World Inflation Champions - Crypto in EU - Global Trade Recovery - US Buybacks & Insider Buying Strong — Covid Stocks Falling — Covid Vaccine Removed from US Market - [05-21-2023]

Direct from BOOM Finance and Economics at the links below

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THIS WEEK’S EDITORIAL

VENEZUELA WORLD CHAMPION OF INFLATION: If you think the prices of consumer goods and services are rising too quickly in your country, calm down and think again. You could be living in Argentina, Syria, Venezuela or Lebanon.

Venezuela is the undisputed World Champion of CPI Inflation with a Year on Year inflation rate of 436%. Lebanon’s rate is at 264 %. Syria is at 139 % and Argentina’s inflation rate is at 109%

After Argentina, we see the following nations – Zimbabwe (75%), Sudan (63%), Suriname (59.4%), Iran (53.4%), Haiti (48.2%) , Cuba (46%), Turkey (43%).

Most of those nations either openly oppose the dominance of the US Dollar Empire or are not content with it in some way. But that must surely be a coincidence because, as BOOM explained last week, China and Russia have very low, stable CPI inflation rates and they are perhaps the most belligerent nations opposed to US Dollar dominance. They seek multi-polarity – a world where no single currency dominates in settlements of trade and capital movements.

If you wish to move to a nation with very low CPI inflation, you can choose between South Sudan (- 6.2%), Bahrain (-0.1%), China (0.4%), Brunei (0.4%), Seychelles (0.64%), Cambodia (0.7% ), Macau (0.86%), Panama (0.95% ), Niger (1.4%) or Oman (1.6%).

Here in the chart below is Lebanon’s CPI inflation history over the last 10 years. Three years ago, the people clearly lost faith in their governance and in their currency, resulting in a rapid onset of Hyperinflation. Hyperinflation is always caused by currency collapse. Unfortunately, the US Dollar in cash form was readily available as an alternative currency and the people desperately swapped their Lebanese currency for US Dollars.

In such a situation, prices of goods and services skyrocketed in return for Lebanese Pounds in a typical Hyperinflation scenario. However, at the same time, prices collapsed equally dramatically in return for US Dollars. Anyone holding large amounts of US Dollars could buy anything for extremely low prices.

In retrospect, it was foolish for the Lebanese government to tolerate the free use of US Dollars in cash form in their economy for many years. No nation should ever allow such a thing. They should ban all currencies other than their own and back that ban with extreme force and dis-incentives. They should also watch and regulate their banking system closely and not allow bank loans to be denominated in any currency other than their national currency

LEGISLATION FOR CRYPTO IN EUROPEAN UNION:  BOOM has stated for many years that Cryptos are simply digital assets. Or perhaps more accurately, they are digital commodities. Some may also fall under the definition of being a security. However, they are not currencies and can never be currencies because they do not have the essential features required to be generally accepted as currencies.

LEGISLATION FOR CRYPTO IN EUROPEAN UNION:  BOOM has stated for many years that Cryptos are simply digital assets. Or perhaps more accurately, they are digital commodities. Some may also fall under the definition of being a security. However, they are not currencies and can never be currencies because they do not have the essential features required to be generally accepted as currencies.

For 15 years, the Crypto world has been largely unregulated. It has been a financial Wild West with many fraudulent claims being made and with very little protection for investors against fraud, miss-management and outright crime.

Billions of Dollars have been lost in many failures. Criminals have made off with the proceeds. However, that is now history as evidenced by recent regulatory changes in Canada and proposed regulations (currently in draft form) in the US. BOOM wrote about those developments in the last 2 editorials especially in regard to Stablecoin regulation.

Just 5 days ago, the European Council formally adopted new rules for Crypto Assets. The members of the European Council are the heads of state or government of the 27 EU member states, the European Council President and the President of the European Commission. The European Council defines the EU’s overall political direction and priorities, traditionally by adopting conclusions.

As a result, the European Union now has a regulatory framework for Crypto-assets, Crypto-asset issuers and Crypto-asset service providers. Setting an EU level legal framework for this sector for the first time, the Council adopted regulations called MiCA on markets in crypto-assets. MiCA stands for Markets in Crypto Assets. Elisabeth Svantesson, Minister for Finance of Sweden said this:

“I am very pleased that today we are delivering on our promise to start regulating the crypto-assets sector. Recent events have confirmed the urgent need for imposing rules which will better protect Europeans who have invested in these assets, and prevent the misuse of the crypto industry for the purposes of money laundering and the financing of terrorism.”

MiCA will (hopefully) protect European based investors by increasing transparency and putting in place a comprehensive framework for issuers and service providers including compliance with EU anti-money laundering rules. The new rules cover issuers of utility tokens, asset referenced tokens and so-called ‘Stablecoins’. It also covers service providers such as trading venues (exchanges) and the wallets where crypto-assets are held.

What is an “asset referenced token”?  Under MiCA, a crypto-asset is an “asset-referenced token” if it purports to “maintain a stable value by referring to the value of several fiat currencies that are legal tender, one or several commodities or one or several crypto-assets, or a combination of such assets”.

The legislation is expected to come into force around July this year. Some provisions will be applicable from July 2024, including those for Stablecoins. The new regulations will impose the anti-money laundering (AML) “travel rule” on Cryptos. This means the sender and recipient’s details in any transaction must be transmitted whenever a Crypto-asset service provider is involved.

Originally there was a proposed threshold of €1,000 for such identification requirements. However, that threshold has been dropped. This means that the travel rule is required for transfers of as little as a few cents.  However, private transactions occurring between two parties using self-hosted wallets are excluded. If the transaction occurs between a self-hosted wallet and an exchange, then the €1,000 threshold will apply.

Some Crypto enthusiasts regard this as a step in the right direction and think that such regulations will attract more and more investors to the Crypto world. If so, the Crypto world could start to resemble a Safe Deposit service.

Other more sceptical observers believe the opposite. They think that this will be the end of the golden era of Wild West Crypto speculation and that the price of all Cryptos will now go into relentless decline as sellers perpetually outweigh buyers. We shall see. So far, over the last 5 days, there has been no significant price reaction.

GLOBAL TRADE:  BOOM’s most reliable indicator for world trade has continued to rise. A month ago, BOOM said of the indicator — “readers should take note that the indicator stopped declining last month, during February, and during March it began rising steadily.”

BOOM can now report that this rise in trade is continuing which is a strongly positive sign for the future health of the global economy.  The World Trade Organisation released a Trade Barometer report for Trade in Goods in early March and another for Services late last year. Both reports now appear to have been too pessimistic.

For Goods: World merchandise trade growth appears to have lost momentum in the fourth quarter of 2022 and is likely to remain weak in the first quarter of 2023, according to the latest WTO Goods Trade Barometer issued on 1 March.

For Services: World services trade activity appears to have weakened in the fourth quarter of 2022 and is likely to remain soft in the opening months of 2023, with slowing growth in major economies weighing on the post-pandemic recovery, according to the latest WTO Services Trade Barometer released on 22 December.

On 5^th April, the WTO released another forecast that BOOM thinks may well prove to have again been too pessimistic.

"Global trade growth in 2023 is still expected to be subpar despite a slight upgrade to GDP projections since last fall, WTO economists said in a new forecast on 5 April. Weighed down by the effects of the war in Ukraine, stubbornly high inflation, tighter monetary policy and financial market uncertainty, the volume of world merchandise trade is expected to grow by 1.7% this year, following 2.7% growth in 2022, a smaller-than-expected increase that was pulled down by a sharp slump in the fourth quarter.

BOOM did forecast a drop in economic activity towards the end of 2022, especially in the US economy. That drop came a little later than expected. However, it now looks like the recovery may be earlier than expected.

US STOCK BUYBACKS AND INSIDER BUYING STRONG:  Stock buybacks are rising from US companies themselves. Buybacks are determined at Board level. Insider buying interest from employees and close associates is also rising in the US. In particular, stock buybacks started rising in October last year and have been in a steady uptrend since then. Increased buybacks and insider buying add more weight to BOOM’s hypothesis of steadily rising financial asset prices in the United States which began in October.

COVID STOCKS BUCK THE TREND:  However, some noteworthy declines are in Pfizer (PFE) and Moderna (MRNA). Both companies are involved in the development of new, experimental mRNA technology. As time passes the world is becoming increasingly wary of the whole mRNA story and especially in Covid vaccines (which do not stop virus transmission and do not prevent infection). Investors are relentlessly selling the stocks. Pfizer share prices have now been in decline for almost 18 months while Moderna stock has been falling for longer – 21 months. Here is the Pfizer stock chart over the last 3 years — courtesy of Stockcharts.com

And here is the Moderna stock chart — also over 3 years

COVID VACCINE REMOVED FROM MARKET: During the week, the Johnson and Johnson Covid-19 vaccine was quietly removed from the US market. All remaining doses expired last week and the CDC (Center for Disease Control and Prevention) directed providers to dispose of any that they had left over.

QB Explained: https://boomfinanceandeconomics.wordpress.com/2019/12/15/boom-as-at-15th-december-2019/  AND BOOM’s Perfect Economy: https://boomfinanceandeconomics.wordpress.com/2020/01/18/boom-as-at-19th-january-2020/

In economics, things work until they don’t.  Until next week.  Make your own conclusions, do your own research.  BOOM does not offer investment advice.

CLICK HERE FOR PODCASTS:   OUR BRAVE NEW ECONOMIC WORLD

BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY: LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans). https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how global banking systems really work.

AND Watch for 4 minutes, this Bank of England explanation: Money is essential to the workings of a modern economy, but its nature has varied substantially over time. This video describes what money is today.

Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models.

On 25th April 2017, the central bank of Germany, the Bundesbank, released a statement on this matter — “In terms of volume, the majority of the money supply is made up of book money, which is created through transactions between banks and domestic customers. Sight deposits are an example of book money: sight deposits are created when a bank settles transactions with a customer, ie it grants a credit, say, or purchases an asset and credits the corresponding amount to the customer’s bank account in return. This means that banks can create book money just by making an accounting entry: according to the Bundesbank’s economists, “this refutes a popular misconception that banks act simply as intermediaries at the time of lending – i.e. that banks can only grant credit using funds placed with them previously as deposits by other customers”. By the same token, excess central bank reserves are not a necessary precondition for a bank to grant credit (and thus create money).” Reference: https://www.bundesbank.de/en/tasks/topics/how-money-is-created-667392

The Reserve Bank of Australia (Australia’s central bank) has also contributed to the issue in a speech by Christopher Kent, the Assistant Governor on September 19th 2018…“the vast bulk of broad money consists of bank deposits” “Money can be created…when financial intermediaries make loans“ - “In the first instance, the process of money creation requires a willing borrower.” “It’s also worth emphasizing that the process of money creation is not the result of the actions of any single bank – rather, the banking system as a whole acts to create money.”

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