Does The Fed Still Believe In The Efficacy Of Monetary Policy?
Does The Fed Still Believe In The Efficacy Of Monetary Policy?
Authored by Joe Carson via TheCarsonReport.com,
In January, consumer price…
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Authored by Joe Carson via TheCarsonReport.com,
In January, consumer price inflation of 7.5% for the past year represents the highest twelve-month increase since 1982.
As alarming as that is, the more shocking development is that the Federal Reserve eased monetarily every month for the past year and continues to do so even today.
For a central bank that has repeatedly stated that "inflation is always and everywhere a monetary phenomenon," the policy decisions of the past year are unprecedented and indefensible. It is unclear how much politics and financial markets influenced policy decisions, but policymakers are overly sensitive to both.
As bad as the policy decisions were in 2021, policymakers don't seem aware of the challenges they face to get inflation under control. Even though one policymaker called for a 50 basis point move at the next FOMC meeting in March, press reports indicate that others still believe a gradual or measured approach is the best policy option.
[ZH: According to The Taylor Rule, The Fed is currently 1075bps 'too easy' in its monetary policy...]
If policymakers still believe in the efficacy of monetary policy, how does the projection of three of four rate hikes to 1% in 2022 slow an inflation rate of 7.5%? That policy would still leave monetary policy in a more accommodative position than any time during the pandemic and with a jobless rate of 4% and fast-rising wages. Blunders by the Fed come with a cost, and the price is increasing with every passing day policymakers do not pursue a policy stance to contain inflation.
The current generation of policymakers faces a new trade-off. The choice is to fight inflation now with more forceful actions and let the financial markets bear the brunt of the policy adjustment or continue with a modest, gradual approach and risk a more wrenching and hard landing in the economy and financial markets later.
A student of inflation cycles finds similarities between the 1970s and the current inflation cycle. Supply shocks sparked both cycles. In the 1970s, policymakers' fear of the negative trade-off between fighting inflation and triggering more unemployment kept policy too easy for too long, extending the inflation cycle and ending with a hard landing.
In 2022, policymakers fear the negative trade-off between fighting inflation and starting a substantial fall in asset prices. Maintaining an easy money policy might be today's politically correct and market-friendly policy, but it's not a sound monetary policy.
It took Fed Chair Paul Volcker's wisdom and courage to break the 1970s inflation cycle. But those hard decisions came late and with huge costs (i.e., three years of recession).
Is there a Volcker-type among the current generation of policymakers? I don't see one.
There's an old saying, "Pay me now, or pay me more later." By not making the hard decisions today, policymakers are increasing the scale of "pay me later."
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Core Scientific seals $77M Bitmain deal for 27K Bitcoin mining rigs
The deal was first finalized in August, with Anchorage as another party agreeing to an equity stake in the bankrupt crypto miner.
Cryptocurrency…
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The deal was first finalized in August, with Anchorage as another party agreeing to an equity stake in the bankrupt crypto miner.
Cryptocurrency mining hardware maker Bitmain and bankrupt crytpto mining firm Core Scientific have agreed on a combination of equity and cash to finalize the deal on the expansion of mining facilities.
The deal between the two mining companies will see Bitmain supply 27,000 Bitcoin (BTC) mining rigs for $23 million in cash along with $53.9 million worth of common stock of the bankrupt firm. Apart from the mining hardware purchase deal, Bitmain and Core Scientific have signed a new hosting arrangement to assist Bitmain's mining operations.
The deal was finalized earlier last month when a court filing highlighted Bitmain’s plan to sell mining hardware in exchange for cash and equity as part of Core Scientific’s restructuring plan. Apart from Bitmain, the restructuring plan also included Anchorage, BlockFi and Mass Mutual Asset Finance. Apart from Anchorage, all other three firms chose a mix of cash and equity options to settle their claims.
Related: Core Scientific appoints Adam Sullivan as CEO amid restructuring process
The expansion and investment plan by Bitmain will come into force by the fourth quarter of this year pending approval from a judge slated for the final quarter. Once approved, the added hardware will potentially add 4.1 exahashes to Core Scinfitic’s hash rate. The two crypto mining focused companies have also agreed to work together to upgrade Bitmain’s last-generation miners hosted at Core Scientific’s data centres to increase the firm's productivity further.
Core Scientific filed for Chapter 11 bankruptcy in December 2022, citing the financial crisis and declining price of Bitcoin as the key reasons behind their decision. The firm started facing trouble in the weeks leading upto its eventual collapse in December owing to the market turmoil.
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Bitcoin mining can help reduce up to 8% of global emissions: Study
The report highlighted that Bitcoin mining can convert wasted methane emissions into less harmful emissions.
A paper published by…
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The report highlighted that Bitcoin mining can convert wasted methane emissions into less harmful emissions.
A paper published by the Institute of Risk Management (IRM) concluded that Bitcoin (BTC) has the potential to be a catalyst for a global energy transition.
IRM Energy and Renewables Group members Dylan Campbell and Alexander Larsen published a report called “Bitcoin and the Energy Transition: From Risk to Opportunity.” The paper argued that while BTC was perceived as a risk because of its energy consumption, it can also become a catalyst for energy transition and could lead to new solutions for energy challenges across the globe.
Within the report, the authors also highlighted the important function of energy and the increasing need for reliable, clean and more affordable sources of energy. Despite the criticisms of Bitcoin's energy intensity, the study provided a more balanced view of Bitcoin by also showing the potential benefits that BTC can bring to the energy industry.
According to the report, Bitcoin mining can reduce global emissions by up to 8% by 2030. This can be done by converting the world’s wasted methane emissions into less harmful emissions. The report cited a theoretical case saying that using captured methane to power Bitcoin mining operations can reduce the amount of methane vented into the atmosphere.
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The paper also presented various other opportunities that allow Bitcoin to contribute to the energy sector. According to the report, Bitcoin can also contribute to energy efficiency through electricity grid management by using Bitcoin miners and transferring heat from miners to greenhouses.
“We have shown that while Bitcoin is a consumer of electricity, this does not translate to it being a high emitter of carbon dioxide and other atmospheric pollutants. Bitcoin can be the catalyst to a cleaner, more energy-abundant future for all,” the authors wrote.
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Diamond Prices Are Crashing, Forcing Russian Mining Giant To Halt Sales
Diamond Prices Are Crashing, Forcing Russian Mining Giant To Halt Sales
A surge in lab-grown diamonds flooding the market, coupled with a…
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A surge in lab-grown diamonds flooding the market, coupled with a decline in luxury spending, has forced Russian mining giant Alrosa PJSC to temporarily suspend rough diamond sales to prevent prices from crashing further.
Bloomberg obtained a memo from Alrosa addressed to its customers, explaining rough diamond sales for September and October have been suspended as the company "strives to reverse the existing trend of diminishing demand."
Diamonds, watches, and other jewelry soared during the pandemic and peaked in the first half of 2022. We have covered the Rolex boom and bust extensively and have turned our attention to crashing diamond prices in 2023:
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World's Top Polishing Diamond Hub Warns "Difficult Year" Ahead On Weak US, China Demand
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Another Middle-Class Spending Barometer Flashes Red: Rolex Prices Near Two-Year Low
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Luxury Recession: Diamond Prices Crash, Rolex Downturn Persists
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Luxury Turmoil: Diamond Prices Crash To Pre-COVID Levels; Used Rolex Prices Hit New Six-Month Low
Besides the luxury spending slowdown due to tapped-out consumers, man-made diamonds have been all the rage because these gems are only a fraction of the cost. The big fear of the natural diamond industry is starting to be realized as consumers accept lab-grown diamonds in rings.
Edahn Golan, an independent diamond industry analyst, told CNN Business consumers are flocking to man-made diamonds because the most popular one-carat round man-made diamond for an engagement ring in March was $2,318. He said that's 73% cheaper than a natural diamond of the same size, cut, and clarity.
The latest data from the Diamond Index via the International Diamond Exchange shows prices have crashed well below pre-Covid levels.
Alrosa competes with De Beers, the biggest producer of diamonds, both of which have been rocked by a rough diamond sales slowdown this year after a massive boom during the pandemic.
Last week, Reuters reported the Group of Seven (G7) nations might be preparing to reshape the global diamond supply chain by placing restrictions on Alrosa.
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