Bretton Woods anniversary has crypto traders dreaming of dollar’s demise

Bretton Woods anniversary has crypto traders dreaming of dollar’s demise
The dollar represents a dominant 59 percent of central bank reserves. (Reuters)
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Updated 14 August 2021

Bretton Woods anniversary has crypto traders dreaming of dollar’s demise

Bretton Woods anniversary has crypto traders dreaming of dollar’s demise
  • The gold standard ended 50 years ago on Aug. 15
  • Cryptocurrencies yet to show they can replace so-called fiat currencies

LONDON: Aug. 15 marks the 50th anniversary of Bretton Woods and the end of the gold standard, which pegged all currencies to the yellow metal.

That ushered in the era of fiat currencies, whereby their value was pegged not to gold but to each other. Cryptocurrency fans love referring to the dollar and other central bank-backed currencies as “fiat” because it drives home the fact that the financial system is a potential house of cards that relies on the faith of everyone involved in it to assign value to currencies and other financial assets.

The alternative, of course, is cryptocurrencies, which cannot be debased by central banks printing more of them.

They are, though, even more than so-called fiat currencies reliant on the whims of the market. Such are the swings in the likes of bitcoin, they are essentially unusable as currencies, unless you are OK with seeing the value of your savings drop by 20 percent in a matter of days.

Coindesk marked the Bretton Woods anniversary with a column by its Chief Insights Columnist David Z. Morris, who pointed to the dollar’s slow erosion as the leading reserve currency held by central banks. He does, however, acknowledge that it still makes up a dominant 59 percent.

He also suggests that the next wave of adoption could come from small countries, such as El Salvador, which said it will allow make bitcoin legal tender from Sept. 7.

Just a few days ago the IMF warned that using cryptocurrencies as legal tender could threaten macroeconomic stability, but that’s what you would expect to hear from one of the main institutions overseeing the currency financial system, right?

It will be a big experiment and, of course, it could work out fine. However, if I was ever forced to accept bitcoin in return for services, I would be converting it into something more stable as soon as I could.

Financial stability is one of those things, like fresh air, that few people appreciate until it’s gone. For all their quantitative easing and other measures that potentially debase a currency, central banks do an incredible job at maintaining stability.

So good, in fact, that we can undergo the kind of pressure that has been exerted on us by the coronavirus pandemic and see only a relatively small amount of financial disruption, albeit it devastating for many individuals.

Elsewhere, in cryptoville, Intel Corp. on Friday disclosed a stake worth less than a million dollars in US cryptocurrency exchange Coinbase Global Inc.

The chipmaker held about 3,014 shares of Coinbase’s Class A common stock as of June 30, Intel said in a regulatory filing. The Coinbase shares would be worth around $788,191, based on trading price of $261.51 at 15:01 p.m. ET on Friday.

Major players have doubled down on crypto holdings including star stock picker Cathie Wood and Tesla Inc. Chief Elon Musk.

One of the largest cryptocurrency exchanges in the world, Coinbase went public through a direct listing in April, which saw its valuation rise to as high as $112 billion on the first day of trading.

On the markets, trading was light on Saturday as bitcoin rose 1 percent to $46,811 and Ethereum by 2 percent to $3,265.


Economic sentiment in the EU drops slightly; inflation on the rise in Germany and Spain: Economic wrap

Economic sentiment in the EU drops slightly; inflation on the rise in Germany and Spain: Economic wrap
Updated 11 sec ago

Economic sentiment in the EU drops slightly; inflation on the rise in Germany and Spain: Economic wrap

Economic sentiment in the EU drops slightly; inflation on the rise in Germany and Spain: Economic wrap

The EU’s Economic Sentiment Indicator slipped marginally by 1.1 points to reach 116.5 in November, the European Commission said.

The drop was attributed to a noticeable fall in consumer confidence, although among other sectors such as industry and services it remained the same. At the same time, confidence in the retail trade and construction sectors improved.

Germany, the Netherlands and Spain were among the countries that experienced a downward trend in their economic sentiment, with the latter undergoing the largest decline.

On the other hand, France had the biggest improvement in economic sentiment during the month. Italy and Poland were another two countries that had more favorable sentiment.

Inflation in Western Europe

Annual inflation rate in Spain reached 5.6 percent in November, according to preliminary estimates in a press release issued by Spain's National Statistics Institute. 

The inflation rate predicted for November will be the highest since September 1992. The increase was mainly driven by higher food prices.

In addition, the monthly inflation rate is expected to reach 0.4 percent in November.  

Meanwhile, Germany’s consumer prices are expected to rise in November by 5.2 percent from a year ago, data from Germany’s Federal Statistics Office showed. This is higher than October's 4.5 percent.

Energy costs surged by 22.1 percent while food prices went up by 4.5 percent, according to preliminary estimates.

The monthly inflation rate is expected to be a negative 0.2 percent in November.

Mexico’s unemployment

The Mexican jobless rate decelerated to 3.9 percent in October from 4.2 percent in the prior month, according to the country’s official statistics agency, INEGI.

The number of unemployed persons eased to 2.3 million, declining by 288,000 from a year earlier, the INEGI report showed.

On a seasonally adjusted basis, the jobless rate remained at 3.9 percent.


Egypt and Jordan agree to more than double the electric capacity between them

Egypt and Jordan agree to more than double the electric capacity between them
Updated 21 min 9 sec ago

Egypt and Jordan agree to more than double the electric capacity between them

Egypt and Jordan agree to more than double the electric capacity between them

Egypt and Jordan have agreed to strengthen the electrical interconnection between them in a plan that could see them exchange energy with the rest of the region.

The two governments have settled on a deal that will see the current capacity of 500 megawatts increased to up to 2000 MW, with Jordanian Minister of Energy and Mineral Resources Saleh Al-Kharabsheh saying it “benefits both sides.”

“Our relationship with Egypt is distinguished, as the electrical connection between Jordan and Egypt began in 1999, and there is an exchange of electrical energy with capacities of up to 500 megawatts, and the new agreement may raise this capacity to 1,000 or 2,000 megawatts in the future,” Al-Kharabsheh said, at a press conference in the Jordanian capital of Amman.

“It is possible that Jordan and Egypt will eventually be able to exchange electrical energy between the countries of the region and link it to each other and with other countries such those in Europe or through Egypt to the African continent, which helps encourage and strengthen cooperation between the two countries,” he continued.

Speaking alongside Al-Kharabsheh, the Egyptian Minister of Electricity and Renewable Energy Mohamed Shaker said his country has managed to raise its electrical capacity enough to be able to export.

He added that Egypt plans to increase the percentage of renewable energy from its electrical capacity to 42 percent in 2035.

Shaker also explained that Cairo is studying a new link line with Europe through Greece and Cyprus, explaining that strengthening the link with Jordan opens the way for the exchange of capabilities.

 


16 more fintech firms enter Saudi market in Q3 of 2021

16 more fintech firms enter Saudi market in Q3 of 2021
Updated 45 min 55 sec ago

16 more fintech firms enter Saudi market in Q3 of 2021

16 more fintech firms enter Saudi market in Q3 of 2021

RIYADH: Saudi Arabia issued licenses to 16 fintech companies in the third quarter of 2021, Sabq quoted Saudi Central Bank governor as saying at an event on Monday.

Fahad Almubarak said 13 of those companies work in the field of payments and electronic wallets, and three firms are engaged in insurance and finance sector.

Saudi Arabia witnessed a 37 percent rise in the number of fintech firms entering the market and also recorded an increase in venture capital investments that exceeded SR680 million ($181 million).

Capital Market Authority chairman Mohammed Elkuwaiz said fintech companies develop technical ideas that challenge the current situation, which has an added value because it offers a product that did not exist before, Sabq paper reported.

Fintech in Saudi Arabia has competitive advantages over other countries, and 90 percent of transactions in the Saudi financial market are automated and have been conducted electronically for more than 10 years, Argaam reported.


Chinese developers to face $1.3bn of bond payments in December

Chinese developers to face $1.3bn of bond payments in December
Updated 29 November 2021

Chinese developers to face $1.3bn of bond payments in December

Chinese developers to face $1.3bn of bond payments in December

RIYADH: China’s developers face around $1.3 billion of bond payments in December, following a month of investors’ sentiment stabilising toward the property sector.

In November, the total bond payments was $2 billion, with no defaults reported, according to Bloomberg. 

Investors' scrutiny regarding principal and interest payments lingers as the cash crisis hits the real estate industry. 

China’s Evergrande group unit and Kaisa group’s grace periods are ending by mid-December on coupons of a total of $171 million. 


SMEs loans growth slows down in 3Q 2021

SMEs loans growth slows down in 3Q 2021
Updated 29 November 2021

SMEs loans growth slows down in 3Q 2021

SMEs loans growth slows down in 3Q 2021

RIYADH/MOSCOW: Annual growth in total credit provided to small and medium enterprises by Saudi banks slowed in the third quarter of 2021 to 12.9 percent from 25.3 percent in the previous quarter, the Saudi Central Bank report issued on Sunday showed.
Loans given to SMEs reached SR186.2 billion ($49.6 billion) in the third quarter of 2021 compared to SR165 billion in the same quarter a year ago.
A descending trend in quarterly growth rates has also been observed as the value of SME lending increased by just 0.8 percent in the third quarter of 2021, the lowest quarterly rate of growth recorded since the fourth quarter of 2019.
In addition, lending to SMEs from finance companies totaled SR14.2 billion in the third quarter of 2021 compared to SR13.5 billion in the previous quarter. It was also higher than last year’s SR10.8 billion in the same period.