Confidence in Bank of England (BoE) is a measure of how much the public trusts the central bank to control inflation, set interest rates and maintain economic stability.
According to the latest Inflation ‘Attitudes Survey‘ conducted by the Bank of England in August 2023, confidence in Bank of England has plummeted to an all-time low.
Survey
The survey found that only 19% of the respondents were satisfied with the way the Bank of England was doing its job to set interest rates to control inflation, while 40% were dissatisfied. The net satisfaction rate was -21%, which is the lowest since the survey began in 1999.
2% inflation please
The main reason for the low confidence is the high inflation rate that has been persisting in the UK for more than a year. Inflation reached a peak of 11.1% in December 2022, and was still at 6.8% in July 2023, well above the Bank of England’s target of 2%. The Bank of England has raised interest rates 14 times since the end of 2021, from 0.1% to 5.25%, to try to bring inflation down, but this has also increased the cost of borrowing and living for many households and businesses.
Slow
Some critics have argued that the Bank of England (BoE) acted too slowly and too cautiously to raise interest rates when inflation was rising, while others have warned that raising rates too high and too fast could harm the economic recovery from the Covid-19 pandemic.
The public’s expectations of future inflation are also high, with a median answer of 2.9% for inflation in five years’ time, almost one percentage point higher than the Bank’s target.
Credibility
Confidence in Bank of England (BoE) is important because it affects how people behave in terms of spending, saving, investing, and borrowing.
Bank of England hits all-time confidence low according to survey
Loss of faith
If people lose faith in the central bank’s ability to control inflation and maintain economic stability, they may act in ways that could worsen the situation, such as hoarding money, demanding higher wages, or taking on more debt.
Therefore, it is crucial for the Bank of England to communicate clearly and effectively with the public about its policies and actions, and to restore trust and confidence in its role as an independent and credible institution.
It is also useful to take notice of early warning signs, such as the economic red alert posed by inflation after the pandemic recovery started.
Eurozone interest rates have been hiked again to a record high by the European Central Bank (ECB).
The bank raised its key rate for the 10th time in a row, to 4% from 3.75%, as it warned inflation was expected to remain too high for too long.
The latest increase came after forecasts predicted inflation, which is the rate prices rise at, would be 5.6% on average in 2023. However, the ECB signalled that this latest hike could be the last for now.
‘The council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target’, the bank reportedly said. The central bank originally expected inflation to be ‘transitory’.
It added that it expected inflation in the 20-nation bloc to fall to around 2.9% next year and 2.2% in 2025.
As in other parts of the world, the eurozone has been hit by rising food and energy prices that have squeezed household budgets and from the Russia/Ukraine war. Central banks have been increasing interest rates in an attempt to tame inflation and slow rising prices.
More expensive to borrow
The theory behind increasing rates is that by making it more expensive for people to borrow money, the ‘consumer’ will then have less excess cash to spend, meaning households will buy fewer things and then price rises will ease. But it is a balancing act as raising rates too aggressively could cause a recession.
Interest rates in the UK are currently higher than in the eurozone at 5.25%, but UK inflation is also higher at 6.8%, and the Bank of England is expected to raise rates again next week.
Attracting seasonal workers remains a problem for some UK farmers, despite the UK government’s attempts to increase the number of visas available for people from overseas.
There is a shortage of short term farm labour in the UK to pick crops, especially potatoes. Some of the possible causes and consequences of this situation range from Brexit to the war in war Ukraine.
Problems
Brexit has reduced access to temporary workers coming from the EU, while war in Ukraine has disrupted the flow from a country that has provided a large proportion of the UK’s harvest workers in recent years.
The UK government has a seasonal workers pilot scheme that offers short-term visas to those helping with food production, but the farming industry says it needs more than the 38,000 visas that have been made available.
High employment levels in the UK and alternative work opportunities in other sectors such as warehouses and delivery have made it harder for farmers to recruit local workers.
The labour shortage has led to food waste of home-grown fruit and vegetables, as some crops are left to rot in the fields or are harvested less frequently.
Unharvested crops left to rot in a field due to worker shortage in the UK
Food waste and supply chain
The food supply chain is also affected by the lack of workers in slaughterhouses, dairy farms, and other processing facilities.
The food waste and supply disruption could have negative impacts on the environment, the economy, and the consumers’ access to fresh and affordable produce
And it can be especially challenging for farmers in very rural areas, where transport is more difficult and the pools of workers available are likely to be smaller.
Many economists stronly believe that India’s stellar economic trajectory alongside strong forecasts for some Southeast Asian countries will be important drivers for future global growth.
The next decade, could see Asia Pacific become the fastest growing region of the world economy. India, Indonesia, the Philippines and Vietnam will most likely be among the world’s fastest growing emerging markets over the next 10 years.
India’s economy grew 7.8% in the June quarter, marking the fastest pace of growth in a year.
The momentum in the Indian economy looks really strong at the moment, economists suggest. Some forecasts expect that India will surpass Japan to become the third largest economy by 2030, with the country’s GDP projected to rise from $3.5 trillion in 2022 to $7.3 trillion by 2030.
As a region, Asia-Pacific’s growth is expected to strengthen from 3.3% last year to 4.2% this year, according to economic projections.
Over the next decade, we expect that about 55% of the total increase in the world’s GDP will come from the Asia-Pacific region.
Where does this leave the U.S. and China?
Still, the U.S. will remain an important driver of the global economy, accounting for some 15% of the world’s growth over the next decade.
China will also still be pivotal in this growth story, contributing to about one-third of the total increase over the same period, analysts suggest. China’s recovery has been weaker than expected and the expected ‘growth momentum’ has wained.
China has been affected by a slew of economic data broadly missing expectations.
As a whole, analysts expect global growth to come in at 2.5% this year and next. But please bear in mind these are forecast and move regularly.
Ashoka Chakra – the Flag of India
The flag of India is a horizontal tricolour of saffron, white and green, with a navy blue wheel called the Ashoka Chakra in the centre. The flag was adopted on 22nd July 1947, after India gained independence from British rule.
It is based on the Swaraj flag, which was designed by Pingali Venkayya and modified by Mahatma Gandhi. The colours and symbols of the flag have different meanings and interpretations.
Saffron represents courage, sacrifice, Hinduism and Buddhism. White represents peace, truth, purity and other religions in India. Green represents faith, fertility, Islam and Sikhism.
The Ashoka Chakra represents the law of dharma, the cycle of life and death, and the ancient Indian emperor Ashoka who spread Buddhism across Asia.
India’s flag is also known as the Tiranga, which means ‘the tricolour’ in Hindi. The flag has a ratio of 2:3 and can only be made of khadi, a hand-spun cloth.
The flag code of India regulates the usage and display of the flag by the government and the public.
The G20 summit will be held in New Delhi on 9th and 10th September 2023. This is the first time that India has hosted such a prestigious event, which brings together the leaders of the world’s 20 major economies with the exception of Russia.
India has invited several other countries and organisations to attend the summit, to include Bangladesh, Egypt, Spain, Netherlands, Nigeria, Mauritius, Singapore, Oman, UAE, UN, IMF, WHO, WTO, ILO, OECD, ISA, CDRI and ADB.
Broad range of issues
The summit will cover a range of issues, such as global health and pandemic response, economic recovery and resilience, climate change and environment, digital transformation and innovation, and gender equality and women empowerment. India has also proposed three new agenda items for the summit: reformed multilateralism, physical and social infrastructure for rapid inclusive development, and media and entertainment.
Major global player
India hopes that the G20 summit will cement its role as a major global player and showcase its achievements and aspirations to the world. However, the summit also faces some challenges and uncertainties, such as the absence of China’s Xi Jinping and Russia’s Vladimir Putin, the possibility of failing to agree on a joint communique, and the criticism of India’s beautification efforts that have displaced many poor people and animals.
Significant growth expected for India
India’s economy is expected to grow significantly in the coming years. For example, some economists predict that India’s annual gross domestic product growth (GDP) will average 6.3% through 2030. Others estimate that India’s GDP is likely to more than double from current levels by 2031. The OECD also forecasts that India will grow by 6% in 2023–24 and by 7% in 2024–25.
Some of the factors that may contribute to India’s economic growth are its strong emphasis on physical infrastructure development, ease of doing business, improved global conditions, and increased public spending on health care. However, there are also some challenges and risks that India may face, such as inflationary pressures, global uncertainties, environmental issues, and the labour market.
What is the G20?
The G20 is a group of 20 major economies that meet annually to discuss global issues such as economic growth, trade, development, health, climate change and energy.
India plays host to the G20 (2023)
Members of the G20
Argentina
Australia
Brazil
Canada
China
France
Germany
India
Indonesia
Italy
Japan
Republic of Korea
Mexico
Russia
Saudi Arabia
South Africa
Turkey
United Kingdom
United States
European Union
The European Union is represented by the European Commission and the European Central Bank. The G20 accounts for around 80% of gross world product, 75% of international trade, two-thirds of the global population, and 60% of the world’s land area.
The G20 was founded in 1999 in response to several world economic crises and has become the primary venue for international economic and financial cooperation.
There is a possibility that the summit could be overshadowed by India and Modi, who has given the event ‘major’ attention.
Update
African Union made permanent member of G20 ‘family’ of countries at the India hosted summit 2023.
CLOSED: ‘How am I meant to get a decent education’?
School and building closures are disrupting our children’s education in the UK. The issues range from asbestos contamination, building material failures, Covid closures and teacher strikes. What the hell?
The digital pound is a proposed new form of money that would be issued by the Bank of England and backed by the government. It would be similar to a digital banknote, enabling you to use it in-store or online to make payments.
It would not be intended to replace cash, but complement it. The digital pound is also known as digital sterling or Britcoin.
Bank of England and UK Government
The Bank of England and HM Treasury are looking at the idea of a digital pound because they think it might offer a new way to pay, help businesses, build trust in money, and better protect the UK’s financial system. They have published a Consultation Paper, which explores the need for the digital pound and proposes a set of design choices for it. They are also engaging with businesses and communities to get their views on the digital pound.
The digital pound is not a cryptocurrency or cryptoasset. Unlike cryptocurrencies, which have volatile values, the digital pound would be issued by the Bank of England and have a stable value, just like banknotes.
I promise to pay the bearer on demand the sum of £10.00
The digital £ is coming to a bank near you or more likely, an app near you
£10 in digital pounds would always have the same value as a £10 banknote.
Yet more strike action continues to create chaos for travellers
Much of the UK will have no train services on Friday 1st Septemebr 2023 as the latest major strike action takes place.
Members of Aslef, the train drivers’ union, who work at more than a dozen train companies, have walked out and have refused to work.
Up to 20,000 RMT union members at 14 operators will also strike on Saturday in a long-running dispute
Meanwhile, a consultation closing most ticket offices in England ends.
Ticket office closures
Unions and disability groups have also taken action against other proposed working practices in the industry, such as ticket office closures.
Currently, nearly 300 stations in England run by train companies with Department for Transport contracts have a full-time staffed ticket office – 708 are staffed part-time. Under the proposals, most would close.
‘What’s the point in HS2 if there is no one to run it’? ‘Beats me… guess we’re stuck with it!’
Ongoing dispute
The UK train strikes are part of an ongoing dispute between the rail unions and the train operators over pay and conditions.
ASLEF members at 16 rail operators will strike again on Friday, 1st September 2023 and Saturday, 2nd September 2023.
‘What year is it? Strike action continues to hold inflation higher. Been here too many times before’.
RMT members at 14 train companies will strike again on 2nd September 2023. This will severely affect the timetables.
Pay dispute and working practices
The rail unions are demanding a pay rise that reflects the rising cost of living, as well as job security and improved working conditions. The train operators say they need to make changes to the ways of working in order to save money and improve efficiency, especially after the pandemic hit their finances hard.
The Rail Delivery Group, which represents the train operators, has offered a 5% pay rise for 2022, but the unions have rejected it as insufficient and conditional on reforms they oppose.
The train strikes have caused significant disruption and frustration for millions of passengers, especially during the peak summer holiday season. The government has urged both sides to resume talks and find a resolution
The Nationwide Building Society says house prices are 5.3% lower compared to August last year, in the biggest annual decline since 2009.
Nationwide said the drop represented a fall of £14,600 on a typical home in the UK since house prices peaked in August 2022. It also said higher borrowing costs for buyers had led to a slowdown in activity in the housing market. Mortgage approvals are also about 20% below pre-Covid levels.
After 14 rate increases from the Bank of England – a two year fixed rate mortgage is now touching 6.7%
Since December 2021, the Bank of England (BoE) has raised interest rates 14 times in row in a bid to clamp down on rising inflation in the UK. The bank’s base rate now stands at 5.25%. This has led to lenders raising their mortgage rates, putting increased pressure on homebuyers.
The average two-year fixed mortgage rate on Friday was 6.7%, while the average five-year fix was 6.19%.
Average house prices in the UK peaked at £273,751 in August 2022 but fell to £259,153 last month.
The price of bitcoin surged Tuesday 29th August 2023 after the U.S. Court of Appeals ruled that the Securities and Exchange Commission (SEC) was wrong to deny crypto investment giant Grayscale permission to convert its popular bitcoin trust into an ETF.
Bitcoin jumped around 7% following the ruling to $27,852. The move lifted other cryptocurrencies as well as crypto equities higher.
Grayscale
Grayscale’s lawsuit against the SEC has been closely watched by investors and other industry participants as a key catalyst that would shake up a market governed by low volatility and liquidity.
Earlier this month, bitcoin trading volatility fell to its lowest level in more than four years as investors had been waiting on the sidelines for more regulatory clarity on crypto activity .
Several bitcoin futures ETFs have already been approved in the U.S.
‘Shackles being removed from crypto regulation paving way for easier crypto trading’
Court ruling
‘The denial of Grayscale’s proposal was arbitrary and capricious … The Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin Exchange Trade Product (ETP),‘the court said in the ruling. ‘In the absence of a coherent explanation, this unlike regulatory treatment of like products is unlawful. We therefore grant Grayscale’s petition for review and vacate the Commission’s order‘.
Tuesday’s ruling may increase the chances that the SEC will approve other bitcoin ETF applications, including that of BlackRock, whose filing in late June 2023 drove one of bitcoin’s big rallies this year, as well as Fidelity, Invesco and many others.
A U.S. bitcoin ETF would provide a way to get exposure to bitcoin without having to hold it, which would invite retail and institutional investors as well as wealth managers into the market.
A spokesperson for the SEC said it’s ‘reviewing the court’s decision to determine next steps‘.
‘Today’s decision reaffirms that a bitcoin ETF in the U.S. is a matter of when, not if’, said the global head of asset management at Galaxy, which filed with Invesco for its bitcoin ETF. ‘In order for digital assets to continue to flourish, they must be accessible to all investors. We believe that the ETF structure can enable greater access to and transparency across cryptocurrency investing, and truly help further democratize the asset class‘.
Dark cloud for crypto finally lifting?
The ruling also comes as a relief to many crypto market traders who have been frustrated by the SEC, particularly under Chair Gary Gensler, and its insistence on regulating by enforcement.
The crypto industry has long sought out clarity in rules businesses can apply to establish and build long-lasting, compliant companies. The U.S. regulatory crackdown on crypto in 2023 – which includes SEC enforcements and a lawsuit against the biggest U.S. crypto exchange Coinbase and also its case against XRP Ripple has been a dark cloud over the market.
Lawsuit filed June 2022
Grayscale initiated its lawsuit against the SEC in June 2022 after the agency rejected its application to turn its bitcoin trust, better known by its ticker GBTC, into an ETF. The company decided to pursue the ETF, which would be backed by bitcoin rather than bitcoin derivatives, after the SEC approved ProShares’ futures-based bitcoin ETF in October 2021.
The ruling faced multiple delays but the SEC ultimately rejected the application last summer, citing failure by Grayscale to answer questions related to concerns about market manipulation and investor protections.
Japan has started releasing treated radioactive water from the Fukushima nuclear plant into the Pacific Ocean on Thursday 25th August 2023.
This is a controversial decision that has been opposed by China, South Korea, and some Pacific island nations. They fear that the water release will harm the marine environment and human health, and affect seafood exports.
Safe?
Japan says that the water release is safe and necessary for the decommissioning of the plant, which was damaged by a massive earthquake and tsunami in 2011. The water has been treated to remove most of the radioactive substances, except for tritium and carbon-14, which are considered to have low risks. The water will also be diluted to meet the international standards for drinking water before being discharged.
IAEA
The International Atomic Energy Agency (IAEA) has endorsed Japan’s plan and said that the water release will have a negligible impact on people and the environment. The IAEA will also monitor the water release and verify Japan’s compliance with the safety standards.
30 years
The water release is expected to take about 30 years to complete, and will involve pumping out about 1.34 million tonnes of water from more than 1,000 tanks at the Fukushima site.
Japan Fukushima nuclear plant controversial release of potentially contaminated water
Slow-Growing UK Faces Over £2.6 Trillion Debt Pile
£2,600,000,000,000 in debt
The amount the UK owes exceeds GDP for first time since 1961. Inflation-linked bonds mean the UK is paying more than its peers.
From the financial crisis to Russia’s invasion of Ukraine, the UK has borrowed and spent its way out of every jam. The bill for that is becoming a massive concern for the UK treasury and for the economy.
£2.6 trillion public debt
The UK’s public debt has soared by more than 40% to almost £2.6 trillion ($3.3 trillion) since the pandemic struck, leaving the country owing more than its entire annual economic output for the first time since 1961. A heavy reliance on index-linked bonds, at a time of high inflation, also means Britain will pay more to service the debt.
The high level of debt poses a risk to the UK’s credit rating, which could affect its borrowing costs and fiscal credibility. The three main credit-rating firms are due to update their assessments of the UK over the next four months in 2023, and some analysts are concerned that the UK could face a downgrade, especially after the U.S. lost its AAA status from Fitch.
A downgrade could undermine Prime Minister Rishi Sunak’s effort to rebuild Britain’s fiscal reputation after his predecessor, Liz Truss, triggered a bond-market crash in 2022 by promising huge unfunded tax cuts.
Bond sell-off pressure
The pressure on the UK’s finances is also being compounded by a selloff in bonds amid aggressive rate hikes by the Bank of England to quell inflation. The yield on the 10-year benchmark this week rose above 4.70% to its highest since 2008.
UK debt higher than UK GDP March 2023
The UK bond market is among the developed world’s worst performers this year. The rise in yields could increase the cost of servicing the debt, which is already high due to the UK’s heavy reliance on index-linked bonds that adjust with inflation.
The UK’s economic growth is forecast to remain flat through next year, which limits the scope for reducing the debt through higher revenues or lower spending. The National Health Service is stretched to breaking point and the tax burden is already at a 70-year high. The ONS warned that debt could balloon to more than three times GDP over the next half century without action.
ONS data
According to the latest data from the Office for National Statistics (ONS), the UK’s gross domestic product (GDP) grew by 0.2% in the second quarter of 2023 (April to June), following a revised growth of 0.1% in the first quarter of 2023 (January to March). This means that the UK’s GDP growth rate for the whole year of 2023 is estimated to be 0.3%, which is lower than the previous forecast of 0.5%.
ONS data to March 2023
The main factors that contributed to the weak GDP growth in the second quarter were the slowdown in consumer spending, the decline in business investment, and the negative impact of the additional bank holiday in May due to the King’s Coronation. The services sector, which accounts for about 80% of the UK’s economy, grew by only 0.1% in the second quarter, while the production sector grew by 0.7%, and the construction sector fell by 0.2%.
Uncertain outlook in uncertain times
The outlook for the UK’s economy remains uncertain, as it faces several challenges such as high inflation, rising interest rates, a slowing global economy, and the ongoing effects of Brexit and the effects of the war in Ukraine.
ONS data for EU countries
Some economists have warned that the UK faces a ‘very real risk’ of recession due to higher interest rates, which could dampen consumer and business confidence and increase the cost of servicing the debt.
The OECD has projected that the UK’s GDP growth will improve moderately to 1.0% in 2024, but still remain below its pre-pandemic level.
AI Chatbot ChatGPT reportedly has a political bias
ChatGPT, the popular artificial intelligence chatbot, shows a significant and systemic left-wing bias, UK researchers have found. According to the new study by the University of East Anglia, this includes favouring theLabour Party and President Joe Biden’s Democrats in the U.S.
Concerns about an inbuilt political bias in ChatGPT have been raised before, notably by SpaceX and Tesla tycoon Elon Musk, but the academics said their work was the first large-scale study to find proof of any favouritism.
Lead author o the report reportedly warned that given the increasing use of OpenAI’s platform by the public, the findings could have implications for upcoming elections on both sides of the Atlantic. Any bias in a platform like this is a concern’, he said. If the bias were to the right, we should be equally concerned.
Sometimes people forget these AI models are just machines. They provide very believable, digested summaries of what you are asking, even if they’re completely wrong. And if you ask it ‘are you neutral’, it says ‘oh I am!’ Just as the media, the internet, and social media can influence the public, this could be very harmful. I have personally witnessed incorrect responses from ChatGPT where the AI ‘system’ 100% believed ‘it’ was correct and would not engage in a debate as ‘it’ was right!
How was ChatGPT tested for bias?
The chatbot, which generates responses to prompts typed in by the user, was asked to impersonate people from across the political spectrum while answering dozens of ideological questions. These questions ranged from radical to neutral, with each ‘individual’ asked whether they agreed, strongly agreed, disagreed, or strongly disagreed with a given statement.
UK researchers descovered Chatbot ChatGPT had a political bias
Its replies were compared to the default answers it gave to the same set of queries, allowing the researchers to compare how much they were associated with a particular political stance.
Each of the more than 60 questions was asked 100 times to allow for the potential randomness of the AI, and these multiple responses were analysed further for signs of bias.
Dr Motoki described it as a way of trying to simulate a survey of a real human population, whose answers may also differ depending on when they’re asked.
British microchip designing giant Arm has announced that it has filed paperwork to sell its shares in the U.S.
The Cambridge-based company, which designs chips for devices from smartphones to game consoles, plans to list on New York’s Nasdaq in September. The highly anticipated IPO in the U.S. comes after UK Prime Minister, failed to convince Arm to float in London or pursue a dual UK-U.S. listing.
Arm’s decision to list in New York rather than London has fuelled fears that the City is losing its competitiveness to Wall Street, where valuations are typically higher. SoftBank-owned chip designer Arm on 21st August 2023 disclosed a modest 1% fall in annual revenue as it made public the paperwork for a U.S. listing that is expected to be the year’s biggest initial public offering. The company is reportedly looking for a valuation of between $60bn (£47bn) to $70bn.
Arm was bought in 2016 by Japanese conglomerate Softbank in a deal worth £23.4bn. Prior to the takeover, it was listed in both London and New York for 18 years.
Companies that use ARM processors in their products
Some of the companies that use ARM processors include Apple, Qualcomm, Samsung, Broadcom, and Fujitsu. ARM technology is used in a wide range of devices, from smartphones to game consoles to supercomputers.
ARM
Arm is a British semiconductor and software design company that is known for its Arm processors, which are widely used in smartphones, tablets, laptops, and other devices. Arm was founded in 1990 as a joint venture between Acorn Computers, Apple Computer, and VLSI Technology. The company was originally called Advanced RISC Machines, but later changed its name to Arm Ltd in 1998.
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.
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.
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.
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.
The U.S. will ban American investment in some areas of China’s high-tech sector, including artificial intelligence, adding to strained relations between the two superpowers.
U.S. firms will also be invited to disclose what investments they make in China in high-tech sectors.The much-anticipated move gives the U.S. government new power to screen foreign dealings by private companies. The U.S. said the measure would be narrowly targeted. However, it is poised to further chill economic relations between the world’s two largest economies. China has reportedly said it was ‘very disappointed‘. The U.S. ‘has continuously escalated suppression and restrictions on China‘. He added that White House claims that the US was not seeking to hurt China’s economy or separate the two countries did not match its actions. ‘We urge the US side to honour its words‘.
Biden order
The order by U.S. President Biden formally kicks off the push to introduce rules to restrict, even prevent American businesses from investing in firms from ‘countries of concern‘ that are active in advanced semiconductors, quantum computing and certain areas of artificial intelligence.
The government will also require U.S. firms to notify the Treasury Department of investments in firms working on a wider range of artificial intelligence and semiconductor technology.
U.S. restriction on AI related tech knowledge to China
The rules are not expected to apply to ‘portfolio’ investments, in which firms invest passively in companies via the stock market, but are focused on active investments made by private equity and venture capital businesses. They will now enter a public ‘reflection’ period, which is expected to further clarify what kinds of investments are off-limits. The rules are not expected to go into effect for sometime yet. This new ‘order’ is quite a big deal.
In a briefing with reporters, senior administration officials said the measure was a ‘national security action, not an economic one‘. They said the U.S. remained committed to open investment.
Investment control
Controls on outbound investment are rare among advanced economies, currently present only in Japan and Korea, according to a 2022 report.
In the U.S., prior restrictions on China trade have relied on limiting sales of sensitive technology by U.S. firms and screening Chinese investments in American companies. The Trump administration had also barred investments in firms tied to China’s military.
The latest measure has widespread support in Washington, where it is seen as fixing a regulatory gap concerning financial flows that risks allowing American money and know-how to to flow into China.
International support
The U.S. has been trying to build international support for the investment curbs with some signs of success.
Prime Minister Rishi Sunak in May 2023 said the UK government would consider curbs on outbound investment; the European Commission put forward a proposal focused on investments in sensitive technologies earlier this summer. It is not clear how significantly the order would affect flows of investment.
China was the number two destination for foreign investment in 2022, behind the U.S., but many reports suggest money flowing into the country from the U.S. and elsewhere has dropped sharply as geopolitical relations sour. In the UK, a recent survey by the Institute of Directors found that one in five UK importers had already switched investments away from the country due to geopolitical tensions.
Gallium and Germanium considered critical elements required in the production of microchips
Treasury Secretary Janet Yellen, who visited China in July 2023 in an attempt to ease tensions, said last month she did not think the coming curbs would have a fundamental impact on the investment climate in the country.
Will these measures likely damage the U.S. in the future by escalating issues and restricting the U.S. from other shared advancements in technology – only time will tell.
Tech’ rivalry
U.S. and China are two of the world’s leading powers in artificial intelligence (AI) and semiconductors, which are essential components for many AI applications such as self-driving cars, smart phones, and cloud computing. However, the two countries have also been engaged in a fierce competition and rivalry over these technologies, as they seek to gain an edge in innovation, security, and economic growth. Some of the issues that have caused tensions between U.S. and China include trade disputes, intellectual property theft, cyberattacks, human rights violations, and military expansion.
AI chips
AI semiconductors are designed to perform complex calculations and tasks that require high levels of intelligence, such as natural language processing, computer vision, and machine learning.
These chips can be classified into two types: general-purpose chips that can run various AI algorithms, and specialized chips that are optimized for specific AI functions or domains.
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’.
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’.
