The 89 threats to life in the UK are listed in a recent report called the National Risk Register (NRR), which was published by the Deputy Prime Minister Oliver Dowden on 3rd August 2023.
The NRR is an assessment of the risks facing the UK that would have a significant impact on the UK’s safety, security or critical systems at a national level. The NRR is based on the government’s internal, classified risk assessment and offers more detail on the potential scenarios, response and recovery options relating to the risks.
The 89 threats are divided into four categories: natural hazards, malicious attacks, accidents and system failures, and global events.
Some of the threats
Natural hazards: These include extreme weather events, such as heatwaves, floods, storms, droughts, and wildfires; geological hazards, such as earthquakes, tsunamis, volcanic eruptions, and landslides; biological hazards, such as pandemics, animal diseases, plant diseases, and invasive species; and space weather events, such as solar flares and geomagnetic storms.
Malicious attacks: These include terrorism, such as bombings, shootings, chemical weapons, biological weapons, radiological weapons, cyberattacks, and drones; espionage and sabotage, such as interference with critical infrastructure, communications, or data; and conflict and instability, such as war, nuclear weapons, state-sponsored attacks, civil unrest, and violent extremism.
‘Cyber security hack – just one of the potential risks facing the UK’.
Accidents and system failures: These include industrial accidents, such as explosions, fires, spills, or leaks; transport accidents, such as plane crashes, train derailments, ship collisions, or road collisions; infrastructure failures, such as power outages, water shortages, gas leaks, or internet disruptions; and technological failures, such as software bugs, hardware malfunctions, or AI errors.
Global events: These include economic crises, such as recessions, inflation, debt defaults, or trade wars; political crises, such as coups, revolutions, sanctions, or human rights violations; social crises, such as migration flows, refugee crises, humanitarian emergencies, or famines; and environmental crises, such as climate change, biodiversity loss, pollution, or resource depletion.
Threat level
The NRR also provides information on how likely each threat is to occur in the next five years (from very low to very high), how severe the impact would be on the UK (from minor to catastrophic), and what actions the government and other stakeholders are taking to prevent or mitigate the risks.
The NRR is intended to help the public and businesses better understand and prepare for potential threats facing the country now and in the future.
The U.S. stock market has experienced a 5.6% slide for the S&P 500 index over 15 trading sessions through 17th August 2023 and levelling off in the last trading day of that week.
This is about as bad as August typically gets, as August is a rocky month with low volume and high volatility. Some of the reasons for the pullback include the rise in the 10-year Treasury yield, the strengthening of the U.S. dollar, and the signs of a slowing Chinese economy.
Pullback temporary for August?
However, some analysts argue that the pullback will likely prove to be temporary and not turn into a serious market rout. It has been suggested that the bull run isn’t quite over just yet, and that a 10% ‘pullback’ was on the cards.
Analysts also suggest that the rise in yields would need to threaten a serious shift or there would need to be an additional shock to cause a larger selloff.
NASDAQ
NASDAQ drops some 7% in one month from 19th July – 18th August 2023
However, some suggest that the market is showing signs of stability, as the speed of the surge in the 10-year yield often occurs near the end of a selling cycle for equities. Investors should watch for indicators such as oil prices, wage pressures, and inflation expectations to gauge the market sentiment.
The S&P 500 and the Dow levelled off the week at the close of trading Friday 18th August 2023.
The NASDAQ did score its best first half of the trading year since 1983 January to June 2023 so a pullback was likely to happen.
Bitcoin fell sharply on Thursday 17th August by 9% to just over $26,000
The fall in Bitcoin followed several hours after reports emerged that SpaceX, one of Elon Musk’s enterprises, wrote down the value of its Bitcoin holdings by a total of $373 million in 2022 and 2021, and that the space travel company had sold the virtual currency.
This is likely one of the fastest minute-by-minute selloffs in the history of Bitcoin but this is largely an Elon Musk/SpaceX-driven selloff and probably short-sighted and largely retail-driven. But still, 9% is a big drop for any asset!
In 2022, Tesla, which Musk also owns, announced that it sold about 75% of its Bitcoin holdings after investing $1.5 billion in the flagship cryptocurrency.
Bitcoin had been under pressure earlier, starting after the Federal Reserve issued the minutes from its July policy meeting. In Thursday’s session, the cryptocurrency slumped to its lowest level in almost two months.
Singapore’s financial regulator has reportedly said it had finalised rules for a type of digital currency called ‘stablecoin’, placing it among some of first the regulators worldwide to do so.
Stablecoins are a type of digital currency designed to hold a constant value against a fiat currency. Many claim to be backed by a reserve of real-world assets, such as cash or government bonds.
Reserves that back stabelcoins must be held in low-risk and highly-liquid assets. They must equal or exceed the value of the stablecoin in circulation at all times, the rules say. The stablecoin market is valued at around $125 billion, with two tokens – Tether’s USDT and Circle’s USDC – dominating roughly 90% of the market cap value. Stablecoins are broadly unregulated around the world.
The Monetary Authority of Singapore’s (MAS) framework requirement
Reserves that back stabelcoins must be held in low-risk and highly-liquid assets. They must equal or exceed the value of the stablecoin in circulation at all times
Stablecoin issuers must return the par value of the digital currency to holders within five business days of a redemption request.
Issuers must also provide ‘appropriate disclosures‘ to users, including the audit results of reserves.
These rules will apply to stablecoins that are issued in Singapore and mimic the value of the Singapore dollar, or of any G10 currencies, such as the U.S. dollar.
‘Shackles being removed from crypto regulation paving way for stablecoin adoption’
Last year, the collapse of a so-called algorithmic stablecoin named UST put this type of stablecoin in the crosshairs of regulators. Unlike USDT and USDC, UST was governed by an algorithm and did not have real-world assets like bonds in its reserves.
Singapore’s stablecoin framework puts it among one of the first jurisdictions to have such rules. In June, the U.K. passed a law that gives regulators the ability to oversee stablecoins, though there are no concrete rules yet. Hong Kong is meanwhile undergoing a public consultation on stablecoins and seeks to introduce regulation next year.
What is a stablecoin
A stablecoin is a type of cryptocurrency that tries to maintain a stable value by being pegged to another asset, such as a fiat currency, a commodity, or another cryptocurrency. Stablecoins aim to offer the benefits of cryptocurrencies, such as decentralisation, security, and transparency, without the drawbacks of high volatility and price fluctuations.
Stablecoins can be used for payments, remittances, trading, and storing value. However, stablecoins also face some challenges and risks, such as regulatory uncertainty, technical issues, and trust issues.
There are different ways to create and manage stablecoins, depending on the mechanism used to stabilize their value.
Main types of stablecoins
Fiat-backed: These stablecoins are backed by a reserve of fiat currency, such as the US dollar or the euro, held by a third-party entity. The stablecoin issuer promises to redeem the stablecoin for the fiat currency at a fixed ratio. Examples of fiat-backed stablecoins are Tether (USDT), USD Coin (USDC), and TrueUSD (TUSD).
Commodity-backed: These stablecoins are backed by a reserve of physical commodities, such as gold, silver, or oil, held by a third-party entity. The stablecoin issuer promises to redeem the stablecoin for the commodity at a fixed ratio. Examples of commodity-backed stablecoins are Paxos Gold (PAXG), Tether Gold (XAUT), and Digix Gold (DGX).
Crypto-backed: These stablecoins are backed by a reserve of other cryptocurrencies, such as Bitcoin or Ethereum, held in a smart contract. The stablecoin issuer uses over-collateralization or algorithmic adjustments to maintain the stability of the stablecoin. Examples of crypto-backed stablecoins are Dai (DAI), sUSD (SUSD), and BitUSD (BITUSD).
Algorithmic: These stablecoins are not backed by any reserve, but instead use an algorithm to control the supply and demand of the stablecoin. The algorithm adjusts the supply of the stablecoin according to the market conditions and the target price. Examples of algorithmic stablecoins are Basis Cash (BAC), Empty Set Dollar (ESD), and TerraUSD (UST).
What is ‘crypto’
Crypto has attracted a lot of attention in recent years. Crypto is short for cryptocurrency, which is a digital or virtual currency that uses cryptography to secure and verify transactions. Crypto can also refer to the underlying technology that powers cryptocurrencies, such as blockchain.
Some examples of popular cryptocurrencies are Bitcoin, Ethereum, Ripple ( XRP)and Cardano (ADA).
Cryptoman superhero
Cryptocurrencies have many advantages over traditional currencies, such as decentralisation, transparency, anonymity, and lower fees. However, they also face some challenges, such as volatility, regulation, security, and scalability. Crypto enthusiasts believe that cryptocurrencies have the potential to revolutionise the world of finance and beyond.
Some examples of popular stablecoins are Tether, USD Coin and Binance USD.
Asia is promoting clear crypto rules at a time when large businesses are facing regulatory uncertainty in the U.S.
Some Asian countries that have taken the lead in crypto regulation include Singapore, Hong Kong, Japan, and South Korea. They have proposed or implemented frameworks that protect investors, prevent money laundering, and encourage innovation in the crypto industry.
Lack of clarity in U.S.
In contrast, the U.S. has been singled out for its lack of clarity and consistency in crypto regulation. The SEC for instance and other agencies have different views on how to classify and regulate crypto assets – take alook at the case with XRP and ripple of recent years.
Some industry leaders have threatened to leave the U.S. or sued the regulators over their actions. There is also a debate in Congress that could level crypto transactions with a tax.
Attractive
As a result, some analysts have suggested that Asia could become more attractive to investors and innovators in the crypto industry, as it offers more certainty and stability in the regulatory environment.
However, there are also challenges and risks involved in crypto regulation, such as balancing security and innovation, ensuring compliance and enforcement, and dealing with cross-border issue.
A technical issue that affected the Bank of Ireland’s online banking services allowed some customers to withdraw or transfer more money than they had in their accounts.
The glitch reportedly also added €1,000 to some accounts without explanation. This led to large crowds forming at ATMs across the country, hoping to take advantage of the error.
Some reports suggest that the police were called to calm some situations as some ATMs ran out of cash. The bank has since fixed the problem and warned customers that any excess money they withdrew or transferred will be debited from their accounts.
The bank also apologized for the disruption and urged customers who may face financial difficulties due to overdrawing on their accounts to contact them.
Questions remain – how or even why did this happen?
‘Bank error allowed people to withdraw money from their accounts they didn’t have’.
According to the Office for National Statistics (ONS) – Inflation fell to 6.8% in the year to July 2023, down from 7.9% in June. A reduction was anticipated by analysts, and there are signs the cost of living could be easing finally, after figures on Tuesday revealed wages rose 7.8% annually between April and June 2023. But inflation and therefore prices remain high, placing pressure on household finances.
When the rate of inflation falls, it does not always mean that prices are coming down, but that they are likely to rise less quickly. A fall in gas and electricity prices last month helped drive inflation lower. The cost of some food food items, such as milk, bread and cereals had come down, but that food prices are still some 15% higher than they were in July 2022.
Core inflation
However, according to the ONS figures core inflation a figure which strips out the price of energy, food, alcohol and tobacco, remained unchanged in July at 6.9%. With inflation still more than three times the Bank of England’s 2% target, many ‘experts’ expect the UK’s central bank to raise interest rates again in September 2023.
The Bank has steadily hiked interest rates to 5.25%, the highest level in 15 years, meaning mortgage costs have jumped dramatically, but on the flipside savings rates have increased too for the first time since the financial crisis of 2008.
Working?
The Chancellor said July’s figures on the cost of living showed the action the government had taken ‘is working’.
Comment
Well… it’s ‘working‘ in the sense it is having the desired affect to reduce inflation – (that both the government and the Bank of England were way behind on) – but it isn’t helping the economy, as interest rates climb making it more expensive for businesses and consumers to function.
But, at least wages are going up now thanks to all the strikes! This will ultimately add more inflationary pressure in the short term.
Regular pay grew by 7.8%, the highest annual growth rate since comparable records began in 2001.Inflation, which measures the pace at which prices are rising, has eased but remains relatively high at 7.9%. Thhe ONS suggested these latest figures demonstrates ‘people’s real pay is recovering‘ and that basic pay is growing at its fastest since current records began’.
However, wage growth is still not quite outstripping the pace of price rises and inflation is still high. Figures suggest that, taking into account the Consumer Prices Index (CPI) measure of inflation, average regular pay fell by 0.6%.
There are signs in the ONS’s data that the UK employment market is easing. The jobless rate rose from 4% to 4.2%, while the number of people in employment ticked lower.
Backward stats..?
The fall in employment in the three months to June and the further rise in the unemployment rate will be welcomed by the Bank of England as a sign labour market conditions are cooling. These comments from an analyst were presented as welcome news – but they are odd really when an economy needs good levels of employment (not unemployment). We live in weird times! Good news! Bad news!
The Bank of England is still generally expected by many pundits to increase its key interest rate again to 5.5% before ending the current run of rate rises.
The number of vacancies in the UK jobs market fell again, down 66,000 between May and July 2023. However, there are still more than one million vacancies.
Strike action adds to inflationary pressure
List of workers striking for higher pay
Teachers
Tube staff
Railway workers
Doctors
Nurses
NHS staff
Ambulance workers
Passport Office workers
Border control staff
Airport workers
Civil servants
University staff
Barristers
This is by no means an exhaustive list – just a sample of the demands placed on resources through strike action that impacts inflation through a period of fast wage growth.
Japan’s economy beats expectations with 6% annualised growth in Q2
Japan’s economy posted its third straight quarterly expansion, latest government data showed 15th August 2023, as robust export growth contributed to an annualised 6% expansion in the second quarter, easily beating market expectations.
Economists had reportedly expected the world’s third-largest economy to produce a 3.1% growth in the April-June quarter. The GDP data translated to a more modest quarterly expansion of 1.5%, topping expectations for 0.8% growth.
The strong performance was mainly driven by a surge in exports, especially in the auto sector, as global demand recovered from the impact of the COVID-19 pandemic. Japan also benefited from an increase in inbound tourism, as travel restrictions eased and the Tokyo Olympics boosted visitor arrivals.
Outlook
However, the outlook for the Japanese economy remains uncertain, as the country faces a resurgence of COVID-19 cases and a sluggish consumer recovery. The government has extended a state of emergency in several regions, including Tokyo and Osaka, until the end of August, which could dampen domestic spending and business activity.
Quarterly expansion came in at a more modest 1.5%, versus expectations for 0.8% growth.
Optimism was tempered by muted domestic demand, given a surprise drop in private consumption expenditure despite the first employee compensation sequential increase in seven quarters.
Historically low interest rates
The Bank of Japan has maintained its ultra-easy monetary policy stance, keeping its key interest rate at -0.1% and pledging to support the economy with massive asset purchases.
The central bank has also introduced a new lending scheme to encourage green and digital investment for the future.
Russia’s central bank has announced a surprise hike in its key lending rate by 3.5%, from 8.5% to 12%, as the country’s economic recovery loses steam amid a resurgence of COVID-19 cases and weak domestic demand.
The decision was announced after an emergency meeting of the bank’s board of directors was called a day earlier as the ruble declined. The fall comes as Moscow increases military spending and Western sanctions weigh on its energy exports.
The Russian currency passed 101 roubles to the dollar on Monday, losing more than a third of its value since the beginning of the year and hitting the lowest level in almost 17 months. It had recovered slightly after the central bank announced the meeting.
The central bank blamed the weak ruble on ‘loose monetary policy‘, suggesting that bank has ‘all the tools necessary‘ to stabilize the situation.
More imports, less exports
By raising borrowing costs, the central bank is trying to fight price spikes as Russia imports more and exports less, especially oil and natural gas, with defense spending going up and sanctions taking a toll. Importing more and exporting less means a smaller trade surplus, which typically weighs on a country’s currency.
The bank also made a big rate hike of 1% last month, saying inflation is expected to keep rising and the fall in the ruble is adding to the risk.
After Western countries imposed sanctions on Russia over the invasion of Ukraine in February 2022, the ruble plunged to a low of 130 to the dollar, but the central bank enacted capital controls that stabilized its value.
China’s central bank has announced a surprise cut in its key lending rates as the country’s economic recovery loses steam amid as domestic demand remains weak.
The PBOC trimmed the interest rate on 401 billion yuan ($55.25 billion) worth of one-year medium-term lending facility (MLF) loans from 2.65% to 2.50%.
The People’s Bank of China (PBOC) said on Monday 14th August 2023 that it would lower the one-year loan prime rate (LPR) by 10 basis points from 3.55% to 3.45%, and the five-year LPR by 10 basis points from 4.2% to 4.1%. The LPRs are benchmark rates that reflect the cost of borrowing for banks and businesses.
Easing domestic contraints
The rate cuts are aimed at easing the financial constraints on households and businesses to boost their financing demand and stimulating economic growth, which slowed to 5.2% year-on-year in the second quarter, down from 6.8% in the first quarter.
Analysts said the rate cuts also indicated a shift in China’s monetary policy stance from neutral to moderately easing, as the PBOC faces increasing pressure to support the economy amid rising deflationary risks, falling producer and consumer prices, and subdued real estate activity.
The PBOC reportedly said it would continue to implement a prudent monetary policy and maintain reasonable and sufficient liquidity in the market.
UK to unleash £50 billion in pension funding for tech startups
The U.K. government has unveiled a series of reforms that will allow pension funds to invest more in private and high-growth companies, especially in the tech sector. The move is expected to boost economic growth, support innovation and increase returns for future retirees.
The reforms include an agreement with the country’s largest defined contribution pension schemes to allocate 5% of assets in their default funds to unlisted equities by 2030. This could unlock up to £50 billion of investment in high-growth firms if all other defined contribution pension schemes follow suit, according to the government.
AI
The government will also create new investment vehicles that will give pensioners a stake in homegrown private companies, such as fintech and biotech startups, that have increasingly snubbed the London Stock Exchange and turned to foreign investors for cash. The aim is to make the U.K. a more attractive market for technology and a global leader in emerging fields like artificial intelligence.
The Treasury claimed that the reforms would not only help burgeoning industries, but could also result in higher returns for workers’ retirement funds. The government estimates that the average earner’s pension pot could rise up to 12% to as much as £16,000 with defined contribution pension schemes committing to more effective investments.
Unlock
The announcement comes amid criticism that the U.K. is losing its edge in technology and innovation, as evidenced by the recent decision of U.K. chip design giant Arm to list in New York rather than London. The chancellor, Jeremy Hunt, reportedly said that he wanted to make the U.K. ‘the world’s next Silicon Valley and a science superpower’ by unlocking investment from the U.K.’s £2.5 trillion pensions sector.
The reforms were welcomed by industry groups and experts, who said that they would help address the funding gap faced by many U.K. startups and scale-ups, and create more opportunities for long-term growth and value creation.
Amazon is one of the leading companies in the field of artificial intelligence (AI) and has been developing its own custom chips to power its AI applications and services.
Amazon’s AI chips are designed to perform tasks such as natural language processing, computer vision, speech recognition, and machine learning inference and training.
AI chips created by Amazon
AZ2: This is a processor built into the Echo Show 15 smart display and powers artificial intelligence tasks like understanding your voice commands and figuring out who is issuing those commands. The AZ2 chip also enables features such as visual ID, which can recognize faces and display personalized information on the screen.
Inferentia: This is a high-performance chip that Amazon launched to deliver low-cost and high-throughput inference for deep learning applications. Inferentia powers Amazon Elastic Compute Cloud (EC2) Inf1 instances, which are optimized for running inference workloads on AWS. Inferentia also powers some of Amazon’s own services, such as Alexa, Rekognition, and SageMaker Neo.
Trainium: This is a chip that Amazon designed to provide high-performance and low-cost training for machine learning models. Trainium will power Amazon EC2 Inf2 instances, which are designed to train increasingly complex models, such as large language models and vision transformers. Trainium will also support scale-out distributed training with ultra-high-speed connectivity between accelerators.
Despite advancements is Amazon chasing to keep up?
Amazon is racing to catch up with Microsoft and Google in the field of generative AI, which is a branch of AI that can create new content or data from existing data. Generative AI can be used for applications such as natural language generation, image and video synthesis, text summarization, and personalization.
AI models from Amazon
Titan: This is a family of large language models (LLMs). Titan models can generate natural language texts for various domains and tasks, such as conversational agents, document summarization, product reviews, and more. Titan models are trained on a large and diverse corpus of text data from various sources, such as books, news articles, social media posts, and product descriptions.
Powerful chips for artificial intelligence (AI)
Bedrock: This is a service that Amazon created to help developers enhance their software using generative AI. Bedrock provides access to pre-trained Titan models and tools to customize them for specific use cases. Bedrock also allows developers to deploy their generative AI applications on AWS using Inferentia or Trainium chips.
Generative AI
Amazon’s CEO, Andy Jassy in the past said he thought of generative AI as having three macro layers: the compute, the models, and the applications. He said that Amazon is investing heavily in all three layers and that its custom chips are a key part of its strategy to provide high-performance and low-cost compute for generative AI. He also said that Amazon is not used to chasing markets but creating them, and that he believes Amazon has the best platform for generative AI in the world.
Inferentia and Trainium, offer AWS customers an alternative to training their large language models on Nvidia GPUs, which have been getting difficult and expensive to procure.
‘The entire world would like more chips for doing generative AI, whether that’s GPUs or whether that’s Amazon’s own chips that we’re designing’, Amazon Web Services CEO Adam Selipsky is reported to have said. ‘I think that we’re in a better position than anybody else on Earth to supply the capacity that our customers collectively are going to want’.
Fast actors
Yet others have acted faster, and invested more, to capture business from the generative AI boom. When OpenAI launched ChatGPT in November 2022, Microsoft gained widespread attention for hosting the chatbot, and investing a reportedly whopping $13 billion in OpenAI. It was quick to add the generative AI models to its own products, incorporating them into Bing in February 2023.
That same month, Google launched its own large language model, Bard, followed by a $300 million investment in OpenAI rival Anthropic.
AI Chat Bot robot
It wasn’t until April 2023 that Amazon announced its own family of large language models, called Titan, along with a service called Bedrock to help developers enhance software using generative AI.
Amazon is not used to chasing markets. Amazon is used to creating markets. And for the first time for some time, they find themselves on the back foot and working to play catch up.
And Meta?
Meta also recently released its own LLM, Llama 2. The open-source ChatGPT rival is now available for people to test on Microsoft’s Azure public cloud.
U.K. economy beat expectations with 0.2% growth in the second quarter, boosted by household consumption and manufacturing output, the Office for National Statistics said Friday.
Economists had expected U.K. GDP to level off in the second quarter, after a surprise increase of 0.1% in the first quarter, as the Bank of England’s monetary policy tightening took effect and as persistent inflation began to slow consumer demand.
The economy expanded by 0.5% in June 2023, beating a forecast of 0.2% growth. It follows monthly GDP growth of 0.1% in May and 0.2% in April. However, the strength of the June rise was partially attributed to warm weather, as well as the additional public holiday in May to celebrate the coronation of King Charles III.
Better than expected
GDP was lifted by 1.6% growth in manufacturing and 0.7% in production in the second quarter, while services grew by 0.1%.
The Office for National Statistics (ONS) noted strong growth in household and government consumption in terms of expenditure. Both faced price pressures in the quarter, though this moderated from the previous three-month period.
Growth in June 2023 was stronger than expected at 0.5%
Growth in June 2023 was stronger than expected at 0.5%, showing a recovery when the economy lost one working day due to the national holiday in May. June’s warm weather also benefited the construction industry as well as pubs and restaurants. But the economy was impacted by strike action by NHS workers, doctors, railway unions and teachers. However, the figures for the three months and June in particular were better-than-expected.
What does it mean?
Gross Domestic Product (GDP) is one of the most important tools for looking at the health of the economy, and is watched closely by the government and businesses. If the figure is increasing, that means the economy is growing and people are doing more work and getting a little bit richer, on average.
But if GDP is falling, then the economy is shrinking which can be bad news for businesses. If GDP falls for two quarters in a row, it is typically defined as a recession.
U.S. consumer prices rose a mild 0.2% in July, but the rate of inflation rose for the first time in more than in a year in a sign it’s going to take a while to get the cost of living fully under control. But a steady slowdown in inflation over the past year could keep the Federal Reserve on the sidelines when officials consider whether to raise interest rates again at their next meeting in September.
The yearly rate of inflation, rose to 3.2% from to 3% in the prior month. It’s the first increase in 13 months, though inflation has eased considerably since hitting a 40-year high of 9.1% in 2022. The core rate of inflation, which omits volatile food and energy costs, also rose 0.2% last month.
The increase in core inflation over the past year slowed slightly to 4.7% from 4.8%. That’s the lowest rate in almost two years. The Fed doesn’t ignore food and energy prices, but the central bank views the core rate as a better predictor of inflation trends. Even so, the core rate of inflation remains well above the Fed’s 2% goal.
Rapid rate rise
Over the past year the U.S. central bank has been raising interest rates rapidly to try to slow the economy and dampen inflation, but it’s unclear if the Fed will continue to do so at its next meeting in September 2023. Financial markets put the odds close to zero.
Inflation has slowed sharply in the first half of 2023, but further gains this year are unlikely to come as easy. U.S. gas (petrol) prices are on the rise again. U.S. rent and house prices are still going up. And labour costs are increasing more than 4% a year, making it harder for the Fed to achieve its inflation target.
Robust economy
The U.S. economy, for its part, is still expanding at a surprisingly robust pace. Strong consumer demand could keep prices elevated, especially for popular services such as hotel rentals, dining out and entertainment.
Whether inflation is still rising too fast for the Fed to necessate another rate hike in September remains to be seen, for now.
The UK’s elections watchdog has revealed it has been the victim of a complex cyber-attack potentially affecting millions of voters.
The Electoral Commission said unspecified ‘hostile actors‘ had managed to gain access to copies of the electoral registers, from August 2021. Note the word ‘unspecified’ is used – do they even know?
Hackers also broke into its emails and “control systems” but the attack was not discovered until October last year. The watchdog has warned people to watch out for unauthorised use of their data.
The commission said hackers accessed copies of the registers it was holding for research purposes, and for conducting checks on political donors. The commission knew which of its systems were accessible to the hackers, but could not ‘conclusively‘ identify which files may have been accessed.
‘Very sophisticated’ attack
The personal data held on the registers – name and address – did not itself present a ‘high risk‘ to individuals, it added, although it is possible it could be combined with other public information to ‘identify and profile individuals’.
It has not said when the hackers’ access to its systems was stopped, but said they were secured as soon as possible after the attack was identified in October 2022. Why was it left so long to be made public and how long did it take to make systems secure again?
Explaining why it had not made the attack public before now, the commission said it first needed to stop the hackers’ access, examine the extent of the incident and put additional security measures in place.Defending the delay, commission chair John Pullinger said: “If you go public on a vulnerability before you have sealed it off, then you are risking more vulnerabilities.” He is reported to have said the ‘very sophisticated attack involved using software to try and get in and evade our systems’. Well, that clearly worked then.
The world of digital data
He reportedly said that the hackers were not able to alter or delete any information on the electoral registers themselves, which are maintained by registration officers around the country. Information about donations and loans to political parties and registered campaigners is held in a system that is not affected by this incident, the notice added. He understood public concern, and would like to apologise to those affected.
Steps
The commission added that it had taken steps to secure its systems against future attacks, including by updating its login requirements, alert system and firewall policies. The Information Commissioner’s Office, which is responsible for data protection in the UK, said it was urgently investigating.
Labour’s deputy leader Angela Rayner reportedly said: ‘This serious incident must be fully and thoroughly investigated so lessons can be learned‘. Why wouldn’t it be investigated? I dislike it immensely when clueless politicians roll out this ‘standard remark’ as an attempt to demonstrate they ‘know what’s going on’.
Then what? It happens again and we have to… learn more lessons…?
Americans are using their credit cards more than ever, pushing the total balance to over $1 trillion for the first time in history, according to a report from the New York Federal Reserve.
The report, released August 2023, showed that credit card balances rose by $45 billion to $1.03 trillion in the second quarter of 2023, reflecting robust consumer spending as well as higher prices due to inflation. The increase was the largest quarterly gain since 2008 and surpassed the previous record of $1.02 trillion set in 2019.
The rise in credit card debt also coincided with a higher payment failure rate, which measures the share of borrowers who are at least 30 days behind on their payments. The failure measure climbed to 7.2% in the second quarter, up from 6.5% in the first quarter and the highest level since 2012.
The New York Fed reportedly said that the increase in failure rates may reflect a normalization to pre-pandemic levels, as many lenders offered relief programs and forbearance options to borrowers during the Covid-19 crisis. However, some analysts warned that the high level of credit card debt could pose a risk to the financial stability of households and the economy if interest rates rise or incomes fall.
Expensive debt
Credit card debt is one of the most expensive forms of debt, and it can quickly spiral out of control if not managed. ‘Consumers should aim to pay off their balances in full every month, or at least pay more than the minimum due, to avoid paying unnecessary interest and fees.
The burden of debt is all to consuming!
Interest rates and fees on credit cards are one of the highest payable and if you fall into the debt spiral it can be almost impossible to liberate yourself from that consuming debt.
Younger users
The New York Fed also noted that credit card usage has become more widespread among Americans, especially among younger and lower-income borrowers. The share of adults with at least one credit card increased from 76% in 2019 to 79% in 2021, while the share of those with four or more cards rose from 18% to 21% over the same period.
Tool
The report suggested that credit cards have become an essential tool for many consumers to access credit and smooth purchases over time, especially during periods of economic uncertainty and volatility. However, it also cautioned that credit cards can also lead to overborrowing and financial distress if not used responsibly.
It is one of the most expensive ways to borrow money and far too easy to access.
China’s consumer price index (CPI) fell by 0.3% in August from a year ago, while the producer price index (PPI) fell by 4.4% last month. This is the first time since February 2021 that the CPI has fallen, and the 10th consecutive month that the PPI has contracted. This indicates that China is experiencing deflation pressure as demand in the world’s second-largest economy weakens.
Factors that contribute to the deflation risk
A prolonged property market slump, which reduces investment and consumption.
A plunging demand for exports, due to the global economic slowdown and trade tensions with the United States.
A subdued consumer spending, due to the coronavirus pandemic and rising unemployment.
Deflation can have negative effects on the economy
Lowering profits and incomes for businesses and households.
Increasing the real value of debt and making it harder to repay.
Reducing incentives for investment and innovation.
Creating a downward spiral of falling prices and demand.
The Chinese government and the central bank have taken some measures to stimulate the economy and prevent deflation.
Cutting interest rates and reserve requirement ratios for banks.
Increasing fiscal spending and issuing special bonds for infrastructure projects.
Providing tax relief and subsidies for businesses and consumers.
However, these measures have not been enough to offset the deflationary pressure, and some analysts expect more monetary easing and fiscal support in the coming months.
Deflation definition
Deflation is the opposite of inflation. It means that the prices of goods and services are going down over time. This may sound good for consumers, who can buy more with the same amount of money. But deflation can also have negative effects on the economy.
Deflation can be caused by a decrease in the supply of money and credit, a fall in demand, or an increase in productivity. To prevent or reverse deflation, the central bank and the government can use monetary and fiscal policies to stimulate the economy, much the same as we are now seeing to deal with ‘inflation’.
According to latest figures the country’s trade fell more sharply than expected in July 2023, as both global and domestic demand receded amid the pandemic and ongoing tensions with the United States.
China’s exports fell by 14.5% in July 2023 from a year ago, the biggest drop since February 2020, while imports dropped by 12.4%, according to Chinese data. This was much worse than the 5% decline in both exports and imports analysts were expecting.
Poor trade performance
Some of the reasons for the poor trade performance are the rising costs of raw materials, the global shortage of semiconductors, the Covid-19 outbreaks in some regions, and the U.S. sanctions on some Chinese companies.
China’s trade with the U.S., its largest trading partner, fell in the first seven months of the year. The trade slump has added pressure on China to provide more support for the economy, which has lost momentum after a strong recovery in late 2020 and early 2021.
China’s trade drop July 2023 more than expected
China’s trade situation is also closely watched by other countries, as it reflects the health of the global economy and demand for goods. Some analysts have warned that China’s trade slowdown could signal a broader weakening of consumer spending in developed economies, which could lead to recessions later this year. China’s trade data also has implications for inflation and monetary policy, as lower import prices could ease inflationary pressures and allow central banks to keep interest rates low.
China’s export to the U.S. and EU down
China’s exports to the U.S. plunged by 23.1% year-on-year in July 2023, while those to the European Union fell by 20.6%, CNBC analysis of customs data showed. Exports to the Association of Southeast Asian Nations fell by 21.4%, according to the data. Chinese imports of crude oil dropped by 20.8% in July from a year ago, while imports of integrated circuits fell by nearly 17%.
China’s imports from Russia fell by around 8% in July 2023 from a year ago, the data showed.
A slowdown in U.S. and other major economies’ growth has dragged down Chinese exports this year. Meanwhile, China’s domestic demand has remained subdued.
Growth areas
Among the few higher-value export categories that saw a significant increase in the first seven months of the year were: cars, refined oil, suitcases and bags. And for imports: paper pulp, coal products and edible vegetable oil were among the categories seeing significant growth in the January to July period from a year ago.
Chancellor Jeremy Hunt has asked the City watchdog to speed up a probe into whether people have had bank accounts closed due to their political views
It follows a row over the closure of former UKIP leader Nigel Farage’s Coutts account.
Mr Hunt requested the Financial Conduct Authority (FCA) to ‘urgently investigate how widespread this practice is, and put a stop to it’. The FCA reportedly said Mr Hunt’s request is ‘in line with our plans‘.
It comes after Mr Farage obtained a report from Coutts which indicated his political views were considered as a factor in his account closure. Mr Farage had his account re-instated and has launched a campaign against account closures which has received support from government ministers.
Express or suppress?
The FCA is already preparing to look into this, and banks also face government reforms over account closures. Mr Hunt reportedly said: ‘You can agree or disagree with Nigel Farage but everyone wants to be able to express their opinions’.
‘In today’s society, you need a bank account function and so a threat to be de-banked is a threat to your right to express your opinions‘.
Mr Hunt expressed the FCA has the power to fine banks ‘very large sums of money if they find this practice widespread’.
The Bank of England’s forecasting, which has a major impact on the UK economy, is being reviewed and has been criticised.
After the Bank raised interest rates for a 14th time in a row in an effort to slow price rises in Augts 2023, officials have predicted inflation to fall from the current rate of 7.9%, to ‘around 5%‘ by the end of the year. The Bank puts rates up when they are concerned that too much spending will send prices spiralling.
So, in light of its estimating techniques being challenged, how much faith should we put in ‘5% by Christmas’?
For the last two years, the Bank of England has been underestimating the likely rate of inflation in the short term. MPs have been critical of the Bank’s forecast, and its officials have acknowledged they have got some judgements wrong in their forecasting.
The Central Bank has also announced a review into how it makes forecasts.
This was one of the questions put to the Bank of England governor
Mr Baron:Good morning, everyone. In looking at the bank rate going forward, some of us, it is fair to say, have long believed that central banks, including the Bank of England, have been well behind the curve with regard to inflation. As the Chair has said, forecasting has been awry. The Bank of England is one among others that has been too slow in raising interest rates, allowing inflation to mushroom well above the 2% target.
I have put it as strongly as suggesting that it has been a woeful neglect of duty. It is causing real pain out there for people and businesses. We should always remember, as we sit in our, sometimes, white ivory towers, having these debates, that we are talking about people’s lives and businesses that are having to grapple with double-digit inflation and interest rates perhaps going up too quickly. I think that you get it, but it is useful to remind ourselves of that.
Why should the public have confidence in your ability to get it right going forward? What lessons do you think that you have learned? What are you going to do differently? I am not hearing a satisfactory answer to that...
See the full report here – be prepared, it’s an acquired taste and a long read…
More wrong than right
However, some critics have argued that the BoE’s forecasts are often too optimistic or pessimistic, and that they fail to capture the impact of major shocks or structural changes in the economy. For example, the BoE was widely criticised for underestimating the severity of the 2008 financial crisis and overestimating the negative effects of Brexit on the economy. Some have also questioned the usefulness of the BoE’s forecasts for guiding monetary policy decisions, as they may be influenced by political or psychological factors.
Therefore, it may be wise to take the BoE’s forecasts with a grain of salt, and not to rely on them too much for making economic or financial decisions. The BoE’s forecasts are not useless, but they are not infallible either. They are one of many sources of information and analysis that can help us understand the state and prospects of the UK economy, but they should not be treated as gospel truth.
The Bank of England has been wrong with too many forecasts, so why bother? Target 2%, actual above 10%!
According to the chancellor Jeremy Hunt, the UK economy is caught in a trap
The UK and other advanced economies are facing a low-growth trap that is hard to escape. This means that the potential growth of the economy, which depends on factors such as productivity, innovation, investment, and labour force, is very low and insufficient to meet the demand and expectations of the people.
Brexit
The UK economy has been hit by huge global shocks that have disrupted its normal functioning and recovery. These include the Covid-19 pandemic, which caused lockdowns, restrictions, and health crises; the energy crisis, which led to soaring gas prices and supply shortages; and the Brexit transition, which created uncertainty and trade barriers.
Inflation
The UK economy is also struggling with high inflation, which erodes the purchasing power of consumers and businesses. Inflation is driven by various factors, such as rising energy costs, global supply chain bottlenecks, labour shortages, and pent-up demand.
‘Don’t you just love numbers?’
The Bank of England has raised interest rates to 5.25% as of August 2023 – the highest level since 2008, to curb inflation and maintain price stability. The Bank of England inflation target is 2%.
The plan?
The chancellor reportedly has vowed to stick to the plan that he believes will bring down inflation and boost growth in the long term.
He said that he will unveil a plan in the autumn statement that will show how the UK can break out of the low-growth trap and become one of the most entrepreneurial economies in the world. He also said that he will not ‘veer around like a shopping trolley‘ and change course in response to short-term pressures.
China has been leading the global electric vehicle (EV) market for years, thanks to its large domestic demand, generous government subsidies, and well-established battery and electronics industry. However, the west is not giving up on the race to electrify the transport sector and reduce greenhouse gas emissions.
Europe reportedly surpassed China in terms of new EV registrations in 2020, driven by stricter emission regulations, higher consumer awareness, and more diverse and affordable models. The United States also saw a growth in EV sales, despite the Covid-19 pandemic and lower fuel prices. How are western countries and companies now competing with China in the EV market?
Global automakers such are using advanced tech such as driver-assist software to compete in the world’s largest EV market – China. ‘China’s domestic brands are leading the market in the development and implementation of advanced assisted driving systems, capitalizing on their early-entry advantages in the electric and intelligent vehicle sector‘, a recent report suggests.
BofA reportedly said it expects China to still be the world’s largest EV market in 2025, standing at 40%-45% market share.
Strategy
One of the strategies is to invest more in research and development, innovation, and collaboration. Western automakers are trying to improve the performance, efficiency, and cost of their EVs by developing new technologies and designs, such as advanced batteries, smart and autonomous features, and sustainable materials. They are also partnering with other players in the EV ecosystem, such as battery suppliers, charging network operators, software developers, and regulators, to create synergies and overcome challenges.
EV
Another strategy is to adapt to local market conditions and consumer preferences. Western automakers are aware that China is not a homogeneous market, but rather a complex and dynamic one with different regional characteristics, customer segments, and competitive landscapes. They are tailoring their products and services to meet the specific needs and expectations of Chinese consumers, such as offering more connectivity options, longer driving ranges, and lower prices. They are also leveraging their global brand reputation, quality standards, and customer loyalty to differentiate themselves from local competitors.
Niche markets
A third strategy is to diversify their portfolio and target niche markets. Western automakers are not only focusing on passenger cars, but also exploring other types of EVs, such as commercial vehicles, motorcycles, scooters, and buses. They are also targeting niche markets that have high growth potential or specific demands, such as luxury cars, sports cars, or green cars. By doing so, they can tap into new customer segments and create more opportunities.
The EV market is expected to grow rapidly in the coming years, as more countries and regions adopt policies and measures to support the transition to low-carbon mobility. China will remain a dominant player in the global EV scene, but the west will not lag behind.
How do EV’s compare to traditional vehicles?
Electric vehicles (EVs) are becoming more popular and competitive with traditional cars in terms of performance and cost. Here are some of the main differences and similarities between EVs and traditional cars:
Performance: EVs have a faster acceleration and are more efficient than traditional cars. They can reach high speeds in a short time, thanks to their instant torque rovided by the electric motor. They also have a smoother and quieter ride, as they do not have gears or transmissions. However, traditional cars perform better at high speeds and have a longer driving range than EVs. They can also handle different terrains and weather conditions better than EVs, as they have more power and stability.
Cost: EVs have a higher retail price than traditional cars, on average. But EVs may be a better financial deal for consumers over the long term. That’s because maintenance, repair and fuel costs tend to be lower than those for fossil fuel cars. EVs have fewer moving parts and fluids, which means they require less servicing and repairs. They also run on electricity, which is cheaper and cleaner than fossil derived fuels. However, traditional cars have lower upfront costs and more financing options than EVs. They also have a higher resale value and more availability than EVs, as they are more common and therefore familiar to buyers.
Environmental impact: EVs are more environmentally friendly than traditional cars, as they do not emit greenhouse gases or pollutants that contribute to air quality problems. They can also use renewable energy sources, such as solar or wind power, to charge their batteries and use fossil derived energy too.
However, EVs are not completely carbon-neutral, as they still depend on the electricity grid, which still uses fossil fuels to generate power. They also produce emissions during their manufacture and disposal processes.
Traditional cars, on the other hand, are a major source of carbon emissions and environmental damage, as they burn fossil fuels and release harmful substances into the atmosphere such as carbon monoxide and carbon dioxide. They also consume natural resources and create waste during their production and operation.
Fossil fuels generate power for the electric vehicle
As the EV population grows, so too will the energy requirement – and it will most likely be met moreso by fossil fuels in the short term as well as by renewables.
According to various sources, electric cars are generally cheaper to run than petrol cars in terms of fuel, road tax, maintenance, and insurance. However, the initial purchase price of electric cars is usually higher than petrol cars, so the overall cost of ownership may depend on how long you plan to keep the car and how much you drive it.
Running cost examples of electric cars vs petrol cars – (Spring 2023 data)
According to British Gas – fully charging a typical 60kW electric car at home costs £15.10 and gives you a 200-mile range, whereas filling up a petrol car with a similar range costs over £104. Electric cars also pay zero road tax, while petrol cars pay between £30 to £2,365 per year depending on their CO2 emissions. Electric cars also tend to have lower maintenance and insurance costs than petrol cars.
According to Regit – charging an electric car like the Vauxhall Corsa-E costs roughly £9.50 in electricity for a 200-mile range, while fuelling a petrol car with a similar range costs £41.63 in petrol. Electric cars also save money on road tax, maintenance, and congestion charges compared to petrol cars.
According to Which? – the electric Mini Cooper SE costs £8,000 more to buy than the petrol Mini One, but it costs £2,591 less to run over three years, mainly due to fuel savings. The electric car also pays no road tax or congestion charges, while the petrol car pays £155 and £11.50 per day respectively.
According to Auto Express – the annual running costs of an electric car are 21% less than those of a petrol car, excluding the purchase price. The average annual running cost for an electric car is £1,742, compared to £2,205 for a petrol car.
According to RAC – the annual running costs of an electric car like the Nissan Leaf are £1,233 less than those of a petrol car like the Ford Focus, excluding the purchase price. The electric car costs £1,062 per year to run, while the petrol car costs £2,295
Conclusion
There are many factors that affect the running costs of electric cars vs petrol cars, and different sources may have different assumptions and methods of calculation. However, the general trend is that electric cars are cheaper to run than petrol cars in most cases.
Hydrogen and hybrids are fast becoming future contenders. Watch this space…
No, nor me – never heard of them, but they are extremely important elements needed in microchip manufacturing and China is the world’s largest producer.
Germanium and gallium are two elements that are used in the production of semiconductor chips, which are essential for various electronic devices and technologies. They have different properties and applications, and they are both considered critical materials.
Germanium
Germanium is a metalloid, which means it has properties of both metals and non-metals. It is a shiny, hard, gray-white element that is brittle and can be cut easily with a knife. It has a high melting point of 938°C and a low boiling point of 2830°C. It is mainly obtained as a by-product of zinc production, but it can also be extracted from coal.
Germanium is used in, solar cells, fibre optic cables, infrared lenses light-emitting diodes (LEDs), and transistors. It is also used in some alloys to improve their strength and hardness. Germanium is essential for the defence and renewable energy sectors, as well as for space technologies. It can resist cosmic radiation better than silicon, and it can enhance the performance and efficiency of some semiconductors.
Gallium
Gallium is a metal that has a very low melting point of 29.8°C, which means it can melt in your hand. It is a soft, silvery-white element that can be easily cut with a knife. It has a high boiling point of 2403°C. It is mainly obtained as a by-product of processing bauxite and zinc ores.
Gallium and Germanium considered critical elements required in the production of microchips
Gallium is used in the electronics industry to produce heat-resistant semiconductor wafers that can operate at higher frequencies than silicon-based ones. It is also used in LEDs, solar panels, microwave devices, sensors, and lasers. Gallium is important for the development of new technologies such as electric vehicles, high-end radio communications, and Blu-Ray players. It can also improve the power consumption and reliability of some semiconductors.
China the largest producer
China is the largest producer and exporter of both germanium and gallium, accounting for about 60% and 80% of the global supply. However, China has recently announced new export restrictions on these two elements, requiring special licences for exporters. This move is seen as a response to the western sanctions on China’s access to advanced microchip technology.
The export curbs could affect the global supply chain of semiconductor chips and have implications for various industries and markets
Latest reports suggest that the number of people heading out to the shops fell for the first time in July in 14 years as the UK struggled with one of the wettest months on record.
Overall footfall was down by 0.3% (that doesn’t seem high to me) – in the first drop in July since 2009, latest reports suggest. High Streets were hit hardest but shopping centres and retail parks got a boost in visitor numbers.
Not all bad
Soft play areas and cinemas have enjoyed a business boost. Also holiday parks are taking last minute bookings as discounts are offered.
Aside from the rain, the rising cost of living and rail disruption were also behind the fall. Shoppers have been battling with one of the wettest Julys on record, according to provisional reports.
Don’t be too surprised when it rains in the UK
High Streets in coastal towns were especially hard hit, with footfall dropping 4.6%, as the rain kept people away from beaches.
July’s figures also appeared to demonstrate the harsh reality of the impact of interest rate rises on consumers, combined with rain and the continuing transport and rail turmoil traveller have to endure in the UK.
Moving on
Digressing from the real report here, which is the slowdown in UK shopping habits due to the rain – we ought to remember that in the South West there is a hose pipe ban. This ban has been in force since summer 2022! And, the UK looses excessive amounts of water through leaks.
Ironic isn’t it. All that rain and we just don’t store enough! How do other ‘hot’ countries manage? Anyway, at least we can go shopping, or not as the case may be!
The U.S. has lost its top credit rating from Fitch Ratings, one of the three major credit rating agencies, due to its recent political gridlock over the debt ceiling and deteriorating fiscal situation. How much does this matter?
Fitch re-calculated the U.S.’s long-term foreign-currency issuer default rating (IDR) from AAA to AA+ early August 2023, reportedly saying it was because of a ‘steady deterioration in standards of governance‘ and a lack of confidence in fiscal management.
Fitch Rating Agency downgrade U.S. from AAA to AA+ August 2023
Downgrade
The downgrade comes despite the resolution of the U.S. debt ceiling crisis in June 2023, when Congress agreed to suspend the $31.4tn borrowing limit until January 2025. Fitch warned that the U.S. faces serious long-term fiscal challenges, such as rising debt levels, unfunded social security and Medicare obligations, and the real possibility of a recession.
Disagree
Janet Yellen, the U.S. Treasury Secretary and the White House strongly disagreed with Fitch’s decision, calling it ‘arbitrary’ and ‘bizarre‘. They stated that the U.S. economy is fundamentally strong and that Treasury securities remain the world’s safest and most liquid assets. They reportedly suggested that Fitch’s calculation model is flawed and outdated.
Downgrade rattles markets
The downgrade is unlikely to have a significant impact on the U.S.’s borrowing costs or reputation, as it still retains its triple ‘A’ rating from the other two major credit rating agencies, Standard & Poor’s and Moody’s.
However, it could increase market volatility and pressure the U.S. to address its fiscal imbalances. But according to Janet Yellen these do not exist and there is no problem…?
