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Madeira ‘embraces’ Bitcoin, and how its president met Michael Saylor

Here is why the archipelago of Madeira is “adopting” Bitcoin and how its president fell down the BTC rabbit hole.
The tiny Portuguese…

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Here is why the archipelago of Madeira is “adopting” Bitcoin and how its president fell down the BTC rabbit hole.

The tiny Portuguese archipelago of Madeira has “adopted” Bitcoin (BTC) — but what does that mean? The announcement, made during the Bitcoin 2022 conference in Miami, has spurned confusion and misinformation.

Miguel Albuquerque, the president of the Regional Government of Madeira, hopped on the stage in April to announce: “I believe in the future, and I believe in Bitcoin.” He also said he would work to “create in Madeira a fantastic environment for Bitcoin.” However, the details remained unclear.

Cointelegraph spoke to André Loja, a Madeiran entrepreneur who spearheaded the plan to bring BTC to the archipelago in the Atlantic ocean, to find out how Bitcoin is shaping the islands’ development.

Madeira exploded onto the Bitcoin world map on April 7 when JAN3 CEO Samson Mow proudly announced that it “will be adopting Bitcoin.”

Upon the announcement, news outlets around the world reported that Madeira had adopted Bitcoin as legal tender; however, this was not the case. Loja explained to Cointelegraph that prior to the announcement, he would have preferred to use the phrase “Madeira is embracing Bitcoin.”

“We embrace it, we support it. We are not ‘adopting’ Bitcoin because adopting looks like we were making it legal tender when it’s already de facto legal.”

Indeed, in Madeira and across Portugal — which is around 620 miles to the northeast — there is zero tax on Bitcoin capital gains. That means any time one of Madeira’s residents disposes of, spends or uses BTC, it does not need to be declared to tax authorities.

Loja orange-pilled the president of Madeira just a few weeks prior to the conference, sharing his vision for Bitcoin as not only a means to attract foreign investment but to “protect my island from the fiat system.”

By happenstance, Albuquerque came to visit Loja’s coworking space — one of the few places to accept BTC in Madeira — and Loja jumped at the opportunity to share his passion for Bitcoin. Madeira was kneecapped by the COVID-19 pandemic as critical tourism revenue fell off a cliff. Loja, therefore, presented a Bitcoin future to the president as a means to diversify and restructure Madeira’s economy, among other advantages.

Albuquerque was reportedly open to the idea, so Loja quickly sought the help of Bitcoiners around the world, including Daniel Prince, a renowned Bitcoin podcaster; Jeff Booth, author of The Price of Tomorrow; and even Michael Saylor, CEO of MicroStrategy.

Within weeks, the Bitcoiner all-star team had contacted the organizers of Bitcoin 2022 to organize the president’s appearance on stage. Ultimately, having the head of state of an autonomous region endorse Bitcoin was an opportunity too big to miss.

Upon landing in Miami, Loja and Albuquerque were invited to Saylor’s flashy Miami villa, “with the yachts and everything,” Loja joked. While Loja had already orange-pilled the president, the conversation with Saylor was on another level:

“Michael Saylor sat down with President Albuquerque, and well, […] it was more like he sat down with his head!”

Saylor told Albuquerque that “You need to focus on Bitcoin. Everything else is garbage.” A conversation the president is unlikely to forget, the seminar was sufficient preparation for him to step on stage in front of 25,000 Bitcoin enthusiasts.

Loja explained that the announcement that Madeira is adopting Bitcoin would “kickstart an intention” for Madeira to become an island in which Bitcoin prospers alongside the people. For Loja, who has already translated popular Bitcoin-related books into Portuguese, “It starts with education — the most important thing.”

Loja (far right), President Albuquerque (center with book) and Knut Svanholm (far left) in Madeira in May 2022. Source: Loja

Indeed, Loja cut his teeth during the bear market of 2018. A passionate educator, Loja works closely with other educators in the space, such as Knut Svanholm, author of Bitcoin: Everything Divided by 21 Million, to teach the principles of sound money:

“I have a lot of ideas, from kindergarten to schools to adult workshops — and to bring people from outside the island. The association will have the best people as consultants.”

To this end, Loja is founding the Sound Money Foundation, a Bitcoin education center in Madeira. The center has support from Mow and Booth, among others, and seeks to help locals to better understand cryptocurrency from a young age.

Accompanying the education drive and the focus on improving “financial literacy,” Loja’s hometown also lures Bitcoin companies with attractive fiscal incentives. At the International Business Center, companies pay just 5% business tax, a highly competitive rate. Portugal was already a budding hub for individual Bitcoiners, but companies can now reap the benefits.

Related: Bitcoin, Bukele and a bevy of central bankers meet in El Salvador

Further down the road, Loja plans for the autonomous government of Madeira to mine Bitcoin with leftover renewable energy — as the island has abundant wind and sunlight — and even utilize “a multisignature wallet for the government to work with Bitcoin financially.”

Madeira's International Business Center. Source: IBC

As a result, the government would take full custody of the Bitcoin it mines by taking control of the private keys. Loja highlighted that the electrical power grid is a standalone “public company,” so any Bitcoin mined by the grid would go into government multisig wallets.

In essence, Madeira’s approach to Bitcoin goes above and beyond the lauded legal tender status. From public sector BTC mining and education to state-run multisig wallets and having Saylor on speed dial, the island is slowly steering toward a Bitcoin future.

Unsurprisingly, Loja’s holistic approach to the island “embracing” Bitcoin has a low time preference. 

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Spread & Containment

This Week in Apps: Twitter Notes, Instagram age verification, Spotify’s Live Events

Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy….

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Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy.

The app industry continues to grow, with a record number of downloads and consumer spending across both the iOS and Google Play stores combined in 2021, according to the latest year-end reports. Global spending across iOS, Google Play and third-party Android app stores in China grew 19% in 2021 to reach $170 billion. Downloads of apps also grew by 5%, reaching 230 billion in 2021, and mobile ad spend grew 23% year over year to reach $295 billion.

Today’s consumers now spend more time in apps than ever before — even topping the time they spend watching TV, in some cases. The average American watches 3.1 hours of TV per day, for example, but in 2021, they spent 4.1 hours on their mobile device. And they’re not even the world’s heaviest mobile users. In markets like Brazil, Indonesia and South Korea, users surpassed five hours per day in mobile apps in 2021.

Apps aren’t just a way to pass idle hours, either. They can grow to become huge businesses. In 2021, 233 apps and games generated over $100 million in consumer spend and 13 topped $1 billion in revenue. This was up 20% from 2020, when 193 apps and games topped $100 million in annual consumer spend and just eight apps topped $1 billion.

This Week in Apps offers a way to keep up with this fast-moving industry in one place, with the latest from the world of apps, including news, updates, startup fundings, mergers and acquisitions and suggestions about new apps to try, too.

Do you want This Week in Apps in your inbox every Saturday? Sign up here: techcrunch.com/newsletters

Top Stories

Instagram to verify users’ ages in new test

Image Credits: Instagram

Instagram announced this week it’s testing a new set of features for verifying users’ ages in the app, including things like video selfies, vouching from adult friends and providing an ID. The tests, which will begin in the U.S., will apply to users who try to change their age to 18 or over after being previously set to under 18. These users may be trying to correct an earlier mistake or they could be teens trying to circumvent the app’s newer age-appropriate restrictions.

If users are prompted to provide an ID card, like a passport or driver’s license, Meta will store it on its servers for 30 days before deletion. If users choose the social vouching option, they’ll need at least three other adult friends to vouch for their age — and Instagram will choose a list of six people randomly who meet the criteria. Those users can’t have a new account or be vouching for others at the same time.

The company also said it’s using AI that can estimate users’ ages in video selfies. The company is working with the London-based digital identify firm Yoti which will examine the file, make an estimate, then delete the file.

Age verification is an increasingly common feature in social apps used by younger users as a result of tighter regulations. Another company catering to Gen Z users, Yubo, recently rolled out its own age estimating tech as well.

Twitter goes long form

TechCrunch broke the news that Twitter was testing a long-form writing feature called Twitter Notes. The next day after our report went live, Twitter announced it officially.

The news is one of Twitter’s more significant changes since doubling the character count from 140 to 280 characters, as it will allow users to write on Twitter directly, as if it’s a blogging platform. With Twitter Notes, users are able to create articles using rich formatting and uploaded media, which can then be tweeted and shared with followers upon publishing. The company also said it would merge its newsletter service, Revue, into Twitter Notes.

Users with access can create Twitter Notes from the “Write” link in Twitter’s navigation. For the time being, Twitter is testing Notes with a small group of writers in the United States, Canada, Ghana and the United Kingdom. The Notes can be up to 2,500 words in length.

The feature could encourage users to rely on Twitter Thread (tweetstorms) less in order to share their longer thoughts, ideas or stories with their Twitter followers, Community or Circle. It could also put an end to using a screenshot from the Notes app to tweet something longer than 280 characters. Meanwhile, Twitter Notes can tap into the potential for viral distribution that comes with posting to the platform. Like tweets, the Notes would have their own link and could be tweeted, retweeted, sent in DMs, liked and bookmarked. They can also be reported and must comply with Twitter’s rules.

It’s worth noting (ha!) that Twitter Notes also gives the company a new business and potential revenue stream as it further develops the product. The feature may allow the social platform to compete with established services, like Medium for blogging, or Substack’s newsletters.

Weekly News

Platforms: Apple

E-commerce

Image Credits: Twitter/Shopify

  • As part of its ongoing efforts to expand into e-commerce, Twitter announced a new partnership with Shopify. The deal will see Twitter launching a sales channel app that will be made available to all of Shopify’s U.S. merchants through its app store. The app allows merchants to onboard themselves to Twitter’s Shopping Manager, the dashboard offered by the social media company where sellers can access product catalog tools and enable other shopping features for their profiles. Merchants will be able to use the new sales channel app to connect their Twitter account to their Shopify admin then get set up with Twitter’s Shopping Manager and other free tools Twitter built for “Professionals.” This includes Twitter’s launch of a new feature called Location Spotlight, which allows local businesses in the U.S., Canada, U.K. and Australia to display information like their street address, contact info and operating hours directly on their profile.

Augmented Reality

  • Walmart gave its app an AR upgrade with the launch of View in Your Space, which allows customers to see home décor and furniture in their own homes. The feature will be rolled out to over 300 items on Walmart’s iOS app by early July.
  • Tim Cook may have hinted at Apple’s AR headset plans when he told a Chinese state-run news outlet to “stay tuned” to see what Apple had in store next for AR in an interview. A later investor note by Ming-Chi Kuo also suggested the new hardware could arrive as soon as early 2023.
  • IKEA launched a new in-app design experience, called IKEA Kreativ, that lets U.S. shoppers visualize furniture in their own spaces using AR and AI. The feature can also remove the existing furniture from your room so you can better imagine the changes.
  • Snap shared some data about AR shopping trends, noting that there was a 32% increased use of shoppable AR during the pandemic and that 69% of consumers believed AR was a part of shopping’s future.

Fintech

  • Coinbase is shutting down its standalone Pro service by year’s end and replacing it with Advanced Trade across its website and app. The latter offers comparable features to the Pro service, which had lowered fees to traders who interacted directly with the Coinbase Exchange order book.
  • Facebook Pay formally rebranded to Meta Pay. The change had already been announced but is now rolling out in the U.S. before expanding globally.

Social

Image Credits: Twitter

  • Snapchat announced its first accelerator program for emerging Black creators, which will see 25 selected participants receive $10,000 per month to launch their careers across a total $3 million investment.
  • Instagram has been experimenting with a new feature that would allow users to leave notes for their friends at the top of the DM inbox. The feature could help users share urgent or more important messages that could be overlooked in Stories or in messages.
  • Meta announced more ways for creators to make money on Facebook and Instagram and the expansion of other monetization tools to more creators. The company will keep paid online events, fan subscriptions, badges and its upcoming independent news products free for creators until 2024, instead of 2023, as it had said before. Meta is also testing a designated place on Instagram where creators can get discovered by brands for partnerships; will launch a way for users to subscribe to Facebook Groups even for those who have paid for access on another platform; and is expanding the Reels Play Bonus program to more creators and making Facebook Stars available to all.
  • Twitter announced the return of its developer conference, Chirp. The event was first held in 2010 but was then canceled the next year. At the time, the event had been a reflection of Twitter’s attitude toward its developer community in general — disorganized and constantly in flux as the company’s business initiatives changed. Times have since changed and Twitter has been trying to woo back developers with its new API, even by promoting some apps on Twitter itself.

Messaging

  • Telegram said it now has over 700 monthly active users and announced Telegram Premium, a subscription that gives users access to exclusive features like doubled limits, 4 GB file uploads, faster downloads, exclusive stickers and reactions, improved chat management and more.

Photos

Dating

  • Match-owned Hinge added a new feature that allows users to share their “Dating Intentions” — meaning whether they’re looking for long-term, short-term, open relationships and more. The update changes Hinge’s focus as the company has historically been the app designed to connect people looking for more serious relationships, while Match-owned Tinder was aimed at those seeking casual encounters.

Streaming & Entertainment

Image Credits: Spotify

  • Spotify revamped its concert discovery feature with the launch of a new Live Events Feed. The personalized feature will allow users to find favorite artists’ events in your area and will now include artist imagery and more tour details. Local events will also be highlighted while streaming and soon, in other places in the Spotify app.
  • Clubhouse is testing a new feature called Houses, per Bloomberg, which are private rooms aimed at encouraging social interactions where anyone can unmute themselves and speak.
  • Reddit Talk, the company’s live audio Clubhouse-like feature, announced its Host program would launch on July 11th. The program will promote hosts’ audio across the site. Reddit Talk also gained new features like a soundboard and topic selector for discovery purposes.
  • Apple Music raised the price of its student plan in the United States, Canada and the United Kingdom. In the United States and Canada, the price for the plan has increased from $4.99 to $5.99. In the United Kingdom, the price has increased from £4.99 to £5.99.

Gaming

  • Epic Games has come up with a new system for game ratings. While these changes apply to its own online games store, it’s an example of why alternative app stores could be useful to provide competition with Apple’s own — they can be a ground to test out new ideas. In Epic’s case, random players who have played a game for over two hours will be asked to rate the game on a five-point scale. Over time, these will create the game’s Overall Rating. The system, which relies on random sampling, could cut down on review bombing and reviews left by those who aren’t actual players, the company notes.
  • China’s regulation of the mobile gaming market may be leading to declining use of the App Store in the country, according to Morgan Stanley. The firm’s latest analysis estimated that the App Store only saw 1% growth in June so far, compared with 6% growth in May.

Health & Fitness

  • Fitbit added a new premium feature, “Sleep Profile,” which will allow users to track their sleep patterns across 10 key metrics, including new data points like bedtime consistency, the time before sound sleep and disrupted sleep. The feature is rolling out to the Fitbit app’s Premium users and supports devices including Sense, Versa 3, Versa 2, Charge 5, Luxe or Inspire 2.

Travel & Transportation

  • Apple is planning to expand its CarPlay experience to China, according to a job posting.
  • Polestar has now added Apple CarPlay to its all-electric Polestar 2 sedan via an over-the-air software update, after previously only supporting Android Auto.
  • Car rental apps saw their MAUs grow 19% year-over-year in the U.S. in May, reported Apptopia, despite rising gas prices.

Image Credits: Apptopia

Government & Policy

  • TikTok offered a series of commitments in the EU to improve user reporting and disclosure requirements around ads/sponsored content as well as an agreement to boost transparency around its digital coins and virtual gifts. The agreement follows a series of complaints over child safety and consumer protection complaints filed back in February 2021.
  • The U.S. Department of Justice today entered into an agreement with Meta to resolve a lawsuit that alleged Meta engaged in discriminatory advertising in violation of the Fair Housing Act (FHA). As a result, Meta has agreed to develop a new system for housing ads and will pay a roughly $115,000 penalty, the maximum under the FHA.

Reading & News

  • India-based VerSe Innovation rolled out its news aggregator Dailyhunt in the UAE, Saudi Arabia, Bahrain, Oman, Qatar and Kuwait, with over 5,000 content partners in the region.

Security & Privacy

  • Google Chrome for iOS gained a number of new features in a recent update, including access to Enhanced Safe Browsing to protect users from dangerous websites and malware, as well as the ability to make Google Password Manager your Autofill provider. Other additions include Chrome Actions (typed commands in the URL bar) and access to Google’s Discover feed on the main page.
  • Daycare apps including those from Brightwheel, HiMama and others were found to lack 2FA and other privacy protections, in an analysis.
  • Google threat researchers detailed a commercial spyware system called Hermit, used in Kazakhstan and Italy, which targeted both Android and iOS. The iOS version had six exploits, including two zero-days. Targeted victims are tricked into installing a malicious app — which masquerades as a legitimate branded telco or messaging app — from outside the app store.

Funding and M&A

Courier raised $35 million in a Series B funding round led by GV. The company provides an API for sending notifications across multiple channels, including email, text, web and mobile.

Ghana-based fintech Fido raised $30 million in equity investment and some undisclosed debt funding in a Series A round led by Israel-based private equity fund Fortissimo Capital. The round brings the total equity investment raised to date to $38 million. The startup says it’s adding savings and payment products to its portfolio later this year and will enter Uganda.

Twitter asked its shareholders to approve the $44 billion Elon Musk acquisition. At the time of its SEC filing, Twitter’s share price was around $38.12 — lower than Musk’s offer price of $54.20 a share. The company’s market cap had also dropped below $30 billion, making a $44 billion deal look very good.

Downloads

WatchTube

Image Credits: WatchTube

Well, here’s something kind of crazy: 9to5Mac this week highlighted the new app WatchTube, which lets you watch YouTube videos directly on your Apple Watch. Yes, really!

The app is not the best experience for watching videos, as you may have guessed, but it is pretty wild that it actually works. The app by default shows you top trending videos, but you can customize this so the videos that appear are selected from a particular genre, like Music, News, Gaming, Movies and more. While it would be enough to just accomplish bringing YouTube to the Watch, the developer also added other features like the ability to search for videos, save videos to the app’s local Library and subscribe to Channels. When you get back to your other devices, you can also scan a QR code to share the video back to your iPhone or iPad.

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Government

The End Game Approaches

The pendulum of market sentiment swings dramatically.  It has swung from nearly everyone and their sister complaining that the Federal Reserve was lagging…

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The pendulum of market sentiment swings dramatically.  It has swung from nearly everyone and their sister complaining that the Federal Reserve was lagging behind the surge in prices to fear of a recession.  On June 15, at the conclusion of the last FOMC meeting, the swaps market priced in a 4.60% terminal Fed funds rate.  That seemed like a stretch, given the headwinds the economy faces that include fiscal policy and an energy and food price shock on top of monetary policy tightening. It is now seen closer to 3.5%.  It is lower now than it was on when the FOMC meeting concluded on May 4 with a 50 bp hike.  

In addition to the tightening of monetary policy and the roughly halving of the federal budget deficit, the inventory cycle, we argued was mature and would not be the tailwind it was in Q4. While we recognized that the labor market was strong, with around 2.3 mln jobs created in the first five month, we noted the four-week moving average of weekly jobless claims have been rising for more than two months.  In the week to June 17, the four-week moving average stood at 223k.  It is a 30% increase from the lows seen in April.  It is approaching the four-week average at the end of 2019 (238k), which itself was a two-year high.  In addition, we saw late-cycle behavior with households borrowing from the past (drawing down savings and monetizing their house appreciation) and from the future (record credit card use in March and April).  

The Fed funds futures strip now sees the Fed's rate cycle ending in late Q1 23 or early Q2 23.  A cut is being priced into the last few months of next year.  This has knock-on effects on the dollar.  We suspect it is an important part of the process that forms a dollar peak.  There is still more wood to chop, as they say, and a constructive news stream from Europe and Japan is still lacking.  The sharp decline in Russian gas exports to Europe is purposely precipitating a crisis that Germany's Green Economic Minister, who reluctantly agreed to boost the use of coal (though not yet extend the life of Germany's remaining nuclear plants that are to go offline at the end of the year), warns could spark a Lehman-like event in the gas sector.  

At the low point last week, the US 10-year yield had declined by around 50 bp from the peak the day before the Fed delivered its 75 bp hike.  This eases a key pressure on the yen, and, at the same time, gives the BOJ some breathing space for the 0.25% cap on its 10-year bond.  A former Ministry of Finance official cited the possibility of unilateral interventionWhile we recognize this as another step up the intervention escalation ladder, it may not be credible.  First, it was a former official.  It would be considerably more important if it were a current official.  Second, by raising the possibility, it allowed some short-covering of the yen, which reduces the lopsided positioning and reduces the impact of intervention.  Third, on the margin, it undermines the surprise-value.  

Ultimately, the decline in the yen reflects fundamental considerations.  The widening of the divergence of monetary policy is not just that other G10 countries are tightening, but also that Japan is easing policy.  A couple of weeks ago, to defend its yield-curve-control, the BOJ bought around $80 bln in government bonds.  The odds of a successful intervention, besides the headline impact, is thought to be enhanced if it signals a change in policy and/or if it is coordinated (multilateral).  

There are a few high frequency data points that will grab attention in the coming days, but they are unlikely to shape the contours of the investment and business climate.  The key drivers are the pace that financial conditions are tightening, the extent that China's zero-Covid policy is disrupting its economy and global supply chains, and the uncertainty around where inflation will peak. 

Most of the high frequency data, like China's PMI and Japan's industrial production report and the quarterly Tankan survey results, and May US data are about fine-tuning the understanding of Q2 economic activity and the momentum at going into Q3.  They pose headline risk, perhaps, but may be of little consequence.  It is all about the inflation and inflation expectations: except in Japan. Tokyo's May CPI, released a few weeks before the national figures, is most unlikely to persuade the Bank of Japan that the rise in inflation will not be temporary.  

With fear of recession giving inflation a run for its money in terms of market angst, the dollar may be vulnerable to disappointing real sector data, though the disappointing preliminary PMI likely stole some thunder.  The Atlanta Fed's GDPNow says the US economy has stagnated in Q2, but this is not representative of expectations.  It does not mean it is wrong, but it is notable that the median in Bloomberg's survey is that the US economy is expanding by 3% at an annualized rate.  This seems as optimistic as the Atlanta Fed model is pessimistic.  May consumption and income figures will help fine-tune GDP forecasts, but the deflator may lose some appeal.  Even though the Fed targets the headline PCE deflator, Powell cited the CPI as the switch from 50 to 75 bp hike.  

In that light, the preliminary estimate of the eurozone's June CPI that comes at the end of next week might be the most important economic data point.  It comes ahead of the July 21 ECB meeting for which the first rate hike in 11 years has been all but promised.  Although ECB President Lagarde had seemed to make clear a 25 bp initial move was appropriate, the market thinks the hawks may continue to press and have about a 1-in-3 chance of a 50 bp move.  The risk of inflation is still on the upside and Lagarde has mentioned the higher wage settlements in Q2.  That said, the investors are becoming more concerned about a recession and expectations for the year-end policy rate have fallen by 30 bp (to about 0.90%) since mid-June.  

A couple of days before the CPI release the ECB hosts a conference on central banking in Sintra (June 27-June 29).  The topic of this year's event is "Challenges for monetary policy in a rapidly changing world," which seems apropos for almost any year.  The conventional narrative places much of the responsibility of the high inflation on central banks.  It is not so much the dramatic reaction to the Pandemic as being too slow to pullback.  In the US, some argue that the fiscal stimulus aggravated price pressures. On the face of it, the difference in fiscal policy between the US and the eurozone, for example, may not explain the difference between the US May CPI of 8.6% year-over-year and EMU's 8.1% increase, or Canada's 7.7% rise, or the UK's 9.1% pace.

There is a case to be made that we are still too close to the pandemic to put the experience in a broader context. This may also be true because the effects are still rippling through the economies.  In the big picture, central banks, leaving aside the BOJ, appear to have responded quicker this time than after the Great Financial Crisis in pulling back on the throttle, even if they could have acted sooner.  Some of the price pressures may be a result of some of the changes wrought by the virus.  For example, a recent research paper found that over half of the nearly 24% rise in US house prices since the end of 2019 can be explained by the shift to working remotely, for example. 

The rise in gasoline prices in the US reflect not only the rise in oil prices, but also the loss of refining capacity. The pandemic disruptions saw around 500k barrels a day of refining capacity shutdown.  Another roughly 500k of day of refining capacity shifted to biofuels.  ESG considerations, and pressure on shale producers to boost returns to shareholders after years of disappointment have also discouraged investment into the sector.  The surge in commodity prices from energy and metals to semiconductors to lumber are difficult to link to monetary or fiscal policies.  

Such an explanation would also suggest that contrary to some suggestions, the US is not exporting inflation.  Instead, most countries are wrestling with similar supply-driven challenges and disruptions.  That said, consider that US core CPI has risen 6% in the year through May, while the ECB's core rate is up 3.8%, and rising. The US core rate has fallen for two months after peaking at 6.5%.  The UK's core CPI was up 5.9% in May, its first slowing (from 6.2%) since last September.  Japan's CPI stood at 2.5% in May, but the measure excluding fresh food and energy has risen a benign 0.8% over the past 12 months.  

Consider Sweden.  The Riksbank meets on June 30.  May CPI accelerated to 7.3% year-over-year.  The underlying rate, which uses a fixed interested rate, and is the rate the central bank has targeted for five years is at 7.2%.  The underlying rate excluding energy is still up 5.4% year-over-year, more than doubling since January.  The policy rate sits at 0.25%, having been hiked from zero in April.  The economy is strong.  The May composite PMI was a robust 64.4.  The economy appears to be growing around a 3% year-over-year clip.  Unemployment, however, remains elevated at 8.5%, up from 6.4% at the end of last year.  The swaps market has a 50 bp hike fully discounted and about a 1-in-3 chance of a 75 bp hike.  The next Riksbank meeting is not until September 20, and the market is getting close to pricing in a 100 bp hike.  Year-to-date, the krona has depreciated 11% against the dollar and about 3% against the euro.  

In addition to macroeconomic developments, geopolitics gets the limelight in the coming days.  The G7 summit is June 26-28.  Coordinating sanctions on Russia will likely dominate the agenda and as the low-hanging fruit has been picked, it will be increasingly challenging to extend them to new areas.  

At least two important issues will go unspoken and they arise from domestic US political considerations.  Although President Biden has recommended a three-month gas tax holiday, he needs Congress to do it.  That is unlikely.  Inflation, and in particular gasoline prices are a critical drag on the administration and the Democrats more broadly, who look set to lose both houses.  And the Senate and Congressional Republicans are not inclined to soften the blow.  Talk of renewing an export ban on gasoline and/oil appears to be picking up. The American president has more discretion here. This type of protectionism needs to be resisted because could it be a slippery slope. 

The other issue is the global corporate tax reform.  Although many countries, most recently Poland, have been won over, it looks increasingly likely that the US Senate will not approve it.  Biden and Yellen championed it, but the votes are not there now, and it seems even less likely they will be there in the next two years.  The particulars are new, but the pattern is not.  The US has not ratified the Law of the Seas nor is it a member of the International Court of Justice. Some push back and say that the US acts as if it were.  That argument will be less persuasive on the corporate tax reform.  

NATO meets on June 29-30.  For the first time, Japan, Australia, New Zealand, and South Korea will be attending.  Clearly, the signal is that Russia's invasion of Ukraine is not distracting from China. Most recently, China pressed its case that the Taiwan Strait is not international waters.  Some in Europe, including France, do not want to dilute NATO's mission by extending its core interest to the Asia Pacific area and distracting from European challenges. NATO is to publish a new long-term strategy paper.  Consider that the last one was in 2010 and did not mention Beijing and said it would seek a strategic partnership with Russia.  Putin's actions broke the logjam in Sweden and Finland, and both now want to join NATO, but Turkey is holding it up.  


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Commodities

The Link Between Soaring Food Prices & Political Instability

The Link Between Soaring Food Prices & Political Instability

The Russian war in Ukraine has had immediate repercussions for global food…

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The Link Between Soaring Food Prices & Political Instability

The Russian war in Ukraine has had immediate repercussions for global food markets given the countries’ role as major exporters of essential agricultural products, such as wheat, sunflower oil, barley and corn, while also affecting perishable foods like fruits and vegetables.

As shown in FAO data, the price of basic food products has surged since the invasion of Ukraine after already having followed an upward trend since 2020 over the course of the Covid-19 pandemic.

You will find more infographics at Statista

As Statista's Katharina Buchholz notes, in the past, similar surges in the price of food have led to unrest, mostly in developing countries, and even coincided with the Arab Spring in 2011, when populations in North Africa and the Middle East cornered by oppressive regimes and feeling the additional squeeze on their livelihoods due to high prices rose up and toppled several regional regimes. The current level of food prices is even surpassing the peaks observed in 2011 and 2008, when food and other prices rose dramatically, causing unrest in several African countries as well as in Bangladesh, Haiti, Indonesia and Yemen. The onset of the global financial crisis put an end to the price surge that year.

In the current situation, Human Rights Watch has warned that food crisis could hit North Africa and the Middle East again, as several countries in the region are major importers of Russian or Ukrainian food products

According to Cornell University economics professor Chris Barrett, the potential for unrest is again heightened.

As of early June, food prices had already fueled protests all over the world, including in Asia, Africa, the Middle East, Latin America and Europe.

Tyler Durden Fri, 06/24/2022 - 23:20

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