Latest news with #centralbankers
Free Malaysia Today
2 days ago
- Business
- Free Malaysia Today
Trump wants Big Tech to own the dollar
The Spring Meetings of the International Monetary Fund and the World Bank are usually placid, forgettable affairs. Not this year. Several central bankers returned home with a visceral sense of dread. The reason? The specter of the GENIUS Act – the stablecoin bill barreling towards passage by the US Congress hot on the heels of President Donald Trump's March 6 executive order establishing a strategic cryptocurrency reserve. Central bankers have hitherto seen cryptocurrencies as a nuisance that, thankfully, lacked the capacity to cause serious ruptures in the monetary systems under their care. But now they think that Trump's team is counting on cryptocurrencies pegged to the dollar as part of its strategy to rejig the global monetary system (and make the boss and his family a fortune in the process). What unsettled central bankers this spring was the policy's implications: a deliberate, chaotic unraveling of the twentieth century's monetary order, under which central banks reigned as the sole architects of money. While the GENIUS Act allows private stablecoins, another bill would bar the US Federal Reserve from issuing a central bank digital currency (CBDC), thereby anointing corporate-issued tokens as the new guardians of dollar hegemony. This isn't innovation; it's a hostile takeover of the money supply. Lacking anything resembling serious regulation, stablecoins are neither stable nor merely an alternative dollar payment option. They are a Trojan horse for the privatisation of money. The European Central Bank (ECB) sees the danger. If securities migrate to the blockchain, with bonds, stocks, and derivatives becoming tokenised, then settlement must follow. The ECB's solution is a tokenised euro, ensuring public money remains the bedrock of finance. So far, the ECB has faced resistance to this plan from German and French private banks. Now, the ECB has another, bigger headache: the US is racing in the opposite direction. By banning CBDCs and green-lighting stablecoins, Trump's team is not just rejecting public digital money; it is outsourcing dollar supremacy to the darkest forces within Big Tech. The irony is grotesque. The same libertarians who railed against the government are now begging the state to anoint their stablecoins as de facto official currency. Worse, they demand access to the Federal Reserve's balance sheet, allowing private issuers to back their tokens with central bank reserves. Imagine a world where Tether, Circle, or some non-scam 'X Token' backed by Elon Musk enjoys the implicit backing of the US Treasury while operating outside banking regulations. This isn't just regulatory arbitrage; it's monetary feudalism. Lest we forget, nineteenth-century America was a monetary dystopia. With thousands of wildcat banks issuing private notes, frequent financial panics left the public, the working class in particular, holding worthless paper. Even JP Morgan was so appalled and felt so threatened that he decided to strong-arm the federal government and other bankers to establish the Federal Reserve as a public institution with a remit to stabilise money. Now, the US is hurtling backward – and dragging the rest of the world along. In a stunning reversal of reality, Trump's Jan 23 executive order on Strengthening American Leadership in Digital Financial Technology defines dollar-backed stablecoins as instruments that will 'promote and protect the sovereignty of the US dollar'. But the GENIUS Act (whose final draft is not yet public) is a formula for unleashing a digital wildcat era, where stablecoins – pegged to the dollar but controlled by private actors – flood the global economy with digital pseudo dollars. Private stablecoins stand no chance of maintaining their tokens' dollar peg after they receive the official imprimatur of the federal authorities and their volume balloons. Even if countries ditch the greenback, they will remain trapped in its digital shadow. Europe is scrambling. The ECB, recognising the existential threat, is fast-tracking a 'wholesale CBDC': a digital euro for institutional use that acts as a stopgap – a quick and dirty hybrid system that syncs traditional payments with blockchain infrastructure and buys time until true atomic settlement can be pushed past the resistance of private bankers who profit from the status quo. But it may be too late. While Europe dithers with committees, the US is acting. The Markets in Crypto-Assets (MiCA) regulation has already driven Tether out of Europe – not because MiCA is too strict, but because the EU's political leadership still does not grasp the stakes. If stablecoins become the default money of crypto markets, decentralised finance, and emerging economies, the ECB's half-baked digital euro will arrive to a battlefield where the war is already lost. Meanwhile developing countries face a brutal choice. Already struggling under the dollar's dominance, they must now either ban stablecoins (thus forfeiting access to crypto capital flows) or create their own to compete with the dollar's network effects. A third, unappetising alternative, is to surrender to a new – even more perilous – form of de facto dollarisation. The only central bank that has planned ahead is the People's Bank of China (PBOC). Having the luxury of its own, already functioning digital renminbi, the PBOC can afford to refuse lending legitimacy to stablecoins by banning them. But this sensible defiance leaves one gigantic dilemma unaddressed: China's public and private institutions hold accumulated savings of approximately US$4.5 trillion. Should they dump their dollars, thus giving a boost to the Trump team's plan to devalue the greenback, or hold them and remain exposed to the turbulence that Trump is so adept at stirring up? In the longer term, the danger is that monetary bifurcation exacerbates geopolitical and geo-economic uncertainty. Two parallel monetary systems – one based on public monies issued in China, India, and maybe the eurozone, and the other comprising private money, increasingly dominated by dollar-pegged stablecoins – would inevitably clash. Central bankers are not the only ones who should feel anxious. Yanis Varoufakis, a former finance minister of Greece, is leader of the MeRA25 party and professor of economics at the University of Athens. The views expressed are those of the writer and do not necessarily reflect those of FMT.
CTV News
26-05-2025
- Business
- CTV News
Global central banks talk harsh new economic realities in Tokyo
The headquarters of Bank of Japan (BOJ) is seen in Tokyo on Aug. 18, 2023. (AP Photo/Shuji Kajiyama, File) TOKYO — It's Japan's version of the Fed's Jackson Hole symposium, without the trail hikes or views, and this year's gathering of global central bankers in Tokyo will focus on two uncomfortable realities: flagging economic growth and sticky inflation. The Bank of Japan and its affiliated think tank host a two-day annual conference that kicks off on Tuesday and includes prominent U.S., European and Asian academics and central bankers. While most of the speeches are academic in nature and closed to media, this year's theme looks at 'New challenges for monetary policy,' specifically how central banks should deal with persistent inflation, downside economic risks, volatile markets and U.S. tariffs. Those conflicting headwinds, much of it a result of U.S. President Donald Trump's policies, are creating speedbumps for many central banks, regardless of whether they are raising and cutting interest rates. The BOJ, for example, remains on track to continue raising interest rates and steadily taper its bond purchases, a stark contrast to its rate cutting peers, but recent global developments have raised questions about the pace of such moves. 'While the BOJ may be forced to stand pat for a while, it doesn't need to ditch rate hikes altogether,' said former BOJ official Nobuyasu Atago. 'It just needs to communicate in a way that when the environment looks right, it can resume rate hikes.' Officials from the Federal Reserve, including New York Fed President John Williams, European Central Bank, Bank of Canada and Reserve Bank of Australia are among participants of the conference, which takes place at the BOJ's headquarters in central Tokyo. At last year's meeting, participants took stock of their experience battling economic downturns by discussing lessons learned from using various unconventional monetary easing tools. They also discussed whether Japan - an outlier that kept interest rates ultra-low even as other major central banks hiked aggressively - could emerge from decades of deflation and low inflation with budding signs of sustained wage hikes. While concerns this year center on tariff-induced economic downturns, the conference's session topics indicate policymakers still sensitive to risks of being caught with persistent, too-high inflation. One session features 'reserve demand, interest rate control, and quantitative tightening.' Another will debate a paper published by the International Monetary Fund (IMF) in December titled 'Monetary Policy and Inflation Scares.' That paper explains how large supply shocks, such as one caused by the COVID pandemic, can lead to persistent inflation, warning of the dangers central banks face assuming that they can look through cost-push price pressures. ERRATIC POLICY That could be a compelling message for major central banks that face a similar dilemma exacerbated by a global trade war and Trump's erratic trade policy. Initially thought to be on course for more rate cuts, the U.S. Federal Reserve has been forced into a waiting game with officials warning last week of creeping inflation due to tariffs. While the European Central Bank is expected to cut rates again in June, the case is growing for a pause beyond that as inflation challenges creep up on the horizon, according to Reuters' conversations with policymakers. 'Tariffs may be disinflationary in the short run but pose upside risks over the medium term,' ECB board member Isabel Schnabel, an outspoken policy hawk, told a conference at Stanford University on May 9, in an explicit call for a pause. The BOJ, too, faces the challenge of balancing domestic inflationary pressure and growth risks from U.S. tariffs. Trump tariffs forced the BOJ to sharply cut its growth forecasts on May 1, signaling a pause in its rate-hike cycle that still leaves short-term interest rates at a meager 0.5 per cent. And yet, Governor Kazuo Ueda has signaled readiness to resume rate hikes if underlying inflation stays on course to durably hit its 2 per cent target. Japan's core consumer inflation hit a more than two-year high of 3.5 per cent in April as food prices surged 7 per cent in a sign of the pain rising living costs are inflicting on households. 'It's clear the BOJ has failed to achieve its mandate of price stability,' said Atago, who is currently chief economist at Rakuten Securities Economic Research Institute. 'Inflation will always be among worries for the BOJ, which is probably already behind the curve in dealing with domestic price pressures.' Ueda delivers a keynote speech at the outset of the conference on Tuesday, followed by a lecture by Agustin Carstens, general manager of the Bank for International Settlements (BIS). (Reporting by Leika Kihara; Editing by Sam Holmes)
Globe and Mail
23-05-2025
- Business
- Globe and Mail
Investment puzzle
Trying to make investment decisions amidst so much geopolitical uncertainty is like trying to win at poker with a deck that keeps reshuffling itself mid-hand. A stray comment from a central banker, a vague tweet from a billionaire president, haphazard tariff headlines and trade deals that are more about strategy than substance have sent U.S. equity markets reeling or surging. The latest in this fear/greed playbook was an agreement between the U.S. and China to reduce their embargo style tariffs by 85% for 90 days so the parties could open negotiations for a comprehensive trade deal. That was welcome news for Chinese factories and U.S. importers. It also reset third- and fourth-quarter earnings expectations and spurred a massive rally in U.S. and Chinese stocks. At the end of trading on Monday, May 12, U.S. equities had recovered all the losses that were triggered by President Trump's April 2 'Liberation Day' levels. At the time of writing, U.S. equity markets were still below 2024-year-end levels (see chart below) but had made a remarkable recovery from the post-liberation day selloff. Perhaps more remarkable is the year-to-date performance of the Canadian market as measured by the iShares S&P/TSX 60 Index ETF (TSX: XIU), that is up 3.00% since the end of 2024. There is a puzzling divergence between hard and soft economic data as well as the uncertainty triggered by President Trump's haphazard approach to tariffs. The problem lies in trying to decipher why equity markets are paradoxically performing better than expected in light of the largest corporate tax hike in U.S. history. On a positive note, first-quarter earnings have come in better than expected. However, in keeping with our uncertainty barometer, forward guidance had all but disappeared. That's problematic for experts trying to predict outcomes across forward-looking equity markets. How can analysts assign reasonable probabilities to outcomes when corporate insiders cannot? We believe the performance of equity markets over the next six to nine months will come down to macroeconomic conditions rather than company-specific events. Perhaps, given the rally on May 12, investors have come to believe that Trump's tariff policies will deliver the results that he has been promising. A little pain now for a better economy later. Our view based on trading volumes and frequency of buy and sell decisions is that gyrations in the U.S. equity markets are being propelled by long-short hedge funds and retail day traders. And while we never discount the premonitions of the retail investor collective, one must ask if we are experiencing a classic fakeout boosted by misguided optimism. One thing is certain, the May 12 rally has diminished the outlook for any near-term rate cuts. We know that the U.S. economy did not feel the pinch of tariffs in the first quarter. There is also a view that consumers and companies attempted to front run the tariffs by stockpiling supplies and inventory. That would explain the better-than-expected profits during the first quarter. The hard economic data provides additional support to that thesis. There is clear evidence that the U.S. economy is declining. U.S. GDP decreased at 0.3% in the first quarter (January through the end of March), according to the advance estimate released by the U.S. Bureau of Economic Analysis. In the fourth quarter of 2024, real U.S. GDP increased 2.4%. The decrease in real first-quarter GDP was driven by an increase in imports, which are subtracted from the GDP calculation, and a decrease in government spending. These movements were partly offset by increases in investment, consumer spending, and exports. Consumer spending and private investment remained steady, increasing by 3% in the first quarter, compared with 2.9% in the fourth quarter. Private investment is a more challenging statistic. It may be the result of companies investing to onshore their production to avoid future tariffs. Or it could be projects that were underway but may not necessarily imply future expenditures. Inflation is also sticky. The year-over-year price index for retail consumption increased 3.4% in April, compared with an increase of 2.2% at the end of the fourth quarter. The personal consumption expenditures (PCE) price index (the Fed's favorite inflation barometer) increased by 3.6%, compared with an increase of 2.4% in the fourth quarter. Excluding food and energy prices, the PCE price index increased 3.5%, compared with an increase of 2.6% in the fourth quarter of 2024. These numbers point to a worrying rise in prices which requires the U.S. Federal Reserve (Fed) to question whether the inflationary impact is transitory or more deep-rooted. Interestingly, the inflation data seem at odds with an upbeat employment report. Non-farm payroll employment surprisingly rose by 177,000 in April, roughly in line with the average monthly gain of 152,000 over the prior 12 months. Employment continued to trend up in health care, transportation and warehousing, financial activities, and social assistance. Federal government employment declined. The total non-farm employment change for February revised down from +117,000 to +102,000, and the change for March was revised down from +228,000 to +185,000. On net, employment over these months is 58,000 lower than previously reported. Average hourly earnings for all employees on private-sector payrolls rose by 6 cents, or 0.2% in the month of April. So far this year, average hourly earnings have increased by 3.8% which is above the prevailing inflation rate. Clearly, the stronger-than-expected labor market was one catalyst that supported the upward momentum in equities. And that may continue if the labor market remains buoyant and the upward bias of employment income persists. Unfortunately, neither scenario is predictable. The soft economic data paints a very different picture. Surveys taken during March 2025 showed a marked decline in sentiment. According to the U.S. Conference Board, the Consumer Confidence Index declined by 7.2 points to 92.9, marking a 12-year low in consumer expectations for the future. This decline Is reminiscent of the fallout during the covid pandemic and reflects ongoing concerns about the economy. Consumer confidence has declined for four consecutive months. If the soft data hold, it means the future will not look anything like the recent past. Next time: Tariff guesswork, the Fed's uncomfortable position, and outlook for Canada Richard Croft is Founder, Chief Investment Officer, and Portfolio Manager of R.N. Croft Financial Group Inc. Disclaimers Content © 2025 by R.N. Croft Financial Group Inc. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited. Used with permission. Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Investment funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently, and past performance may not be repeated. The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. R N Croft Financial Group Inc. is a Licensed Discretionary Portfolio Management and Investment Fund Management company serving investors and investment professionals across Canada since 1993.
CTV News
22-05-2025
- Business
- CTV News
G7 finance ministers to wrap up summit in Banff
Finance ministers and central bankers from the G7 are gathering in Banff to lay the groundwork for the G7 Summit in Kananaskis. Rachel Aiello has the latest.
Al Arabiya
14-05-2025
- Business
- Al Arabiya
China, EU discuss global economic uncertainty, says central bank
China and the European Union had in-depth exchanges on global economic uncertainties during a financial working group meeting held in Brussels on Tuesday and Wednesday, the People's Bank of China said on Wednesday. The two sides discussed optimizing market access, cross-boarder data transfer and supervision of banking and insurance industries. Chinese and EU central bankers, financial and securities regulators attended the meeting.
