sector does suffer the consequences of taking a higher risk when the evidence of debt saturation is clear to all those who risk their capital.

    Debt Monetization

    Unfortunately, the next wave of central bank action will be the full monetization of government excess. The excuse will be the so-called “climate emergency” and “green new deals.” Yet governments don’t have better or more information about the best course of action for energy transition. By artificially picking winners and losers, ignoring the positive forces of competition and creative destruction to deliver faster innovation and progress, governments tend to delay, not accelerate, change.

    In any case, it will happen. The ECB, always happy to repeat the mistakes of Japan with an even stronger impetus, is likely to start new programs of debt monetization for green projects and claim it’s a different, radical, and new measure—as if it wasn’t doing so already with the Renewable Energy Directive.

    The result is easy to predict, unfortunately. Governments hate two things that disruptive technologies do: reduce consumer prices and generate lower tax revenues. Yes, disruptive technologies are, by definition, disinflationary both in CPI and in tax receipts. Furthermore, disruptive technologies also demolish government control of the economy.

    These three reasons—lower inflation, lower tax revenues, and less control—are the reasons why governments will never adopt true changes in the economic growth pattern. And because of these reasons, the massive spending financed with new money creation is likely to be even worse for economic growth.

    Not only is it likely to be an even bigger crowding-out of the private sector, but it will also make economies less dynamic, less productive, and more indebted.

    There are ways to incentivize change and a green revolution. It’s called competition and creative destruction. None of those are favored by governments, not because they are evil, but because governments have the incentive to maintain the obsolete sectors via subsidies.

    If the previous $20 trillion stimuli have delivered more debt, less growth, and rising discontent among the middle class that always pays for government experiments, the next episode, à la Sen. Elizabeth Warren (D-Mass.), will likely be the last step toward full Japanization.

    If anything, what are already prudent spending and investment decisions from the private sector are likely to be even more conservative, and the resulting negative productivity growth will mean lower salaries and employment, but higher debt and a larger government footprint in the economy—which is, in reality, the ultimate goal of these massive plans.

    The reader may think that this time is different, but it’s not, because the incentives are the same. What I’m completely sure is that, once it fails as well, many will demand even more stimuli to solve the problem.

    Daniel Lacalle is chief economist at hedge fund Tressis and author of “Escape From the Central Bank Trap,” published by BEP.
    From: https://www.theepochtimes.com/the-ne...mpression=true
    *I have loved the stars too dearly to be fearful of the night*

  40. The Following 4 Users Say Thank You to Cara For This Post:

    Bill Ryan (27th November 2019), Dennis Leahy (29th November 2019), Richard S. (27th November 2019), silvanelf (27th November 2019)

+ Reply to Thread
Page 3 of 4 FirstFirst 1 3 4 LastLast

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts