Sunday, April 29, 2018

Wall Street Journal - Iran, China Seek to Loosen Dollar's Grip on Global Markets

This Wall Street Journal article says what we have been reporting here from some time. Despite ongoing efforts by a number of nations to dethrone the US dollar globally, it remains the global reserve currency with no signs that will change soon at this time. Below are a couple of excerpts.

"A small but growing number of countries are stepping up efforts to wean themselves off the dollar, aiming to chip away at the U.S. currency’s decadeslong dominance.

Iran last week became the latest when it pledged to replace the dollar with the euro in its foreign-currency accounting.

China introduced the world’s first yuan-denominated oil contracts last month, part of a continuing effort to raise its currency’s global profile, while Venezuela launched a bitcoin-like cryptocurrency earlier this year. Russia has ramped up its gold reserves to diversify away from the dollar. Still, none of these new efforts has threatened the dollar’s global role."

. . . .

"China’s efforts to use the yuan to create an oil benchmark that would rival those in New York and London “look to be a nonstarter,” the Council on Foreign Relations said in a report. In February, the yuan made up just 1.6% of domestic and international payments, according to financial-transactions firm Swift. As a share of currency reserves, the yuan represents 1.2%."

Thursday, April 26, 2018

BIS - Payments are Changing, But Cash Still Rules

Below I have pasted in the April newsletter I receive by email from the Bank for International Settlements. Of note in this issue is a video discussion that points out that despite all the talk we hear about a "cashless society", we are far from that being a reality today.


April 2018

Central bank digital currencies 

Central banks must carefully weigh the implications for financial stability, monetary policy and payments systems of issuing digital currencies, according to the Committee on Payments and Market Infrastructures and the Markets Committee.

Volatility is back 

Volatility returned to markets, puncturing a long period of unusual calm and highlighting the difficulties in normalising monetary policies.

Minimum capital requirements for market risk

The Basel Committee is proposing revisions to minimum capital requirements for banks’ trading activities.

Payments are a-changin' but cash still rules

Demand for cash has risen in many advanced economies following the Great Financial Crisis, even though consumers are using cards or contactless payment options more often.

Common lenders in emerging Asia: their changing roles in three crises

Shifting sources of international finance - from Japanese banks in the 1990s to European banks in the 2000s, with a growing role for Chinese banks today - have affected how economic shocks could be transmitted worldwide.

Monday, April 23, 2018

Stephen Leeb on China

Stephen Leeb says he thinks China and the US can come to "win-win" agreement and resolve their trade issues. He thinks gold will come into play during the process. You read his comments on this in this recent interview on King World News.

We are now halfway through April in 2018. We have alerted readers that by summer or early fall we will end regular articles here if no significant events that may lead to major monetary system change appear on the horizon.

We still don't see anything that would change that at this time. The events that we will keep an eye along the way for the time being are:

- what happens with North Korea and China (see news note below)

- what happens with global debt and derivatives

- what happens with the legal battle involving the Trump Administration

- what happens with the so called "petro-yuan" impact on the US dollar

- what happens with various efforts to establish non legal tender currencies such as cryptocurrencies and gold backed cryptocurrencies

These are the main events we know of that could create conditions that might impact financial markets and even the monetary system.

We will also watch for any articles by experts we follow on major issues that might impact monetary system change as well, but we have pretty well covered the main proposals we can find by these experts on ideas for monetary system change and listed them on this page of the blog. I will note that recently Sean Rushton of the Jack Kemp Foundation wrote an article calling for monetary system change consideration published in the Wall Street Journal. In the article he mentions the SDR. I think he may have been thinking about something along the lines of the Real SDR proposal that we have featured here by Dr. Warren Coats.

Added news note: This article in the South China Morning Post reports that North Korea blew up their own nuclear test facility last fall. It says that this problem on top of US sanctions may have set back North Korea for some time and may be why they are now interested in talks with the US. If so, this probably takes this situation off the table as a risk to systemic stability.

Friday, April 20, 2018

IMF Issues New Report on Expanded Role for the SDR

Last fall the IMF announced it would begin a study to see if an expanded role for the SDR might improve the financial stability of the international monetary system. This month the IMF issued a report on some of its findings. Below I have pasted in that report. I added bold type for a few points I wanted to emphasize.


IMF Executive Board Discusses the Role of SDR

April 11, 2018
On March 30, 2018, the Executive Board of the International Monetary Fund (IMF) discussed a staff paper entitled Considerations on the Role of the SDR. The paper explores whether a broader role of the SDR could contribute to the smooth functioning and stability of the international monetary system (IMS). It provides an updated assessment of the IMS, highlighting its considerable resilience but also some weaknesses—a weak external adjustment mechanism, gaps in international liquidity provision, and large-scale reserve accumulation— and explores whether the SDR could play a broader role in mitigating these weaknesses

Conceptually, there are three distinct forms of the SDR: official SDRs, the reserve asset administered by the IMF (O-SDR); SDR-denominated financial instruments, or “market SDRs” (M-SDR); and the SDR as a unit of account (U-SDR). The O-SDR was conceived under the Bretton Woods gold exchange standard as an international reserve asset to supplement existing reserve assets. As the IMS evolved, and despite the aim of the Second Amendment of the Articles of Agreement to make the SDR “the principal reserve asset in the international monetary system,” the SDR’s role as an international reserve asset has been limited. Interest in both the U-SDR as the unit of account to price international trade or for the dissemination of statistics, and M-SDR as the denomination for financial instruments such as bank deposits, loans, or securities, has been sporadic with low overall uptake. 

The staff analysis concludes that among the three conceptual forms of SDR, the O-SDR has the greatest potential to contribute to the smooth functioning of the IMS under a different legal framework that would require amendments to the Fund’s Articles of Agreement. The paper highlights, among others, the major challenges around scale, targeting and the use of O-SDR allocations. It argues that widespread M-SDR and U-SDR use would likely make more limited contributions to systemic IMS stability and face significant implementation challenges. The paper also aims to initiate a conversation about the SDR’s role amid uncertainties caused by economic and technological developments, such as the prospect of a more multipolar global economy and the impact of financial innovation and new technologies. 

Executive Board Assessment

“Executive Directors welcomed the opportunity to discuss whether the SDR could play a broader role in contributing to the smooth functioning and the stability of the international monetary system (IMS). Many Directors noted that the IMS had shown considerable resilience and strength, including during the global financial crisis (GFC), and a few noted that it had been further strengthened after the GFC. Directors noted, however, that the IMS continues to face several important challenges, mainly related to external adjustment mechanisms, gaps in official provision of international liquidity, and systemic side effects of large scale reserve accumulation. In this context, Directors reflected on whether an enhanced role for the SDR could help in mitigating the observed weaknesses of the IMS and complement other efforts such as global policy coordination, enhanced surveillance, and a strengthened global financial safety net (GFSN), alongside countries’ own efforts to increase resilience through sound domestic macroeconomic policies and strong policy frameworks. Most Directors were uncertain or unconvinced that there is a role for the SDR in addressing the weaknesses of the IMS. A number of Directors, however, considered that there is a potential for the SDR to address these gaps and saw merit in continuing to explore its future role.

“Directors discussed whether an expanded role of official SDRs (O SDRs) could help smooth external adjustment, augment the supply of safe global assets, and reduce incentives for precautionary reserve accumulation. In this context, while a number of Directors saw a potential for additional O SDR allocations to help foster greater IMS stability, most were not convinced that it could be effective in addressing the IMS gaps. Many Directors noted that the 2009 SDR allocation played an important role in mitigating the impact of the GFC. Nevertheless, many Directors also cautioned that such allocations could raise moral hazard concerns, including reluctance in some recipient countries to enact needed policy adjustments, although a few felt that such concerns might be overstated and could be mitigated through increased transparency and effective surveillance. Some Directors also doubted whether voluntary trading participants would be willing to support high volumes of O SDRs. A number of Directors expressed skepticism regarding alternative targeting mechanisms for SDR allocations, such as allocations contingent on global conditions or meeting policy criteria, noting that it would blur the distinction between conditionality based Fund lending and the role of the SDR as reserves. Many Directors noted that such alternatives would require amending the Articles of Agreement and resolving a number of operational considerations, such as the allocation of credit risk.

“Most Directors saw limited scope for market based SDRs (M SDR) and SDRs as a unit of account (U SDR) to contribute to systemic stability. Despite the benefits of diversification and stability of payments and receipts, uptake would be hard to achieve even with official sector support to reduce transaction costs and develop market liquidity and infrastructure. A number of Directors, however, saw merit in exploring these issues further, and a few called for a more active role for the Fund to contribute to the development of SDR market infrastructure. 

“Directors welcomed a preliminary discussion of economic and technological transitions, such as a potential move toward a multipolar global economy and adoption of financial technologies, and their impact on the IMS. Most supported further analysis of how these developments could reshape the IMS in the future, noting that the role of the SDR either should not be the central question in this analysis or need not be explored at all. It was also suggested that staff should focus more on issues such as exchange rate adjustment, excess reserve accumulation, and global rebalancing.”

My added comments: As we can see from the report above, the IMF continues to look at the idea of some kind of expanded role for the SDR in the international monetary system. We have covered that extensively here since Jim Rickards continues to predict that when the next major global financial crisis arrives, the SDR will be put forward to replace the role of the US dollar as global reserve currency.

Along those lines, we have also extensively covered the Real SDR proposal of Dr. Warren Coats (former IMF) which is a real detailed proposal the IMF could consider at some point in the future. We have even published a direct Q&A interview with Dr. Coats on this proposal

Looking at this new release from the IMF, I don't see any indication that there is much momentum inside the IMF for much major change at this time. Please note the bolded sections above which state clearly that "most (IMF) Directors were uncertain or unconvinced that there is a role for the SDR in addressing the weaknesses of the IMS (International Monetary System)." Also, see this quote from the concluding paragraph:

"Most (IMF Directors) supported further analysis of how these developments could reshape the IMS in the future, noting that the role of the SDR either should not be the central question in this analysis or need not be explored at all."

This is in line with what I heard for some time from experts like Dr. Coats and what we have reported here. I continue to believe that without a new major global financial crisis, the impetus for major change to the existing monetary system does not exist right now. This is why we have focused on keeping an eye on any events that might lead to a new major crisis. That would be the trigger point that could change the dynamic of the situation and allow for new ideas to be put forward. 

We will continue to monitor events that might lead to a new crisis, but unless we see those emerge by mid to fall 2018, we will end regular blog articles here and simply continue to monitor events and wait for something significant to report. Meanwhile, readers can access our list of potential systemic risks here and various proposals for monetary system change here. If a new crisis does emerge, this information will be valuable for readers to be able to access.

Monday, April 16, 2018

Jim Rickards on Russia

Jim Rickards offers this geo political analysis on Russia. He says the threat from Russia is not any attempt at world conquest, but rather its more modern approach to increasing Russian influence using a long term campaign to undermine the US dollar as global reserve currency. Below is an excerpt.


"Russia’s Putin has never taken his eye off the ball. His ambition is not global hegemony or European conquest. Putin seeks what Russia has always sought: regional hegemony and a set of buffer states in eastern Europe and central Asia that can add to Russia’s strategic depth.

In Syria, Russia has the warm water port of Tartus — which is important when you consider that most Russian ports are ice-bound for months of the year.

It is strategic depth — the capacity to suffer massive invasions and still survive due to an ability to retreat to a core position and stretch enemy supply lines — that enabled Russia to defeat both Napoleon and Hitler. Putin also wants the modicum of respect that would normally accompany that geostrategic goal.

Understanding Putin is not much more complicated than that."    . . . . .

Added note: A blog reader (not Jim Rickards) sent me these thoughts by email in regards to events taking place in Syria and related to Russia:

"Trump tells Russia, "Get ready for missiles in Syria". Most people think this is probably about the chemical attack.  I believe it is about the real war about to get started over the petroyuan and Russia-Iran-Syria having a pipeline and port to the Mediterranean.  This could be the stresser against the dollar forcing monetary change."

Additional side notes: I sent Jim Rickards a link to this recent article appearing in the NY Post and he indicated in his reply that he agrees with the main thrust of the article. This means we should keep an eye on what happens with the Trump legal situation and its potential impact on markets as we noted here earlier. More and more analysts (both pro and anti Trump) are talking about this situation as a coming potential "constitutional crisis". Obviously, if that does happen, it may negatively impact markets and even systemic stability.

Also, after Jim wrote this article on Russia, the US launched attacks on Syria and Russia reacted with anger. Another potential global trigger point we must keep an eye on. Jim made this comment on that recently in his twitter feed.

"Syrian Civil War bears more than passing resemblance to Spanish Civil War in that Russia confronts West via proxies while Great Powers use the conflict as proving ground for new weapons as they prepare to fight each other." --- Jim Rickards

One could make the observation that so far, despite some corrections, global markets have shown remarkable resilience in the face of ramped up tensions between the US, China, Russia, North Korea, and pretty much the whole Middle East. On top of all that, we appear to have the potential for a global trade war. In this recent article, Nomi Prins makes the argument that this won't last and markets will eventually react in a way that forces new easing policies by central banks.

Saturday, April 14, 2018

IMF - US Dollar Share of Global Reserves Hits 4 Year Low

In its most recently quarterly report on global reserves, the IMF reports that the share of US dollar reserves globally hit a four year low. The MalaymailOnline carried the report and some excerpts are below. It should be noted that while dollar reserves did drop a bit a new four year low, they are still by far the majority of global reserves.


"NEW YORK, March 31 — The US dollar’s share of currency reserves reported to the International Monetary Fund declined in the final quarter of 2017 to a four-year low, as other currencies’ shares of reserves grew, data released yesterday showed.

The share of dollar reserves has declined for four straight quarters as the greenback weakened in 2017 due to faster growth outside the United States and bets that other major central banks would consider reducing stimulus. Still the dollar has remained the biggest reserve currency by far.

Global reserves are assets of central banks held in different currencies, mainly used to support their liabilities. Central banks sometimes have used reserves to help support their respective currencies.

“Reserve managers in Q4 liked (yen) and ‘other currencies,’” Steven Englander, head of research and strategy with Rafiki Capital Management, wrote in a research note. “The limited (US dollar) buying is not surprising. Reserve managers buy (US dollar) when they have to — they rarely want to buy.”


Added news note: Quartz ( reported in January 2018 that there is a small move away from the US dollar towards the Chinese Yuan going on in Europe. However, it again should be noted that the changes so far are very small and taking place at a very slow pace with the US dollar still over 60% of global reserves (the Euro is the next closest at around 20% while the Yuan is still only just over 1%).

Additional news notes: IMF Director Christine Lagarde issued a warning on global debt in this interview with the South China Morning Post. The Director noted that 40% of new global debt since 2007 has come from China and said the debt to GDP ratio for both Hong Kong and China raised red flags.She also pointed out that global debt has now soared to 220% of global output. Despite the warnings, she finished the interview by saying she is "desparately optimistic, always."

In this article in the IndiaTimes, she is quoted as warning that the so called "belt and road" initiative coming out of China may add to debt problems for some of the nations involved in that project. The article says that some of her comments may "ruffle feathers in Beijing."

I always find it interesting to read articles from different parts of the world because you can see how different talking points are emphasized depending on who is running the article.

Wednesday, April 11, 2018

Greg Hunter Interview on Kinesis

We noted earlier that the Allocated Bullion Exchange (ABX) recently announced its new gold backed cryptocurrency initiative they call Kinesis. Greg Hunter interviewed the CEO of the ABX along with Andrew Maguire to get more information on how this is intended to work. Below you can view that interview.


My added comments:  Readers may wonder why we would cover this news given that earlier efforts to initiate a similar cryptocurrency by the ABX were not able to get off the ground. The answer is simple. The ABX has made an announcement that the Indonesian Post Office will be a partner with Kinesis. In addition, they repeat in this interview that an Islamic organization with 100 million members will also partner with Kinesis (see page 20 of the Kinesis blueprint). Also, near the end of the interview, the statement is made the some eastern governments have approached them with interest in participating in Kinesis and it is pointed out that Russia and China are continuing with massive gold purchases.

These are significant claims. If they pan out, they do provide a realistic path for Kinesis to gain enough widescale adoption by the public to become viable (starting in the Eastern part of the world). If that were to happen, the demand for physical gold (and silver) will certainly go up quite a bit because all the money in this system is fully backed by physical gold and silver. The gold and silver markets are fairly tight now in the sense that if only 3-5% of the worlds investment capital were to move into gold and silver, the price would be substantially impacted upwardly.

On top of this, what is being proposed here is truly an alternative monetary system that would operate fully outside the banking system and be backed by physical gold and silver. It is clear that the plan in this system is to entice money into it by offering a yield on gold and silver not usually available. The yield is derived from small transaction fees as the money turns over in transactions using Kinesis as money.

Only time will tell us if all this actually pans out. As noted above, previous efforts to do this by the ABX did not go forward. However, if this does pan out, we would view it as significant news we need to follow here over time. It appears it will be the fall of 2018 before this really gets started up. Currently, the fund raising process is in progress.

Added note (4-12-18): I am advised by reader who is participating in the Kinesis project that a series of additional new announcements by Kinesis/ABX are scheduled to come out fairly soon so we will watch for that news.

Sunday, April 8, 2018

Mark Carney (BOE) - The Future of Money

Here we have some more input on money from the head of the Bank of England (BOE), Mark Carney. This is recent speech he gave on The Future of Money that goes into some basics on money, looks at cryptocurrencies, and then tries to look ahead into the future to see where things may be headed. Below are some excerpts from the speech. (see the slides for the speech here).


Comments on cryptocurrencies:

"Even though their prospects of replacing fiat money are tenuous at best, cryptocurrencies are of growing interest to policymakers, many of whom prefer to term them crypto-assets expressly because they are not true currencies—a convention I will adopt for the balance of my remarks.

On the upside, as I will come onto in a moment, some of the underlying technologies are exciting. Whatever the merits of cryptocurrencies as money, authorities should be careful not to stifle innovations which could in the future improve financial stability; support more innovative, efficient and reliable payment services as well as have wider applications.

On the downside, at present, crypto-assets raise a host of issues around consumer and investor protection, market integrity, money laundering, terrorism financing, tax evasion, and the circumvention of capital controls and international sanctions.

 The Bank of England’s FPC is currently considering the risks posed to UK financial stability. And internationally the Financial Stability Board (FSB) will report to the G20 in Argentina later this month on the financial stability implications of crypto-assets.

At present, in my view, crypto-assets do not appear to pose material risks to financial stability

This is in part because they are small relative to the financial system. Even at their recent peak, their combined global market capitalisation was less than 1% of global GDP. In comparison, at the height of the dotcom mania, the valuations of technology stocks were closer to about a third of global GDP. And just prior to the global financial crisis, the notional value of credit derivative swaps was 100%."

. . . . . .

Pointing to the Future I trust you have gathered by now that for many reasons the crypto-assets in your digital wallets are unlikely to be the future of money. 

But that is not meant to dismiss them. Their core technology is already having an impact. Bringing cryptoassets into the regulatory tent could potentially catalyse innovations to serve the public better. Indeed, crypto-assets help point the way to the future of money in three respects: 

- By suggesting how money and payments will need to adjust to meet societies’ changing preferences, particularly for decentralised peer-to-peer interactions; 

- Through the possibilities their underlying technologies offer to transform the efficiency, reliability and flexibility of payments; and 

- By the questions they raise about whether central banks should provide a central bank digital currency (CBDC) accessible to all.

. . . . . .

On the Potential for Central Bank Digital Currency for Everyone:

Third, crypto-assets raise the obvious question about whether their infrastructure could be combined with the trust inherent in existing fiat currencies to create a central bank digital currency (CBDC). 

Currently only banks can hold central bank money electronically in the form of a settlement account at the Bank of England. To be truly transformative a general purpose CBDC would open access to individuals and firms. 

The Bank has an open mind about the eventual development of a CBDC and an active research programme dedicated to it. That said, given current technological shortcomings in distributed ledger technologies and the risks with offering central bank accounts for all, a true, widely available reliable CBDC does not appear to be a near-term prospect. 

Moreover whether it is desirable depends on the answers to a series of big policy questions. While these are largely for another speech, I will note that a general purpose CBDC could mean a much greater role for central banks in the financial system. Central banks may find themselves disintermediating commercial banks in normal times and running the risk of destabilising flights to quality in times of stress.

There are also broader societal questions (that others would need to answer) such as how society balances privacy rights with the extent to which the information in a CBDC could be used to fight terrorism and economic crime.

A CBDC shouldn’t be a solution in search of a problem or an effort of central bankers to be down with the kids. 

My Added Comments: This speech provides a lot of good information on the current thinking inside major central banks such as the Bank of England. I feel like we have covered the issues discussed in this speech about as well as anyone. We have noted that despite a constant drumbeat we see in various media that blockchain based crytocurrencies will soon be arriving at major central banks, the reality is quite a bit different. Here is what Mr. Carney says about this directly from this very recent speech:

The Bank has an open mind about the eventual development of a CBDC and an active research programme dedicated to it. That said, given current technological shortcomings in distributed ledger technologies and the risks with offering central bank accounts for all, a true, widely available reliable CBDC does not appear to be a near-term prospect. 
I think he makes things pretty clear. The US Federal Reserve has made similar comments as well in the past year. Those who have been speculating that the IMF will have a blockchain based SDR any time soon are off base as well in our view here. 

If you simply read what Mark Carney says in this speech, you will see that there a number of concerns central banks have about issuing central bank digital currencies even as they continue to study the concept. The IMF would be even less likely to move forward with anything like this until they see some major central banks test it out in the real world for a lengthy period of time (something that may not happen for years). As Mark Carny plainly says, "a true, widely available CBDC does not appear to be a near term prospect."

He does offer encouragement for improved cross border payments systems for existing national currencies perhaps along the lines that IBM and others are working on with partners such as Stellar and KlickEx. We will continue to watch for anything along those lines that may unfold over time.
Added unrelated news note: Today (4-9-18) we get news that the personal lawyer of President Trump had his files raided by the FBI. Up to now I have viewed all this as mostly political theater leading to nowhere. This action today may indicate a much more serious ramping up of this situation. 

Anything that might lead to instability (or perceived instability) of the US government (and the President of course) is something we must watch carefully. A long, protracted and bloody legal battle could become a very serious situation. And we can be sure that the enormous political divide that exists in the US already will only get much worse as each side digs in and ramps up their attacks on the other side. Experts I follow also do believe this could be a serious situation as well.

That type of thing could certainly significantly impact markets on top of everything else. I encourage readers to pay close attention to this situation and market reactions to it going forward and consider what actions might be worth considering (to increase personal financial insurance against instability) if this situation gets much worse in weeks and months ahead.

Thursday, April 5, 2018

Bank of England - How is Money Created?

The Bank of England offers this explanation concerning the question of how money is created. Below are some excerpts from their article.

How Does it Work?

"Money is more than banknotes and coins. If you have a bank account, you can use what’s in it to buy things, typically with a debit card. Because you can buy things with your bank account, we think of this as money even though it’s not cash.

Therefore, if you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account.

This also means as you pay off the loan, the electronic money your bank created is “deleted” – it no longer exists. You haven’t got richer or poorer. You might have less money in your bank account but your debts have gone down too.  So essentially, banks create money, not wealth."

. . . . . .

Can banks create as much money as they like?

"No, they can’t.

Regulation limits how much money banks can create. For example, they have to hold a certain amount of financial resources, called capital, in case people default on their loans. These limits have become stricter since the financial crisis."

Please click here to read the full article on the Bank of England web site

Added note: Not to be outdone, the NY branch of the US Federal Reserve has produced comic books to explain banking and central banks from their point of view. You can find them here if interested:

Tuesday, April 3, 2018

Reuters - China taking first steps to pay for oil in yuan this year - sources

This is news that needs to be noted. Recently China launched new oil futures contracts trading in Yuan which many viewed as just one more effort to bypass the US dollar. How much impact the new "petro-yuan" contracts will have has been much debated.

Now we have Reuters reporting that three sources (not identified) are saying that later this year China plans to start using Yuan to buy the oil it imports. This could be viewed as a more significant effort to displace US dollars with Chinese Yuan and will need to be watched this year. Below are excerpts from the Reuters article (I added the underline and bold type for emphasis).

"China is taking its first steps towards paying for imported crude oil in yuan instead of the U.S. dollar, three people with knowledge of the matter told Reuters, a key development in Beijing’s efforts to establish its currency internationally.

Shifting just part of global oil trade into the yuan is potentially huge. Oil is the world’s most traded commodity, with an annual trade value of around $14 trillion, roughly equivalent to China’s gross domestic product last year.

A pilot program for yuan payment could be launched as early as the second half of this year, two of the people said."

My added comments: The article goes on to say that China could start up this program first with Russia and Angola and adds:

"Both Russia and Angola, like China, are keen to break the dollar’s global dominance. They are also two of the top suppliers of crude oil to China, along with Saudi Arabia."

It should be noted that the three sources cited here are not willing to go on the record with this information which suggests to me this may be a politically sensitive issue. Someone clearly wanted Reuters to report this, but no officials in China are willing to confirm it so far or provide much detail.

I have also seen a number of articles suggesting that China will eventually demand that Saudi Arabia accept yuan in payment for oil. All of this needs to be monitored especially given the apparent "trade war" that seems to be ramping up between the US and China. Not to mention we have the potential for a summit on North Korea with both the US and China involved. 

It is hard to tell how all the cards now being played between China and the US may or may not be related to the big picture maneuvering by each side (what is real, what is a bluff, etc). But it is news we should follow this year.

Sunday, April 1, 2018

Singapore (MAS) Managing Director - Crypto Tokens - The Good, The Bad, and The Ugly

Singapore is well known for innovation in things related to Fintech. We have mentioned here that we would keep an eye on central bank in Singapore (MAS) for possible implementation of central bank digital currency. Based on this recent speech by MAS Managing Director Ravi Menon, it appears that the MAS is continuing with serious testing along those lines. 

A thank you to a reader for sending me the link to this recent speech. Some excerpts are below.


"Crypto Tokens: The Good, The Bad, and The Ugly"

"Ladies and gentlemen, good afternoon. And to all our foreign guests, welcome to Singapore. 

This is a conference named after Money. Money has been with us for at least 5000 years. And over the last 300 years or so, we have come to accept Money as being issued by central banks whose mission in life is to safeguard its value. 

Now, along comes a new phenomenon – crypto money or currency or asset. The past year has seen explosive growth in the trading and use of these crypto assets. We have also seen a roller-coaster ride in their prices."

. . . .

"MAS has been watching the crypto space with great interest. Our views are still evolving but let me share with you the current state of our thinking and our evolving regulatory approach."       . . . . .

My added commments: There is a bit of new information related to the work the MAS is doing in testing the potential for a central bank digital currency. Midway through the speech we find this bullet point:

--  Following two successful proofs-of-concept domestically, MAS has entered a collaboration with the Bank of Canada to test and develop a cross-border solution using crypto tokens issued by the two central banks.