The Treasury has been weighing its options in the wake of the ongoing financial crisis with a trillion-dollar coin being in the cards. However, that move has not been welcomed by many as some nations are moving away from the US dollar which could lead to de-dollarisation and stripping off of its stature as the world reserve currency.
However, economists have presented a trillion-dollar gold solution to curb the US debt crisis. This creative alternative has popped up as all hands in the economic space suggest various remedies to the looming economic fiasco.
Re-monetization and revaluation of the US gold reserves could accumulate trillions
In less than 30 days from now, the treasury could run out of money, thus defaulting its debt and plunging the country into an unimaginable economic implosion. This possibility is most likely to occur if the ongoing standoff between the Republicans and the Democrats regarding raising the debt ceiling goes unresolved. As a result, economists have proposed re-monetizing the gold reserves as yet another creative remedy to curb the looming catastrophe.
TRILLION DOLLAR COIN — OR TRILLION DOLLAR GOLD?
The Treasury might run out of money. It can't borrow till the debt ceiling is raised. And as of right now, there's no agreement in sight.
But rather than a trillion dollar coin, the US could remonetize its gold. It has 261… pic.twitter.com/oqKHas2CCX
Currently, the treasury has about 261 million ounces of gold in its reserves which it values at $42.22. This rate dates back to the 70s when the US went off the gold standard. Therefore, it is almost 50 times less than the current market price of $2035. Economists have pointed out that the Fed Reserve bank manual instructs that the treasury can mandate the Fed to re-monetize and revalue its gold reserves.
Fed Reserve Banks operating manual says Treasury can instruct the Fed to revalue US official gold, every $4,000/oz deposits $1 trillion into TGA.
I figure at $20,000/oz, Tsy could buy back enough USTs to get debt/GDP back down to 50% or so, then Fed could normalize w/no problems
As such, they have proposed a revaluation of up to $20,000 per ounce, summing up to a trillion-dollar gold remedy. If the market accepts the rate, it will provide up to $5 trillion in gold, an annual federal budget. This amount will offset the cataclysmic crisis by buying back USTs and reducing the debt by 50%.
The proposal draws a tsunami of negative reactions from the Twitter financial community
The trillion-dollar gold has attracted much negative attention from Twitter financial pundits. Fort Knox has not been audited for more than 60 years now, and some users were skeptical of the existence of the said gold reserves. The Republican representative for West Virginia’s 2nd district, Alex Mooney, introduced a bill in 2021 seeking to audit the US gold reserves, but it has been stalled to date. The US treasury cannot allow auditors into the maximum security storage, raising questions about the mere existence of the reserves.
Are the stated gold reserves actually there?
Fort Knox hasn’t been audited in 60 YEARS. @RepAlexMooney introduced a bill to physically audit Ft. Knox [1], but it hasn’t gone anywhere in years.
In 2017 @FT asked “Would it matter if Fort Knox turned out to be empty?” [2]
In addition, the revaluation might deeply enrich its geopolitical rivals like China and Russia, who have been accumulating gold over the past decade. The BRICS New Development Bank (NDB) is set to release a gold-backed currency later this year. Such revaluation could empower the currency to the dollar’s detriment as the global reserve currency.
The problem is the #debt, not the ceiling. The problem will never be solved if #Congress keeps raising the ceiling. The U.S. is definitely headed for a sovereign debt and dollar crisis, but not because Congress fails to raise the #DebtCeiling , but because it succeeds!
Even so, the pro-gold economist Peter Schiff has explained that the underlying problem is the debt, not the debt ceiling. In his tweet, Schiff emphasized that the US sovereign debt and dollar crisis will occur not because of the failure of Congress to raise the debt ceiling but by its success.
The Bank of England is expected to propose a 12th consecutive hike in interest on Thursday to keep the fight against inflation lively. The nation’s Core inflation remains unchanged, highlighting the possibility of entrenchment. As such, analysts expect the bank to announce a 7-2 split vote pushing the hikes trend upwards to hit 4.25% to 4.5%.
More pain in Britain Markets?
The Bank of England is expected to hike the interest rates again on Thursday, marking the 12th time the hike has happened. This hike will most likely happen as inflation continues to roar though there are signs to slow down soon.
The U.K. economy has been performing well this year though its GDP flatlined in February owing to strikes due to the rising cost of living. However, now the country’s job market looks resilient and promising.
As such, the market almost unanimously expects the Monetary Policy Committee to opt for another 25 basis point hike on Thursday, taking the total interest rates to a 4.5% high, close to U.S.’s 5%, which was hit last week. Market analysts also expect the U.S. to pause hiking rates starting June.
Similarly, last week, the European Central Bank slowed down its hiking cycle and went for a 25 basis point increment. However, the decision still lifted the rates to levels not seen since November 2008.
Keep watching FinTech Express for updates on this story and other FinTech-related developments.
Bittrex crypto exchange has revealed that they have filed for bankruptcy, and the Treasury’s Office of Foreign Assets Control is its largest creditor.
Bittrex to instigate more pain in the crypto space?
2022 was one of the hardest years for the crypto space as several companies went down, dragging the whole market with them. Some, like FTX and Terra ecosystems, brought fear to the crypto space due to huge instances of fraud being unearthed.
Other major organizations like Genesis, Celsius and BlockFi went down in the same year. Now, one more organization, Bittrex, has gone down. The exchange was under probe by the Securities and Exchanges Commission, which led to its charging in April because of running an unregistered securities exchange.
Bittrex went ahead to cease operations towards the end of April with plans to end its US-based platform’s presence in the market. However, it said that the bankruptcy proceedings in the US would not impact its international customers.
Its May 8 court filing shows that it was founded in 2014 and accrued 100K US-based creditors during its lifetime. It also stated that it has liabilities of between $500 million and $1 billion. Additionally, some US customers still have yet to withdraw their funds from the exchange.
Now that the bankruptcy proceedings have kickstarted via Yesterday’s filing, the US customers will have to wait longer before they can finally withdraw their funds. Keep watching FinTech Express for updates on finance and banking-related news.
Binance has announced that it will enable the trading of Bitcoin Ordinals NFTs in its marketplace via a recent announcement. It has stated that it will allow investors to trade their Ordinals NFTs using the already existing wallets. This news comes when the total number of generated Ordinals hits over 5M.
Binance NFT Marketplace to allow the trading of BTC Ordinals
Bitcoin Ordinals NFTs have been a hot topic in the crypto space this year, and by now, 5M inscriptions have been hosted on the network. By now, they have been supported by major NFT exchanges like Magic Eden.
On May 9, 2023, Binance announced it would support Bitcoin Ordinals on its NFT Marketplace in May. The NFT Marketplace will now expand its NFT ecosystem to offer Bitcoin products. Previously, the marketplace integrated with decentralized networks like BNB Chain, Ethereum, and Polygon.
Keep watching FinTech Express for updates on this and other Finance related stories.
The ongoing banking collapse is sending shivers down the spines of US investors as they are losing trust in the policies that the Fed has been issuing. This has been seen via an increasing number of Short sellers in the stock market and bank withdrawals sending major banks under.
Where is this money going? Is it going into crypto? The answer is no. Most US citizens are still wary of the crypto industry, which the continued bear market has shown. A firm survey by Goldman Sachs shows that 62% of the firms do not intend to enter crypto, which is a long way from 2021’s 39%.
Dwindling trust in the US banking system
About half of US citizens are confirming that they no longer have trust in banks and are afraid to keep their money there. The main reason behind this decision is the looming financial crisis and the harsh rates hike by the Federal Reserve (Fed) that directly impacts their day-to-day lives.
Interest rate hikes are meant to slow down inflation rates. However, they impact normal citizens greatly by making borrowing money more expensive. As a result, fewer people are interested in borrowing, so the net spending falls. The Federal TReserve has been raising interest rates continuously since 2022 to combat inflation to a range of 5%, only to indicate signs of slowing down recently.
One of the side effects of continuous hikes is the increased cost of living and other strings of economic damages like bank collapse. However, the US is still posting strong job statistics, and the inflation rates are slowing down, showing that all is not lost yet.
Crypto isn’t safe, either
Investors still need to be convinced about getting into the crypto space. Recent figures from Goldman Sachs show that even more institutions are willing to stay away from the crypto space in this market cycle.
The banking institution’s findings show that roughly 26% of family offices are currently invested in crypto, up from 16% recorded in 2021. However, among those not invested in the crypto industry, the number willing to stay away from the crypto space has grown from 39% in 2021 to 62 % now.
The number of respondents potentially interested in crypto fell from 45% to 12% over the same span. Family offices are wealth management firms that work with high-net-worth individuals and families. Goldman Sachs conducted the survey discussed in this article using 166 family offices worldwide between January and February 2023.
While these findings come from a market in distress of a looming financial meltdown, they clearly show how interest in both banks and crypto industries is fairing at the moment. However, it doesn’t mean that any of the information covered here is financial advice. Keep watching FinTech Express for updates on this and other FinTech-related news.
Coinbase Executives have visited the United Arab Emirates to see if the country would be favorable to setting up their global presence. Due to regulatory uncertainties, the crypto exchange has been looking for alternatives to the U.S. and now is weighing whether the UAE could be a perfect match for it.
Coinbase actively searching for a way out from U.S. legal battles
The exchange’s Chief Executive Officer Brian Armstrong has taken another shot at the U.S. regarding its crypto treatment claiming that they are trailing behind. He made these comments at the Dubai FinTech Summit on May 8, 2023.
— Brian Armstrong 🛡️ (@brian_armstrong) May 8, 2023
In a May 7 blog post, Coinbase stated that its CEO Brian Armstrong and some of its Executive team were discussing the feasibility of using UAE as a strategic hub for the exchange. According to the company, it was working closely with the regulators in the Abudhabi Global Marlet and DUbai’s Virtual Assets Regulatory Authority as part of efforts to expand into the region potentially.
“The UAE is exciting for us as a potential hub to build as well, an international hub for Coinbase that could serve not only in the Middle East but parts of Africa or other countries in Asia,” said Armstrong at the Dubai Fintech Summit on May 8. “I think the U.S. right now is a little bit behind in regulatory clarity and some of the rhetoric from the top.”
UAE has become a leader in promoting crypto adoption, allowing VASPs like Binance to thrive and operate there. It does not have laws barring these exchanges from offering their services and does not have a ‘dirty’ history of charging organizations.
As such, many Web 3 and crypto organizations are turning to the country to set up their premises to go international. Now Coinbase seeks to follow suit following its announcement on March 2 that it was launching the Coinbase International Exchange.
These efforts by the exchange follow when a battle with the US SEC is in the cards. The exchange’s CEO has repeatedly hit the regulator for not encouraging crypto technology in the country. He also shot at the SEC for using enforcement measures rather than harmonizing regulatory efforts.
The SEC has already issued a Wells Notice to the exchange showing intent to charge it for operating ‘against’ U.S. laws. Keep watching FinTech Express for updates on the story as it unfolds.
Standard Charted CEO has commented on the likelihood of the U.S. Federal Reserve ( Fed) temporarily pausing interest rate hikes temporarily. However, he has added that he does not expect the end of the rate hikes cycle to be anytime soon as inflation is still running wild.
Analysts expect a pause or slowdown of US rates hikes
Via a statement shared with CNBC, CEO Bill Winters claims that the Central Bank will most likely use its June meeting to explain how its latest battle with inflation has been going and offer the country’s wage data.
“If we can get the regular wage growth cycle back under control, then I think the Fed can stop here. But it’s not done yet,” he said.
Bill Winters’s words echo a report by Fintech Express from last week that expected both the ECB and the U.S. federal reserve to rethink the recent hikes in interest rates. This aggressive money-tightening agenda by the two banks has contributed to increased pains in the markets and needs a break though the work is yet to be done.
Winters explain that Central Bankers in the U.S. and other locations are wary about the rising wage rates. As such, they fear such occurrences could prompt a wage-price spiral, which would embed inflation.
To avoid such, the Central Banks need to ensure that job and wage rates growth is cooling before they end the rates hiking cycle entirely.
“The fact is, job growth is still pretty strong, wage growth is still pretty strong. And that’s not just in the U.S., that’s in Europe and the U.K. as well, as in many other parts of the world,” Winters said.
“So, if we can control the regular wage growth cycle, then I think the Fed can stop here. But it’s not done yet,” he added.
Fed pausing the rates hikes could be a mistake-Fed Historian
As the rumors of the possibility of the Fed pausing the rates hike rage, a Fed Historian is not happy with it. He claims that the possibility of such a decision being taken would mean a slower sliding of the inflation rates. The rates have been falling following the 10 consecutive hikes that have been done by the Fed.
Now, Gary Richardson, a Fed historian is worried that the authority has still not learned from its past mistakes. He says that the longer the rates hikes are paused the longer it will take to tame inflation.
“The more times you pause [rate hikes], the longer the problem is going to go on,” he told me. “That’s a worry here.”
He explained that a premature retreat could cause a series of problems for the country’s economic stability as the Fed could lose its grip on inflation. He noted how the Chair of the Federal Reserve in 1972 hiked interest rates till 1974 only to retreat when he noticed an improvement.
However, the decision proved wrong as the inflation roared back forcing the inevitable change of the administrators and Paul Volcker took over. He tamed double-digit inflation — but only by raising borrowing costs high enough to trigger back-to-back recessions in the early 1980s that at one point pushed unemployment above 10%.
Richardson, who is also an economics professor at the University of California added that if the Fed doesn’t stop the inflation now, history might repeat itself. Keep watching Fintech Express for updates on Macro-Finance and other Fintech-related stories.
Meme coins season is driving Ethereum and Bitcoin transaction fees up as investors are largely dealing with the two networks. Many developers use the Ethereum network to host the coins as smart contracts, which means a spike in the usage of the smart contracts increases traffic in the network.
Meme coins keep stealing the show
Bitcoin and Ethereum transaction fees are with the former hitting levels last recorded two years ago. Ethereum’s transaction fees have also spiked to 87 Gwei due to the ongoing meme coin frenzy. The last time such high gas fees were recorded on the Ethereum network was in May 2022.
The total fees paid on the Bitcoin blockchain reached $3.5M on May 3, a jump of 400% from late April. Now, data from Ycharts indicate that the median Bitcoin transaction fees range around $7.2.
This rise in Bitcoin and Ethereum transaction fees is credited to the continued frenzy of the upcoming meme coins like Pepe Coin. This meme coin has been moving the internet over the past few days as new millionaires were made from significantly low initial investments from early and mid-April 2023. As a result, the transaction numbers of other meme coins like Wojak have been unticked, increasing the daily transactions recorded in the crypto space.
Bitcoin’s BRC-20 standard, a protocol designed after Ethereum’s ERC-20 standard and used for the transaction of fungible tokens on the Bitcoin network, is also to blame for the uptick of ots gas fees. This standard was introduced in March 2023 by a pseudonymous on-chain analyst, Domo.
Despite the uptick in the transaction fees of the two networks, they are still lower than their ATH records. Keep watching Fintech Express for updates on Bitcoin, Ethereum, meme coins, and other crypto and fintech-related news.
US vice president Kamala Harris met with top tech CEOs to discuss the risks associated with AI. She met with the CEOs, accompanied by Biden’s top advisors, on May 4, 2023, to figure out the impacts of the budding technology.
AI discussions continue raging
Kamala was joined by Biden’s nine advisors in Science, national security, economics, and policy in a meeting with CEOs of OpenAI, Microsoft, Anthropic, and Google in the discussions about the risks associated with Artificial Intelligence technology (AI)
Before the meeting, the White House released a series of AI-related announcements regarding the efforts to support AI research. The meeting largely focussed on the transparency of AI systems, the need for evaluating and validating their safety, and ensuring that they won’t land in the hands of bad actors
Advances in tech always present new opportunities and challenges. Generative AI is no different.
Today, I met with CEOs of companies at the forefront of these advances to discuss the responsibility that governments and companies have to mitigate risks to protect the public. pic.twitter.com/YQOkdv1BgR
Reportedly, the meeting resolved that more work is needed to ensure the technology’s safety. The CEOs pledged to engage with the White House to ensure that Americans would benefit from the revolution. However, no information was shared with the general public regarding the specific details of the required safety measures for the AI programs.
The absence of Meta’s CEO, Mark Zuckerberg, was widely noticed despite his company having worked on AI for the past several years. As retaliation, a White House official told CNN that the meeting was held with companies currently leading in the AI space.
The efforts towards monitoring the AI space and products associated with AI are intensifying as individuals like Elon Musk, companies like Samsung, banking corporations, and governments worldwide notice that the technology could endanger humanity.
However, these entities are not condemning or hindering the development of AI technology; they are seeking ways to regulate and sensitize the public to its possible risks.
Now, the US has said that it will release a draft policy on how the US government will use AI and be open for public commentary this summer. It also said that it would introduce technology policies in the future. Keep watching Fintech Express for updates on this and other tech stories.
As most market analysts expected, European Central Bank(ECB) has raised its interest rates again by another 25 basis points. Its President, Christine Lagarde, has announced this decision saying that they are rallying to maintain their battle against inflation.
ECB hikes rates again to hit 3.25%
The main policy rates have been hiked by 25 basis points bringing the total interest rates up by 3.25% in this economic shake-up. The decision by the ECB follows suit Yesterday’s U.S. Federal Reserve decision to hike the rates by another 25 basis points bringing its tally to 5%, the highest range since August 2007.
The European markets reacted to the news from the U.S. financial policymakers earlier today, dipping across almost all sectors as market analysts from the region also expected ECB to do the same.
Central banks have been hiking rates to bring down high inflation that most countries are battling with due to COVID economic disruption. The massive global lockdowns to battle the epidemic disrupted major supply chains, which have caused a crunch in global economics.
Currently, inflation stands at an average of 7% in the 20 countries that use the Euro for trade. That number is more than ECB’s 2% inflation rate target. However, today’s rate hike was lower than the previous ones, which foreshadows plans by the ECB to slow down the program of hikes. The same steps are expected from the U.S. Federal Reserve as it gave hints of pausing the hikes soon in its official statement.
The rising interest rates have resulted in higher profits for lenders, but on the other hand, it’s putting pressure on banks as some government bonds are losing value. However, the E.U. has been experiencing a stronger banking system resilience, unlike the U.S., which has seen the collapse of around 3 major banks collapse.
However, only time will tell how long the battle against inflation will take. Keep watching Fintech Express for updates on Macro-finance and other fintech-related stories.
