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China’s Digital Currency

China’s Digital Currency

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(co-authored with Bob Lynch, a global macro strategist, focusing on currencies, interest rates, and cross-asset solutions. He consults and provides investment advisory for institutional money managers, corporations, family offices, and high net worth individuals. He previously worked with J.P. Morgan Private Bank, HSBC, and BNP Paribas. www.linkedin.com/in/robertlynch6 )

As governments around the world manage their respective economic-restarts from the COVID-induced lockdown, there will be a host strategies and innovations employed to assist the process. For China, one element of that strategy may include the acceleration of its plans to introduce a digital currency.

China’s digital currency project has been underway since 2014 and reports just before the COVID outbreak suggested it could be introduced as soon as this year. Under normal circumstances, a successful digital currency would reduce payment frictions and demonstrate China’s ongoing efforts in technological advancement. But in the post-COVID era, when reviving economic growth will be paramount, the potential for enhanced commerce/consumption via a streamlined payment system becomes even more appealing.

To achieve relative stability, the digital currency would have to be more like a  “stablecoin,” linking the currency’s value 1:1 to the renminbi and essentially creating a digital yuan. That construct would likely be more stable than one linked to a basket of currencies such as Facebook’s proposed Libra project, let alone one without any fiat currency linkages such as Bitcoin or Ethereum. It would be tantamount to a digital expression of the paper and coin form.  

It is not yet clear exactly how the digital yuan will work. Likely it will be an app on a smartphone that one registers. There would, of course, be robust security and a record of every transaction both locally and someplace else. Henceforth when you get paid or receive funds, it would go directly into your secured account. When you pay, it would be withdrawn from the same account.  

Chinese consumers are already more familiar than many westerners with paying for nearly everything from a smartphone. Alipay is ubiquitous, and a digital currency seems to be a modest evolutionary step. Even now, tourists in China need to access the local apps to do basic things, like secure a ride or purchase food or drink in many places.  

The sheer size of China’s population and economy gives it a unique advantage to establish scale, turnover, and usage of a new digital currency.  Sweden plans to introduce its own digital krona next year as part of its broader effort to ban cash transactions in 2023. Still, Sweden is a relatively small economy with a fairly homogeneous population where social trust measures run high. China is pushing hard to be the first large country to adopt a digital currency, and the pandemic may accelerate its efforts. There may not be the same kind of first-mover advantage with a digital currency as there was with selling books on the internet. Nonetheless, a digital currency, based on its patented technologies, is a prestigious accomplishment for the status-conscious Chinese elite.

A digital currency recognizes that a payment system is a utility. In an earlier era, electricity, gas, oil, coal, telephones were utilities, but perhaps we need to re-think what are their modern equivalents. It replaces this function of banks and credit cards and their derivatives (payment systems that depend on them).  It allows for instantaneous payments.  It squeezes the underground economy, even if human ingenuity finds some workarounds.  Tax avoidance is also made more difficult.  

At the same time, in an illiberal society, the digital currency can also become an instrument that extends command and control. Every transaction now becomes part of the public record. The line, already blurred between what is personal/private, could be obliterated by the digital currency. The surveillance state can be further empowered. In a society that rates social trust, is it a stretch to think about fines as well as rewards?  

One thing that the digital currency will not do is to make the yuan convertible. And barring full convertibility, it will not have any meaningful bearing on the role of the yuan in the global economy.  It is currently a [very] minor reserve currency, though included in SDRs. It has less than a 2% share of SWIFT transactions. The Dim Sum bond market and yuan deposits in Hong Kong are well off their highs set several years ago. A digital yuan by itself does nothing to enhance its position in the rivalry with the dollar. 

Moreover, the COVID-induced financial market stresses—like the 2008 financial crisis—demonstrated the global market’s preference for US dollars during periods of extreme duress and uncertainty. That’s not merely a function of inertia; it also reflects the market’s confidence in the transparency and management of US currency, monetary and fiscal policies, relative to those in most of the rest of the world. A successful, digital, convertible yuan could advance the internationalization of the renminbi. But China’s management of its financial system and economy as well as its interactions in global affairs do not consistently build the kind of trust and confidence that global investors have favored most in times of severe financial stresses. 




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Government

Trump Says Only One Thing Can Fix Economy

Trump Says Only One Thing Can Fix Economy

Authored by Tom Ozimek via The Epoch Times (emphasis ours),

Former President Donald Trump has…

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Trump Says Only One Thing Can Fix Economy

Authored by Tom Ozimek via The Epoch Times (emphasis ours),

Former President Donald Trump has warned Americans to brace for something “a lot worse than a recession” while blaming the Biden administration’s poor stewardship of the economy for soaring inflation and denouncing the tax hikes in the latest Democrat spending bill.

Former President Donald Trump prepares to speak at the Conservative Political Action Conference (CPAC) in Dallas, Texas, on Aug. 6, 2022. (Brandon Bell/Getty Images)

Trump made the remarks at the Conservative Political Action Conference (CPAC) in Dallas on Saturday, where the former president raised the alarm on the state of the union.

Our country is being shot. It’s being destroyed,” Trump told attendees, while touting his administration’s record on the economy and national security.

Trump spoke of “creating the most secure border in American history, record tax and regulation cuts, $1.87 gasoline, no inflation, low interest rates, record growth in real wages, record growth in our economy.”

Former President Donald Trump speaks at the Conservative Political Action Conference in Dallas on August 6, 2022. (Bobby Sanchez for The Epoch Times)

Soaring Inflation, Recession

During Trump’s tenure, the highest the Consumer Price Index (CPI) inflation gauge came in at was 2.9 percent in July 2018, while in his final month in office, January 2021, inflation clocked in at 1.4 percent.

Under Biden, inflation has climbed steadily, soaring 9.1 percent year-over-year in June 2022, a figure not seen in more than 40 years.

In his speech, Trump drew a contrast with the economy under President Joe Biden, blaming the president for the highest inflation in decades that Trump estimates is costing American families as much as $7,000 a year.

“After the pandemic, we handed the radical Democrats the fastest economic recovery ever recorded, the history of our country, ever recorded,” Trump continued. “They’ve turned that into two straight quarters of negative economic growth, also known, despite their protestation to the contrary, as a recession.”

Two consecutive quarters of negative GDP growth are a common rule-of-thumb definition for a recession, although recessions in the United States are officially declared by a committee of economists at the National Bureau of Economic Research (NBER) using a broader definition than the two-quarter rule.

Despite a number of economists arguing that the United States is in a recession based on the two-consecutive-quarters rule, the Biden administration insists that the economy isn’t in a recession, citing NBER’s consideration of a broader range of indicators.

A key argument against recession made by Treasury Secretary Janet Yellen and others in the Biden administration is that the U.S. labor market remains tight, with unemployment at 3.5 percent and, at 10.7 million, the number of job openings remaining well above the 6 million or so people classified as unemployed.

President Joe Biden gives remarks during a meeting on the economy with CEOs and members of his Cabinet in the South Court Auditorium of the White House on July 28, 2022. (Anna Moneymaker/Getty Images)

Worse Than Recession

In his CPAC speech, Trump then issued an ominous warning that, absent a course correction, the recession could spiral into something even worse.

“Just hope that the recession doesn’t turn into a depression, because the way they’re doing things, it could be a lot worse than a recession,” Trump said, echoing similar remarks he made at a rally in Arizona at the end of July, where he warned that “we’re going to have a serious problem” unless political change takes place.

We got to get this act in order, we have to get this country going, or we’re going to have a serious problem,” Trump said at a rally in Arizona, warning that “we’re going to have a much bigger problem than recession. We’ll have a depression.”

During his appearance at CPAC, Trump issued a call for urgent action at the polls in the upcoming midterms.

The future of our country is at stake. We don’t have time to wait years and years. We won’t have a country left. What I used to say about Venezuela is true. We have to save the economy, defeat the Biden, Pelosi, Schumer tax hike, which is happening right now tonight,” Trump continued, referring to the so-called “Inflation Reduction Act” that cleared the Senate not long after his speech.

Senators passed the sweeping bill, estimated at $740 billion, in a 51–50 vote on Aug. 7, with the package next going to the House for consideration.

During the deliberations, Senate Democrats rejected an amendment offered by Sen. Mike Crapo (R-Idaho) that sought to ban any of the $80 billion for the Internal Revenue Service (IRS) from being used to target Americans making less than $400,000 per year.

“My colleagues claim this massive funding boost will allow the IRS to go after millionaires, billionaires and so-called rich ‘tax cheats,’ but the reality is a significant portion raised from their IRS funding bloat would come from taxpayers with income below $400,000,” Crapo said in a statement.

Crapo’s amendment was rejected on a party-line vote, with the Democrat bill including softer language that features a non-binding statement of intention not to squeeze more revenue from America’s middle class.

Tax Hikes

According to an analysis by Americans for Tax Reform, a U.S. advocacy group, the spending bill includes a number of tax hikes on American households and businesses.

This includes a $6.5 billion natural gas tax that ATR says will increase household energy bills, a $12 billion crude oil tax that will end up being passed on to drivers in the form of higher gas prices, and a $52 billion income tax hike on mid-sized and family businesses.

In a separate analysis, ATR said that the Democrat bill’s changes to the book tax threaten small businesses.

Elaborating on that theme, economist and author Antonio Graceffo wrote in an op-ed for The Epoch Times that the so-called “Inflation Reduction Act” would drive up prices for American households.

Nearly half of these new taxes will be paid by manufacturers, creating disincentives to produce. Diminished industrial output will drive up the cost of goods and reduce the variety and quantity of goods available on store shelves,” Graceffo wrote.

“Beyond the manufacturing sector, the act increases taxes on businesses in general, which, combined with higher interest rates will decrease new investment and hamper job creation. Ultimately, these increased costs will be passed on to customers,” he added.

We Have to Win’

During his CPAC speech, Trump revealed what he sees as the key to bringing the country and its economy back on track.

“We have to win an earth-shattering victory in 2022. We have to do it, coming up in November,” Trump said.

Read more here...

Tyler Durden Tue, 08/09/2022 - 14:10

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Spread & Containment

New test may predict COVID-19 immunity

CAMBRIDGE, MA — Most people in the United States have some degree of immune protection against Covid-19, either from vaccination, infection, or a combination…

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CAMBRIDGE, MA — Most people in the United States have some degree of immune protection against Covid-19, either from vaccination, infection, or a combination of the two. But, just how much protection does any individual person have?

Credit: Courtesy of the researchers. Edited by MIT News.

CAMBRIDGE, MA — Most people in the United States have some degree of immune protection against Covid-19, either from vaccination, infection, or a combination of the two. But, just how much protection does any individual person have?

MIT researchers have now developed an easy-to-use test that may be able to answer that question. Their test, which uses the same type of “lateral flow” technology as most rapid antigen tests for Covid-19, measures the level of neutralizing antibodies that target the SARS-CoV-2 virus in a blood sample.

Easy access to this kind of test could help people determine what kind of precautions they should take against Covid infection, such as getting an additional booster shot, the researchers say. They have filed for a patent on the technology and are now hoping to partner with a diagnostic company that could manufacture the devices and seek FDA approval.

“Among the general population, many people probably want to know how well protected they are,” says Hojun Li, the Charles W. and Jennifer C. Johnson Clinical Investigator at MIT’s Koch Institute for Integrative Cancer Research. “But I think where this test might make the biggest difference is for anybody who is receiving chemotherapy, anybody who’s on immunosuppressive drugs for rheumatologic disorders or autoimmune diseases, and for anybody who’s elderly or doesn’t mount good immune responses in general. These are all people who might need to be boosted sooner or receive more doses to achieve adequate protection.”

The test is designed so that different viral spike proteins can be swapped in, allowing it to be modified to detect immunity against any existing or future variant of SARS-CoV-2, the researchers say.

Li, who is also an attending physician at the Dana-Farber/Boston Children’s Cancer and Blood Disorders Center, is the senior author of the study, which appears online today in Cell Reports Methods. Guinevere Connelly, a former Koch Institute research technician who is now a graduate student at Duke University, and Orville Kirkland, a research support associate at the Koch Institute, are the lead authors of the paper.

A simple test

Li, who joined the Koch Institute in the fall of 2019, studies blood cell development and how blood cells become cancerous. When SARS-CoV-2 emerged, he started thinking about ways to help combat the pandemic. Many other researchers were already working on diagnostic tests for infection, so he turned his attention to developing a test that would reveal how much immune protection someone has against Covid-19.

Currently, the gold standard approach to measuring immunity involves mixing a blood sample with live virus and measuring how many cells in the sample are killed by the virus. That procedure is too hazardous to perform in most labs, so the more commonly used approaches involve noninfectious modified “pseudoviral” particles, or they are based on a test called ELISA (enzyme-linked immunosorbent assay), which can detect antibodies that neutralize a fragment of a viral protein.

However, these approaches still require trained personnel working in a lab with specialized equipment, so they aren’t practical for use in a doctor’s office to get immediate results. Li wanted to come up with something that could be easily used by a health care provider or even by people at home. He drew inspiration from at-home pregnancy tests, which are based on a type of test called a lateral flow assay.

Lateral flow assays generally consist of paper strips embedded with test lines that bind to a particular target molecule if it is present in a sample. This technology is also the basis of most at-home rapid tests for Covid-19.

Li did not have experience working with this type of test, so he reached out to two MIT faculty members with expertise in devising diagnostics based on lateral flow assays: Hadley Sikes, an associate professor of chemical engineering, and Sangeeta Bhatia, the John and Dorothy Wilson Professor of Health Sciences and Technology and of Electrical Engineering and Computer Science, and a member of the Koch Institute.

With their help, his lab developed a device that can detect the presence of antibodies that block the SARS-CoV-2 receptor binding domain (RBD) from binding to ACE2, the human receptor that the virus uses to infect cells.

The first step in the test is to mix human blood samples with viral RBD protein that has been labeled with tiny gold particles that can be visualized when bound to a paper strip. After allowing time for antibodies in the sample to interact with the viral protein, a few drops of the sample are placed on a test strip embedded with two test lines.

One of these lines attracts free viral RBD proteins, while the other attracts any RBD that has been captured by neutralizing antibodies. A strong signal from the second line indicates a high level of neutralizing antibodies in the sample. There is also a control line that detects free gold particles, confirming that the solution flowed across the entire strip.

To develop the reagents needed for the test, members of Li’s lab worked with the labs of Angela Koehler, an associate professor of biological engineering, and Michael Yaffe, a David H. Koch Professor in Science, who are both members of the Koch Institute.

Predicting immunity

Along with a testing cartridge, which contains the paper test strip, the testing kit also includes a finger prick lancet that can be used to obtain a small blood sample, less than 10 microliters. This sample is then mixed with the reagents needed for the test. After about 10 minutes, the sample is exposed to the test cartridge, and the results are revealed in 10 minutes.

The output can be read two different ways: One, by simply looking at the lines, which indicate whether neutralizing antibodies are present or not. Or, the device can be used to obtain a more precise measurement of antibody levels, using a smartphone app that can measure the intensity of each line and calculate the ratio of neutralized RBD protein to infectious RBD protein. When this ratio is low, it might suggest that another booster shot is needed, or that the individual should take extra precautions to prevent infection.

The researchers tested their device with blood samples collected in December 2020 from about 60 people who had been infected with SARS-CoV-2 and 30 people who had not. They were able to detect neutralizing antibodies in the samples from people previously infected to the virus, with accuracy similar to that of existing laboratory tests. They also tested 30 serial samples from two people before they received an mRNA Covid-19 vaccine and at several time points after vaccination. The level of neutralizing antibodies in the vaccinated individuals peaked around seven weeks after the first dose, then began to slowly decline.

Previous studies of SARS-CoV-2 and other viruses have shown a strong correlation between the amount of neutralizing antibody circulating in an individual’s bloodstream and their likelihood of infection.

The test could be easily adapted to different variants of SARS-CoV-2 by swapping in a reagent that is specific to the RBD from the variant of interest, Li says. The researchers now hope to partner with a diagnostics company that could manufacture large quantities of the tests and obtain FDA approval for their use.

###

The research was funded by the Koch Institute Support (core) Grant from the National Cancer Institute, an American Society of Hematology Scholar Award, the National Institutes of Health, and the Charles and Marjorie Holloway Foundation.

 


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Economics

Saudis turn their backs on Biden’s request for more oil

The crude oil markets are in retreat. The prospects of a global economic slowdown are beginning to hit oil demand The much-awaited ministerial meeting…

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The crude oil markets are in retreat. The prospects of a global economic slowdown are beginning to hit oil demand

The much-awaited ministerial meeting of the Organization of Petroleum Exporting Countries and its allies, including Russia, in the expanded OPEC+, opted to increase its September output by just 100,000 barrels per day (bpd).

Despite the urgings of U.S. President Joe Biden to open Saudi Arabia’s crude oil taps during his visit there, the announced output increment is sharply lower than the 648,000 bpd OPEC+ earlier announced for July and August.

The Biden administration didn’t criticize the small increase and gave the OPEC+ announcement a positive spin, saying the “OPEC+ oil output increase is a step forward.” But many observers felt the small increment – representing 0.1 per cent of the total global crude supply – was a slap in the face to the U.S.

Despite his earlier vows to make Saudi Arabia “a pariah,” Biden opted to go to the oil kingdom to encourage OPEC to produce more and help cool down the markets.

The initiative failed, and the market was swift to react.

“That (the announced OPEC+ output increase) is minuscule, almost imperceptible,” Bob McNally, president of consulting firm Rapidan Energy Group, told CNN. It represents the smallest increase in production on a percentage basis in OPEC history, emphasized McNally. “OPEC+ did the absolute minimum. The market is interpreting this as just short of a rebuff. It’s a purely symbolic gesture.”

Others go even further, describing the OPEC+ move as an insult. “It’s a slap in the face for the Biden administration. This trip and (Biden’s) meeting with MBS (Saudi crown prince Mohammad bin Salman) just didn’t work,” Matt Smith, lead oil analyst for the Americas at Kpler, told CNN.

Robert Yawger, vice-president of energy futures at Mizuho Securities, also described the decision as a slap in the face. “I must say I am surprised they only threw in 100,000 barrels per day.”

The reasons for OPEC’s decision are ample.

Despite the decision, oil markets last week posted their biggest weekly loss since April. That meant markets have shed all the gains made due to Russia’s war on Ukraine.

And the prospects of a global economic slowdown are beginning to hit oil demand.

OPEC+ sees a recession storm on the horizon. The summer driving season is on, but U.S. gasoline consumption is tanking. Americans are driving even less this summer than they were two years ago, during the 2020 pandemic lockdowns. This is stoking demand concerns.

The shift to tighter monetary policy also indicates that economic growth will slow, resulting in crude oil demand shrinking.

Bloomberg reports that China, the world’s largest crude importer, is also showing signs of economic weakness, clouding its outlook for crude consumption. Recent data shows shrinking factory activity, with China Beige Book – which helps institutional investors and corporate CEOs navigate China’s notoriously black box economy – warning that the economy is deteriorating.

In the meantime, few OPEC+ members seem able to meet their export quotas. Saudi Arabia and the United Arab Emirates are the only two countries with spare capacity and they want to maintain that cushion in the event the world faces a winter supply crunch. They vow to be ready to deliver a “significant increase” if necessary, sources told Reuters.

Reuters quoted three anonymous sources as saying that Saudi Arabia and the U.A.E. can produce more crude oil but won’t tap that capacity now. That helps explain the latest OPEC+ output decision.

OPEC oil producers are also aware of Russian reluctance to increase crude output now. Russia isn’t interested in a significant increase reaching the global market. Energy Intelligence Group reported last week that Russia wants prices to stay high, allowing it to keep offering steep discounts for its exports.

The decision to increase output by just 100,000 bpd in September demonstrates that the OPEC+ de facto leaders, Saudi Arabia and Russia, remain aligned in their views on the global market and how it should be managed.

So Biden’s Saudi Arabian visit failed to yield the desired results.

By Rashid Husain Syed

Toronto-based Rashid Husain Syed is a respected energy and political analyst. The Middle East is his area of focus. As well as writing for major local and global newspapers, Rashid is also a regular speaker at major international conferences. He has provided his perspective on global energy issues to the Department of Energy in Washington and the International Energy Agency in Paris.

Courtesy of Troy Media

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