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Thread: Financial flows: moves, changes and significant events

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    Default Re: The Changing / Emerging Global Landscape

    This posted previously here: http://projectavalon.net/forum4/show...obal-Landscape

    ~~~

    I posted in #14 above about nation / state issued cryptocurrencies.

    In addition to this change (and maybe as a necessary precursor - see in the article below, 2nd last paragraph), it seems there is also work underway by Central Banks to transform payment systems in a significant way - they are aiming at a digital system, with interoperability across regional systems and a span of control that includes ALL payments (including small local banks).

    (Bold emphasis in the original, my emphasis underlined)

    Quote Lost Within the Rate Cut: The Fed’s Drive to Establish a New Payment System
    5 days ago [14 August 2019]


    Part way through delivering a press conference following the Federal Reserve’s first rate cut since December 2008, chairman Jerome Powell let it be known that the central bank was ‘looking carefully‘ at developing a new faster payments system. Unsurprisingly, his words on the subject proved the equivalent of screaming into the face of a force ten gale. Besides a handful of financial outlets, nobody heard him. All that analysts and observers were really interested in was the Fed’s stance on interest rates.

    This was unfortunate because whilst they may appear banal and complex on the surface, payments systems are of far greater significance than whether a central bank opts to cut or raise interest rates. Anyone keeping pace with the myriad of speeches and publications emanating from central banks will know that globalists are working incrementally to introduce a cashless monetary system under their control. The Federal Reserve are one strand of this strategy as we will discover.

    Less than a week after the rate cut, the Fed announced that they were planning to devise a new ‘round-the-clock real-time payment and settlement service.’ Called ‘FedNow‘, the system would be an RTGS run service designed to initiate faster payments.

    RTGS stands for ‘Real Time Gross Settlement‘, and is the same model through which the Bank of England and the European Central Bank operate their payment systems. The BOE announced back in May 2017 a blueprint for the introduction of a ‘renewed‘ RTGS service, whilst the ECB in late 2018 launched a new system dubbed TIPS (TARGET Instant Payment Settlement). It was around the time that TIPS launched that the Fed issued a ‘request for comment‘ on reforming their own system. Taken as a whole, this is a further example of central banks working in coordination.

    In a press release announcing ‘FedNow‘, the Fed justified the venture on the premise that the ‘rapid evolution of technology‘ had presented them with a ‘pivotal opportunity‘ to modernise the U.S. payment system. Exactly how long the Fed have been looking into adopting a new payment system is unclear. But if the Wall Street Journal is to be believed, they have been exploring a faster system since at least 2013.

    The press release also pointed out that over 10,000 financial institutions are incorporated into the current Fed payment system known as ‘Fedwire‘, and argued that new real time infrastructure developed through the central bank would be best placed to offer full nationwide coverage.

    The next stage of ‘FedNow‘ sees the Fed ‘requesting comment on how the new service might be designed‘. As for when it becomes available, the expectation is either 2023 or 2024. The Bank of England’s renewed RTGS system is due to be operational by 2025.

    On the day ‘FedNow‘ was announced, Lael Brainard, a member of the Fed’s board of governors, offered up more information on the system in a speech at the Federal Reserve Bank of Kansas City. As you might expect, Brainard was there to extol the benefits. The big selling point was 365 days a year access, 24 hours a day, 7 days a week. Funds would be available immediately after payment is sent. It would be a system built on convenience and one that was fit for the speed of the 21st century.

    Of greater interest than these superficial benefits, however, is the motivation behind what the Fed are seeking to achieve with ‘FedNow‘. Brainard was equally as explanatory in this regard.

    We learned from her speech four key bits of information.

    Firstly, fintech companies are openly supportive of the Fed’s new system. These are companies that are part of an industry that has pioneered the creation of distributed ledger technology.

    Secondly, the planned implementation for either 2023 or 2024 is not a fixed objective. More important to the Fed is the goal of achieving ‘nationwide access for all‘, meaning that their overarching aim is for ‘FedNow‘ and private sector payment services to work in conjunction (or, as Brainard put it, to ‘interoperate by exchanging payments among services directly).

    Thirdly, Brainard told us that no one private sector provider of a U.S. payment system has ever been able to establish nationwide reach by itself. Nationwide coverage would have to encompass the many thousands of small and medium sized banks. Hence why the Fed are now making a determined move to utilise private sector technology and incorporate it into their own system. I would contend that the Fed’s goal is to achieve full spectrum control of America’s payment infrastructure, with all digital transactions falling under their jurisdiction. ‘FedNow‘ would be the mechanism in making this happen.

    Fourthly, as Brainard laid out, the path that the Fed are embracing is not one of ‘incremental‘ change. Rather, it is of ‘transformative‘ change. I would take this to mean that the infrastructure underpinning current payment systems must be overhauled to allow for the implementation of fintech devised technology.

    An accompanying list of FAQ’s lent credence to the understanding that fintech is central to the construction of ‘FedNow‘. Here, the Fed expounded that the market for faster payments in the U.S. remains in the ‘early stages‘. Banks and fintech firms can provide a range of services, but the functionality of them is limited which restricts their level of coverage and reliability. They lamented the ‘lack of a universal infrastructure to conduct faster payments‘, which means that at present users who are signed up to one service such as Paypal invariably cannot send or receive payment from a user signed up to another service. As a result, the market remains ‘fragmented‘.

    With the Federal Reserve system encompassing twelve regional banks, and the relationships the Fed has with 10,000 plus banking institutions, their belief is that they are ‘well positioned to overcome the challenge of extending nationwide access.

    Throughout their communications there is a preoccupation with the objective of achieving nationwide access. So much so that the Fed board are apparently intending to ‘explore interoperability and other paths to achieving the ultimate goal of nationwide reach.’

    ‘FedNow’ would provide the necessary universal infrastructure that the Fed are seeking, and allow banks of all description to offer real-time payments.

    Undoubtedly this presents an opportunity for the Fed, and indeed central banks throughout the world, to move in and claim hegemony over the next generation of global digital payment systems. But they, along with the Bank for International Settlements and the International Monetary Fund that preside over them, cannot do this by themselves. This is where the private sector comes in, for it is here where the expertise and technological innovation is found.

    Within the FAQ’s it is also stated that the ‘FedNow‘ service would ‘operate alongside private sector RTGS services for faster payments‘. Prior to the announcement of the new system, the Federal Reserve board had come to the conclusion that private sector RTGS services ‘cannot be expected to provide an infrastructure with reasonable effectiveness, scope and equity alone.’ A roundabout way of saying that whilst the Fed do not possess the technology, they do have the reach in order to disseminate private sector innovation to every corner of the U.S. The beauty for the Fed is that they would have full regulatory authority over ‘FedNow‘. In conjunction with fintech, their level of control over the payments infrastructure would be unassailable.

    If central banks manage to utilise fintech successfully, it will give them a clear path to begin the gradual implementation of central bank issued digital currencies. Back in April I published an article (BIS General Manager Outlines Vision for Central Bank Digital Currencies) that looked into the subject of CBDC’s more deeply.

    In regards to ‘FedNow‘, equally as interesting as what was discussed by the Fed is what was left unsaid. There was no mention throughout any of the supporting documentation of plans to incorporate distributed ledger technology. Instead, there will be ‘engagement between the Fed and the industry to inform the final service design.’ This is a process that is now getting underway.

    I would expect that once the final design of ‘FedNow‘ is confirmed, it will have the capability of interacting with systems that use distributed ledgers. This would follow on from the Bank of England who in 2018 announced that their new RTGS service would enable such systems to achieve settlement in central bank money.

    Once this has been achieved, the next logical step for central banks is to complete the process of digitising all financial assets through the issuance of central bank digital currency. And as BIS general manager Agustin Carstens warned back in March 2019, this would mean that people would no longer have the option of paying with cash. ‘All purchases would be electronic‘.

    In a follow up article I will be exploring the process underway at the Bank of England and the European Central Bank to reform their payment systems, and how China is proving to be the test bed for fintech innovation.
    From: https://stevenguinness2.wordpress.co...ayment-system/
    Last edited by Cara; 4th October 2019 at 05:05.
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    Default Re: Financial flows: moves, changes and significant events

    From the Financial Times - the large and growing global remittances market. (Normally their content is subscription only and I am not a subscriber, so I am not sure why I was able to access this article.)

    Quote Remittances: the hidden engine of globalisation
    With 270m migrants around the world, the money they send home now exceeds foreign direct investment

    Federica Cocco, Jonathan Wheatley, Jane Pong, David Blood and Ændrew Rininsland August 28, 2019


    © FT

    Every month Joy Kyakwita presses a button on her phone and does something in common with millions of other people across the globe: she sends money home.

    Ms Kyakwita, a London-based lawyer, gives a third of her salary to her family back home in Uganda, including paying money for school fees for her brothers and nephews.

    “I believe that when you pay for them to go on a good course, then there is a good chance of them becoming employable,” she says. “And if they are employed then they will be able to help their siblings as well.”

    Ms Kyakwita is just one of an estimated 270m migrants around the world who will send a combined $689bn back home this year, the World Bank estimates. That figure marks a landmark moment: this year remittances will overtake foreign direct investment as the biggest inflow of foreign capital to developing countries.

    Remittances were once viewed by many economists as a secondary issue for developing economies behind FDI and equity investments. Yet because of their sheer volume and consistent and resilient nature, these flows are now “the most important game in town when it comes to financing development", says Dilip Ratha, head of the World Bank’s global knowledge partnership on migration and development.

    Click image for larger version

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    The number of people in the world who live outside the country of their birth has risen from 153m in 1990 to 270m last year according to the World Bank, swelling global remittance payments from a trickle to a flood. As migration has increased, these financial snail-trails have become one of the defining trends of the past quarter-century of globalisation - the private, informal, personal face of global capital flows.

    For many developing economies, it is a lifeline.

    “In times of economic downturn, natural disaster or political crisis, private capital tends to leave and even official aid is hard to administer,” says Mr Ratha. “Remittances are the first form of help to arrive, and they keep rising.”

    Remittance inflows help boost countries’ balance of payments and therefore their credit ratings, lowering the borrowing costs of governments, companies and households. In the Philippines, for example, this year’s remittances inflows of $34bn will help reduce what would otherwise be a current account deficit of more than 10 per cent of gross domestic product to a deficit of just 1.5 per cent of GDP.

    Remittances are “a relatively stable source of foreign currency in the current account, and that feeds directly into our sovereign ratings”, says James McCormack of Fitch Ratings. “In the case of a country like the Philippines, Egypt or Nigeria, their current account positions would be much weaker in the absence of remittance flows.”

    [Image in original]
    A heatmap matrix showing bilateral remittance flow between countries, categorised by region. Cells in each column represent a country receiving remittances, while cells in each row represent a country sending remittances. Darker coloured cells means higher share of receiving country's GDP in percent. The graphic shows that countries in EU (pre-2004 expansion) and North America are the biggest senders of global remittances. Other notes include South Asian workers in the Middle East sending lots of remittances back home, and flows within sub-Saharan Africa are increasingly significant.
    https://www.ft.com/__origami/service...ality=lossless

    Some governments have sought to channel remittances into development efforts; Indonesia is the latest country to consider a “diaspora bond” in a bid to tap the savings of its wealthier overseas residents.

    But remittances have economic downsides too. By helping to subsidise low incomes at home they provide a cushion against the impact of slow growth, which eases pressure on governments to reform their policies.

    And, by channelling capital into consumer spending, remittances boost imports - which, some economists say, holds back the development of domestic manufacturing.

    “No country is ever going to get rich from remittances,” says Gareth Leather of Capital Economics, a consultancy. “I don’t think any government would want to get rid of them, but many would like to get to the point where they are no longer needed.”

    Mr Ratha at the World Bank argues, however, that this understates the importance of remittances. “Is consumption bad?” he asks. “Not really. Without it we’d be dead. Investment can wait, consumption can’t.” As incomes rise, he added, people put money into housing, health and education. “This is human capital formation. That’s a great investment in any economy.”

    Remittances are also one of the key transmission mechanisms of global economic stress. People move in search of opportunities, so emigration rises when an economy is doing badly. When their host country is doing well and migrants prosper, they send more money home - a countercyclical boost to the struggling economy at home.

    But when host countries hit hard times, the shock is transmitted back to migrants’ families in the form of lower remittances. This can export the slowdown to the recipient country, fuelling economic instability on a global scale.

    One example is the recent fall in oil prices. It was a blow not only to oil producing countries but also to families across south-east Asia and elsewhere who have breadwinners working in the Gulf.

    It proved to be a structural shock for Lebanon, a small economy in which families and the banking system are heavily dependent on inflows from the diaspora.

    “We’ve been watching Lebanon closely because remittances have really declined in the past decade, by almost 12 per cent of GDP,” says Frank Gill of S&P Global, one of the big three rating agencies. “This is a key source of funding for the public sector and it’s a major worry for a rating agency, for obvious reasons.”

    In May S&P lowered its outlook for Lebanon’s sovereign rating to negative, citing slowing inflows from non-residents as a threat to the country’s fiscal stability.

    Although remittances have become one of the chief characteristics of the current era of globalisation, political shifts including the rise of populism raise the question of whether their economic importance will prove short-lived.

    The backlash against globalisation is growing and anti-immigration sentiment is rising in many developed countries. So it is possible that both migration and the capital flows that it drives could begin to ebb.

    But the World Bank expects 550m people to join the workforces of low and middle-income countries between now and 2030. And the gaping income disparity between developed and low-income countries - $43,000 a year per capita in the former, and $800 a year in the latter - is set to persist.

    That means job opportunities abroad will continue to look attractive.

    “The structural trends in the world are towards more migration, not less,” says Mr Leather.

    And the push from poor countries will be met by a pull from rich ones.

    “The western world is ageing, and it’s going to be increasingly reliant on imported labour,” says S&P’s Mr Gill. “I don’t see why that isn’t going to continue.”

    Meanwhile, other flows of capital into developing economies are becoming less reliable. FDI, traditionally a key driver of development, is in retreat. Outward FDI from the five principal global sources in recent years - the US, China, Germany, Japan and the UK - fell by two thirds between 2017 and 2018, according to OECD data.

    And as a global economic slowdown looms on the horizon, speculative investment flows are also likely to become more volatile.

    That leaves the cobweb of remittance flows around the world as one of the main systems by which global capital circulates. And even if migration tails off, the high existing stock of migrants around the world means those flows are likely to continue for decades to come.

    In Staines-upon-Thames, the town in Surrey where she lives, Joy Kyakwita has no plans to move back to Uganda. “Now I'm not thinking about that, because I have a big dream in this country,” she says. “I have children who were born here.”

    She studied and qualified as a lawyer thanks to financial help from her sister, who came to the UK to work as a nurse. Now she wants to pass that good fortune on to the next generation of her family.

    Returning home, she says, has become “no longer about me, but also about my children as well … I would rather support [my wider family] from here”.
    From: https://ig.ft.com/remittances-capita...rging-markets/

    ~~~

    Some months ago I looked into this topic. I was wondering to what extent foreign national workers sending money back to their homes was contributing to global financial flows of cash. What I discovered is that this is considered a large and growing market and several payments providers are looking to take advantage of it. The article above points to the fact that these flows are now larger than foreign direct investment.

    The World Bank has quite a few briefing documents on remittances and migration:
    https://www.worldbank.org/en/topic/l...nd-remittances

    They are the “custodian” of several migration-related “Sustainable Development Goals” (SDG):
    • increasing the volume of remittances as a percentage of gross domestic product (GDP) (SDG indicator 17.3.2),
    • reducing remittance costs (SDG indicator 10.c.1), and
    • reducing recruitment costs for migrant workers (SDG indicator 10.7.1)

    Here is their latest report, from April 2019:
    https://www.knomad.org/sites/default...entbrief31.pdf

    Quote This Migration and Development Brief provides updates on global trends in migration and remittances and validates the projections made in the previous Brief in December 2018. It highlights developments related to migration-related Sustainable Development Goal (SDG) indicators for which the World Bank is a custodian: increasing the volume of remittances as a percentage of gross domestic product (GDP) (SDG indicator 17.3.2), reducing remittance costs (SDG indicator 10.c.1), and reducing recruitment costs for migrant workers (SDG indicator 10.7.1). It also presents recent developments on the Global Compact on Migration (GCM).

    Remittance trends. In 2019, annual remittance flows to low- and middle-income countries (LMICs) are likely to reach $550 billion. That would make remittance flows larger than foreign direct investment (FDI) and official development assistance (ODA) flows to LMICs. In 2018, remittance flows to LMICs reached $529 billion, an increase of 9.6 percent over 2017. Remittance flows grew in all six regions, particularly in South Asia (12.3 percent) and Europe and Central Asia (11.2 percent). Growth was driven by a stronger economy and employment situation in the United States and a rebound in outward flows from some Gulf Cooperation Council (GCC) countries and the Russian Federation.

    Remittance costs. The global average cost of sending remittances remained at about 7 percent in the first quarter of 2019, roughly the same level as in recent quarters, accord- ing to the World Bank’s Remittance Prices Worldwide database. The cost of sending money to Sub-Saharan Africa was 9.3 percent, significantly higher than the SDG target of 3 percent. Banks were the costliest channel for transferring remittances, at an average cost of 10.9 percent. De-risking by international correspondent banks—that is, the closing of bank accounts of money transfer operators (MTOs) to avoid rather than manage the risk in their efforts to comply with anti–money laundering and countering financing of terrorism (AML/CFT) norms—has affected remittance services and may have prevented further reduction in costs. Also, in an apparent example of policy incoherence, remittance costs tend to include a premium, that is a cost mark-up, when national post offices have exclusive partnership arrangements with a dominant MTO. This premium averages 1.5 percent of the cost of transferring remittances worldwide and is as high as 4.4 percent in the case of India, the largest recipient of remittances. Opening up national post offices, national banks, and telecommunications com- panies to partnerships with other MTOs could remove entry barriers and increase competi- tion in remittance markets.

    Recruitment costs. SDG indicator 10.7.1, on reducing the recruitment costs paid by migrant workers, was upgraded to a Tier 2 indicator in November 2018. A Tier 2 Indicator is conceptually clear, has an internationally established methodology and standards are available, but data are not regularly produced by countries.

    Migration. In the GCC countries, the deployment of workers from South Asia has been declining. Japan has a new policy to admit 345,000 foreign workers over a period of 5 years from the following nine priority countries: Cambodia, China, Indonesia, Mongolia, Myanmar, Nepal, Philippines, Thailand, and Vietnam. Latin America is facing several migratory movements from Central America and Venezuela. Since 2015, around 2.7 million persons have left Venezuela for other countries, especially in South America.

    Refugees and asylum seekers. While the European migration crisis is past its peak, LMICs continue to bear the brunt of forced displacement. By mid-2018, the number of refugees worldwide (excluding Palestinian refugees) had reached 20.2 million, according to the United Nations High Commissioner for Refugees (UNHCR). There were more than 2.5 million internally displaced persons in the Lake Chad Basin. The top origin countries for refugees were Syria (6.5 million), Afghanistan (2.7 million), South Sudan (2.2 million), Myanmar (1.2 million), and Somalia (1 million).

    Return migration. In Europe, the stock of detected undocumented migrants rose from 1.4 million in 2011 to around 6 million in 2018, due to rejection of a large number of asylum applications. In the United States, the stock of migrants detected to be undocumented increased from around 1.5 million in 2011 to 3.8 million in 2018. Thailand also deported about 100,000 undocumented migrants from Cambodia and Myanmar in 2018.
    From: https://www.knomad.org/sites/default...entbrief31.pdf
    Last edited by Cara; 4th October 2019 at 05:11.
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  5. Link to Post #23
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    Default Re: Financial flows: moves, changes and significant events

    Digital / crypto currency goes mainstream in the US

    Quote US Lawmakers Ask Fed to Consider Developing ‘National Digital Currency’
    Nikhilesh De Oct 3, 2019 at 22:00



    Two U.S. lawmakers want the Federal Reserve to consider creating a digital dollar.

    In a letter sent to Federal Reserve Chairman Jerome Powell, Rep. French Hill (R-Ark.) and Rep. Bill Foster (D-Ill.) outline concerns they have about risks to the U.S. dollar if another country or private company creates a widely used cryptocurrency, and ask whether the central bank is looking into creating its own version.

    First reported by Bloomberg Law, the letter details how the Fed has the right to create and manage U.S. currency policy.

    “The Federal Reserve, as the central bank of the United States, has the ability and the natural role to develop a national digital currency,” the Congressmen wrote, adding:

    Quote “We are concerned that the primacy of the U.S. Dollar could be in long-term jeopardy from wide adoption of digital fiat currencies. Internationally, the Bank for International Settlements conducted a study that found that over 40 countries around the world have currently developed or are looking into developing a digital currency.”
    Indeed, there have been some calls for the global financial system to move away from the dollar. Most notably, Bank of England governor Mark Carney suggested that a digital currency backed by a basket of other financial instruments might help nations make this shift.

    In Monday’s letter, Foster and Hill wrote that cryptocurrencies are currently used for speculative purposes in the U.S., but their use may “increasingly align with that of paper money in the future.”

    The U.S. should not rely on private companies to develop digital currencies, they wrote. The letter specifically mentions the Facebook-led Libra stablecoin.

    “The Facebook/Libra proposal, if implemented,” the congressmen wrote, “could remove important aspects of financial governance outside of U.S. jurisdiction.”

    The letter goes on to mention recent cryptocurrency efforts by J.P. Morgan and Wells Fargo.

    Path forward

    The letter asks a number of questions, including whether the Fed is currently looking into developing a digital currency, whether there are any contingency plans if digital fiat currencies gain traction, what legal, regulatory or national security issues might prevent the Fed from developing a digital currency, what market risks or other issues might result from a Fed cryptocurrency and what benefits there might be to the project.

    Hill and Foster are not the only individuals to suggest that the Fed might benefit from creating its own cryptocurrency. Last year, former Federal Deposit Insurance Corporation Chair Sheila Bair also recommended the Fed look into creating a digital currency as a way of avoiding being disrupted by the private sector or another nation.

    The Federal Reserve is also looking to create a real-time payments system, though it is unclear whether there will be a cryptocurrency-like aspect to it.

    In the letter, the Congressmen suggest that it might even be an urgent matter for the Fed, writing:

    Quote “With the potential for digital currencies to further take on the characteristics and utility of paper money, it may become increasingly imperative that the Federal Reserve take up the project of developing a U.S. dollar digital currency.”
    A message left with the Federal Reserve’s press office was not immediately returned.

    Update (Oct. 3, 16:52 UTC): Following the publication of this article, a spokesperson for Hill told CoinDesk that the Congressman does not have a position on the Fed creating a digital currency, and considers the correspondence “more of a fact finding letter.”

    Federal Reserve Chairman Jerome Powell image via Federal Reserve / Flickr
    From: https://www.coindesk.com/us-congress...mpression=true

    ~~~

    Here we have that phrase again: “real-time payments system”. Coming soon?
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    Default Re: Financial flows: moves, changes and significant events

    Quote Posted by Cara (here)
    Quote Posted by pyrangello (here)
    In an interview I heard recently they said JP Morgan bank has 830 million ounces of silver and 25 million ounces of gold. How does that integrate with all of this going on especially the daily borrowings happening? Has this type of money being pumped put ever happened before?
    ...

    Update:
    I have just been listening to a Sirius Report podcast (subscription only sadly) that says that a change in JPMorgan’s balance sheet is what triggered the recent trouble in the US repo.
    Some more information on JPMorgan:

    Quote Too big to lend? JPMorgan cash hit Fed limits, roiling U.S. repos

    NEW YORK (Reuters) - JPMorgan Chase & Co (JPM.N) has become so big that some rival banks and analysts say changes to its $2.7 trillion balance sheet were a factor in a spike last month in the U.S. "repo" market, which is crucial to many borrowers.

    Rates in the $2.2 trillion market for repurchase agreements rose as high as 10% on September 17 as demand for overnight cash from companies, banks and other borrowers exceeded supply.

    While not seen as an sign of distress as it was during the collapse of Bear Stearns and Lehman Brothers in 2008, the spike did prompt the U.S. Federal Reserve to promise to lend at least $75 billion each day until Oct. 10 to relieve the pressure.

    Analysts and bank rivals said big changes JPMorgan made in its balance sheet played a role in the spike in the repo market, which is an important adjunct to the Fed Funds market and used by the Fed to influence interest rates.

    Without reliable sources of loans through the repo market, the financial system risks losing a valuable source of liquidity. Hedge funds, for example, use it to finance investments in U.S. Treasury securities and banks turn to it as option for raising suddenly-needed cash for clients.

    Publicly-filed data shows JPMorgan reduced the cash it has on deposit at the Federal Reserve, from which it might have lent, by $158 billion in the year through June, a 57% decline.

    Although JPMorgan's moves appear to have been logical responses to interest rate trends and post-crisis banking regulations, which have limited it more than other banks, the data shows its switch accounted for about a third of the drop in all banking reserves at the Fed during the period.

    "It was a very big move," said one person who watches bank positions at the Fed but did not want to be named. An executive at a competing bank called the shift "massive".

    Other banks brought down their cash, too, but by only half the percentage, on average.

    For example, Bank of America Corp (BAC.N), the second-biggest U.S. bank by assets, with a $2.4 trillion balance sheet, took down 30% of its deposits, a $29 billion reduction.

    Overall deposits at the Fed from banks have come down over the past year as a consequence of the central bank's decision to gradually reduce the vast holdings of bonds it had acquired to bolster the economy after the financial crisis. As the Fed has run off its bond portfolio, its deposits from banks have also declined.

    "All of the banks were doing this to a degree," said one Wall Street banking analyst, requesting anonymity because he was not authorized to speak on the record, adding: "JPMorgan does look like an outlier here".

    (GRAPHIC - Bank reserves held at the Fed: here.jpg)

    POST-CRISIS RULES

    In the past JPMorgan would have gladly seized the opportunity to lend cash in the repo market, where loans are backed by the best collateral, often U.S. Treasury securities.

    But on Sept. 17 even as the majority of repo loans were being made at 5% and above, twice the usual rates, JPMorgan was limited in how much of its remaining cash it could provide because of regulatory and other constraints, a person familiar with the trading said.

    The spike in rates reflected extra demand for cash, which was widely anticipated due to corporations requiring cash to make scheduled tax payments and banks and other firms needing it to buy newly-issued U.S. Treasury securities.

    Without the constraints on JPMorgan, the rate wouldn't have spiked to 10%, the person said.

    JPMorgan made the biggest draws from the Fed late last year and bought securities, winning praise from analysts for locking in fixed interest rates before Federal Reserve cuts. Buying the securities also offset pressure on JPMorgan's mortgage loan portfolio from falling rates.

    JPMorgan also needs cash for sudden demands by corporate depositors and to meet government requirements for reserves on checking account deposits.

    It must also comply with rules adopted since the financial crisis which require banks to keep additional cash in case they fail and the government needs to transfer their operations in viable condition to other firms. Banks do not disclose how much of this so-called resolution cash they must hold, but some analysts believe the amount is significant.

    Another post-crisis regulation imposes a capital surcharge on banks that are most important to the global financial system and it gives JPMorgan particular reason not to make repo loans going into the last three months of the year.

    That is especially true for repos with firms from abroad, which include U.S. branches of foreign banks and Cayman Islands-registered hedge funds.

    Such loans could push JPMorgan's surcharge higher, requiring it to carry an additional $8 billion of capital, a Goldman Sachs research note said.

    JPMorgan's capital surcharge is already the highest of any U.S. bank, which means its must make more profit from its business to produce the same return on shareholder equity.

    Goldman analysts see the repo market pressures continuing under the regulatory constraints and what they believe is a shortage of extra cash on deposit at the Fed.

    The Federal Reserve has said it is considering bolstering the market in the longer term by encouraging banks to build up their cash deposits. It has also discussed opening a standing repo facility to be a reliable source of cash loans.

    (Reporting by David Henry in New York. Additional reporting by John McCrank. Editing by Paritosh Bansal and Alexander Smith)
    From: https://mobile.reuters.com/article/a...mpression=true
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    Default Re: Financial flows: moves, changes and significant events

    I have read in several articles that there is an attempt to devalue the dollar. Here are two articles on the topic.

    The first is a historical review and references agreements made by the world’s leading economies since Breton Woods.

    Quote Will the Drive to Devalue the Dollar Lead to a Plaza Accord 2.0?
    The Lead-Up to the Plaza Accord

    Ronald-Peter Stöferle

    To understand the Plaza Accord, one has to look back to August 15, 1971. On this day Richard Nixon closed the gold window. This step de facto ended the Bretton Woods system, which had been created in 1944 in the New Hampshire town of the same name and was formally terminated in 1973. The era of gold-backed currency was well and truly over; the era of flexible exchange rates had begun. Without a gold anchor, the exchange rate of every currency pair was supposed to be driven exclusively by supply and demand. National central banks — and indirectly governments as well — were at liberty to make their own decisions, free of the tight restrictions imposed by a gold standard, but they had to bear the costs of their decisions in the form of the devaluation or appreciation of their currencies. While a gold-backed currency aims to impose discipline on nations, a system of flexible exchange rates enables national idiosyncrasies to be preserved, with the exchange rate serving as a balancing mechanism.

    However, unlike any other currency system, the system of free-floating currencies invites governments and central banks to manipulate exchange rates practically at will. Without reciprocal agreements, which can provide planning security to export-oriented companies in particular, the danger of international chaos is very high, as the system of flexible exchange rates lacks an external anchor.

    In order to prevent this chaos, a repetition of the traumatic devaluation spiral of the 1930s, and the resulting disintegration of the global economy, IMF member nations agreed in 1976 at a meeting in Kingston, Jamaica, that “the exchange rate should be economically justified. Countries should avoid manipulating exchange rates in order to avoid the need to regulate the balance of payments or gain an unfair competitive advantage."1 And in this multilateral spirit — albeit under an US initiative that was strongly tinged by self-interest — an agreement was struck nine years later that has entered the economic history books as the Plaza Accord.

    Macroeconomic Excesses in the 1980s?

    In the first half of the 1980s the US dollar appreciated significantly against the most important currencies. In five years the dollar rose by around 150% against the French franc, almost 100% against the Deutschmark, and intermittently 34.2% against the yen (from the January 1981 low).

    The significant appreciation of the US dollar was of course reflected in the US Dollar Index, which consists of the currencies of the most important US trading partners, weighted according to their share of trade with the US. The following chart, moreover, shows exchange rates in real terms — i.e., it takes price levels into account, which can vary substantially in some cases.

    Real trade-weighted US Dollar Index, 03/1973=100, 01/1980–12/1989

    Source: Federal Reserve St. Louis, Incrementum AG

    From an interim low of 87.7 in July 1980, the index rose by about 50% to 131.6 by March 1985. Not surprisingly, the US current account balance deteriorated significantly in the first half of the 1980s as a result of this substantial dollar rally, as the following chart shows.

    Current account balance, US, Germany, France, United Kingdom, Japan, in % of GDP, 1980–1989

    Source: World Bank, Quandl, Incrementum AG

    In 1980 and 1981 the US still posted a moderate surplus, but by 1985 this surplus had turned into a deficit of 2.9%. The trend in Germany and Japan was almost a perfect mirror image. While the two export nations had current account deficits of 1.7% and 1.0% in 1980, their current account balances turned positive in 1981 and 1982, respectively. In 1985, they already posted surpluses of 2.5% and 3.6%. Germany’s current account surplus in particular grew even further in subsequent years.

    The Plaza Accord

    Representatives of the US, Germany, Japan, France, and Great Britain, a.k.a. the G5 countries, met in September 1985 at the Plaza Hotel in New York under the leadership of US Treasury Secretary James Baker in order to coordinate their economic policies. Their declared aim was to reduce the US current account deficit, which they planned to accomplish by weakening the overvalued US dollar. Moreover, the US urged Germany and Japan to strengthen domestic demand by expanding their budget deficits, which was supposed to give US exports a shot in the arm.

    In the Plaza Accord, the five signatory nations agreed to cooperate more closely when cooperation made sense. The criterion cited for adopting a joint approach was “deviation from fundamental economic conditions.” Interventions in the foreign exchange market were to be conducted with the aim of combating current account imbalances. In the short term the target was a 10%–12% devaluation of the US dollar relative to its level of September 1985.

    The immediate outcome of the agreement was as desired. One week after the Plaza Accord had been signed, the Japanese yen gained 11.8% against the US dollar, while the German mark and the French franc gained 7.8% each, and the British pound 2.8%. However, the speed of the adjustment in foreign exchange markets continued to be the same as before the Plaza agreement, as the following chart clearly shows.

    USD exchange rate vs. DEM, FRF, JPY, GBP, 01/01/1980=100, 01/1980–09/1985

    Source: fxtop.com, Incrementum AG

    However, the charts also show quite clearly that the depreciation of the US dollar had already begun several months before the official agreement was concluded in the heart of Manhattan. The Dollar Index had reached its peak in March of 1985, i.e., half a year before the Plaza Accord.

    Plaza Accord 2.0?

    Some people propose the creation of a new version of the Plaza Accord, i.e., a multilateral agreement that includes, inter alia, coordinated intervention in foreign exchange markets. The proponents of a Plaza Accord 2.0 point to the appreciation of the US dollar by almost 40% (particularly in the years 2011–2016), and to the large differences between the current account balances of the leading developed countries. However, such an agreement would represent a new turning point in international currency policy. After all, in 2013 the G8 agreed to refrain from foreign exchange interventions — in a kind of Anti-Plaza Accord.2

    The following chart illustrates the significant appreciation of the US dollar in recent years.

    Real trade-weighted US Dollar Index, 03/1973 = 100, 01/2011–04/2019

    Source: Federal Reserve St. Louis, Incrementum AG

    And just as was the case thirty years ago, the US has a significant and persistent current account deficit, while Germany, Japan — and these days also China — have significant surpluses. Germany’s surplus, which intermittently reached almost 9%, is particularly striking.

    Current account balances of US, Germany, France, Great Britain, Japan, China, in % of GDP, 2010–2017

    Source: World Bank, Quandl, Incrementum AG

    Long before Donald Trump weighed in on the issue, the US Treasury — which is in charge of the US dollar’s external value — repeatedly stressed that the dollar was too strong, especially compared to the renminbi. Time and again the US accused China, Japan, and the eurozone of keeping their currencies at artificially low levels in order to support their export industries.3 The fact that Donald Trump used the term manipulation in a tweet came as a bit of a surprise, as the US has not used this term officially since 1994.4

    In any case, such a significant adjustment in exchange rates would have to be implemented gradually; the risk of creating further distortions would be too great. An abrupt adjustment of rates might result in, for example, a significant increase in the pace of US inflation and/or a collapse of the export sectors of countries whose currencies would appreciate.

    But as exchange rates — at least in the medium to long term — are mainly determined by fundamentals, exchange rates can change substantially only if underlying macroeconomic conditions (real interest rate differentials, trade and current account balances, the investment climate, and budget balances) change. Regardless of how powerful a government or how watertight an international agreement is, those who enter an agreement cannot get past this fact. As Eugen von Böhm-Bawerk has stated explicitly: “The most imposing dictate of power can never effect anything in contradiction to the economic laws of value, price, and distribution; it must always be in conformity with these; it cannot invalidate them; it can merely confirm and fulfill them.”

    1. “The Specificity of the Jamaica Monetary System”, ebrary.net; see also article IV (iii) of the “Articles of Agreement of the International Monetary Fund”.
    2. "The Plaza Accord, 30 Years Later" by Jeffrey Frankel, NBER Working Paper No. 21813, Issued in December 2015 (https://www.nber.org/papers/w21813)
    3. See “U.S. tensions rise over China’s currency policy”, CNN, October 7, 2011; “U.S. declines to name China currency manipulator”, Reuters, November 27, 2012.
    4. Trump, Donald: Tweet, July 20, 2018.
    Ronald-Peter Stöferle is managing partner and fund manager at Incrementum AG, Liechtenstein. He invests using the principles of the Austrian school of economics.
    From: https://mises.org/wire/will-drive-de...laza-accord-20

    ~~~

    The second is based on new quarterly predictions from Saxo Bank contained in their Q4 2019 Quarterly Outlook, The Killer Dollar:

    Quote Weakening the dollar is the last hope for the global economy, economist says
    Elliot Smith | @ElliotSmithCNBC
    Published 5:39 AM ET Thu, 3 Oct 2019 Updated 8:09 AM ET Thu, 3 Oct 2019 CNBC.com

    Weakening the dollar is the last throw of the dice in rescuing the global economy, according to Saxo Bank's Steen Jakobsen.

    In the online trading and investment specialist's outlook report for the fourth quarter, published Thursday, Jakobsen said 2019 will most likely be remembered as the year that kickstarted a global recession, despite the lowest ever nominal and real interest rates.

    "Monetary policy has reached the end of a very long road and has proven a failure," Jakobsen, who is the chief economist and CIO at Saxo Bank, added.

    The U.S. Federal Reserve in September made a second 25 basis point cut to interest rates, moving to a range of 1.75% to 2%. Its initial 25 basis point reduction in July was the central bank's first rate cut since the financial crisis.

    The European Central Bank (ECB), meanwhile, recently unveiled a package of measures to reinvigorate the euro zone economy, cutting its deposit rate by 10 basis points to -0.5% and launching a massive new quantitative easing (QE) program. A host of other central banks across the world have also embarked on dovish policy shifts.

    Fears for the global economy have been exacerbated of late by the weakest manufacturing data out of the U.S. for over a decade, which compounded already fragile readings from across the euro zone and beyond.

    "In a global system of failed monetary policies and a long and difficult path to fiscal policy, there is only one other tool left in the box for the global economy and that is lower the price of global money itself: the U.S. dollar," Jakobsen said.

    The outlook report pointed to an estimated $240 trillion of debt worldwide, roughly 240% of global GDP, and argued that too much of this debt is denominated in dollars, due to the greenback's role as global reserve currency and the deep liquidity of U.S. capital markets.

    This means the prospects for all asset classes have become a function of U.S. dollar liquidity and direction, Saxo Bank economists suggested.

    "If the dollar rises too much, the strain in the system increases: not only for U.S. exports, but also for the emerging market with its high dependence on USD funding and export machines," Jakobsen said.

    "Weakening the Killer Dollar will likely put the final nail in the coffin of the grand credit cycle that started in the early 1980s, when the U.S. balance sheet was reset, and the USD was anchored by Volcker's victory over inflation after Nixon abandoned the gold standard in 1971."

    Paul Volcker was Chair of the Fed between 1979 and 1987, and in 1980, he took the famously bold move of almost doubling the Fed funds rate to its highest point in history to put an end to double-digit inflation.

    The cycle since then has been "turbocharged by globalization" and "lending money into existence via offshore USD creation," the note added.

    Saxo projected that a weaker USD could buy some time for the global markets, adding that it would not offer a structural solution, but represents the easiest quick fix and the one likely to face the least political opposition.

    White House pressure

    U.S. President Donald Trump has repeatedly chastised the Federal Reserve for what he perceives to be insufficient action to weaken the dollar, disadvantaging the U.S.

    In a tweet Tuesday, the president wrote Fed Chair Jerome Powell and the central bank "have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected."

    While market expectation is for the Fed's policy path to remain largely unchanged, the Trump administration is likely to ramp up its pressure on the currency, Saxo analysts project.

    Saxo Bank Head of FX Strategy John Hardy highlighted that as foreign central banks have lost the ability and willingness to accumulate USD reserves, they have increasingly sought funding from domestic sources.

    "U.S. savers' and U.S. banks' balance sheets simply can't absorb the torrent of issuance. Something has to give, and that something will be the Fed: whether it wants to or not," Hardy said.

    He suggested that in Q4, the Fed will likely be forced to respond in an increasingly substantial capacity to further liquidity provision, and the Trump administration may even wrest control of policy.

    "A heel-dragging Fed and dark clouds gathering over the economic outlook almost ensures that the Trump administration will be scrambling for the funding it needs to ensure Trump's re-election in 2020," Hardy said.
    From: https://www.cnbc.com/amp/2019/10/03/...mpression=true
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    Default Re: Financial flows: moves, changes and significant events

    Russia's largest oil company Rosneft ditches dollar for Euro

    Tsvetana Paraskova Oil Price
    Sat, 05 Oct 2019 11:00 UTC





    Russia's largest oil company Rosneft has set the euro as the default currency for all new exports of crude oil and refined products, as the state-controlled giant looks to switch as many sales as possible from U.S. dollars to euros in order to avoid further U.S. sanctions against it.

    As of September, Rosneft is seeking euros as the default option of payment for its crude oil and products, Reuters reported on Thursday, quoting tender documents the Russian firm has published.

    "Rosneft has recently adjusted all the new contracts for export supplies to euros," a trader at a company that regularly procures oil from Rosneft told Reuters, adding that buyers have already been notified of the change.

    Rosneft is the biggest oil exporter from Russia, selling around 2.4 million barrels per day (bpd) of oil, according to Reuters estimates.

    In the latest tender for a spot sale of 100,000 tons of Urals blend loading from the port of Primorsk at the end of October, Rosneft specifies that the default currency in the payment should be in euros, according to the tender document cited by Reuters.

    The United States has not ruled out imposing sanctions on Rosneft over its involvement in trading oil from Venezuela. Rosneft has been reselling the oil from the Latin American country to buyers in China and India and thus helping buyers hesitant to approach Venezuela and its state oil firm PDVSA because of the U.S. sanctions on Caracas, and, at the same time, helping Venezuela to continue selling its oil despite stricter U.S. sanctions.

    In August, Rosneft told customers that oil product sales in tender contracts will be priced in euros instead of U.S. dollars, trading sources told Reuters back then.

    Rosneft's move was seen by traders and analysts as a future hedge against potential new U.S. sanctions on Russia and/or its oil industry.

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

    It seems the United Nations is running a deficit and is at risk of running out of money.

    Quote United Nations could run out of money in a few weeks, Secretary General warns
    Updated on: October 8, 2019 / 11:54 AM

    United Nations — The United Nations is running a deficit of $230 million, Secretary General Antonio Guterres said on Monday, and may run out of money by the end of October. In a letter intended for the 37,000 employees at the UN secretariat and obtained by CBS News' Pamela Falk, Guterres said unspecified "additional stop-gap measures" would have to be taken to ensure salaries and entitlements are paid.

    "Member States have paid only 70 percent of the total amount needed for our regular budget operations in 2019. This translates into a cash shortage of $230 million at the end of September. We run the risk of depleting our backup liquidity reserves by the end of the month," he wrote.

    To cut costs, Guterres mentioned postponing conferences and meetings and reducing services, while also restricting official travel to only essential activities and taking measures to save energy.

    Although 129 States out of 193 have now paid their regular annual dues, the most recent being Syria, UN Spokesperson Stéphane Dujarric told correspondents at the regular briefing in New York, others needed to pay "urgently and in full".

    "This is the only way to avoid a default that could risk disrupting operations globally. The Secretary-General further asked governments to address the underlying reasons for the crisis and agree on measures to put the United Nations on a sound financial footing."

    Guterres had asked member states earlier this year to up contributions to the world body to head off cash flow problems, but they refused, a UN official told French news agency AFP on condition of anonymity.

    "The ultimate responsibility for our financial health lies with Member States," Guterres said.

    Not including what it pays for peacekeeping operations, the UN's operating budget for 2018-2019 is close to $5.4 billion, with the United States contributing the largest share at 22 percent.

    As the Council on Foreign Relations explained earlier this year, U.S. contributions are vital to the UN's operations, and cuts to discretionary contributions implemented by Mr. Trump's administration have already forced the UN agency that serves Palestinian refugees to make deep cuts.

    The White House has been pushing for a broad reassessment of the U.S. contribution to the UN budget since Mr. Trump took office.
    From: https://www.cbsnews.com/amp/news/uni...mpression=true
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    Default Re: Financial flows: moves, changes and significant events

    The OECD has a proposal to impose more tax on multinationals.

    Quote OECD proposes plan to make multinationals pay more tax
    Revolution in corporate taxation would stop digital giants shifting profits round the world to minimise tax bills

    October 9, 2019 9:04 am by Chris Giles in London

    The OECD has proposed a revolution in corporate taxation, overturning a century of rules that had allowed digital groups such as Facebook, Apple, Amazon, Netflix and Google to shift profits around the world to minimise their tax bills.

    The proposals, which were unveiled on Wednesday after months of behind-the-scenes negotiations, are aimed at extracting more corporate tax from large multinationals whether they are digital or own highly profitable brands, such as luxury goods makers or global car companies.

    The winners would be large countries including the US, China, UK, Germany, France, Italy and developing economies. These would see an increase in their rights to levy tax on corporate income earned from sales in their territories, while the companies themselves, tax havens and low tax jurisdictions such as Ireland would lose.

    The OECD’s aim, it said, was to create a new and “stable” international corporate tax system because “the current rules dating back to the 1920s are no longer sufficient to ensure a fair allocation of taxing rights in an increasingly globalised world”.

    The OECD had indications over the summer that its proposals were likely to win support from the leading global economies and this, it hopes, will persuade countries not to go down a unilateral route with domestic digital sales taxes, such as that proposed by France and the UK, which would further inflame global trade tensions.

    The Paris-based international organisation is seeking agreement in principle from the G20 by the end of January so that it can work up detailed rules.

    The main problem it sought to address was that multinationals, whether they were the digital giants or had very profitable intangible brands, could shift the profits to low tax jurisdictions and leaving little corporate tax revenue for large economies to collect despite most of their business activity taking place in these large economies.

    It has proposed breaking a taboo in international corporate taxation that countries only had a right to tax activities from companies that had a physical presence on their soil.

    Instead, the OECD proposed that countries should have a right to tax a proportion of the global profits of highly profitable multinationals wherever these might have been shifted around the world.

    It would enable France, for example, to tax an element of the sales of Google to French advertisers and the US to have greater taxing rights over the profits attributable to the brands of the French luxury brand company LVMH related to the sales in America.
    From: https://amp.ft.com/content/b16fd228-...mpression=true
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    Default Re: Financial flows: moves, changes and significant events

    The World Economic Forum (WEF) has released its Global Competitiveness Report.

    This is the same elite group that meets to discuss and decide on global economic issues. They are also the group that recently agreed a rather close working relationship with the United Nations (here).

    Here is their report:

    Quote Global Competitiveness Report 2019

    Ten years on from the global financial crisis, the world economy remains locked in a cycle of low or flat productivity growth despite the injection of more than $10 trillion by central banks. The latest Global Competitiveness Report paints a gloomy picture, yet it also shows that those countries with a holistic approach to socio-economic challenges, look set to get ahead in the race to the frontier.

    The Top 10


    Long-term growth: the final frontier

    This year’s Global Competitiveness Report is the latest edition of the series launched in 1979 that provides an annual assessment of the drivers of productivity and long-term economic growth. With a score of 84.8 (+1.3), Singapore is the world’s most competitive economy in 2019, overtaking the United States, which falls to second place. Hong Kong SAR (3rd), Netherlands (4th) and Switzerland (5th) round up the top five.

    Building on four decades of experience in benchmarking competitiveness, the index maps the competitiveness landscape of 141 economies through 103 indicators organized into 12 themes. Each indicator, using a scale from 0 to 100, shows how close an economy is to the ideal state or “frontier” of competitiveness. The pillars, which cover broad socio-economic elements are: institutions, infrastructure, ICT adoption, macroeconomic stability, health, skills, product market, labour market, the financial system, market size, business dynamism and innovation capability.

    What is competitiveness?

    What is economic competitiveness? The World Economic Forum, which has been measuring countries' competitiveness since 1979, defines it as: “the set of institutions, policies and factors that determine the level of productivity of a country." Other definitions exist, but all generally include the word “productivity".

    The Global Competitiveness Report is a tool to help governments, the private sector, and civil society work together to boost productivity and generate prosperity. Comparative analysis between countries allows leaders to gauge areas that need strengthening and build a coordinated response. It also helps identify best practices around the world.

    The Global Competitive Index forms the basis of the report. It measures performance according to 114 indicators that influence a nation’s productivity. The latest edition covered 141 economies, accounting for over 98% of the world’s GDP.

    Countries’ scores are based primarily on quantitative findings from internationally recognized agencies such as the International Monetary Fund and World Health Organization, with the addition of qualitative assessments from economic and social specialists and senior corporate executives.

    Explore the full report

    A lost decade

    Economic tipping point and a widening competitiveness gap

    The world is at a social, environmental and economic tipping point. Subdued growth, rising inequalities and accelerating climate change provide the context for a backlash against capitalism, globalization, technology, and elites. There is gridlock in the international governance system and escalating trade and geopolitical tensions are fuelling uncertainty. This holds back investment and increases the risk of supply shocks: disruptions to global supply chains, sudden price spikes or interruptions in the availability of key resources.

    The Global Competitiveness Report 2019 reveals an average across the 141 economies covered of 61 points. This is almost 40 points short of the “frontier”. It is a global competitiveness gap that is particularly concerning, given the world economy faces the prospect of a downturn. The report’s survey of 13,000 business executives highlights deep uncertainty and lower confidence.

    While the $10 trillion injection by central banks is unprecedented and has succeeded in averting a deeper recession, it is not enough to catalyse the allocation of resources towards productivity enhancing investments in the private and public sectors.

    However, some of this year’s better performers appear to be benefiting from global trade tensions through trade diversion, including Singapore (1st) and Viet Nam (67th), the most improved country in 2019.

    The principal culprits

    Persistent weaknesses in the drivers of productivity growth are among the principal culprits. In advanced, emerging and developing economies, productivity growth started slowing in 2000 and decelerated further after the crisis. Between 2011 and 2016, “total factor productivity growth” – or the combined growth of inputs, like resources and labour, and outputs – grew by 0.3% in advanced economies and 1.3% in emerging and developing economies.

    The financial crisis added to this deceleration through “productivity hysteresis”– the long-lasting delayed effects of investments being undermined by uncertainty, low demand and tighter credit conditions. Beyond strengthening financial system regulations, many of the structural reforms designed to revive productivity that were promised by policy-makers in the midst of the crisis did not materialize.

    The injection of cash by the world’s four major central banks may have even contributed to divert more capital towards the financial market rather than to productivity-enhancing investments.

    Who’s the best in class?
    1 With a score of 84.8 out of 100, Singapore is the country closest to the frontier of competitiveness

    2 Other G20 economies in the top 10 include the United States (2nd), Japan (6th), Germany (7th) and the United Kingdom (9th) while Argentina (83rd, down two places) is the lowest ranked among G20 countries

    3 Asia-Pacific is the most competitive region in the world, followed closely by Europe and North America

    4 The United States may have lost out to Singapore overall, but it remains an innovation powerhouse, ranking 1st on the business dynamism pillar, 2nd on innovation capability, and 1st for finding skilled employees

    5 Nordic countries are among the world’s most technologically advanced, innovative and dynamic while also providing better living conditions and social protection

    6 Denmark, Uruguay and Zimbabwe have increased their shares of renewable sources of energy significantly more than other countries at their respective levels of competitiveness
    Winning the game – how to get ahead?

    The index examines the relationship between competitiveness and the two other dimensions of sustainable development – social cohesiveness and environmental sustainability. It shows that there are no inherent trade-offs between competitiveness and sustainability, and between competitiveness and social cohesiveness. This suggests a “win-win” policy space, where a productive, low-carbon, inclusive economy is possible, and it is the only viable option going forward.

    The report is a reminder to apply a holistic approach and to better balance short-term considerations against factors whose impact is felt beyond quarterly results and election cycles. For example, the results of the index show that labour and education policies have not been keeping up with the pace of innovation in most countries, including in some of the largest and most innovative economies.

    For least-developed and emerging economies, their fragile economic foundations make them highly vulnerable to shocks. With extreme poverty reduction decelerating and nearly one-half of humanity still struggling to meet basic needs, the report suggests the need for sustained, productivity enhancing economic growth remaining critical for improved living standards.

    In parallel, the unfolding climate crisis requires urgent, decisive and coordinated action by policy-makers. Supporting economic growth at all costs can no longer be a sole objective.

    Governments must better anticipate the unintended consequences of technological integration and implement complementary social policies that support populations through the Fourth Industrial Revolution. The report shows that several economies with strong innovation capability like South Korea, Japan and France, or increasing capability, like China, India and Brazil, must improve their talent base and the functioning of their labour markets.



    The world’s largest economies also have room for improvement on technology governance. Based on how the legal frameworks in their countries are adapting to digital business models, only four G20 economies made it into the top 20: United States (1st), Germany (9th), Saudi Arabia (11th) and the United Kingdom (15th). China ranks 24th in this category.

    Education, education, education

    Talent adaptability is critical. It pays to enable the workforce to contribute to the technology revolution and to be able to cope with its disruptions. Talent adaptability also requires a well-functioning labour market that protects workers, not jobs. Advanced economies such as South Korea, Italy, France and, to some extent, Japan need to develop their skills base and tackle rigidities in their labour markets. As innovation capacity grows in emerging economies such as China, India and Brazil, they need to strengthen their skills and labour market to minimize the risks of negative social spillovers.

    Economic growth does not happen in a vacuum

    Sustained economic growth remains the surest route out of poverty and a core driver of human development. For the past decade, growth has been subdued and remains below potential in most developing countries, seriously hampering progress on several of the UN’s 2030 Sustainable Development Goals (SDGs). The competitiveness landscape of 2019 does not bode well. Individual countries, the aid community and all stakeholders must step up their efforts urgently.

    The world is not on track to meet any of the SDGs. Least developed countries have missed the target of 7% growth every year since 2015. Extreme poverty reduction is decelerating. 3.4 billion people – or 46% of the world’s population – lived on less than $5.50 a day and struggled to meet basic needs. After years of steady decline, hunger has increased and now affects 826 million – or one in nine people – up from 784 million in 2015. A total of 20% of Africa’s population is undernourished. The “zero hunger” target will almost certainly be missed.

    The index shows that there is little determinism and fatalism in the process of economic development. Economic growth does not happen in a vacuum. Some basic building blocks are required to jumpstart the development process, and more are needed to sustain it. In the current volatile geopolitical context, and with a likely downturn ahead, building economic resilience through improved competitiveness is crucial, especially for low-income countries.

    So as monetary policies begin to run out of steam, it is crucial for economies to rely on fiscal policy and public incentives to boost research and development, enhance the skills base of the current and future workforce, develop new infrastructure and integrate new technologies.
    From: https://www.weforum.org/reports/how-...ctivity-growth

    ~~~

    This seems to be their diagnosis of the problem:
    Quote Subdued growth, rising inequalities and accelerating climate change provide the context for a backlash against capitalism, globalization, technology, and elites. There is gridlock in the international governance system and escalating trade and geopolitical tensions are fuelling uncertainty. This holds back investment and increases the risk of supply shocks: disruptions to global supply chains, sudden price spikes or interruptions in the availability of key resources.
    And this seems to be their recommended solution:
    Quote as monetary policies begin to run out of steam, it is crucial for economies to rely on fiscal policy and public incentives to boost research and development, enhance the skills base of the current and future workforce, develop new infrastructure and integrate new technologies
    Last edited by Cara; 11th October 2019 at 10:11.
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    Default Re: Financial flows: moves, changes and significant events

    Turkey is joining Russia’s SWIFT alternative.

    Quote Turkey Joins Russia's Ruble-Based Alternative To SWIFT
    Wed, 10/09/2019 - 04:15

    After repeated warnings over the past couple of years, Turkey and Russia have signed a pact to increase use of the ruble and lira in cross-border payments, with Turkey signing on to Russia's alternative to SWIFT, the international telecommunications protocol used by banks and central banks the world over.

    Though SWIFT is an international cooperative owned by its members, with more than 10,000 banks worldwide relying on its system for handling sizable inter-bank transactions, the safety of the network was brought into question after a series of cyberattacks in 2015 and 2016 resulted in the theft of $101 million from the Central Bank of Bangladesh.

    For the first time since SWIFT's laucnh, the hacks stoked doubts about the system's safety, and prompted many US rivals, including Russia, to ramp up work on their alternatives to SWIFT.

    In addition to Turkey, China and Russia have signed agreements to bolster trade between the two countries, including settling a larger percentage of their bilateral trade in rubles and renminbi. For China, bilateral trade with Russia grew from $69.6 billion in 2016 to $107.1 billion last year. China is Russia's biggest partner for imports and exports.

    There has also been talk about India joining Russia's SWIFT alternative as Washington continues to threaten New Delhi with sanctions over its decision to purchase Russian-made missile-defense systems.

    According to Reuters, Russian Finance Minister Anton Siluanov signed the agreement with Ankara on Tuesday. The agreement, signed on Oct. 4, will encourage the two countries to start using Russia's system in mutual settlements.

    The agreement envisions Turkish banks and companies becoming connected to the Russian version of the SWIFT payment system, while enhancing the infrastructure in Turkey to allow Russian MIR cards, designed by Moscow as alternative to MasterCard and VISA, to work.

    Though President Trump on Tuesday reiterated his love and respect for Turkish President Recep Tayyip Erdogan, it's worth remembering President Putin's warning about the potential ramifications of American sanctions, which risk undermining the dollar's dominance of the global financial system by driving more countries to use alternatives to SWIFT.

    For example, President Trump's sanctions against Iran prompted Washington's European Union allies to try and launch their own SWIFT alternative to make payments to Iran.

    As Putin warned, American sanctions against Russia are a "colossal strategic mistake" and eventually risk undermining the dollar-based hegemony of the global financial system.
    From: https://www.zerohedge.com/geopolitic...ernative-swift
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    Default Chinese trade deficit with the US

    Also relevant here:

    Quote Posted by TomKat (here)
    Does Trump have it backwards? This economist points out that if you count services and profitability, the Chinese are probably running a trade deficit with the US.



    And that's why they can't cave into Trump's demands.
    Quote Posted by Cara (here)
    Thanks TomKat.

    This is a useful (and not mentioned) part of the story to know. Trade in services is not typically included in the trade war media narrative.
    Last edited by Cara; 13th October 2019 at 09:23.
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    Default Re: Financial flows: moves, changes and significant events

    Some seem to be openly advocating the re-emergence of the gold standard.

    Quote Central Bank Issues Stunning Warning: "If The Entire System Collapses, Gold Will Be Needed To Start Over"

    It's not just "tinfoil blogs" who (for the past 11 years) have been warning that a monetary reset is inevitable and the only viable fallback option once trust and faith in fiat is lost, is a gold standard (something which even Mark Carney hinted at recently): central banks are joining the doom parade now too.

    An article published by the De Nederlandsche Bank (DNB), or Dutch Central Bank, has shocked many with its claim that "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."



    ECB’s Rehn Says FT Story on QE Is ‘Greatly Exaggerated’

    While gloomy predictions of a monetary reset are hardly new, they have traditionally been relegated to the fringe of mainstream financial thought - after all, as Mario Draghi stated on several occasions in recent years, the mere contemplation of a "doomsday scenario" is enough to create the self-fulfilling prophecy which materializes it. As such, it is stunning to see a mainstream financial institution open up about the superior value of limited supply, non-fiat, sound money assets. It is also hypocritical given the diametrically opposed Keynesian practices regularly engaged in by central banks and official institutions worldwide: after all, just a few months back, the IMF published a paper bashing Germany's adoption of the gold standard in the 1870s as the catalyst for instability in the global monetary system.

    Fast forward to today, when the Dutch Central Bank is admitting not only did gold not destabilize the monetary system, but it will be its only savior when everything crashes.

    The article, titled "DNB's Gold Stock" states:

    "A bar of gold retains its value, even in times of crisis. This makes it the opposite of "shares, bonds and other securities" all of which have inherent risk and prices can go down.

    Photo of gold bars from the DNB's article "Goud van DNB."


    According to the IMF's latest data, the DNB holds 615 tons (15,000 bars) of gold mainly in Amsterdam, with other stores in the U.K. and North America; the value of this gold reserve is over €6 billion ($6.62 billion). Calling gold the “trust anchor,” the article details briefly why the hard asset is so important to wealth building and the global economy, claiming: "Gold is... the trust anchor for the financial system. If the whole system collapses, the gold stock provides a collateral to start over. Gold gives confidence in the power of the central bank's balance sheet."

    Why this sudden admission of what goldbugs have been saying for years? Perhaps it has to do with the fact that on October 7, the bank announced it would soon be moving a large part of its gold reserves to "the new DNB Cash Center at military premises in Zeist."

    Almost as if the Netherlands is preparing for the grand reset, and is moving its most valuable asset to a "military" installation just for that purpose.

    As bitcoin.com tongue-in-cheek points out, "DNB is no stranger to playing along with the Keynesian, inflationary games of the global monetary system. A system which, according to some, is now more a Ponzi scheme based on force and blind faith than sound economic principle. That notwithstanding, the centralized financial powers of the world know the real score, and that’s why hard assets like gold are hoarded and locked down while everyday, individual residents of these geopolitical jurisdictions are encouraged to spend and spend, going further into debt to prop up ultimately unsound national economies."

    It is hardly a coincidence that in its preparation for monetary doomsday, the Dutsch Central Bank is also set to begin cracking down on crypto exchanges and wallets, stating that "firms offering services for the exchange between cryptos and regular money, and crypto wallet providers must register with De Nederlandsche Bank."

    While the push for greater KYC/AML transparency is a growing global trend, and is hardly surprising in a world in which trillions in assets reside in "tax-evading" offshore jurisdiction, the remarkable aspect of this latest crackdown against crypto - which many see as a modern, more efficient form of "gold" - is the fact that invasive regulations and restrictions by central banks can be seen as yet another means of stockpiling precious assets. This time, not gold bars, but bitcoin and crypto.

    As for the timing of the "great monetary reset", which other central banks have already quietly hinted at themselves amid massive repatriation of physical gold from the New York Fed to various European central banks such as Germany and Austria, we are confident that the trust-keepers of the current establishment - such as other central banks and the IMF - will be kind enough to provide ample advance notice to the citizens of the "developed" world to exchange their fiat into hard assets. Or, then again, perhaps not.
    From: https://www.zerohedge.com/markets/ce...e-needed-start
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    Default Re: Financial flows: moves, changes and significant events

    Quote Posted by Cara (here)
    Russia and Iran are seeking a SWIFT alternative.

    SWIFT = “The Society for Worldwide Interbank Financial Telecommunication provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment.”
    https://www.swift.com/

    Quote Kremlin aide says Iran, Russia looking for alternative to SWIFT

    IRNA – The aide for Russian president for international affairs said Iran and Russia are looking for an alternative network to replace the Society for Worldwide Interbank Financial Telecommunication (SWIFT) whose key is unlawfully held by the secretary of US Department of Treasury.

    Iran and Russia will take measures for expansion of direct financial transactions and use of national currencies, Uri Ushakov told reporters on Friday.

    Ushakov said that Tehran and Moscow are trying to make Iranian SEPAM and Russian System for Transfer of Financial Messages (SPFS) cooperate to put SWIFT aside.

    He added that the prominent joint project of Russia and Iran is building a nuclear power plant in Iran, the second phase of which is in progress and the concreting process will soon start.

    The Kremlin aide also said that in the upcoming meeting of Iran’s President Hassan Rouhani and Russia’s President Vladimir Putin, the issue of Syria will be discussed, alongside the mutual issues and the topic of the Joint Comprehensive Plan of Action (JCPOA).

    He said that in the aftermath of the US withdrawal from the deal, the goal is now to preserve the JCPOA. Russia is in touch with all the remaining signatories of the deal, including Iran, adding that Russia has had active talks with France and is loyal to the international deal.

    Saying that Rouhani and Putin are to meet for the third time this year, Ushakov added that strengthening the economic and trade relations between Iran and Russia is among the most important issues.

    He said that in 2018, the trade grew by 2% reaching $1.7b and in the first half of 2019 it has grown by 17% to reach $1.1b and that the big oil companies of Russia, such as Gazprom, Rosneft‎, Lukoil, Zarubezhneft, and Tatneft are discussing exploitation of Iran’s big fields.

    ...
    From: https://theiranproject.com/blog/2019...tive-to-swift/
    It can't happen soon enough. This is one of the main reasons for all the current tension in the area. The U.S. And its global financial dominance can get stuffed.

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

    Posted in its own thread by Justplain and also relevant here:

    Quote Posted by Justplain (here)
    Do we really want to have cash eliminated so that Big Brother can track our every financial transaction? I think not.

    The Bank of Canada is considering launching a digital currency that would help it combat the “direct threat” of cryptocurrencies and collect more information on how people spend their money, The Logic has learned.

    An internal Bank of Canada presentation, prepared for Governor Stephen Poloz and the bank’s board of directors, offers the most detailed public insight yet into the bank’s thinking on a proprietary digital coin. According to the presentation, the currency would be widely available. It would initially coexist with coins and paper money, eventually replacing them completely.

    The presentation, titled “Central Bank Money: The Next Generation” and acquired by The Logic via an access-to-information request, was prepared by Stephen Murchison, an adviser to Poloz tasked with leading the bank’s digital currency research, for a September 2018 board meeting. Murchison presented it as part of a two-year research project on whether or not the bank should issue its own digital money.

    https://business.financialpost.com/t...le-spend-money
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    Default Re: Financial flows: moves, changes and significant events

    Another couple of gold-related announcements.

    First, in Russia:

    Quote Moscow Exchange Launches Gold Futures in Derivatives Market
    October 10, 2018



    The Moscow Exchange will begin trading of deliverable gold futures on its Derivatives Market.

    The new contract will link Moscow Exchange’s Precious Metals and Derivatives markets as gold will be delivered via the Precious Metals Market spot section.

    The contract will be quoted in rubles per gram and will expire monthly, the Moscow Exchange said. The contract size is ten grams, and its acronym is GLD (ticker symbol GO). At launch, the contract series with expiration in November and December 2018 and January 2019 will be introduced, MOEX said.

    “Moscow Exchange’s trading volumes in commodities futures have more than tripled over the past four years, accounting for more than 20% of total derivatives trading. The new contract will help expand MOEX’s derivatives offering and expand trading options for our participants. It will further enhance the Precious Metals Market and give impetus to the creation of a Russian gold benchmark,” says Igor Marich, Managing Director of the Money and Derivatives Markets at Moscow Exchange.

    Currently, the Moscow Exchange offers trading in precious metals (gold and silver) as well as cash-settled futures on precious metals (gold, silver, platinum, and palladium).
    From: https://russiabusinesstoday.com/manu...atives-market/

    ~~~

    This one from the UAE.

    Quote UAE to establish federal platform for gold trading

    The gold trade accounts for 20% of the UAE's total non-oil exports

    By Bernd Debusmann Jr13 Oct 2019


    The move – approved by the UAE Cabinet – is part of a larger policy to enhance the UAE’s position as a global hub for gold and jewellery trading.

    The UAE will establish a federal platform for gold trading and the tracking of gold sources, the government has announced.

    The move – approved by the UAE Cabinet – is part of a larger policy to enhance the UAE’s position as a global hub for gold and jewellery trading.

    The policy has three main pillars – governance, sustainability and innovation – with 10 separate strategic programmes and initiatives, also including the establishment of a federal platform for gold trading and tracking, international marketing of the gold sector, and the use of technology in the production of gold.

    Additionally, the policy will develop tools and initiatives that stimulate growth “in order to facilitate doing business and bring added value to this vital sector”, according to the UAE’s state-run WAM news agency.

    The gold trade accounts for 20 percent of the UAE’s total non-oil exports.
    From: https://amp.arabianbusiness.com/amp/...mpression=true

    ~~~

    Perhaps related: last year the UAE introduced VAT (value added taxation). Shortly after its introduction, gold traders were made “exempt” from it:
    Quote The UAE Cabinet has adopted a law to introduce the VAT Reversed Charge mechanism for investors in gold, diamond and precious metals.

    Under the mechanism, there will only be documented entries of five percent VAT in the books of both buyers and sellers but no payment of the fee.
    From: https://www.arabianbusiness.com/reta...ading-from-vat
    Last edited by Cara; 17th October 2019 at 06:37.
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    Default Re: Financial flows: moves, changes and significant events

    It seems there is a “change in sentiment” concerning the value of the so-called “unicorns” of the stock market. These unicorns seem mostly to have built their business model around breaking the traditional employment models and transforming employees into part-time, piece-work, “free” agents.

    This article compares and contrasts the fall-out in the stock market as investors decide these businesses are over-valued with the bust that occurred after the dot-com bubble.

    My view is that this bubble is somewhat smaller in scale than the dot-com bubble (especially as compared with the debt and derivatives market).

    Another thought I had was that although the changing nature of business models was over-hyped in the dot-com boom, it was mostly hyped in terms of timing, i.e. how soon the change would come about. However, if I look at the world today, there are very few businesses or organisations which do not have some kind of internet enabled aspect to their business. So the transformation came, but it took a little longer (a couple of decades).

    Will the same kind of “overshoot —> scale back —> slow, but widespread change” occur for this latest disaggregation of business models? If so, expect fewer and fewer jobs and more and more labour arbitrage models.

    ~~~

    Quote The Not-Com Bubble Is Popping
    The unicorn massacre unfolding today is exactly the opposite of what happened in 2000.

    Derek Thompson, Oct 18, 2019

    Staff writer at The Atlantic


    Twitter logo displayed at the New York Stock Exchange
    Brendan McDermid / Reuters


    It is easy to look at today’s crop of sinking IPOs—like Uber, Lyft, and Peloton—or scuttled public offerings, like WeWork, and see an eerie resemblance to the dot-com bubble that popped in 2000.
    • Both then and now, consumer-tech companies spent lavishly on advertising and struggled to find a path to profit.
    • Both then and now, companies that bragged about their ability to change the world admitted suddenly that they were running out of money.
    • Both then and now, the valuations of once-heralded tech enterprises were halved in a matter of weeks.
    • Both then and now, there was a widespread sense of euphoria curdling into soberness, washed down with the realization that thousands of workers in once-promising firms were poised to lose their jobs.
    But if you look closer, today’s correction isn’t much like the dot-com bubble at all. In fact, it might be more accurate to say that what’s happening today is the very opposite of the dot-com bubble.

    Let’s first understand what exactly that bubble was: a mania of stock speculation, in which ordinary investors—from taxi drivers to Laundromat owners to shoe-shiners—bid up the price of internet-related companies for no good reason other than “because, internet.” Companies realized that they could boost their stock price by simply adding the prefix e- (as in “e-Bay”) or the suffix com (as in Amazon.com) to their corporate names to entice, and arguably fool, nonprofessionals. “Americans could hardly run an errand without picking up a stock tip,” The New York Times reported in its postmortem.

    As prices became untethered from reality, the Nasdaq index doubled in value between 1999 and 2000 without “any plausible candidate for fundamental news to support such a large revaluation,” as the economists J. Bradford DeLong and Konstantin Magin wrote in a paper on the bubble. The crash was equally swift and arbitrary. Between February 2000 and February 2002, the NASDAQ lost three-quarters of its value “again without substantial negative fundamental news,” DeLong and Magin wrote. By late 2000, more than $5 trillion in wealth had been wiped out. This sudden rise and sudden collapse in asset prices—without much change in information about the underlying assets—is the very definition of a bubble.

    The current situation is different, in at least two important ways.

    First, in the dot-com bubble, public investors got hosed. Today, it’s public investors that are doing the hosing.

    When the web browser Netscape went public on August 9, 1995—the day many cite as the beginning of the dot-com bubble—its stock skyrocketed from $28 to $75 in a matter of hours, even though the company wasn’t profitable. In today’s market, the opposite is happening: Unicorns with no positive earnings are getting slaughtered at the gates. WeWork’s valuation fell more than 80 percent pre-IPO when investors balked at its mounting losses. Peloton, Lyft, and Uber have also struggled to persuade public markets to grade them on a curve; all saw their stock prices fall on the day of the public offering. Institutions and retail investors are refusing to fork over to unicorns the valuations that private investors were expecting—particularly Softbank, a major backer of Uber, Lyft, and WeWork.

    This isn’t a picture of mass mania. It’s a picture of public sobriety, where the masses are diagnosing an acute fever in private markets.

    Second, there is little sign of a crisis for firms whose main product is pure software.

    Judging from the news, you might think this has been a terrible year for technology companies. But tech IPOs have been strong for the past two years, “as long as what you’re buying is actually a real tech company,” JP Morgan’s chair of market and investment strategy, Michael Cembalest, wrote in an October 7 research note. By “real tech,” Cembalest was referring to companies whose principal product is software, rather than, say, WeWork, which is in truth a real-estate company caught wearing an Actual Tech Company costume before Halloween.

    You might not have heard about these “real tech” companies—like Zscaler, Anaplan, and Smartsheet—because they mostly sell business-to-business software or cloud services. But all of them are trading more than 100 percent above their listed IPO price. The problematic firms, Cemablest wrote, are those that aren’t pure tech. Either they sell hardware plus software (like the stationary-bike company Peloton) or they own a digital marketplace for humans to transact goods and services in the physical world, like Uber, Fiverr, and Lyft. All those companies are trading below their IPO price.

    This underlines one of the quiet truisms of the state of technology in 2019: Consumer tech grabs most of the headlines. But enterprise tech, whose top clients are other businesses, grabs most of the profit. For example, everybody knows that Amazon is a dominant retailer. What they might not know is that Amazon now makes two-thirds of its profit from Amazon Web Services, its cloud-computing platform. (From an earnings standpoint, it is not too cheeky to say that Amazon is a data-storage provider with a secondary e-commerce division.) Meanwhile, Google’s cloud business is growing rapidly, and Microsoft’s cloud-computing product, Azure, has helped to make it the most valuable company in the world.

    The problem with tech today isn’t so much that software failed to eat the world, but that the most celebrated unicorns weren’t actually software companies. They have struggled to achieve liftoff because their feet are stuck in the mud of the physical world—whether it’s labor costs for Uber and Lyft, or real-estate costs for WeWork. These upstart renegades are getting cut down in the public square, while enterprise-software companies are building profitable businesses by selling shovels at the gold rush—or cloud services at the consumer-tech fair.

    What we’re seeing today isn’t a dot-com bubble. If anything, it’s a not-com bubble—a period of inflated expectations for companies that had no business being valued like pure tech companies in the first place.
    From: https://www.theatlantic.com/ideas/ar...campaign=share
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    Default Re: Financial flows: moves, changes and significant events

    Mervyn King, Former Governor of the Bank of England: The World Turned Upside Down: Economic Policy in Turbulent Times - October 19, 2019



    ~~~

    Coverage of the speech from the UK’s Guardian:

    Quote World economy is sleepwalking into a new financial crisis, warns Mervyn King
    Past crashes spawned new thinking and reform but nothing has changed since 2008 banking meltdown, says former Bank of England boss

    Larry Elliott in Washington
    Sun 20 Oct 2019 12.42 BST

    The world is sleepwalking towards a fresh economic and financial crisis that will have devastating consequences for the democratic market system, according to the former Bank of England governor Mervyn King.

    Lord King, who was in charge at Threadneedle Street during the near-death of the global banking system and deep economic slump a decade ago, said the resistance to new thinking meant a repeat of the chaos of the 2008-09 period was looming.

    Giving a lecture in Washington at the annual meeting of the International Monetary Fund, King said there had been no fundamental questioning of the ideas that led to the crisis of a decade ago.

    “Another economic and financial crisis would be devastating to the legitimacy of a democratic market system,” he said. “By sticking to the new orthodoxy of monetary policy and pretending that we have made the banking system safe, we are sleepwalking towards that crisis.”

    He added that the US would suffer a “financial armageddon” if its central bank – the Federal Reserve – lacked the necessary firepower to combat another episode similar to the sub-prime mortgage sell-off.

    King, Mark Carney’s predecessor as Bank of England governor, said that following the Great Depression of the 1930s there had been new thinking and intellectual change.

    “No one can doubt that we are once more living through a period of political turmoil. But there has been no comparable questioning of the basic ideas underpinning economic policy. That needs to change.”

    The former Bank governor said the economic and political climate had rarely been so fraught, citing the US-China trade war, riots in Hong Kong, problems in key emerging countries such as Argentina and Turkey, the growing tensions between France and Germany over the future direction of the euro, and the increasingly bitter political conflict in the US at a time when the willingness of the US to act as the world’s policeman was disappearing.

    “Ripples on the surface of our politics have become breaking waves as the winds of change have gained force,” he said.

    King said the world economy was stuck in a low growth trap and that the recovery from the slump of 2008-09 was weaker than that after the Great Depression.

    “Following the Great Inflation, the Great Stability and the Great Recession, we have entered the Great Stagnation.” King said that in 2013 the former US Treasury secretary Larry Summers had reintroduced the concept of secular stagnation, a permanent period of low growth in which ultra-low interest rates are ineffective: “It is surely now time to admit that we are experiencing it.”

    Standard models were unhelpful in two important areas of economic policy – getting the world economy out of its low growth trap, and preparing for the next financial crisis.

    “Conventional wisdom attributes the stagnation largely to supply factors as the underlying growth rate of productivity appears to have fallen. But data can be interpreted only within a theory or model. And it is surprising that there has been so much resistance to the hypothesis that, not just the United States, but the world as a whole is suffering from demand-led secular stagnation.”

    King said the world entered and departed from the global financial crisis with a distorted pattern of demand and output. To escape permanently from a low growth trap involved a reallocation of resources from one component of demand to another, from one sector to another, and from one firm to another.

    “There has been excess investment in some parts of the economy – the export sector in China and Germany and commercial property in other advanced economies, for example – and insufficient in others – infrastructure investment in many western countries. To bring about such a shift of resources – both capital and labour – will require a much broader set of policies than simply monetary stimulus.”

    He added: “It is the failure to face up to the need for action on many policy fronts that has led to the demand stagnation of the past decade. And without action to deal with the structural weaknesses of the global economy, there is a risk of another financial crisis, emanating this time not from the US banking system but from weak financial systems elsewhere.”

    King said it was time for the Federal Reserve and other central banks to begin talks behind closed doors with politicians to make legislators aware of how vulnerable they would be in the event of another crisis.

    He said: “Congress would be confronted with a choice between financial armageddon and a suspension of some of the rules that were introduced after the last crisis to limit the ability of the Fed to lend.”
    From: https://amp.theguardian.com/business...mpression=true
    Last edited by Cara; 22nd October 2019 at 06:23.
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    Administrator Cara's Avatar
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    Default Re: Financial flows: moves, changes and significant events

    Some central banks are buying gold:



    Update: apparently the German Bundesbank did not buy gold. The IMF database has been amended:

    Last edited by Cara; 24th October 2019 at 04:12.
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    Default Re: Financial flows: moves, changes and significant events

    Burning other people's cash has some positive effects on the economy due to the 'multiplier effect.'
    I would recommend to read the whole article at the link below.

    Quote Here’s What I’m Worried About with the Everything Bubble

    How cash-burn machines power the real economy, and what happens to the economy when investors refuse to have more of their cash burned.

    [...]

    I’m not going to call it “tech,” because most of the startups in that so-called tech space aren’t tech companies. They’re companies in mundane businesses. And many of these companies aren’t startups anymore but mature companies that have been in business for over a decade and now have tens of thousands of employees. And then there is the entire shale-oil and gas space that has turned the US into the largest oil and gas producer in the world.

    They all share two things in common:
    • One, they’re fabulously efficient, finely tuned, and endlessly perfected cash-burn machines.
    • And two, investors in these companies count on new cash from new investors to bail out and remunerate the existing investors.

    This scheme is a fundamental part of the Everything Bubble, and there is a huge amount of money involved, and it has a big impact on the real economy in cities where this phenomenon has boomed, and everyone loves it, until these hoped-for new investors start seeing the scheme as what it really is, and they’re suddenly reluctant to get cleaned out, and they refuse to bail out and remunerate existing investors. And suddenly the money runs out. Then what?

    -- snip --

    The shale oil-and-gas sector spends a lot of the negative cash flow in the oil patch, but also the locations where the equipment they buy is manufactured, such as sophisticated computer equipment, the latest drilling rigs, big generators, high-pressure pumps, and the like.

    So an oil driller in Texas will transfer some investor money to manufacturers in distant cities. And the employees at these manufacturing plants buy trucks and boats and used cars, and they buy houses, and all kinds of stuff, and all of those hundreds of billions of dollars that investors plowed into the industry got transferred and recycled endlessly.

    This is the multiplier effect of investors plowing their cash into money-losing negative cash-flow operations.

    -- snip --
    https://wolfstreet.com/2019/10/23/he...ything-bubble/

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

    An interview with Nomi Prins (now added to post #2's list of commentators) with Sprott Money's Ask the Expert. The conversation covers:
    • the injection of liquidity into repo rate by the US Federal Reserve;
    • the role of the US dollar as reserve currency;
    • an outlook on gold, silver;
    • thoughts on debt jubilee



    Quote October 25, 2019

    Bestselling author Nomi Prins is an American author, journalist, and public speaker. A former managing director at Goldman Sachs and senior managing director at Bear Stearns, her latest book is Collusion: How Central Bankers Rigged the World. Her previous book All the Presidents' Bankers explored over a century of close relationships between 19 Presidents from Teddy Roosevelt through Barack Obama and the key bankers of their day, based on original archival documents. Prins also received recognition for her whistleblower book, It Takes a Pillage: Behind the Bonuses, Bailouts, and Backroom Deals from Washington to Wall Street , for her views on the U.S. economy, for her published spending figures on federal programs and initiatives related to the 2008 bailout, and for her advocacy for the reinstatement of the Glass–Steagall Act and regulatory reform of the financial industry.

    This month, Nomi answers seven of your listener-submitted questions, including:

    • When will the U.S. dollar end its reign as global reserve currency?
    • Should you be concerned about gold confiscation?

    Plus: If the financial system crashes, are you at risk?
    From: https://www.sprottmoney.com/Blog/ask...ober-2019.html
    *I have loved the stars too dearly to be fearful of the night*

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