Tungsten is a critically important rare earth metal, renowned for its unique and valuable properties.
Tungsten has the highest melting point among all metals, which makes it exceptionally suitable for high-temperature applications.
Key aspects of its importance
Industrial and technological applications
Tungsten is used in many industries where hardness, high density, high wear resistance, and high-temperature resistance are required. This includes mining, construction, energy generation, electronics, aerospace, and defence sectors. It is used in weapons, autos, electric car batteries, semiconductors and industrial machinery.
Fact: approximately 2Kg of tungsten goes into every electric vehicle.
Alloys
Metals are frequently alloyed with Tungsten to enhance their strength without substantially adding to their weight. This property is vital for uses like arc-welding electrodes and heating elements in high-temperature furnaces.
Significance
Tungsten is acknowledged as a critical metal because of its economic significance and the scarcity of its sources. It is reported that China produces the majority of the world’s tungsten, controlling approximately 80% of the supply of this rare earth metal.
Durability and flexibility
Tungsten’s durability, flexibility, and resistance to corrosion contribute to its popularity across various industries and applications. It ranks among the hardest and most resilient materials found in nature.
These characteristics render tungsten not just crucial but also indispensable for numerous high-tech applications. The rarity of tungsten and the intricate nature of its extraction and refinement processes enhance its value even further.
World suppliers of tungsten
According to Statista.com the global tungsten market was valued at over $5 billion USD in 2022. It’s projected to grow significantly, with estimates suggesting it could reach over $9.5 billion USD by 2030
For the first time, automotive companies in China surpassed their U.S. counterparts in car sales last year, driven by BYD and expansion in emerging markets, according to a data released Thursday 13th July 2024.
Chinese brands such as BYD now at the forefront, reportedly sold 13.4 million new vehicles last year. In comparison, American brands sold approximately 11.9 million units. Japanese brands remained at the top with 23.59 million sales.
China’s sales growth rate surpassed that of the U.S., with a 23% rise from the previous year compared to the U.S.’s 9% increase.
The consistent high pricing by legacy automakers has inadvertently steered consumers towards more affordable Chinese alternatives.
No surprise here then as manufacturers milked profits from legacy lineups!
Tariffs have now been introduced on China to curb their automakers runaway success.
In a significant development that may affect the electric vehicle (EV) market, the European Union (EU) has tentatively agreed to levy tariffs on Chinese EV manufacturers.
This decision reportedly follows an inquiry into the surge of inexpensive, government-subsidized Chinese vehicles entering the EU market.
From 4th July 2024, Chinese EV producers who participated in the investigation will incur an average duty of 21%, while those who did not will face a substantial 38.1% tariff. Specific rates will be imposed on firms such as BYD, Geely, and SAIC.
Additionally, non-Chinese automobile companies manufacturing some EVs in China, including those based in the EU like BMW, will also be impacted. Tesla might receive a specially calculated duty rate upon request.
These levies are on top of the current 10% tariff on all electric cars manufactured in China. The EU’s action comes after the United States’ drastic measure last month to increase its tariff on Chinese electric cars from 25% to 100%.
Some critics view this anti-subsidy probe as protectionist, potentially harming China-EU economic relations and the worldwide automotive production and supply chain. The German Transport Minister has reportedly cautioned about the possibility of a trade conflict with Beijing.
Although the tariffs are intended to shield the EU’s own industry, they highlight the challenges of maintaining a balance between free trade and competitiveness in the swiftly changing EV sector.
Unless a qualified majority of EU nations opposes it, the tariffs will become permanent in November 2024. The European car industry stresses the need for free and fair trade but recognizes that promoting the adoption of electric cars requires a diverse strategy.
As the dispute over tariffs persists, the repercussions for the EV market are yet to be determined.
One thing is for sure, the consumer will suffer through these tariffs and also through extra road tax levies yet to be introduced, especially in the UK.
On 22nd May 2024, UK Prime Minister Rishi Sunak announced a snap general election for 4th July 2024 This decision caught many by surprise, as the election was called more than around six months earlier than legally required.
Election Date: 4th July 2024 – let the fireworks begin
The Conservative Party, led by Rishi Sunak, is facing significant challenges in opinion polls, trailing behind the opposition Labour Party.
The economy, immigration, health services, and cost of living have been identified as key issues for voters.
Labour, led by Sir Keir Starmer, is considered the clear frontrunner, with a substantial lead in recent polls.
Since 2010, the Conservatives have seen five prime ministers: David Cameron, Theresa May, Boris Johnson, Liz Truss, and now Rishi Sunak.
Sir Keir described the past 14 years as “Tory chaos” and emphasised that it’s time for change.
So, the UK is gearing up for an early election, and the outcome will be closely watched both domestically and internationally
Leading technology companies, such as Microsoft, Amazon, and OpenAI, have united under a significant international accord for artificial intelligence (AI) safety measures, established at the Seoul AI Safety Summit on Tuesday 21st May 2024.
Following the agreement, firms from various nations, including the UK, China, Canada, the U.S., France, South Korea, and the United Arab Emirates, have pledged to voluntarily commit to the secure development of their cutting-edge AI models.
Framework
AI model developers who have not already done so agreed to issue safety frameworks that detail how they will address the challenges posed by their advanced models, including the prevention of technology misuse by malicious entities.
These frameworks will feature ‘red lines’ that tech companies will establish to delineate the types of risks associated with advanced AI systems that are deemed ‘unacceptable.’ These risks encompass, but are not limited to, automated cyberattacks and the potential for bioweapons.
Kill switch
In the event of such dire scenarios, companies have declared their intention to introduce a ‘kill switch’ that would halt the development of their AI models should they be unable to ensure the mitigation of these risks.
“It is unprecedented for so many prominent AI firms from diverse regions of the world to concur on identical commitments regarding AI safety,” Rishi Sunak, the UK Prime Minister reportedly said on Tuesday 21st May 2024.
He further noted that these commitments would guarantee that the world’s foremost AI companies will maintain transparency and accountability concerning their safe AI development strategies.
This agreement builds upon a prior set of pledges made in November 2023 by entities engaged in the creation of generative AI software.
The involved companies have consented to seek feedback on these standards from ‘trusted actors,’ which include their respective national governments when suitable, prior to their publication in anticipation of the forthcoming AI summit – the AI Action Summit scheduled to take place in France in early 2025.
Tensions between Washington and Beijing have intensified, with the U.S. ramping up trade restrictions and sanctions on China due to national security concerns.
Since Ukraine’s invasion, there has been a roughly 12% drop in trade between the blocs, and foreign direct investments have decreased by 20% compared to those within the bloc’s constituents.
If these divisions persist, the IMF forecasts that the economic impact on global GDP could be as high as 7% in the worst-case scenario.
A senior International Monetary Fund official cautioned on Tuesday, 7th May 2024, that the rift between the U.S. led Western and China-aligned economic blocs endangers global trade cooperation and economic growth.
Inflation has become a persistent challenge for the Fed
The battle against inflation persists, gradually impacting the U.S. economy and presenting substantial challenges for the Federal Reserve.
Despite concerted efforts to control it, inflation remains stubbornly remains, leaving policymakers in a dilemma – to stimulate economic growth or to curb spiraling prices.
Let the data speak
Recent data presents a concerning scenario. Indexes from the Commerce Department, used by the Federal Reserve as indicators of inflation, reveal that prices are rising at a rate significantly exceeding the central bank’s annual target of 2%. Consumer spending persists, encouraged by the excessive amount of money circulating in the financial system.
However, this spending spree isn’t sustainable, and consumers are dipping into their savings to fund purchases. The personal savings rate has plummeted to its lowest level since October 2022. Borrowing is up and debt is far too high!
The Federal Reserve’s primary inflation gauge, the personal consumption expenditures price index, rose to 2.7% in March, encompassing all items. The crucial core index, excluding the more volatile food and energy prices, remained constant at 2.8%. These figures highlight the ongoing inflationary pressures.
Fed’s dilemma
The Federal Reserve is navigating a precarious inflation situation. Should it shift towards rate reductions prematurely, there’s a risk that inflation might surge back in 2024. Conversely, persistent inflation could compel central bankers to not only sustain the present rates but also ponder additional increases. The aspiration for a gentle economic descent is at stake.
Outlook
Forecasters anticipate inflation to dip below 2.5% in 2024, yet challenges persist. The Federal Reserve faces the difficult task of steering the economy towards stability and controlling inflation expectations. With the central bank’s policy meeting on the horizon, speculation abounds regarding their forthcoming strategy.
Will they maintain the current interest rates or implement more assertive measures? Their decision is set to influence the economic outlook for the foreseeable future.
Conclusion
U.S. inflation continues to be a persistent challenge, and the Federal Reserve’s efforts are ongoing. The path forward demands cautious steering, as policymakers must achieve a fine equilibrium to sustain economic stability while simultaneously curbing inflation.
And remember, the Fed said inflation was ‘transitory’.
Record-breaking rain has inundated the United Kingdom over the past few months, leaving fields submerged and livestock at risk.
The relentless downpours, likely exacerbated by climate change, are now threatening the very foundation of UK food production.
Challenges faced by farmers
UK farmers are facing the repercussions of extreme weather events. Fields that would normally be abundant with crops are currently waterlogged, making them barren. Livestock are also suffering, unable to graze in the inundated fields, leading to a shortage of feed. The circumstances are critical, prompting the National Farmers Union (NFU) to raise the alarm.
NFU’s concerns and calls for action
The NFU emphasizes that climate change-induced flooding imperils food security. Rachel Hallos, NFU vice president, warns that these extreme conditions could become the norm. Urgent action is needed to safeguard our agricultural systems.
Compensation and Support: The NFU urges the government to provide more substantial compensation to flooded farmers. The recently launched Farm Recovery Fund offers grants, but broader and longer-term assistance is essential.
Reduced Crop Output: Weeks of incessant rain have already impacted this year’s harvest. Crop quality may suffer, affecting both farmers and consumers.
Resilience and Adaptation: We cannot rely solely on imports. A clear government plan is necessary to prepare for the potential effect of extreme weather, adapt to its effects, and ensure continued food production.
Voices from the fields – case study example
A recent report from a mixed dairy, beef, and arable farmer in Gloucester whose land lies in the floodplain reportedly said that floods occurred every six years, but now they occur with alarming frequency. Cattle, unable to graze, face dwindling feed supplies. Livelihoods hang in the balance.
The farmer went on to say, ‘climate change affects us all. It threatens our food supply and prices. We must think about resilience and feeding the world amidst a changing climate.’
Conclusion
Extreme flooding transcends a natural disaster; it poses a threat to our very sustenance. In the face of such challenges in the UK, it is imperative that farmers, policymakers, and communities collaborate.
Prompt action is essential to safeguard our food security and foster resilience for the future.
Building and farming on low-lying land, often on floodplains, is likely a big part of the problem, along with the potential effects of the ever-changing climate and weather patterns.
Safety valve
Low lying land has always flooded – isn’t it natures safety valve? We cohabit with nature and low-lying land, as good as it is for farming (and building), will always flood – as it has for thousands of years.
But we do need to do more to protect our food production in the UK.
The U.S. economy is on a rip, with employers adding around 303,000 jobs in March 2024 – the largest increase in almost a year.
As the world’s largest economy continues to surge, questions arise about the Federal Reserve’s next move regarding interest rates.
Stronger-than-expected Job Growth
The unemployment rate fell to 3.8%, indicating strong job growth in several sectors such as health care, construction, and government. While economists had predicted job gains of approximately 200,000, the actual numbers have easily exceeded those expectations.
The labour market’s surprising resilience has caught analysts off guard, leading to speculation about the timing of interest rate cuts.
Fed’s Dilemma
The Federal Reserve has held interest rates in a range of 5.25%-5.5%, the highest level in over two decades. Initially, the Fed raised rates sharply in 2022 to curb inflationary pressures. However, the subsequent cooling of price inflation (down to 3.2% in February) without a significant spike in unemployment has complicated matters. The central bank now faces a delicate balancing act.
Delayed Rate Cuts?
The significant increase of 303,000 in non-farm payrolls for March 2024 reinforces the Federal Reserve’s stance that the robustness of the economy permits a gradual approach to interest rate reductions.
The Fed had been expected to initiate rate cuts this year to mitigate the impact of high borrowing costs. However, the stronger-than-anticipated economic performance suggests that rate cuts may not occur until the second half of this year.
Labour Market Dynamics
U.S. government spending in areas like high-tech manufacturing and infrastructure has bolstered the labor market. Additionally, an influx of more than three million immigrants last year has expanded the workforce, potentially keeping wage pressures in check. In March, average hourly pay rose by 4.1% year-on-year, consistent with expectations and near a three-year low.
America’s Comeback
President Joe Biden hailed the latest job figures as a “milestone in America’s comeback.” However, some market analysts argue that the strong jobs growth could complicate efforts to return inflation to the Fed’s 2% target. Some analysts even speculate that rate cuts may not materialize until 2025.
Global Implications
Higher U.S. interest rates have ripple effects worldwide, enticing investors to shift capital toward America. While the Fed’s in-tray still has some warnings, the delay in rate cuts reflects the economy’s underlying strength.
The U.S. jobs boom presents a conundrum for policymakers. Balancing economic vitality with inflation control remains a delicate task, and the Fed’s decisions will reverberate far beyond its borders.
The world’s energy landscape is experiencing an unexpected twist: an oversupply of natural gas.
As economies grapple with the aftermath of the pandemic, the gas market finds itself in a paradoxical situation.
The Glut Unveiled
Abundant Supply: The global gas glut stems from a surge in production. Countries like the United States, Russia, and Qatar have ramped up their natural gas output, flooding the market.
LNG Boom: Liquefied natural gas (LNG) projects have proliferated, adding to the surplus. New terminals and pipelines facilitate the movement of LNG across continents.
Demand Dilemma
Warmer Winters: Milder winters in key consuming regions such as Europe, the U.S., and Asia, have suppressed demand for heating. Gas storage facilities are brimming, leaving suppliers with excess inventory.
Geopolitical Tensions: Europe’s reliance on Russian gas has prompted diversification efforts. LNG imports from the United States, Australia, and other sources provide an alternative. However, the North Sea’s production limitations persist.
Price Plunge
Price Disparities: While wholesale gas prices in Europe and Asia have tumbled, mainland Europe still faces higher prices due to supply constraints. The U.S. market, despite its glut, operates differently.
Investment Paradox: Ironically, this glut coincides with record investments in LNG infrastructure. The mismatch between supply growth and demand dynamics baffles analysts.
Environmental Implications
Balancing Act: As gas prices dip, affordability improves for consumers. However, environmental concerns remain. Natural gas, though cleaner than coal, still contributes to greenhouse gas emissions.
Policy Challenges: Policymakers must navigate this delicate balance—ensuring energy security while transitioning to cleaner alternatives.
Conclusion
The global gas glut is a paradox: abundant supply alongside record investments. As we navigate this downward super cycle, energy markets remain unpredictable and interconnected globally.
Remember, while gas prices dip, the implications for our planet and energy policies are far-reaching. It’s a delicate balance between affordability and sustainability.
China has reportedly prohibited the use of U.S. processors from both AMD and Intel in government computers and servers. The directive is designed to encourage the use of domestic alternatives.
Chinese government agencies are now required to choose ‘safe and reliable’ domestic alternatives for these chips. The sanctioned list features processors from Huawei and the state supported firm Phytium, both of which face bans in the U.S.
In addition to processors, China is now also restricting Microsoft Windows on government devices, opting instead for domestically produced operating systems.
These guidelines are part of a broader tech trade battles between China and the U.S. While the impact on Intel and AMD remains to be seen, it’s clear that China is taking aggressive steps to reduce reliance on U.S. built technology.
The global tech landscape continues to evolve, and these decisions have far-reaching implications for both countries and the industry as a whole.
U.S. and China trade tensions are unlikely to recede anytime soon.
In his Capitol Hill testimony on 6th March 2024, Federal Reserve Chairman Jerome Powell reiterated that was not yet time to begin cutting interest rates.
To fight inflation, which reached a rate of 9% in the summer of 2022, the central bank has significantly increased interest rates in recent times. However, prices are still stubborn, especially for things like housing and groceries.
Due to the robust economic performance in early 2024, the expected reduction in interest rates has been postponed. Instead of taking place this month, the rate cuts are now more probable in May or June 2024.
Powell reportedly said: ‘The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.’
He reiterated the pledge to lower inflation to the 2% target and keep long-term inflation expectations stable.
UPDATE
On Thursday 7th March 2024 Powell also said: the Fed is ‘not far’ from the point of cutting interest rates
UK interest rates have been left unchanged at 5.25% by the Bank of England as widely expected by commentators.
It is the fourth time in a row the Bank has held rates at 5.25%.
The Bank of England had previously raised rates 14 times in a row to curb inflation, leading to increases in mortgage rates but also creating better rates for savers.
Interest rate chart from 2007 to January 2024 demonstrates just how low interest were between 2009 and 2022
Interest rate chart from 2007 to January 2024 demonstrates just how low interest were between 2009 and 2022
Attitude shift
There is a noticeable shift in opinion as the committee entertained the possibility of discussing the feasibility of cuts.
There was a three-way split, with two members of the Monetary Policy Committee (MPC) voting to increase the bank rate to 5.5%; one to reduce it to 5%; and six were in favour of sticking with 5.25%.
With inflation falling it is very likely the interest rates will be reduced by 0.25% by March 2024. Just take a look at the reduction in savers rates that have already occurred.
The anticipation is for a rate reduction soon.
The clue is that savers rates are being cut.
But
The Bank of England Governor, Andrew Bailey, has made clear that for him the key question is: ‘For how long should we keep rates at the current level?’
There may be disappointment ahead then – but a rate cut is next and I still expect it by Easter.
Turkey’s central bank on Thursday 25th January 2024 hiked its key interest rate to 45%.
It comes amid an ongoing struggle against double-digit inflation for Turkey’s policymakers, with the rate hike the latest step in that ongoing fight.
30 Turkish Lira to 1 U.S. dollar
Inflation in Turkey increased nearly 65% year-on-year in December 2023, up from 62% in November, and the country’s currency, the lira, hit a new record low against the U.S. dollar earlier in January 2024 at 30 Lira to $1.
Analysts predict this will be the last hike for some time, especially with local elections approaching in March 2024
China, which consumes over half of the global coal demand and produces over 4 billion tonnes of coal per year.
India, which consumes about 14% of the global coal demand and produces over 900 million tonnes of coal per year.
The United States, which consumes about 9% of the global coal demand and produces over 600 million tonnes of coal per year.
Japan, which consumes about 3% of the global coal demand but imports most of its coal.
These countries accounted for about 82% of the global coal production in 2021 according to 2021 data set. China alone produced more than half of the world’s coal, followed by India with nearly 10%.
Global coal use in 2023 hits few high
Global coal use in 2023 has hit a record high, surpassing 8.5 billion tons for the first time, on the back of strong demand in countries like India and China, said IEA. These countries are the world’s largest consumers of the dirtiest fossil fuel, and continued modernization puts their energy consumption on a rapid growth trajectory.
China
China and India’s growing economies will continue to fuel demand for coal even as they set ambitious renewable energy targets, according to experts.
While China is the world’s largest energy consumer, India is ranked third globally, and both countries are the top consumers of coal as they strive to fuel economic growth.
Global coal usage in 2023hit a record high, surpassing 8.5 billion tons for the first time, on the back of strong demand in emerging and developing countries such as India and China, IEA noted in a recent report.
China’s electricity sector has been in the throes of a clean revolution over the past few years, with an almost five-fold growth in wind and solar generation since 2015. As a result, the share of coal generation has fallen by 17 percentage points, from 78% in 2000 to 61% in 2022.
China has suffered from drought in recent years, which reduced hydroelectric power generation in its southern provinces. To maintain the necessary power output, the country had to turn to coal.
United States
By contrast, U.S., which is the world’s second largest consumer of coal, has seen a decrease in its usage of the fuel. According to the Institute for Energy Economics and Financial Analysis, the amount of coal that the superpower consumes each day recorded a 62% drop from 2.8 million to 1.1 million tons a day.
75% of India’s power is derived via coal-fired plants. Coal accounts for 61% of China’s power generation, even though the country is recognized as the indisputable leader in renewable energy expansion. It has been adding new projects to the grid almost as fast as the rest of the world combined in 2022 and has ambitions of becoming carbon neutral by 2060.
Annual average capacity additions by country and region, 2016-2023
India’s coal production rose to 893 million tons during the financial year ending March 2023, jumping nearly 15% from a year earlier. China’s raw coal production in 2023 went up by 2.9% compared with the same period in 2022.
There are no signs of a slowdown, with the IEA saying coal consumption in India and Southeast Asia is projected to grow significantly.
Coal won’t go!
But the lack of reliability of renewables means coal has still very much been a critical fallback option for the two countries.
Top five coal producing countries in the world
China: 4,126.0 million tonnes
India: 762.0 million tonnes
Indonesia: 614.0 million tonnes
United States: 523.8 million tonnes
Australia: 467.1 million tonnes
Five of the Greenest energy producers in the world
Sweden
Norway
Denmark
Finland
Switzerland
The greenest were based on these five criteria: carbon emissions, energy transition, green society, clean innovation, and climate policy.
Top countries by renewable energy production
China: 2,271.9 TWh (28.2% of total electricity)
United States: 804.8 TWh (20.5% of total electricity)
Brazil: 491.9 TWh (83.3% of total electricity)
Canada: 433.6 TWh (66.9% of total electricity)
India: 303.5 TWh (24.5% of total electricity)
Note: three of the world’s worst offenders of fossil fuel use are also in the top five for energy production by renewables – China, U.S. and India.
Deflation is an economic phenomenon characterized by a general decline in prices for goods and services. It occurs when the inflation rate falls below 0%, resulting in a negative inflation rate.
This means that the purchasing power of currency increases over time, allowing you to buy more with the same amount of money. It can be as damaging to the economy as inflation.
Consumer and Asset Prices: During deflation, both consumer and asset prices decrease, which might seem like a good thing because it increases the purchasing power.
Economic Impact: However, deflation can be harmful to the economy. It often signals an impending recession or hard economic times. If people expect prices to fall further, they may delay purchases, hoping to buy later at a lower price. This leads to reduced spending, which can cause producers to earn less, potentially leading to unemployment and higher interest rates.
Measurement: Deflation is measured using economic indicators like the Consumer Price Index (CPI), which tracks the prices of commonly purchased goods and services. When the CPI shows that prices are lower than in a previous period, the economy is experiencing deflation.
Causes: The main causes of deflation include a decrease in demand or an increase in supply. A decline in aggregate demand can lead to lower prices if supply remains unchanged. Conversely, an increase in supply can also cause prices to drop if demand does not increase accordingly.
It’s important to note that deflation is different from disinflation. Disinflation refers to a slowdown in the rate of inflation, where prices are still rising but at a slower pace than before.
Deflation can have complex effects on an economy, and while it may benefit consumers in the short term, it can lead to broader economic challenges.
Deflation, friend or foe?
Deflation, often perceived as a relief during times of high prices, is a complex economic condition that presents both benefits and challenges. It is defined by a general decrease in the price level of goods and services, leading to an increase in the real value of money. This means consumers can buy more for less, but this apparent advantage masks the potential dangers lurking beneath the surface.
The immediate effect of deflation is an increase in consumer purchasing power. As prices drop, money buys more, which can be particularly beneficial for individuals on fixed incomes. However, this boon is short-lived if deflation persists. Consumers, anticipating further price drops, may postpone purchases, leading to a decrease in consumer spending, the lifeblood of any economy. This reduction in demand can force businesses to lower prices further, creating a vicious cycle that’s hard to break.
Deflation can lead to a reduction in demand and can force businesses to lower prices, creating a vicious cycle that’s difficult to break.
Moreover, deflation can exacerbate debt burdens. As prices and revenues fall, the real value of debt increases, making it more challenging for borrowers to repay their obligations. This can lead to increased loan defaults and financial instability. For businesses, falling prices mean reduced profit margins, leading to cost-cutting measures such as layoffs, reduced investment, and even bankruptcy.
Causes
The causes of deflation are multifaceted, often stemming from a decrease in aggregate demand or an oversupply of goods. Technological advancements, while boosting productivity, can also contribute to deflation by lowering production costs and increasing supply faster than demand. Additionally, a strong currency can make imports cheaper, contributing to lower prices domestically.
Tools
Central banks and governments typically combat deflation with monetary and fiscal policies aimed at stimulating demand. Lowering interest rates, increasing government spending, and quantitative easing are common strategies employed to inject money into the economy and encourage spending.
While deflation can initially seem like a welcome development, its long-term effects can be detrimental to economic health. It is a delicate balance that policymakers must navigate carefully to ensure stability and growth in the economy.
During this period of inflationary pressure, no country is beyond the grasp of deflation.
A message for governments and central banks around the world – don’t push too hard!
The economy fell by 0.3% October, after growth of 0.2% in September 2023.
UK GDP is 0.0%
The UK economy shrank more than expected in October 2023, as higher interest rates hit consumers. The bad weather didn’t help either.
Household spending has been dented by rate rises as the Bank of England tries to tackle inflation. It is due to make its next rate decision on Thursday 14th December 2023. Retail and tourism were hit by severe weather hit the UK in October 2023.
Analysts had predicted that the economy would fall by just 0.1% but services, manufacturing and construction sectors all contracted more than expected.
The UK economy has been stagnating and the Prime Minister has promised to speed up economic growth. But no significant recovery is expected until January 2025.
Chancellor’s spin
Commenting on the latest figures, Chancellor Jeremy Hunt said it was ‘inevitable economic growth would be subdued, whilst interest rates are doing their job to bring down inflation.’
The figures underline the ongoing impact of the cost-of-living crisis and the tools employed by our ‘decision’ makers on our behalf.
United Nations’ biggest and most important annual climate conference to-date, gets underway as the United Arab Emirates on Wednesday 29th November 2023 defended what it described as ‘fake news’ designed to undermine its work as the host of the COP28 climate conference.
The UAE organizers slammed a number of ‘fake press‘ releases in the name of COP28. Among them, a letter claiming COP28 president-designate Sultan Al-Jaber was due to step down from his position as chief executive of state oil giant the Abu Dhabi National Oil Co. (ADNOC).
Al-Jaber’s appointment as COP28 president-designate had provoked a furious backlash from climate activists when it was first announced. He reportedly pushed back over reports earlier in the week that said the UAE planned to use its role as the host of the climate summit as a platform to lobby foreign government officials for oil and gas deals.
Even so, the COP28 summit, which starts on Thursday 30th November 2023 and is scheduled to run through to 12th December 2023. I will provide a critical forum for government officials, business leaders and campaign groups to accelerate action to tackle the climate crisis. Let’s hope there is no further rolling back on previous pledges such as the UK’s government announcement to increase the number of North Sea oil and gas exploration and recovery licences.
OPEC
Meanwhile, also on Thursday 30th, the influential Organization of Petroleum Exporting Countries (OPEC) and its allies will convene to decide the next production policy steps in a delayed meeting caused by the conflict in the Middle East.
Art illustration of renewable and fossil fuel energy – Heat is on at COP28
UAE, one of the world’s major oil producers and a key OPEC+ component, is keen to burnish its reputation as a champion of the transition to green energy.
Tangible climate action though is the best way to push back all scepticism and cynicism. Now is as good as any time to start.
Production cuts will come – some analysts predict $100 a barrel.
The world is not ready to relinquish its thirst for oil and gas… just yet. It is still hungry for traditional power – and renewables is not ready to take over.
Singapore is planning to introduce stricter regulations for cryptocurrency service providers in order to protect retail customers from the higher financial risks associated with digital assets.
Requiring crypto service providers to disclose the fees and charges for their services, as well as the risks and volatility of the crypto assets they offer.
Preventing crypto service providers from accepting payments through locally issued credit cards.
Enhancing the standards and governance of stablecoin-related activities, such as requiring stablecoin issuers to have a presence in Singapore and to comply with anti-money laundering and counter-terrorism financing rules.
Imposing a cap on the amount of crypto assets that retail customers can buy or sell in a single transaction, as well as a limit on the total value of crypto assets they can hold across all service providers.
MAS
The Monetary Authority of Singapore (MAS) stated that these measures are intended to reduce the potential for consumer harm and financial instability arising from crypto trading, while supporting the development of stablecoins as a credible medium of exchange in the digital asset ecosystem.
The MAS also noted that crypto assets are not legal tender and are not backed by any asset or issuer, and therefore carry significant risks of loss, fraud, hacking, and theft. The MAS urged consumers to exercise due diligence and understand the potential risks before engaging in crypto transactions.
Federal Reserve members, in their most recent meeting, gave little indication of cutting interest rates anytime soon, particularly as inflation remains well above their goal of 2%, according to minutes released Tuesday 21st November 2023.
The detail of the meeting held 31st October – 1st November 2023, showed that Federal Open Market Committee (FOMC) members are still concerned that inflation could be stubborn or move higher, and that more may need to be done.
They indicated that policy would need to stay ‘restrictive’ at the very least, inflation is on a convincing move back to the central bank’s 2% goal.
Tech execs have expressed concern that the development of artificial intelligence (AI) is concentrated in the hands of too few companies, potentially giving them too much power. OpenAI’s ChatGPT marked the start of what many in the industry have called an AI arms race, as tech giants including Microsoft and Google have sought to develop and launch AI models.
A number of tech execs have said that they feel users have lost control of their data online and that it is being harnessed by technology giants to feed their profits.
The development of artificial intelligence (AI) is concentrated in the hands of too few companies, potentially giving them excessive control over the rapidly evolving technology.
OpenAI’s ChatGPT
An explosion of interest in AI was sparked by OpenAI’s ChatGPT late last year thanks to the novel way in which the chatbot can answer user prompts. Its popularity contributed to the start of what many in the tech industry have called an AI arms race, as tech giants including Microsoft and Google seek to develop and launch their own artificial intelligence models. These require huge amounts of computing power as they are trained on massive amounts of data.
Meredith Whittaker reportedly said of large tech companies and the current deployment of AI…
‘Right now, there are only a handful of companies with the resources needed to create these large-scale AI models and deploy them at scale. And we need to recognize that this is giving them inordinate power over our lives and institutions’,Meredith Whittaker, president of encrypted messaging app Signal, is reported to have said. ‘We should really be concerned about, again, a handful of corporations driven by profit and shareholder returns making such socially consequential decisions’.
Whittaker previously spent 13 years at Google but became disillusioned in 2017 when she found out the search giant was working on a controversial contract with the Department of Defence known as Project Maven. Whittaker grew concerned Google’s AI could potentially be used for drone warfare and helped organize a walkout at the company that involved thousands of employees.
‘AI, as we understand it today, is fundamentally a technology that is derivative of centralized corporate power and control’, Whittaker reportedly said. ‘It is built on the concentrated resources that accrued to a handful of large tech corporations, largely based in the U.S. and China via the surveillance advertising business model, which gave them powerful computational infrastructure and huge amounts of data; large markets from which to pull that data; and the ability to process and structure that data in ways useful for creating new technologies.’
In essence, BIG TECH has far too much power in AI technology.
Tim Berners-Lee
The inventor of the web, Tim Berners-Lee, has also raised concerns about the concentration of power among the tech giants. Jimmy Wales, the founder of Wikipedia, says it is the state of social media that is of particular concern right now. On AI, however, he feels that while the technology giants now are leading the way, there is space for disruption.
Big tech and social media giants are inflicting profound damage on our society, and he believes AI could make this worse.
Binance chief Changpeng Zhao pleaded guilty Tuesday to criminal charges and stepped down as the company’s CEO as part of a $4.3 billion settlement with the Department of Justice, according to court documents.
The plea arrangement with the U.S. government resolves an investigation into the world’s largest cryptocurrency exchange.
Zhao said Tuesday in a post on X, that he had ‘made mistakes’ and ‘must take responsibility’. He said Richard Teng, the company’s former global head of regional markets, is the new CEO of Binance.
Action taken against Binance
The action against Binance and its founder was a joint effort by the Department of Justice, the Commodity Futures Trading Commission and the Treasury Department. The Securities and Exchange Commission (SEC) was absent.
Treasury Secretary Janet Yellen reportedly said in a release Tuesday 21st November 2023 that the cryptocurrency exchange permitted ‘illicit actors’ to make transactions that supported activities such as terrorism and illegal narcotics and that it allowed more than 1.5 million virtual currency trades that violated U.S. sanctions.
Plea deal
Zhao personally pleaded guilty to violating and causing a financial institution to violate the Bank Secrecy Act, according to the plea agreement. The DOJ is also recommending that the court impose a $50 million fine on Zhao.
Zhao has been released on a $175 million bond secured by $15 million in cash and has a sentencing hearing scheduled for 23rd February 2024.
Continue to operate
Binance will continue to operate but with new strict rules. The company will be required to maintain and enhance its compliance program to ensure its business is in line with U.S. anti-money-laundering standards. The company is required to appoint an independent compliance monitor.
The case against Binance shows that three criminal charges were brought against the exchange, including conducting an unlicensed money-transmitting business, violating the International Emergency Economic Powers Act, and conspiracy. Binance has agreed to forfeit $2.5 billion to the U.S. government, as well as to pay a fine of $1.8 billion.
SEC takes aim too
The SEC targeted the company with a lawsuit in June 2023, alleging that Binance was running an illegal securities exchange and mishandling customer funds.
The SEC also challenged rival crypto exchange Coinbase with a similar lawsuit, alleging it is operating as an unauthorized securities exchange, broker and clearing agency.
And on Monday 20th November 2023 the SEC sued Kraken, alleging that the exchange commingled $33 billion in customer crypto assets with its own company assets, creating the potential for a significant risk of loss to its users.
Binance battered as CEO Changpeng Zhao (CZ) pleads guilty to federal charges, steps down.
In the charges brought against Binance by the SEC, the agency accused Binance of ‘commingling’ billions of dollars in customer money with Binance’s own funds, similar to allegations made against the now bankrupt and disgraced crypto exchange FTX. The founder of FTX, Sam Bankman-Fried was convicted of fraud and now awaits sentencing.
EC Chair, Gary Gensler reportedly said, ‘Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law’.
Binance origin
Started by the Chinese-born entrepreneur in 2017, Binance went from being a relatively obscure name to being a major force in crypto in a matter of weeks. Binance remains the world’s largest crypto exchange globally, processing billions of dollars in trades every year.
While its holding company is based in the Cayman Islands, Binance doesn’t have a global headquarters and Zhao frequently resisted calls to create one, saying he wanted the platform to run on a ‘decentralized’ operating model.
UK ban
In 2021, the U.K.’s Financial Conduct Authority (FCA) barred Binance’s U.K. unit from operating in the country, saying it wasn’t authorized to carry out regulated activities. More recently, Binance scrapped plans to pursue a full U.K. license after the regulator said its ‘know-your-customer and anti-money-laundering’ controls didn’t meet its requirements.
Binance and Zhao filed a motion in July 2023 to dismiss the CFTC’s suit. The U.S. arm of the exchange is also pushing back on the SEC’s lawsuit, filing a protective order against what they call the SEC’s ‘fishing expedition’.
Crypto industry concern
Of particular concern for the crypto industry are the implications of the crypto crackdown for a myriad of altcoins or tokens and blockchains, not just the exchanges.
The SEC maintains that several of the tokens Binance and Coinbase offer on their platforms such as: Solana’s SOL, Cardano’s ADA , and Polygon’s MATIC are all securities that should have been registered.
It was reported Friday 17th November 2023 by the city-state’s central bank that Singapore will be piloting the live issuance and use of wholesale central bank digital currencies in 2024.
During the pilot, the Monetary Authority of Singapore, (MAS) will partner with local banks to pilot the use of wholesale CBDCs to facilitate domestic payments.
What is a CBDC?
A CBDC is a digital form of a country’s fiat currency, issued and regulated by the central bank or monetary authority of that country. CBDCs are different from cryptocurrencies, which are decentralized and not backed by any government.
Singapore is one of the countries that has been actively exploring the potential of CBDCs, both for wholesale and retail purposes. Wholesale CBDCs are meant for interbank transactions and cross-border payments, while retail CBDCs are meant for general public use and everyday payments.
CBDC MAS timeline
In November 2021, the Monetary Authority of Singapore (MAS) launched Project Orchid, a retail CBDC project that aims to build the infrastructure and test the use cases for a digital Singapore dollar. The project will explore the concept of purpose-bound digital Singapore dollars, which allow senders to specify how and where the money will be used.
In August 2021, MAS announced Project Dunbar, a wholesale CBDC project that involves the collaboration of the Reserve Bank of Australia, Bank Negara Malaysia, and South African Reserve Bank. The project will develop prototypes of shared platforms for cross-border transactions using multiple CBDC’s.
In June 2021, MAS published a monograph on the economic considerations of a retail CBDC in the Singapore context. The monograph concluded that there is no urgent case for a retail CBDC in Singapore, but MAS wants to be prepared in case the situation changes in the future.
In April 2021, MAS extended the regulatory sandbox for Project Ubin, a wholesale CBDC project that started in 2016. Project Ubin has successfully demonstrated the feasibility of using blockchain technology for clearing and settlement of payments and securities.
Singapore to pilot use of wholesale central bank digital currencies in 2024
In March 2021, MAS joined the Multiple CBDC (m-CBDC) Bridge initiative, a wholesale CBDC project that involves the Bank of Thailand, the Hong Kong Monetary Authority, and the Bank for International Settlements. The project will explore the use of distributed ledger technology to enable real-time cross-border transactions using multiple CBDC’s.
Process
Banks will issue tokenized bank liabilities in the form of claims in balance sheets. Retail customers can then use the tokenized bank liabilities in transactions with merchants, who will then credit these bank liabilities with their respective banks. Tokenization refers to the process of issuing a digital form of an asset on a blockchain.
The CBDC will then be automatically transferred to the merchant as a form of payment during the transaction.
Many central banks are testing and exploring their own digital currencies, includung the UK and U.S.
European Central Bank President Christine Lagarde on Friday 17th November 2023 reportedly said that Europe is now at a critical juncture, with deglobalization, demographics and decarbonization looming on the horizon.
Fragmentation
‘There are increasing signs that the global economy is fragmenting into competing blocs’, she said at the European Banking Congress, according to a transcript.
Focusing on Europe, she said that a continuous decline in the population of working age looks set to start as early as 2025, alongside climate disasters that are increasing every year.
Her answer to these shocks was that massive investment would be needed in a short space of time, requiring what she called a ‘generational effort‘.
Barriers
‘As new trade barriers appear, we will need to reassess supply chains and invest in new ones that are safer, more efficient and closer to home‘, Lagarde reportedly said.
‘As our societies age, we will need to deploy new technologies so that we can produce greater output with fewer workers. Digitalization will help. And as our climate warms, we will need to advance the green transition without any further delays‘.
IMF’s Kristalina Georgieva reportedly said that the public sector should keep preparing to deploy central bank digital currencies (CBDC’s) and related payment platforms in the future.
But according to data from the Atlantic Council, only 11 countries have adopted CDBC’s thus far.
Alternative to cash
Central bank digital currencies (CBDC’s) have the potential to replace cash. But adoption could take time, said Kristalina Georgieva, managing director of the International Monetary Fund on Wednesday 15th November 2023.
‘CBDC’s can replace cash which is costly to distribute”, she is reported to have said at the Singapore FinTech event. ‘They can offer resilience in more advanced economies. And they can improve financial inclusion where few hold bank accounts’.
‘CBDC’s would offer a safe and low-cost alternative to cash. They would also offer a bridge between private monies and a yardstick to measure their value, just like cash today which we can withdraw from our banks’, the IMF chief reportedly said.
Fiat currency
CBDC’s are the digital form of a country’s fiat currency, which are regulated by the country’s central bank. They are powered by blockchain technology, allowing central banks to channelgovernment payments directly to households.
Central Bank digital money to replace cash. IMF’s Kristalina Georgieva reportedly said that the public sector should keep preparing to deploy central bank digital currencies (CBDC’s) and related payment platforms in the future.
‘The level of global interest in CBDCs is unprecedented. Several central banks have already launched pilots or even issued a CBDC’, the IMF said in a September 2023 report.
According to a 2022 survey conducted by the Bank for International Settlements, of the 86 central banks surveyed, 93% said they were exploring CBDCs, while 58% said they were likely to or may possibly issue a retail CBDC in either the short or medium term.
But as of June 2023, only 11 countries had adopted CBDC’s, with an additional 53 in advanced planning stages and 46 researching, according to data from the Atlantic Council.
