Sydney Morning Herald Mentions Klickex

The Sydney Morning Herald runs an article that asks this question: Why do Electronic Transfers take So Long? The article is about the lag time it takes for electronic money transfers to move when we live in an interconnected world. The article mentions the technology that Klickex already has in place and we have mentioned here many times. Below are some quotes from the article and then an added comment.

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"On paper, it seems ridiculous. You send some money via electronic banking and the transaction apparently goes into limbo – overseas payments can be especially slow, reaching intended recipients after up to five business days, which can effectively mean a week."

"The chief currency strategist at the global payments provider OzForex, Jim Vrondas, blames the frustration on the global transfer network: the ill-named SWIFT (Society for Worldwide Interbank Financial Telecommunication). Banks rely on SWIFT, which in turn counts on intermediary banks. So moving money from a bank account here to another abroad can see funds handled by up to four banks, according to Vrondas."

"The co-founder of the personal finance app Pocketbook, Bosco Tan, also argues that the cause of delay is technical – the result of the need for processes to be underpinned by clearing houses that authorise end-of-day transfers between banks in bulk."

"But, he says, times are changing. He points to how the Reserve Bank of Australia is investing in a real-time banking system. The new system – scheduled to be fully implemented by the end of 2016 – will make institution-to-institution transfers real-time, Tan says, adding that many commercial entities are trying to pep up the payment process, too."

"Another, new service Tan cites, the New Zealand-owned KlickEx, is building a boundary-busting peer-to-peer solution. Touted as a community exchange service rather than a bank, KlickEx lets you move money to family and friends in any of five currencies including the pound, the Australian and NZ dollars. Four more, the Euro, Hong Kong and US dollars and the Japanese Yen are planned."

"Transactions happen in real time, free of charge – you avoid paying bank fees because you are dealing with people like yourself, KlickEx says, adding that it makes money from its premium services. Tan credits the start-up with asking why standard worldwide transfers take longer than international flights."


Read more: http://www.smh.com.au/money/planning/why-do-electronic-transfers-take-so-long-20140821-106v32.html#ixzz3DbMH6Bmd
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My added comment:

This article focuses on the existing technology that Klickex has been using for some time now in the South Pacific. Here, we are following the progress of a new technology that Klickex will be implementing in the coming months. This is a new asset backed currency (Klickex calls it the GSD for Global Stability Dollar) that is intended to increase stability in foreign currency exchange.

Klickex already allows its users to transfer funds on a mobile device in real time. It already allows users to do a currency exchange in real time if need be to complete the transfer. The obvious logical next step is to provide a currency unit intended to provide a stable store of value that can be accessed, converted to local currency, and transferred in real time on a mobile device or on the internet with a home computer. The goal being to reduce or eliminate foreign currency exchange rate risks for users.

Klickex has spent a lot of time and effort working with the banking system to meet its needs in this area and to do so without sacrificing safety and security of the funds for users. The banks also need to make sure that such rapid funds transfers are not abused and meet regulatory standards for anti money laundering, etc.

As we get information on the progress of this new currency technology, we will post it here.

Tracking Bo Polny's Forecast - His September 14th Update

In our last update tracking the Bo Polny forecast, we noted that Mr. Polny had stated that gold should not fall below $1240 for a summer low. Since gold did fall well below that price, a natural question is: Does this change his overall forecast?  The short answer is no it doesn't. To get his full explanation of why you can read his latest update here.

Obviously gold falling below his summer low price calls into question how accurate his forecast model is, at least in the short term. But it will be into early 2015 before we can see how the big picture forecast turns out. 

Mr. Polny is very upfront in addressing that gold did fall below his original summer low price. He is still convinced his big picture forecast will prove to be correct and that is really the one we need to keep an eye on. If gold does make a major move up in the next few months as he expects, it will mean some things are happening that are not normal and could very well impact the monetary system. We will track it into 2015 to see how things turn out.

It is important to stay engaged and watchful even when things appear to be fairly calm and there does not seem like any immediate change is on the horizon. 

I am in the middle of Jim Rickard's book The Death of Money right now and it points out how things can seem stable right up until some unexpected event triggers major change. That is why this blog exists. To watch for this very thing. 

It is important to understand the reasons how and why this can happen, learn as much as possible, and formulate a plan in case change does happen very quickly. Soon we will review The Death of Money to illustrate why this is important for everyone to think about. The book does a very good job of explaining in detail various scenarios that could happen very quickly and why everyone needs to prepare just in case.

China to Open RMB Clearing Bank in Paris

The BRICS have been pretty quiet since their summit back in July in Brazil. But China (and Russia) just keep steadily moving forward in their quest to diminish the use of the US dollar as world reserve currency. This article in the BRICSPOST mentions the latest move, a new RMB clearing bank in Paris.

We already know that both Russia and China are working all over the globe to replace the use of the US dollar wherever they can. This BRICSPOST article is chock full of quotes about all that which are just below.

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"Competition is fierce among Europe’s major financial centres, Frankfurt, London and Luxembourg to trade in China’s currency."

"Beijing is keen on substituting the US dollar with the yuan in all of China’s trade with other countries. The Chinese currency now trades directly with the Japanese yen, the Australian dollar, the Brazilian real, the EU’s euro, the New Zealand dollar and many other currencies."

"BOC became the RMB clearing bank in Frankfurt in June while China Construction Bank was authorized to be the RMB clearing bank in London."

"China stepped up plans to increase the international use of its currency last October with an agreement between the European Central Bank and the PBOC to swap euros and yuan."

"BOC has so far opened more than 1,200 inter-bank RMB clearing accounts and 1.7 million RMB accounts for corporate and individual clients overseas."

"In a major highlight of an investment meet earlier this month, Moscow and Beijing have entered into a pact to boost use of the rouble and yuan for trade transactions."

“We’re going to encourage companies from the two countries to settle more in local currencies, to avoid using a currency from a third country,” Russia’s Deputy Prime Minister Igor Shuvalov said referring to the US dollar."

"Meanwhile, the UK will become the first Western country to issue an offshore bond in the Chinese renminbi. This was announced after discussions between Chinese Vice Premier Ma Kai and UK Chancellor of the Exchequer George Osborne earlier last week."

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My added comment: The move to replace the US dollar in global trade has been underway for some time now. But to be a reserve currency, there needs to be a healthy bond market available. We see the starting up of the part of the process here. Just another step in the march to diminish the US dollar as sole global reserve currency. So far the change in the monetary system we watch for is slow, but steady. But it is happening all the same.

Another Wild Card out There: What will Scotland do this week?

Scotland takes its vote on independence this week. While most would assume this is just a local matter, this Bloomberg article points out the impact this vote could have on stability in the financial system. And keep in mind, because of the interconnected global financial system and all the derivatives out there, a problem anywhere can turn into a problem everywhere.

This Bloomberg article notes that the financial authorities realize this vote has the potential to disrupt the banking system so they are making contingency plans ahead of time. Below are some quotes from the article:

'As Scotland stares history in the face, London's financial guardians are preparing for their worst-case scenario."

"Less than a week before a referendum that could see Scotland ending its 307-year political bond with the UK, officials at the Bank of England and the Treasury are gaming out how they would shore up the financial system if that happens."

"BOE Governor Mark Carney and Chancellor of the Exchequer George Osborne may need to act within hours, say former policy makers, economists, academics and government officials. That will then buy them enough time to start the 18-month negotiation process that would follow any Scottish secession."

“What Carney will be worried about initially is the potential flight of deposits,” said former deputy governor John Gieve, who was in charge of financial stability at the central bank during the run on Northern Rock Plc in 2007."

"In an extreme scenario, officials could implement temporary controls such as limiting the amount bank customers could withdraw each day, or closing lenders by imposing a special so-called bank holiday, said Bell at Stirling University. Authorities could also re-capitalize institutions, restructure their liabilities and help them raise funding -- though Gieve said he thought such steps would not be necessary."

“Everybody will want to do the best for Scotland whatever we decide, but at the end of the day, nobody’s going to put their own savings or their own mortgage at risk,” Alistair Carmichael, the Scottish secretary in the U.K. government, said in an interview in Edinburgh this week."

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My added commment:

Just another reminder that any event can trigger instability these days. It appears the UK is prepared ahead of time for this one, but we will keep an eye on this to see how it turns out.

Added note: John Mauldin offers his comments on this vote.

Now China's Economy is Slowing Down

The ECB recently announced a new asset buying plan to "stave off deflation" in the Eurozone. The latest economic reports in the US (labor and housing) suggest a weakening economy. Now factory growth in China is falling. Sanctions against Russia are hurting global GDP. The evidence keeps piling up that global GDP growth may come in well below forecasts and officials may be fighting a losing battle against deflation. Here is the Reuters article on Chinese factory growth slumping.

"(Reuters) - China's factory output grew at the weakest pace in nearly six years in August while growth in other key sectors also cooled, raising fears the world's second-largest economy may be at risk of a sharp slowdown unless Beijing takes fresh stimulus measures."

"The output data, combined with weaker readings in retail sales, investment and imports, pointed to a further loss of momentum as the cooling housing market increasingly drags on other sectors from cement to steel and saps consumer confidence."

"The August data may point to a hard landing. The extent of the growth slowdown in the third quarter won't be small," said Xu Gao, chief economist at Everbright Securities in Beijing."

"Jiang Yuan, a senior statistician with the bureau, said the dip in August factory growth was due to weak global demand, especially from emerging markets, and the slowdown in the property sector that hit demand for steel, cement and vehicles."

"Property investment data also released on Saturday showed further declines in sales and new construction, while growth in sales of housing-related goods such as home appliances, furniture and building materials all slowed."

"Mortgage issuance in the first eight months fell 4.5 percent from a year earlier, worse than a 3.7 percent drop in January-July. Some would-be buyers have complained of long delays in getting loans as banks grow more cautious, while others may be holding off in anticipation of further price declines."

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My added comment:

In this recent interview with King World News, John Mauldin of Millenium Wave Investments discussed his concerns that a "macroeconomic mistake" by China could lead to sharply lower growth rates than expected there. He says this "will change world cash flows and world commodity flows". Jim Rickards lists a major slowdown in China as one of his 7 signposts to watch for leading to major monetary system change. Some problems he predicted are discussed in the Reuters article linked above.

As we get more and more news indicating the global GDP may fall well below expectations lead by China, the Eurozone, and perhaps the US, we watch to see what Central Bank policy makers will do. They have already flooded the world with trillions of dollars of stimulus to try and get growth moving up. If that is failing, what do they do next?

Cash is still King - Bloomberg

There are all kinds of new technologies around the world for people to use to pay expenses. Credit cards, debit cards, electonic wallets, and more. But for now, as this Bloomberg article notes, good ole cash is still king.  Why is that?

A couple of quotes from the article:

"The average American still uses cash for dozens of transaction each month, despite the wealth of alternatives, from good old plastic to virtual currencies to “point and pay” apps like the upcoming Apple Pay service."

"Cash has advantages these high-tech replacements can't match. It won't run out of battery power, for one thing. It's anonymous -- invisible to the IRS, law enforcement and hackers, as well as to irritating marketers and data brokers. As Cass Sunstein notes, paying only in cash can also be a great way to monitor spending and stick to a budget."

"Using cash can help people carefully track their own spending, as Sunstein says. But one of its most convenient features is that it keeps everyone else in the dark."

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My added comment:

I suspect that another reason for the popularity of cash is that many people still do not trust the economy and want to keep some cash reserves on hand. Recall the recent CNBC article where the Fed said people are "hoarding cash".

The decline in the velocity of money also suggests money in all forms is not turning over in the economy very quickly. We also note that gold is going to close below the key $1240 level, oil is dropping, and jobless claims jumped up again. All this suggests a weaker economy and further evidence that officials may fear a deflation type event. They want 2% inflation in hopes of getting 3% GDP growth, but can't seem to get there.

3rd quarter GDP will be an interesting number to look for.

Poor Jobs Report Followed by Drop in Mortgage Applications

Recently we asked the question: Is the Economy Getting Better or Worse? Jim Rickards and others say the economy never really recovered and is now heading back down. The FED says they see a slow but steady recovery. So we are tracking to see who is right. The latest economic reports support Rickards and friends.

Last week the jobs report came in well below expectations and now CNBC reports mortgage applications have fallen to a 14 year low. Here are some quotes from the CNBC article:

"Just a slight trend higher in interest rates was enough to stall both potential home buyers and borrowers looking to refinance their loans."
 
"Total mortgage application volume fell 7.2 percent last week from the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association (MBA). The weekly index is now at its lowest level since December of 2000. "

"The purchase application numbers are particularly troubling, as all-cash buyers move out of the housing market, leaving mortgage-dependent buyers to pick up the slack. Fall is usually the season where first-time home buyers are most active, but this cohort has had the most trouble participating in the housing recovery, due to tighter credit and weak job and wage growth. Even government-insured loans, which offer lower down payments, are seeing far lower application volumes, down 18 percent from a year ago."
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My added comments:

This is the conundrum for the FED we have noted before. Can they really withdraw from their support of the economy without tanking it? This article notes that just a minor rise in interest rates caused a big drop in mortgage applications.

The big question is: Can the economy stand on its own two feet without artificial support from the FED in the form of asset buying and near zero interest rates? In Europe the answer appears to be no with the ECB caving in to announce an asset buying program and reducing interest rates in "an effort to stave off deflation" as Bloomberg put it.

If the answer is no in the US, what does the FED do then?

Tracking Bo Polny's Forecast - His Sept. 8th Update

We promised to track the bold market predictions of Bo Polny since he is forecasting a severe stock market decline next year. We noted that we can follow his gold price forecast first to see how that works out. Today he released another public update since gold has fallen below his earlier "summer low" price of $1281 made on 8-1-14.

Is he still confident gold will move to $2000? Yes he is. Here is his latest update.

While it will be interesting to watch and see how well he hits his gold (and silver) price predictions, this quote from his update today caught my attention:

"As Gold rises to $5000, a devastating deflationary crash cycle will grab hold of the stock market and unlike the previous recession that followed the collapse of 2008, there is now way out of the one.  It’s going to go from bad to worse to terrible and our world will change forever!"

"On August 7, 2014 an update titled ‘The Coming Inflationary Spike and Deflationary Bear Market Cycle That Devastates the World!’ (click here to view) was posted.  The article speaks of a possible quick Spike for Gold before the Deflationary Stock Market Cycle is to begin come 2015.  Spike or no spike, physical Gold & Silver are the ultimate Insurance Policy against everything paper to the coming Deflationary Bear Market Cycle beginning in 2015."

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My added comment: 

Originally I suggested that you could watch to see if Mr. Polny hit his gold price forecast of $2000 by year end of 2014 as an indicator of how credible his stock market crash in 2015 forecast might be. Since he missed the timing on his summer low call, it appears this has reset the timing range for his bigger picture forecast (moved it back some). Now he is allowing for gold to move to $2000 by the end of the year or no later than mid 2015.

In addition, he makes a comment (underlined above) that "spike or no spike" gold and silver are the insurance policy needed to deal with the "deflationary bear market cycle beginning in 2015"

This is a fairly significant change in the forecast in both potential timing and also if the gold price spike will now take place or not before a deflation event. 

I find this interesting because his timing now lines up closer to what Jim Rickards and others are suggesting (the fireworks may start up in 2015). This change in his forecast means we can't reallly follow his gold price prediction to see if it foretells the big deflation event in the stock market. It now sounds like he thinks they could happen around the same time in 2015.

Missing the summer low call is not really that significant in the big picture. Mr. Polny notes that gold would have to close below $1240 to cause him to rethink his big picture forecast.

So now that is the price level to watch. If gold closes below $1240 it could be yet another indicator that a deflation event is heading our way. We have noted in several recent posts that it seems like there is a real official concern about that problem.

The gold price (and the oil price) are very real indicators to watch (even if these are somewhat manipulated markets as many believe). If we get a close on gold below $1240, it will just add more credence to the idea we need to watch carefully for a deflation event. If gold can stay above $1240 and start on a significant new uptrend, it may mean the market is anticipating further official reaction to try and stave off a deflation event they see coming. We know that officials would not discuss this in public to avoid any kind of public panic so we have to watch the signposts that we do have. 

So, Mr. Polny's forecast is something we will continue to follow along with anything we find that provides evidence of where things might be headed in the next 6-12 months. If gold does still move sharply higher by year end, it would add more credibility to all the 2015 stock market drop forecasts. So its worth tracking to see what happens and what the official response is if there are further signs of weakness and deflation. Obviously a crash of the magnitude Mr. Polny is forecasting will lead to major monetary system changes.

Added note: We did track this forecast over time and on June 30, 2015 we reported that Bo had missed his timing forecast on gold prices here. At that point we ended following his forecasts.

What is the FED really going to do?

This is one of the biggest questions we will have to follow here in coming months. We noted that people like Jim Rickards, Peter Schiff, Michael Pento and many others believe the FED forecasts for an economic recovery are wrong. They are flatly disputing not only their forecast, but also that the FED will really be able to end QE and start thinking about raising interest rates. 

We also ran articles this past week showing that the St. Louis FED now admits QE has not produced the expected GDP growth and the ECB admits the Eurozone economy is so weak they will have to start up an asset buying program there. And yet there seems to be a determination to stick with the story that the economy is poised for recovery and better growth. As we noted in this article, someone has to be wrong here.  Let's take a look at the latest news related to this ongoing debate.

Late this past week the job report came out much weaker than forecast. Here are two articles reacting to that news:

Bloomberg - Job Report Bolsters Yellen's Caution on Raising Rates

"Investors betting the Fedral Reserve will accelerate its timetable for an interest-rate increase may have to think again after today’s jobs report. Fed Chair Janet Yellen and colleagues urging patience in tightening policy got a boost from the surprisingly weak 142,000 increase in August payrolls reported by the Labor Department, economists said."

CNBC- FED's Rosenberg - August Jobs Data were "Disappointing"

"Given the "significant" slack in U.S. labor markets, the Federal Reserve should be patient about reducing monetary policy stimulus and refrain from telling markets exactly when it may raise rates, a top Fed official said on Friday."

Despite the above news there seems to be a determination to insist that things are going well and will get better. Look at these comments quoted from the two articles linked above.

"It seems to me appropriate for monetary policy to continue to be patient—in the interest of ensuring that the economy reaches full employment and the 2 percent inflation target as quickly as possible," he (Rosenberg) said."

"“We are skeptical today’s payroll growth represents the start of a weaker trend,” Neil Dutta, head of economics at Renaissance Macro Research LLC in New York, wrote today in a note to clients."

Joining Jim Rickards and others who believe these rosy predictions are wrong was John Williams of Shadowstats.com. He did this interview with Greg Hunter this week in which he claims the economy is in bad shape and will get much worse. He and Rickards both claim government economic reports are falsely presenting a rosier picture for the economy than the real situation. Someone has to be wrong. We will follow it. Get your popcorn.

A Good News Story - Dr. Kent Brantly

Every now and then we take a break from all the serious (and sometimes troubling) news we cover here to look at some good news. With all the trouble in the world these days, it is great to see a story about those doing good in the world.

Last night (Sept. 5, 2014) NBC did a TV documentary on the story of Dr. Kent Brantly. Dr. Brantly is the US doctor who contracted ebola while trying to help patients with the disease in Africa. 

By chance a relative of Dr. Brantly attends the same university as my daughter who is a journalism student there. The link below is to an article my daughter wrote interviewing Dr. Brantly's cousin. This is one of those good news stories. It is inspiring to know there are people who will make personal sacrifices to help others. 

In Awe After Ebola Recovery

Our deep respect to Dr. Brantly. We appreciate his willingness to put himself at risk in an effort to serve others. An attribute we can surely use more of in this world.

And we should also mention the other medical professionals mentioned in the documentary who helped out. Both the others helping in Africa and those in the US who helped Dr. Brantly after he contracted ebola. Our thanks to all of them!

ECB in Fight to "Stave Off the Threat of Deflation"

More evidence that there is official concern that deflation is winning the battle. The ECB cuts interest rates and announces an asset buying program. Bloomberg and the NY Times both offer articles clearly stating that the concern is deflation and the move is an effort to "stave off the threat of deflation"

The ink barely dried on our recent post saying we need to keep an eye out for signs of official concern about a deflation event when the ECB makes their surprise announcement. Below are links to two articles and some quotes, then a few comments.

Bloomberg - Yields Driven Under 1% on Almost Half World's Government Bonds

"Speculation that the European Central Bank would start buying debt in the year ahead had pushed the yield spread between U.S. 10-year Treasuries and German bunds toward a 15-year high and German 10-year yields to a record low of 0.866 percent last week. The ECB unexpectedly cut interest rates and pledged to buy asset-backed debt at today’s policy meeting to spur economic growth and stave off the threat of deflation."

"The ECB will start buying securitized debt and covered bonds, potentially easing the flow of bank funding for the region’s faltering economy."

"For Pacific Investment Management Co., which runs the world’s biggest bond fund, growth is weak enough that the next round of interest-rate increases will be less than usual."

“No one’s talking about rate hikes in Europe for several years,” Richard Clarida, an official at Pimco, said yesterday on Bloomberg Television’s “Street Smart” program in New York. “Japan is still in an easing cycle. Globally, while the Fed and the Bank of England may start to move in 2015, it’s not going to be your father’s or your uncle’s rate-hike cycle.”

NY Times - Europe's Bank Takes Aggressive Steps

"Mario Draghi, the European Central Bank president, is reaching deep into his toolbox to revive the region’s moribund economy. He is cutting interest rates to the bone. He is charging banks even more to park their money. And he is using the central bank’s financial muscle to spur lending."

"The collective goal is to kick-start lending. In effect, the central bank will pump money into the financial system using the asset purchases, then charge banks if they park the money rather than put it to more productive use like loans to businesses or consumers."                     

"The most important effect of the central bank measures might be psychological. Thursday’s moves signaled that at least one European institution is doing all it can to avert the threat of deflation — the pernicious downward spiral of prices that often leads to high unemployment. Annual inflation in the eurozone was 0.3 percent in August, according to an official estimate, worrisomely below the central bank’s target of about 2 percent."

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My added comments: We don't have to speculate any longer. The evidence is now overwhelming that there is concern at official levels about a deflation event. In the span of a little over a week we have an article in a CFR publication calling on Central Banks to give out free cash to try and stimulate the economy. The article admits QE has not worked to produce growth. Then we have the St. Louis Fed releasing a report that says Fed policy is not working to produce GDP growth with charts and graphs to prove it. Now we have the ECB with a surprise "shock and awe" announcement admitting that the Eurozone economy is struggling and facing the threat of deflation. Case Closed. There is official concern about a deflation event and the lack of velocity of money.

This supports Jim Rickards and others who agree with him that the policies are not working and that we would see new rounds of QE type programs. The ECB is so concerned they are going to charge banks for holding cash instead of injecting it into the economy to get velocity moving. All of this is exactly what Rickards and others predicted. And if the ECB is going to charge the banks to hold cash, why wouldn't the banks charge depositors to hold cash?

Recall the CNBC article on the St. Louis Fed that said people are "hoarding cash" and the velocity of money is too slow. Also that all the new money is creating no net GDP growth at all. All of this adds up to a clear message. There is fear that deflation is winning the battle. When you start charging people to hold cash things are not good. Anyone trying to save money is now viewed as someone who is "hoarding money".  This has a feel of desparation to it to use that kind of rhetoric and implement policy this drastic (charging banks to hold cash).

All the warning signs are clearly flashing. We need to watch like a hawk for any signs of a debt implosion or anything that might trigger a deflation event. The Central Banks are clearly running out of cards to play. At this point they might try anything. Even handing out free cash like the article in Foreign Affairs calls for. If we see that, we will know there are very serious concerns that deflation is overwhelming the Central Banks efforts. 

If so, how do they respond? With even more asset buying that they admit is not working? How do investors and the public react? Are they losing confidence and looking to save more cash in anticipation of possible hard times? Just the opposite of what the Central Banks want? Lots of questions, but few answers right now.

Update: Might as well add in this article: Top Fed Official says US Needs more Inflation
If what he says in this article is true, what is going to happen when all the rest of the FED quantitative easing dries up? What if interest rates start going up? He says he has no answer for that question and does not understand why the Fed is backing off. Will the Fed reverse course like Jim Rickards predicts by next year? And CNBC analyst Art Cashing piles on with this interview suggesting the FED may reverse course. Get your popcorn.

Update on the G20 Financial Inclusion Forum

In an earlier post we noted that Klickex would be attending the GPFI Plenary and Forum in Perth Australia on Financial Inclusion. The forum was held over the weekend of August 31 - Sept. 2nd. We can report that at this meeting a new report from the World Bank on the advantages of financial inclusion was reviewed. The report included ideas and suggestions from the Better Than Cash Alliance and the Bill Gates Foundation. Below are links to the report and a few quotes.

World Bank Report - Digital Payments Vital to Economic Growth

A few quotes:

 "Integrating digital payments into the economies of emerging and developing nations addresses crucial issues of broad economic growth and individual financial empowerment, according to a new report by the World Bank Development Research Group.

The report examines, for the first time, growing evidence from around the world about how digital payments offer immediate benefits for both senders and receivers in developing economies, as well as the ability of such payments to increase citizen access to affordable financial tools."                                                                    

"The Better than Cash Alliance and the Bill & Melinda Gates Foundation—which funded the study in support of the G20 Global Partnership for Financial Inclusion—emphasized the clear link between digital payments and the goals of G20 governments means that action should be swift and purposeful. The two organizations are urging governments, when they meet in November 2014 at the G20 Brisbane Summit, to discuss how they can embrace a broad-based digital financial system as a path to growth, greater participation of women in the economy, and greater access to payments, including remittances."

“We recognize that while the opportunities of digital payments abound, getting there takes work,” said Dr. Ruth Goodwin-Groen, Managing Director of the Better Than Cash Alliance. “Yet digitizing payments is achievable when a government articulates a clear vision, leads by example and provides the right incentives for the private sector to do what they do best: innovate, develop infrastructure and create products designed to succeed in the marketplace.”

The report and its implications will be discussed at the G20 Global Partnership for Financial Inclusion forum on September 1 in Perth, Australia.

The full World Bank study as well as the key findings and recommendations by the Gates Foundation and Better Than Cash Alliance can be found here.         

And here is a link to a pdf of the Gates Report  with the conclusion to the report pasted below:

IV. CONCLUSION

As we have demonstrated, broader adoption of digital 
payments—with regard to both remittances and other 
payments—can significantly advance the global financial 
inclusion agenda and support the priority areas of the Global 
Partnership for Financial Inclusion (GPFI). Not only are digital 
payments more efficient than cash payments, but their broader 
adoption also can reduce rates of corruption and violent 
crime, reduce the cost of government wage and social transfer 
payments, offer new pathways into the financial system for the 
disadvantaged, and, importantly, contribute to the ongoing 
objective of women’s economic empowerment.

The international community must work with both 
governments and the private sector to address the challenges of 
digitizing payments in order to achieve the potential benefits, 
especially when it comes to government “cash” transfers. These 
challenges include generating up-front investment in payments 
infrastructure, ensuring that recipients understand how each 
cash-transfer program works, and taking steps to guarantee 
reliable and consistent payments. It is also important that 
consumers are educated on the basic interactions involved in 
a digital payment ecosystem—using and remembering their 
PINs, understanding how much money they should receive 
at each payout period, and knowing what to do if something 
goes wrong. Otherwise, recipients can lose trust in the system 
and not use their accounts beyond withdrawing to collect their 
government payment—and the broader financial inclusion 
objectives will not be met.

Technology-enabled business model innovation can help build 
inclusive financial sectors that enable people to improve their 
lives. Governments, the private sector, and the international 
community should focus on addressing the challenges of a move 
toward making digital payments available to the billions of 
unbanked adults around the world.

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my added comments: 

It makes sense that Klickex would be invited to the forum where this was being discussed since they are a private sector leader in the technology to accomplish these tasks. When you read through the report you can see there is a lot of momentum and support for the type of technology that Klickex offers, but several challenges to get such a system up and running worldwide are also noted in the report. In other words, all this will take time even if a consensus to implement it is achieved on a widespread basis. Elements of it already exist on a regional basis in various places.

There is a lot of potential for all this to move forward and make major changes to how people use money and transfer it as well as how they save it (here the GSD might enter the picture). So we will just continue to follow it all and see where it leads over time.     

Added note: There is a lot of emphasis on encouraging govenments to support an increase in the use of digital technology in all aspects of government.       

Update: We are advised that the GSD that Klickex has developed is ready for rollout starting in the South Pacific this fall and then on to as many as 30 other countries over the next 1-2 years. We will watch for any news on it and report here when we see any. Sounds like busy times at Klickex are ahead.         

Added note: Klickex Robert Bell is named a Top 25 "Innovator to Watch"                                               

St. Louis FED Admits QE is Not Working

Given that we just posted below the 45 minute infomercial interview with Jim Rickards, this new article on CNBC is very timely. The article cites a new report from the St. Louis FED which confirms what Rickards and others have been saying. Namely that QE policy is failing because the money created is not circulating into the economy at normal historic rates. Or, as the FED puts it, "people have decided to hoard money".

We are getting more and more evidence piling up that FED monetary policy is not working. This new report from the St. Louis FED adds some more. Below are some quotes from the article and then some additional commnents.

"One of the great mysteries of the post-financial crisis world is why the U.S. has lacked inflation despite all the money being pumped into the economy."

"The St. Louis Federal Reserve thinks it has the answer: A paper the central bank branch published this week blames the low level of money movement in large part on consumers and their "willingness to hoard money." The paper also cites the Fed's own policies as a reason for consumers' unwillingness to spend."

"Monetary velocity—or the force to which money is put to work in the economy—is widely considered a key metric in measuring inflation."

"Under normal circumstances, according to the Fed analysis, when the money supply increases at a faster rate than economic output, which has been the case since the Fed has instituted its aggressive easing practices, prices should keep pace. Factoring in the growth in the money supply against output, inflation should have grown at a whopping 33 percent annually, when in fact it has been rising less than 2 percent."

 . . . ."This implies that the unprecedented monetary base increase driven by the Fed's large money injections through its large-scale asset purchase programs has failed to cause at least a one-for-one proportional increase in nominal GDP. Thus, it is precisely the sharp decline in velocity that has offset the sharp increase in money supply, leading to the almost no change in nominal GDP."

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My added comments: This is a stunning admission from the FED itself that its loose monetary policy is not working. Virtually everything in this report is what Jim Rickards and others have been saying. I view this as strong confirmation he is right on this point (lack of velocity of money is negating the QE attempt to stimulate the economy).

Combine this report with the recent article that appeared in Foreign Affairs calling on the FED and other Central Banks to give away free cash to try and stimulate the economy and we are seeing troubling evidence that there is concern within the system. This almost sounds like desparation to avoid a deflation event. 

Note that the CNBC article says we should have gotten 33% annual inflation based on the amount of money they have created in an effort to stave off a deflation event. Let that sink in! The FED expected the amount of money they have created to generate 33% inflation but only got 2%. All that money has resulted in NO NET INCREASE in GDP per this article! This is a massive admission of the failure of the policies by the FED itself. I can't overstate the signifigance of that.

Based on this evidence we need to be very alert to the possibility that deflationary forces are overwhelming the ability of the Central Banks to deal with the problem. It also appears the the public is losing confidence and therefore piling up cash reserves expecting some hard times ahead. Micheal Pento suggests people having too much debt is part of the problem.

If this is the case, we can expect that a potential deflation event may be worrying officials. Then we have to see how the financial authorities react. Do they attempt to not only expand the money supply but also try to "force" people to spend money? Do they adopt the recent proposal from Foreign Affairs to just give out money? If so, under what conditions? Only if the money is used in a way that will get it out into the economy? Will they start charging people interest to hold cash in the bank for example? Will they impose a tax on savings?

All of this is important news related to what we watch here. We need to watch closely for further signs of deflation (oil and gold both took sharp drops today). These conditions could certainly lead to major changes if we get a major deflation event or if we get a major inflation event due to a panic response to the potential deflation event. Either outcome is possible.

On top of everything else we have serious geopolitical problems ramping up worldwide which will probaly drag down global GDP. And there are derivatives exposures all over the world we can't even calculate because they are not disclosed to the public.

It is becoming more than just important to stay informed and keep up with these events. It is becoming critical. When we see the FED itself express concern over its own policies and a major CFR publication call for a radical new policy of free cash transfers directly to the public, we should see warning signs flashing. We will try to follow it all here. 

Added note: Here is a link to the actual FED report. I note that the report actually states an expected inflation rate of 31% annually instead of the 33% used in the CNBC article. But the point remains the same. The FED admits that it should expect the money created to have generated 31% annual inflation and they only got 2% (using their method of calculations for both numbers).

Update 9-4-14: Thanks to a blog reader here for pointing us to this NY Times Article. More evidence of a fear of deflation. We  will run an article on this NT Times story on Friday (Sept. 5th). And here is a similar Bloomberg article.

Jim Rickards Infomercial - A Summary of his Views

We'll kick off September by providing a link to an infomercial that Jim Rickards has just done. It is a fairly in depth interview that summarizes his views. The interview emphasizes Rickards background and experience in working for US intelligence agencies who consult with him on forecasting possible future economic scenarios. 

Readers should know this is an infomercial designed to get the listener to purchase a package of materials Jim Rickards has produced which includes his new book The Death of Money. Normally I don't link to this type of promotional material because I am not in the business of selling anything here. For the record, I have no affiliation with Mr. Rickards or any of the published materials he offers. I don't have affiliations with anything I link to on this blog, period. Just to be clear, by affilations I mean an arrangement whereby I would receive compensation for linking to their product or service. By design, I receive no compensation of any kind from anyone related to articles I post on this blog. 

In this case I am providing the link because the free infomercial itself does provide quite a bit of useful information and some good charts and graphs Jim Rickards uses to make his points. It shows you how he backs up his opinions with factual data you can verify yourself which I think is important. And Rickards does obviously have connections with the US intelligence agencies which add credibility to his views in my opinion. Some, of course, take the view that Mr. Rickards may be a "disinformation agent" for those intelligence agencies. I disagree as noted in this article. But readers can decide for themselves.

For those who may want to get his book, this infomercial will end with a sales pitch that offers you his book plus some other materials for about $40. The book itself sells for about $20 on Amazon so the extra materials cost about $20. 

I did order this package for my own benefit in preparing articles for this blog. For those who like Jim Rickards and want to get his book anyway, you will probably feel like this package is worth the $40. I felt the price was appropriate for the materials offered.

It includes some additional material left out of his book and also his recommendations to people as to how to allocate their investments to prepare for what he thinks is coming. He also lists 7 "signposts" to watch for that will help let people know when the big changes might be about to take place. I will say that we have covered 5 of the 7 signposts here on this blog pretty extensively. He also adds a list of what he says are the safest banks and credit unions and the 10 safest cities in the US to weather an economic storm. Viewers can decide if they are interested in that information.

For those unable to afford it, you can find a lot of what is in this material right here in the archived articles on this blog. For example, a couple of the 7 signposts mentioned are to watch the price of gold and to watch for final approval of the IMF reforms. We have covered both of those topics extensively here (without realizing they were on his list).

But I have no problem saying that for those interested, the package of materials is worth $40 if you would like to have a comprehensive summary of Rickards forecasts and more detailed suggestions on how to prepare for the changes he sees coming. Regardless, the linked infomercial above is also a very good free overall summary of his forecasts and some of the data supporting his forecasts. He also provides some limited general comments on how to prepare.

I will add that we have Jim Rickards forecasts on record here and we will track them over time to see how well he hits them into next year. Right or wrong, we will report it here. If his forecasts prove to be accurate, then people need to be aware of them and make what preparations they can ahead of time. If he misses on his forecast, we need that information as well to assess the reliability of his future forecasts.

There are very few people who have connections "inside the system" who will discuss these issues in public. So we focus on people like Jim Rickards and Andrew Huszar here because they offer a credible alternative view to the conventional mainstream view for readers to consider.

Added note (1-01-2015): A question I get here regularly is how can people prepare for the upcoming change. On January 1, 2015 I wrote this blog article to address that question.