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Global inflation mounts: How stablecoins are helping protect savings

More people are using stablecoins to hedge against inflation, as they offer numerous benefits.
Economies around the world are facing…

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More people are using stablecoins to hedge against inflation, as they offer numerous benefits.

Economies around the world are facing a motley of challenges caused by rising inflation. High inflation devalues national currencies, which, in turn, pushes up the cost of living, especially in scenarios where earnings remain unchanged.

In the United States, the government has responded aggressively to inflation. The nation hit a 9.1% inflation rate in June, prompting the Federal Reserve to implement a series of fiscal countermeasures designed to prevent the economy from overheating. Hiking interest rates was one of them.

Soaring Fed interest rates have consequently slowed down consumer spending and business growth in the country.

The counter-inflation approach has also strengthened the value of the U.S. dollar against other currencies due to tight dollar liquidity checks. As 79.5% of all international trades are undertaken using the dollar, many countries are now paying a premium for imports to compensate for the dollar’s rising value, worsening inflation in those importing countries.

Subsequently, citizens in some flailing economies have started to convert their money into more stable foreign currencies to safeguard their money against value depreciation, and many of them are turning to stablecoins to achieve this.

Whitney Setiawan, a research analyst at the Bitrue crypto exchange, told Cointelegraph, “With the U.S. dollar recording steep appreciation against other fiat currencies, most crypto-savvy users have a special interest in holding stablecoins.”

Setiawan also predicted that the stablecoin sector was likely to disrupt the remittance industry in the near future due to the medley of benefits that stablecoins offer.

“With interest in stablecoins being fueled by various factors, I can predict it will be a matter of time before this asset class topples the remittance industry by a significant margin,” she said.

On this last point, remittance companies have indeed been taking notice and have, in recent months, made moves to claim a share of the stablecoin market. MoneyGram, for example, recently partnered with Stellar to offer stablecoin remittance services on its network.

What are stablecoins?

A stablecoin is a digital currency whose value is often pegged to an asset or regulated by an algorithm to maintain a stable value. 

Collateralized stablecoins are the most popular and are backed by reserves of their underlying assets. In most cases, their value tracks that of popular national currencies such as the U.S. dollar, the British pound or the euro.

This category of stablecoins is used extensively by crypto traders looking to avoid crypto market upheavals and users looking to protect their money against inflation.

Other types of stablecoins include commodity-backed, crypto-backed and algorithmic stablecoins.

Why stablecoins are ideal as instruments against inflation

Stablecoins are ideal as instruments against inflation for numerous reasons. One of them is their immutable and borderless nature.

The decentralized nature of blockchain technology on which stablecoins operate allows them to travel across borders that may otherwise be closed to cross-border financial activities.

Stablecoin transactions are also fast and cost-effective when compared to fund transfers made via commercial bank networks. This makes them convenient for people looking to send and receive money and a hedge against inflation.

Another disruptive property that stablecoins possess is their capacity to cater to the unbanked. Approximately 2 billion people in the world today lack a bank account. Stablecoins have demonstrated the ability to reach this marginalized demographic by allowing anyone with a device that can host a digital wallet, like a smartphone or laptop, to use stablecoins.

In some developing nations, many people lack the necessary documentation to open a bank account, and so they are shut out of their nation’s main financial systems. Using stablecoins allows this group of users to send and receive money easily and use their monetary assets to hedge against inflation when the need arises.

Brian Pasfield, chief technology officer of Fringe Finance — a crypto lending platform that provides lending opportunities to stablecoin holders — told Cointelegraph:

“Banks have strict monetary policies that generally taper down the dollar’s supply. This trend makes stablecoins an attractive option for those aiming to access the USD’s value, as they are generally accessible with little barrier to entry.” 

He also underscored that governments had the ultimate power when it comes to mainstream stablecoin adoption.

“The likelihood of them (stablecoins) becoming commonplace and therefore disruptors lies in the hands of governments themselves, which may seek to implement their own solutions or censor the existing avenues,” he said.

While governments have been slow to adopt official policies regarding stablecoins, or may even undercut private stablecoins with the advent of central bank digital currencies, there are several countries in which citizens have taken matters into their own hands by using stablecoins to protect their savings.

Venezuela

Venezuela has experienced an inflation rate averaging about 3,711% since 1973. The bolivar has lost so much value over the past four decades that it’s had to be reconverted several times. For perspective, the country has had to remove 14 zeroes from its currency over the past 14 years to simplify the monetary scale.

Because the Venezuelan bolivar is volatile and has a value that fluctuates throughout the day, it is common practice for traders to list merchandise and service prices in U.S. dollars. Customers who don’t have dollars are usually expected to pay using bolivars, but at the prevailing exchange rate relative to the dollar.

That said, dollar bills can, at times, be scarce, and this gap is currently being filled by stablecoins. With internet penetration standing at around 72% as per 2020 statistics, online payment companies supporting stablecoin use have already started to set up shop in the country.

The companies include Reserve, a startup backed by Coinbase. Its app is now widely used in Venezuela to buy and sell stablecoins.

Even the U.S. government has joined the stablecoin foray and is increasingly using Circle’s USD Coin (USDC) stablecoin to circumvent corrupt government institutions when providing aid to Venezuelan citizens.

Turkey

Earlier this month, Turkey’s annual inflation rate hit 80%, with the Turkish lira losing approximately 27% of its value against the U.S. dollar so far this year. In 2021, the lira lost 44% of its value against the greenback. Its steep decline has caused demand for stablecoins to rise as people move to protect their money against inflation.

According to data derived from CryptoCompare, the Turkish lira is the second highest fiat-to-Tether (USDT) trading pair and currently accounts for about 21% of all national currency swaps. Tether is a dollar-denominated stablecoin backed by a basket of different assets.

The lira is also the second-most traded Binance USD (BUSD) stablecoin pair and is used in about 5.2% of trades. Binance USD is the dollar-denominated stablecoin from major cryptocurrency exchange Binance.

The growing popularity of cryptocurrencies in the country has, in the recent past, led to monetary control concerns and prompted the authorities to ban the use of cryptocurrencies as a mode of making payments.

However, crypto utility is still high despite the prohibition.

Nigeria

Nigerians are starting to use stablecoins to temper the effects of rising inflation.

According to the latest statistics released by the country’s National Bureau of Statistics (NBS), the inflation rate in the country reached 19.64% in July — a 17-year high.

According to the NBS report, the cost of necessities such as food, transport, fuel and clothing has risen sharply as a result.

The situation has been brought on by climate change, the economic aftershocks caused by the coronavirus and rising insecurity. It has been further compounded by Russia’s invasion of Ukraine, which disrupted crucial import supplies from the two countries. Nigeria imports over $2 billion worth of essential commodities annually from both Russia and Ukraine.

Inflation problems are forcing many Nigerians to start using stablecoins to prevent the devaluation of their savings. According to data pulled from Google Trends, Nigeria ranks top among countries with significant interest in stablecoins. Search statistics indicate that the nation has the highest Tether stablecoin search interest in the world.

USDT is presently the most traded stablecoin.

Argentina

Argentinians are increasingly turning to U.S. dollar stablecoins to shield their money against high inflation. The country’s inflation rate is expected to hit 95% by the end of the year.

Recent developments that have accentuated the demand for stablecoins include the July stablecoin buying frenzy that was triggered by the resignation of Economy Minister Martín Guzmán.

Major crypto exchanges serving Argentinian citizens recorded a spike in stablecoin sales in the aftermath of the announcement, with purchases jumping by over 200%.

The news also caused the value of the Argentine peso to fall by approximately 15%.

Today, Argentinian traders quote dollar prices for high-value items due to the high volatility that’s afflicted the national currency. The Argentine peso has lost over 30% of its value so far his year.

Prevailing U.S. dollar trading restrictions have also helped to increase demand for stablecoins.

Roadblocks for stablecoins

There are numerous limitations that prevent the widespread use of stablecoins as a hedge against inflation. One of them is the changing regulatory landscape that threatens to block their use in some jurisdictions. The European Union, for example, is looking to prohibit the use of dollar-pegged stablecoins in the region in the near future. Such embargoes are likely to limit the use of stablecoins as a hedge against inflation.

Moreover, most countries lack elaborate policies needed to legitimize the crypto industry. Right now, the stablecoin sector would do with extensive Anti-Money Laundering, tax policy and fraud prevention regulations in order to truly go mainstream, but many countries are unwilling to go this far due to the sheer complexity of such processes.

This has led some countries, such as China, Algeria and Egypt, to ban the trading of cryptocurrencies altogether.

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Wendy’s teases new $3 offer for upcoming holiday

The Daylight Savings Time promotion slashes prices on breakfast.

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Daylight Savings Time, or the practice of advancing clocks an hour in the spring to maximize natural daylight, is a controversial practice because of the way it leaves many feeling off-sync and tired on the second Sunday in March when the change is made and one has one less hour to sleep in.

Despite annual "Abolish Daylight Savings Time" think pieces and online arguments that crop up with unwavering regularity, Daylight Savings in North America begins on March 10 this year.

Related: Coca-Cola has a new soda for Diet Coke fans

Tapping into some people's very vocal dislike of Daylight Savings Time, fast-food chain Wendy's  (WEN)  is launching a daylight savings promotion that is jokingly designed to make losing an hour of sleep less painful and encourage fans to order breakfast anyway.

Wendy's has recently made a big push to expand its breakfast menu.

Image source: Wendy's.

Promotion wants you to compensate for lost sleep with cheaper breakfast

As it is also meant to drive traffic to the Wendy's app, the promotion allows anyone who makes a purchase of $3 or more through the platform to get a free hot coffee, cold coffee or Frosty Cream Cold Brew.

More Food + Dining:

Available during the Wendy's breakfast hours of 6 a.m. and 10:30 a.m. (which, naturally, will feel even earlier due to Daylight Savings), the deal also allows customers to buy any of its breakfast sandwiches for $3. Items like the Sausage, Egg and Cheese Biscuit, Breakfast Baconator and Maple Bacon Chicken Croissant normally range in price between $4.50 and $7.

The choice of the latter is quite wide since, in the years following the pandemic, Wendy's has made a concerted effort to expand its breakfast menu with a range of new sandwiches with egg in them and sweet items such as the French Toast Sticks. The goal was both to stand out from competitors with a wider breakfast menu and increase traffic to its stores during early-morning hours.

Wendy's deal comes after controversy over 'dynamic pricing'

But last month, the chain known for the square shape of its burger patties ignited controversy after saying that it wanted to introduce "dynamic pricing" in which the cost of many of the items on its menu will vary depending on the time of day. In an earnings call, chief executive Kirk Tanner said that electronic billboards would allow restaurants to display various deals and promotions during slower times in the early morning and late at night.

Outcry was swift and Wendy's ended up walking back its plans with words that they were "misconstrued" as an intent to surge prices during its most popular periods.

While the company issued a statement saying that any changes were meant as "discounts and value offers" during quiet periods rather than raised prices during busy ones, the reputational damage was already done since many saw the clarification as another way to obfuscate its pricing model.

"We said these menuboards would give us more flexibility to change the display of featured items," Wendy's said in its statement. "This was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants."

The Daylight Savings Time promotion, in turn, is also a way to demonstrate the kinds of deals Wendy's wants to promote in its stores without putting up full-sized advertising or posters for what is only relevant for a few days.

Related: Veteran fund manager picks favorite stocks for 2024

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Inside The Most Ridiculous Jobs Report In Recent History: Record 1.2 Million Immigrant Jobs Added In One Month

Inside The Most Ridiculous Jobs Report In Recent History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the…

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Inside The Most Ridiculous Jobs Report In Recent History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

What happened? Let's take a closer look.

On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

Source: St Louis Fed FRED Native Born and Foreign Born

... but there has been zero job-creation for native born workers since June 2018!

This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

Tyler Durden Fri, 03/08/2024 - 13:30

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Shipping company files surprise Chapter 7 bankruptcy, liquidation

While demand for trucking has increased, so have costs and competition, which have forced a number of players to close.

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The U.S. economy is built on trucks.

As a nation we have relatively limited train assets, and while in recent years planes have played an expanded role in moving goods, trucks still represent the backbone of how everything — food, gasoline, commodities, and pretty much anything else — moves around the country.

Related: Fast-food chain closes more stores after Chapter 11 bankruptcy

"Trucks moved 61.1% of the tonnage and 64.9% of the value of these shipments. The average shipment by truck was 63 miles compared to an average of 640 miles by rail," according to the U.S. Bureau of Transportation Statistics 2023 numbers.

But running a trucking company has been tricky because the largest players have economies of scale that smaller operators don't. That puts any trucking company that's not a massive player very sensitive to increases in gas prices or drops in freight rates.

And that in turn has led a number of trucking companies, including Yellow Freight, the third-largest less-than-truckload operator; J.J. & Sons Logistics, Meadow Lark, and Boateng Logistics, to close while freight brokerage Convoy shut down in October.

Aside from Convoy, none of these brands are household names. but with the demand for trucking increasing, every company that goes out of business puts more pressure on those that remain, which contributes to increased prices.

Demand for trucking has continued to increase.

Image source: Shutterstock

Another freight company closes and plans to liquidate

Not every bankruptcy filing explains why a company has gone out of business. In the trucking industry, multiple recent Chapter 7 bankruptcies have been tied to lawsuits that pushed otherwise successful companies into insolvency.

In the case of TBL Logistics, a Virginia-based national freight company, its Feb. 29 bankruptcy filing in U.S. Bankruptcy Court for the Western District of Virginia appears to be death by too much debt.

"In its filing, TBL Logistics listed its assets and liabilities as between $1 million and $10 million. The company stated that it has up to 49 creditors and maintains that no funds will be available for unsecured creditors once it pays administrative fees," Freightwaves reported.

The company's owners, Christopher and Melinda Bradner, did not respond to the website's request for comment.

Before it closed, TBL Logistics specialized in refrigerated and oversized loads. The company described its business on its website.

"TBL Logistics is a non-asset-based third-party logistics freight broker company providing reliable and efficient transportation solutions, management, and storage for businesses of all sizes. With our extensive network of carriers and industry expertise, we streamline the shipping process, ensuring your goods reach their destination safely and on time."

The world has a truck-driver shortage

The covid pandemic forced companies to consider their supply chain in ways they never had to before. Increased demand showed the weakness in the trucking industry and drew attention to how difficult life for truck drivers can be.

That was an issue HBO's John Oliver highlighted on his "Last Week Tonight" show in October 2022. In the episode, the host suggested that the U.S. would basically start to starve if the trucking industry shut down for three days.

"Sorry, three days, every produce department in America would go from a fully stocked market to an all-you-can-eat raccoon buffet," he said. "So it’s no wonder trucking’s a huge industry, with more than 3.5 million people in America working as drivers, from port truckers who bring goods off ships to railyards and warehouses, to long-haul truckers who move them across the country, to 'last-mile' drivers, who take care of local delivery." 

The show highlighted how many truck drivers face low pay, difficult working conditions and, in many cases, crushing debt.

"Hundreds of thousands of people become truck drivers every year. But hundreds of thousands also quit. Job turnover for truckers averages over 100%, and at some companies it’s as high as 300%, meaning they’re hiring three people for a single job over the course of a year. And when a field this important has a level of job satisfaction that low, it sure seems like there’s a huge problem," Oliver shared.

The truck-driver shortage is not just a U.S. problem; it's a global issue, according to IRU.org.

"IRU’s 2023 driver shortage report has found that over three million truck driver jobs are unfilled, or 7% of total positions, in 36 countries studied," the global transportation trade association reported. 

"With the huge gap between young and old drivers growing, it will get much worse over the next five years without significant action."

Related: Veteran fund manager picks favorite stocks for 2024

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