Two full years of inflation have taken their toll on American households. In 2023, the country’s collective credit card debt crossed $1 trillion for the first time. So who is managing to save money in the current economic environment?
Visual Capitalist’s Pallavi Rao visualizes the percentage of respondents to the statement “I have money leftover at the end of the month” categorized by age and education qualifications. Data is sourced from a National Endowment for Financial Education (NEFE) report, published last month.
The survey for NEFE was conducted from January 12-14, 2024, by the National Opinion Research Center at the University of Chicago. It involved 1,222 adults aged 18+ and aimed to be representative of the U.S. population.
Older Americans Save More Than Their Younger Counterparts
General trends from this dataset indicate that as respondents get older, a higher percentage of them are able to save.
Note: Percentages are rounded and may not sum to 100.
Perhaps not surprisingly, those aged 60+ are the age group with the highest percentage saying they have leftover money at the end of the month. This age group spent the most time making peak earnings in their careers, are more likely to have investments, and are more likely to have paid off major expenses like a mortgage or raising a family.
The Impact of Higher Education on Earnings and Savings
Based on this survey, higher education dramatically improves one’s ability to save. Shown in the table below, those with a bachelor’s degree or higher are three times more likely to have leftover money than those without a high school diploma.
Note: Percentages are rounded and may not sum to 100.
As the Bureau of Labor Statistics notes, earnings improve with every level of education completed.
For example, those with a high school diploma made 25% more than those without in 2022. And as the qualifications increase, the effects keep stacking.
Meanwhile, a Federal Reserve study also found that those with more education tended to make financial decisions that contributed to building wealth, of which the first step is to save.
EU Begins ‘Tank Of Future’ Development After Russia Annihilates Leopard 2 Tanks In Ukraine
German Defense Minister Boris Pistorius and his French counterpart, Sebastien Lecornu, announced Friday the two countries will produce the next-generation battle tank to replace Germany’s Leopard 2 tank that will land on modern battlefields in the late 2030s or early 2040s.
“It’s not about making a Leopard 3 or 4; it’s about designing something brand new,” German defense minister Pistorius said, as quoted by Euronews.
Pistorius said the next-gen main battle tanks will be equipped with artificial intelligence and will not require “human pilots.”
French defense ministry Lecornu said KNDS, Rheinmetall, Thales, and other defense manufacturers will begin work on the ‘tank of the future’—formally known as the Main Ground Combat System (MGCS).
Developing a next-generation tank comes as there have been countless reports that Russian armed forces have destroyed Leopard 2 tanks operated by the Ukranian Army.
Germany and France are also pushing to build the next-generation fighter jet, called the Future Combat Air System, which is set to enter service in 2040, along with integrated drone fleets.
The trend is that a world emerging into a multi-polar state has sparked a surge in military spending worldwide.
A new Stockholm International Peace Research Institute report detailed how global military expenditures hit a record high of $2.44 trillion in 2023.
We’ve diligently noted that the defense sector is in a bull market:
Scientists are still uncovering the secrets of a compound discovered 50 years ago on Easter Island. Produced by bacteria there, rapamycin appears to be a powerful life-extender and may be a transformative treatment for age-related diseases.
In 2009, the National Institute on Aging Interventions Testing Program (ITP) published a groundbreaking study indicating that rapamycin extended the lifespan of mice by 9 percent to 14 percent.Experiments conducted by various research institutions worldwide have further corroborated these findings or have found the compound to have significantly greater life-extending effects.
While the drug label for rapamycin currently does not claim to “extend human life,” some people with a strong desire for longevity have already sought this medication from their doctors and take it regularly in small doses.
A study published in 2023 in GeroScience employed a questionnaire to survey 333 adults taking rapamycin off-label, most under the supervision of a physician. The vast majority (95 percent) reported taking rapamycin for “healthy longevity/anti-aging” reasons, almost 19 percent for preventing dementia, and a few for “cardiovascular disease” or “cancer.” However, no one reported taking the drug for its original approved use: prevention of organ transplant rejection.
Easter Island’s Hidden Treasure
“Rapamycin was not made in a laboratory. It is not a synthetic molecule. It is actually from nature,” Dr. Robert Lufkin, adjunct clinical professor at the University of Southern California Keck School of Medicine, told The Epoch Times.
In December 1964, upon hearing about the Chilean government’s plans to build an international airport on Easter Island, a team of 40 people led by Canadian scientists arrived on the island and stayed for three months. Their objective was to explore the island’s population and natural environment before it became exposed to the outside world.
During this period, they observed that the local indigenous people—who walked barefoot—never contracted tetanus, leading the researchers to suspect that some substance in the soil provided protection. Subsequently, in the laboratory, scientists found just that. This substance was a metabolite of Streptomyces hygroscopicus that possessed antibacterial properties.
This substance starves fungi and things around them and prevents the organisms from growing, Arlan Richardson, professor of biochemistry and physiology at the University of Oklahoma Health Sciences Center, told The Epoch Times.
In the local indigenous language, Easter Island is called Rapa Nui. Therefore, the substance discovered in the island’s soil was named “rapamycin.”
Early Uses
In addition to rapamycin’s antibacterial properties, scientists observed that it could also inhibit the growth of animal cells. Rapamycin’s specific target is a cellular protein essential to living organisms called TOR, which acts as a “switch” for cell growth.
“It (TOR) is arguably one of the most important biological molecules ever known,” said Dr. Lufkin, as it fundamentally affects metabolism. It is worth mentioning that TOR derives its name directly from rapamycin. TOR stands for “target of rapamycin,” while mTOR, used in many studies, stands for the “mechanistic target of rapamycin.”
TOR essentially does one thing: It senses the presence of nutrients. When nutrients are available, TOR signals for cell growth. Conversely, when nutrients are scarce, cells stop growing and initiate repair. “And both of those modes are healthy and necessary for life,” explained Dr. Lufkin.
Rapamycin was initially used as an immunosuppressant. Higher doses of rapamycin (3 milligrams per day) were found to reduce the activity of immune cells, thereby suppressing the immune system’s rejection of foreign organs. In 1999, the U.S. Food and Drug Administration (FDA) approved rapamycin for kidney transplant patients.
Due to its ability to inhibit cell growth, rapamycin was later used as an anti-cancer drug. In 2007, the rapamycin analog temsirolimus was first approved for treating kidney cancer. Dr. Lufkin noted that rapamycin is effective against multiple types of cancer, with the FDA having approved rapamycin for use as a primary or adjunct therapy for eight types.
There is a connection between the immunosuppressive and anti-cancer effects of rapamycin. “It appears to have a positive effect on cancer control in patients who have transplants—for example, heart transplants,” said Dr. Lufkin. Due to immune suppression, “the most common cause of death after the transplant is not organ rejection, but it is actually a cancer.”
Mayo Clinic researchers conducted a controlled trial, tracking over 500 heart transplant recipients for 10 years. They found that patients using rapamycin for anti-rejection had a 66 percent lower risk of developing malignant tumors than those using another anti-rejection medication (calcineurin inhibitor).
Rapamycin’s Longevity Effects
Rapamycin’s primary action is to inhibit mTOR, which can induce a fasting-like state in cells, triggering autophagy. This mechanism may contribute to its effects on longevity.
In simple terms, autophagy is the process by which cells recycle and remove their own waste and foreign materials, conserving energy for survival.
Mr. Richardson explained that mTOR sends growth signals to cells, which are crucial for children and young animals, aiding in bone growth, brain maturation, and other developmental processes. However, this signaling pathway may adversely affect older adults and mature animals. With age, mTOR can become overactive due to disease or oxidative stress—similar to constantly pressing the gas pedal while driving a car. This renders cells hyperfunctional, contributing to age-related diseases and even cancer.
As the Biden administration expands its offshore wind projects as part of its goal to reach a carbon-free energy system, whales and other marine life may become collateral damage, according to new research.
Two independent studies measuring ocean wind turbine construction noise found that the sound emitted by vessels mapping the seafloor was significantly louder than estimated, and that noise protection for whales and other sea creatures during wind turbine pile driving doesn’t work.
Intense noise causes hearing loss in whales, other marine mammals, turtles, and fish, compromising their ability to navigate, avoid danger, detect predators, and find prey, according to scientific studies.
Robert Rand, an acoustics consultant with 44 years of experience, took underwater readings of the sonar survey vessel Miss Emma McCall off the coast of New Jersey. He also recorded acoustic readings of pile driving for Vineyards Wind 1, an offshore wind farm project under construction 15 miles south of Martha’s Vineyard.
In his pile-driving report, published March 28, Mr. Rand found that even the most advanced sound-dampening technologies didn’t adequately control harmful noise. The pounding was just as loud as seismic air gun arrays used for oil and gas exploration, long known to cause injury, hearing loss, and behavioral changes in fish and marine mammals.
Furthermore, the noise made by the construction vessel itself, which is not monitored, was almost as loud as the pile driving. Mr. Rand found that the standard formula used by the National Marine Fisheries Service to calculate how noise, over a period of time, affects a mammal’s hearing, significantly underestimates the sound levels experienced by dolphins and whales.
“These are real data,” Mr. Rand, who testified at a Congressional field hearing on January 20, told The Epoch Times. “I measured it. This is not a computer model. This is not a political press release. These are data.”
Many environmentalists fear that noise related to ocean wind farm construction is contributing to “unusual mortality events” affecting whales. From 2016 through April this year, 220 humpback whales have died, according to data collected by the National Oceanic and Atmospheric Administration (NOAA).
“Elevated humpback whale mortalities have occurred along the Atlantic coast from Maine through Florida,” since 2016, the NOAA states.
The NOAA also reported an “unusual mortality event” for North Atlantic right whales, in which 126 have died since 2017.
“The numbers have been decreasing, especially since 2017, when offshore operations really swung into gear,” Mr. Rand said.
“From my experience in noise control, that’s not a coincidence. Noise is an environmental pollutant. In human terms, it’s measured in life years lost.”
The North Atlantic Right Whale Consortium estimates 350 North Atlantic right whales exist in the world’s oceans today.
Pile-Driving Noise
On Nov. 2, 2023, Mr. Rand went out on a 29-foot sport fishing boat to the Vineyard Wind 1 construction site.
The completed wind farm project will comprise 62 wind turbines in the Atlantic Ocean, spaced one nautical mile apart. The project is estimated to provide power to more than 400,000 homes and businesses.
The offshore wind farm is owned by Copenhagen Infrastructure Partners of Denmark and Avangrid Renewables, part of the Spanish company, Iberdrola.
At the construction site in November 2023, Mr. Rand said an 874-foot crane ship called the Orion was using a massive hammer to pound a monopile foundation for a wind turbine into the seabed.
The monopile is a steel pipe 31 feet in diameter, 279 feet long, and weighs 1,895 tons, according to the manufacturer, EEW Special Pipe Constructions.
Vineyard Wind 1 implemented two sets of noise controls. The first is a “hydro sound damper,” which Mr. Rand said, is a vertical net in the water around the monopile that’s covered with foam or rubber blocks and balls.
The second is a “double bubble” curtain. These are two weighted hoses lying on the seafloor in concentric circles around the monopile. The radius is roughly 492 to 656 feet.
The hoses have holes in them, and compressed air from a support vessel is forced through the hoses, causing bubbles to rise to the surface. The bubbles are supposed to mitigate the sound pressure created by the pile driving.
“These are advanced techniques,” Mr. Rand said. “They aren’t used anywhere else.”
Unfortunately, the noise mitigation techniques don’t work, he said.
Mr. Rand dropped a research-grade, omnidirectional hydrophone into the water at six locations, starting at 4.10 nautical miles from the pile driving and moving closer to 0.57 nautical miles.
Analyzing the data, Mr. Rand found that even with sophisticated noise mitigation in place, the pile driving is as loud as multiple seismic air guns.
“People have been protesting and the government has been rigorously regulating seismic air gun arrays for years, if not decades, because of their sonic intensity and hazard for endangered species—for whales and other marine species,” Mr. Rand said.
“This pile driving is as loud as an array of air guns.”
As part of a larger national security and foreign aid package, President Joe Biden on Wednesday signed into law legislation that forces TikTok parent ByteDance to divest the U.S. arm of its popular social media platform within 270 days or be banned from operating in the United States. The “Protecting Americans from Foreign Adversary Controlled Applications Act” seeks to cut any ties between TikTok, its current parent company and the Chinese government, which allegedly abuses the platform to “surveil and influence the American public” in a way that poses a threat to national security.
As Statista’s Felix Richter reports, compared to an earlier standalone bill that had passed the House in March but then failed to gain traction in the Senate, the newly passed bill extends the time given to ByteDance from 180 to 270 days, with the possibility of a 90-day extension if the president finds that significant progress towards a “qualified divesture” has been made. This means that TikTok’s Chinese owner now has until after the U.S. presidential election to find a suitable buyer, turning the question of whether or not TikTok should be divested or banned into a potential election issue.
Sure enough, former president Donald Trump told young voters to remember that “crooked Joe Biden is responsible for banning TikTok,” when they vote in November, omitting the fact that he tried to ban TikTok himself during his time in office.
And while Trump was right in his view that young Americans would be more likely to oppose legislation against TikTok, he ignored the fact that the vast majority of Republican voters is in favor of a potential ban. According to a recent YouGov/The Economist survey, two thirds of Republicans strongly or somewhat approve the forced divesture/potential ban of TikTok versus just 20 percent who oppose such legislation. Democratic voters are almost evenly split on the issue, with 40 percent of respondents in favor of legislative action against TikTok and its parent company.
Looking at different age groups, the trend is clear: the younger the respondents the more likely they are to oppose a potential TikTok ban, which is easily explained by the fact that young people are much more likely to be TikTok users.
If ByteDance fails to find a suitable buyer within the given timeframe, it would be unlawful for app stores and web hosting companies to distribute the app in the United States.
Finding a buyer will be hard though, as any company with an interest and deep-enough pockets to acquire a platform of TikTok’s stature will almost certainly face intense scrutiny from the FTC for antitrust reasons.
It’s also unlikely that ByteDance will go down without a fight.
“Rest assured, we aren’t going anywhere,” TikTok CEO Shou Chew said in a video posted on Wednesday, claiming that the ultimate goal of the legislation is to ban TikTok, not sell it.
“We are confident and we will keep fighting for your rights in the courts,” he said, addressing the platform’s 170 million U.S. users directly.
It’s beginning to dawn on most Westerners that the US’ long-delayed aid to Ukraine isn’t all that it was hyped up to be and will only at most temporarily slow down the pace of Russia’s increasingly rapid advances. The conflict’s tempo has gradually intensified as Russia exploited Ukraine’s disastrous counteroffensive to regain the military-strategic initiative. Ukraine’s problems are immense and multifaceted, but they’re all connected one way or another to the five following factors:
Russia won the “race of logistics”/“war of attrition” with NATO long ago and that’s why it continued gaining ground over the past 18 months. The sanctions failed to bankrupt the Kremlin, required resources for production remain readily available, and sabotage had no impact on the assembly lines. Not only has NATO been unable to stop Russia’s military-industrial complex, but it couldn’t ramp up its own during this time either, thus creating an unbridgeable gap that weakens Ukraine more by the week.
2. Ukraine Is Struggling To Replenish Its Depleted Military Ranks
NATO’s loss in the abovementioned military-industrial competition with Russia, the consequent failure of Ukraine’s counteroffensive, and Russia’s subsequent on-the-ground gains combined to scare Ukrainian men away from joining the armed forces and helping to replenish their depleted ranks. Without enough soldiers, Ukraine can’t confidently hold off Russia’s advances, thus risking an impending collapse along the front. At the end of the day, it’s just a numbers game, and Ukraine’s continue trending downward.
3. Less Equipment & Troops Mean More Difficulty Building New Defenses
The pace with which Russia has recently gained ground in Donbass is stressing Ukraine’s existing defensive lines like never before, thus compelling it to build newer ones further behind the front lines. Although Zelensky demanded this be done late last year, little progress has been made due to the lack of equipment and troops for holding off the Russian advance while simultaneously accomplishing this task. The breakthrough that the Ukrainian Intelligence Committee warned about is now more likely than ever.
4. Political Instability Is Still A Damocles’ Sword Hanging Over Ukraine
The Committee also warned in their same message from February that political unrest might explode next month around the time that Zelensky’s term expires on 21 May. They of course claimed that Russia would be behind it, which he also preconditioned his partners to falsely believe late last year, but this would actually be a genuine response to growing problems. Authoritarianism, corruption, forcible conscription, serious economic troubles, and the lack of a realistic endgame all enrage Ukrainians.
5. Ukraine Continues Thinking That It Knows Better Than The US
The Washington Post’s two–part post-mortem report on last summer’s failed counteroffensive revealed that one of the reasons why it flopped was because Ukraine refused to listen to the US’ advice. This problem is attributable to Zelensky and most recently took the form of him ordering his forces to attack Russian energy infrastructure in defiance of the US at the expense of more tactically significant targets. It’s actually the US’ own fault, though, since their media convinced him that he was a “god among men”.
* * *
These unsolvable challenges have converged to create a full-fledged crisis for Ukraine that Commander-in-Chief Syrsky is unable to resolve, which is why he candidly informed Ukraine’s partners that “the difficult operational and strategic situation…has a tendency to get worse.” Unless Ukraine agrees to demilitarize the regions still under its control east of the Dnieper and turn them into a buffer zone, the front might collapse by summertime, which could either lead to capitulation or a NATO intervention.
Gen. Stephen Whiting, commander of U.S. Space Command, recently warned about China’s “breathtakingly fast” development of space military capabilities, following his trips to South Korea and Japan.
“We are seriously focused at U.S. Space Command on our pacing challenge, which is the People’s Republic of China,” Gen. Whiting told reporters during a call from Japan on April 24.
“The People’s Republic of China is moving at breathtaking speed in space, and they are rapidly developing a range of counter-space weapons to hold at risk our space capabilities,” he added.
“They’re also using space to make their terrestrial forces—their army, their navy, their marine corps, their air force—more precise, more lethal, and more far-ranging.”
Gen. Whiting was on his first Indo-Pacific trip after becoming the head of U.S. Space Command in January, succeeding Army Gen. James Dickinson. During his trip, he met with top military leaders from South Korea and Japan, including Adm. Kim Myung-Soo, chairman of South Korea’s Joint Chiefs of Staff, and Japanese Defense Minister Minoru Kihara.
One particular concern was the number of Chinese satellites in orbit, Gen. Whiting said.
“Over the last six years, they have tripled the number of intelligent surveillance and reconnaissance satellites on orbit, and they have used their space capabilities to improve the lethality, the precision, and the range of their terrestrial forces,” he said.
“And so that obviously is a cause for concern and something that we are watching a very, very closely.”
China’s satellite fleet stood at 359 systems as of January, according to his prepared remarks for a hearing of the Senate Armed Service Committee in February. He also noted that Beijing is developing hypersonic glide vehicles along with other advanced space weaponry to “overcome U.S. traditional missile warning and ballistic missile defense systems.”
China’s ambitions with regard to the Moon are also among Space Command’s concerns.
“We’ve seen the announcements of China’s ambitions to go to the Moon. And those appear to be exploratory and scientific on the surface, but the Chinese aren’t very transparent with what they do in space,” he said.
“And so we hope there’s not a military component to that, but we would certainly welcome more transparency.”
A U.S. military report published in January warned that China and Russia are putting up dual-use satellites in space while hiding their military applications. One example is a Chinese satellite equipped with a giant robotic arm, which could be used to grapple other satellites in the future.
China is aiming to put its astronauts on the moon by 2030. Pakistan, South Africa, Belarus, and Nicaragua are among a group of nations that have signed up for a planned moon base led by China and Russia. The moon project is officially known as the International Lunar Research Station.
Gen. Whiting said he visited Japan’s Space Operations Group and emphasized the importance of the two nations working together in space.
“Their focus on space domain awareness along with ours to keep track of those threats in space that we see—and many of those are emanating from China—has put an impetus on us developing improved space domain awareness capability,” he said.
Japan is working to bring on board a deep-space radar, Gen. Whiting said, adding that the radar will benefit both nations once it archives initial operational capability.
“We expect that will provide both of our countries an enhanced understanding of what China is doing in space,” he said.
Japan and the United States are also partners in launching new satellites that will be used to conduct space domain awareness missions, according to Gen. Whiting.
In November last year, the United States, Japan, and South Korea agreed on a mechanism to share missile warning data to better track North Korea’s missile launches. The mechanism went into effect in December.
“We need to continue the excellent work in the trilateral agreement between the United States, the Republic of Korea, and Japan to share missile warning information so that that all three countries fully understand anytime North Korea launches a missile where that missile is headed, and we can provide warning to our national leadership, to our military forces, and to our populations,” Gen. Whiting said.
Relentless Chinese Bond Rally Hints at Yuan Challenge Ahead
By Charlie Zhu and Helen Sun, Bloomberg Markets Live reporters and strategists
Three things we learned last week:
1. China’s bond rally seems unstoppable amid a shortage of quality assets for investments. From government bonds to corporate debentures, traders keep hunting for yields in all maturities.
After pushing the yield on 30-year sovereign debt to the lowest since 2005, investors flocked to the notes issued by local government financing vehicles, once deemed as the riskiest instrument in Asia. That helped to drive LGFV companies’ borrowing costs to record lows.
In light of a decline in mortgage loans, long-term sovereign bonds become a good alternative for banks as long-term assets and provides support to the bond rally until the trend changes, said Becky Liu, head of Greater China macro strategy at Standard Chartered Plc.
As the central bank warned the market again about the potential risks in long-term bonds and pointed to signs of stabilizing economic growth, funds rotated out of the back-end of the curve. The yield on two-year sovereign notes slid to the lowest level since mid-2020. That widened its gap with US Treasury to about 317 basis points, the biggest ever.
2. Market speculation about a devaluation of the yuan emerged. To investors onshore, this is an unlikely scenario given the authorities’ emphasis on maintaining stability, but some offshore traders see signs that the pressure is building.
In addition to the record interest rate gap, China’s stockpiling of commodities including gold and copper has prompted conjecture that policymakers may weaken the yuan in a one-off move.
The central bank has been using the daily reference rate to limit the depreciation of the yuan, effectively making it one of the best-performing emerging-market currencies this month. However, the steady fixing kept the spot exchange rate remain close to the 2% daily limit on the weaker side, spurring concerns over the sustainability of the strategy.
3. The US decision on TikTok may bring headwinds to stabilizing relations between Beijing and Washington. President Joe Biden has signed a bill forcing TikTok to find a new owner within a year or face a ban. The move, designed to cut off China’s access to the video app used by 170 million Americans, raised concerns that US firms with large exposure to China’s market, including Apple Inc. and Tesla Inc., may be retaliation targets.
While China’s response was rather restrained compared with last year, Foreign Minister Wang Yi warned his US counterpart Antony Blinken Friday that “negative factors” were rising between the world’s biggest economies.
‘FX Vigilantes’ Strike – Yen Suddenly Crashes To April 1990 Lows Against The Dollar
The yen crashed in early Asia trading, tumbling to match is exact lows from April 1990 in what is being blamed on a ‘fat finger’ trade or multiple barrier-option trades being triggered, by sources that have literally no idea.
“Currency rates is not a target of monetary policy to directly control,” he said.
“But currency volatility could be an important factor in impacting the economy and prices. If the impact on underlying inflation becomes too big to ignore, it may be a reason to adjust monetary policy.”
In fact, policymakers have repeatedly warned that depreciation won’t be tolerated if it goes too far too fast.
Finance Minister Shunichi Suzuki reiterated after the BoJ meeting that the government will respond appropriately to foreign exchange moves.
Potential triggers for interventions are public holidays in Japan on Monday and Friday next week, which bring the risk of volatility amid thin trading.
“Should the yen fall further from here, like after the BOJ decision in September 2022, the possibility of intervention will increase,” said Hirofumi Suzuki, chief currency strategist at Sumitomo Mitsui Banking Corp.
“It is not the level but it’s the speed that will trigger the action.”
Well currency volatility is what he has now…
Source: Bloomberg
The sudden drop pushed USDJPY perfectly to its April 1990 highs to the tick…
Source: Bloomberg
The currency pain was all focused in the Japanese market as EUR and GBP strengthened against the USD…
Source: Bloomberg
Perhaps even more notably, the yen puked relative to the Chinese yuan, hitting 22 for the first time since 1992 and putting further pressure on Beijing to potentially do something…
Source: Bloomberg
The question is, of course, what will Japan’s MoF/BoJ do now – if anything as their recent excuses about ‘velocity’ or some such spin are now out of the window after a 6-handle standalone surge in their currency in a few short days (when the rest of the world’s currencies are not).
“Authorities may say they don’t target levels per se, but they do pay close attention to the trend and the rate of change and current levels suggest they have to act soon or risk facing a credibility crisis,” said Chris Weston, head of research at Pepperstone Group Ltd.
“The FX market is almost taking them on like the bond vigilantes of old.”
However, as we detailed last week,the problem with intervention is that once the genie is out of the bottle… it’s hard to put it back in.
In other words, the onus should be on the BOJ to step in with a much more hawkish move than the market expects.
As Viraj Patel from Vanda Research goes on to note that “we’re at a stage where MoF/BoJ have no choice but to intervene. The best way would be for BoJ to hike 25bps this week. It’s not about the macro anymore (BoJ should’ve normalized policy faster last year).”
Instead, what is going on is that Japan’s disastrous handling of its currency has evolved into a game between speculators and officials: Specs are short yen for good fundamental reasons (carry). At this stage, a “surprise” hike to send a signal to markets that they are concerned about ongoing FX weakness (and don’t test us) would be less costly to the economy vs. a further devaluation in the yen. It also adds an additional level of uncertainty to the BoJ/MoF reaction function – which speculators (long carry trades) don’t like.
Meanwhile, FX intervention – which unfortunately looks to be the MoF/BoJ’s preferred route based on recent history – is not even a short-term fix anymore. USD/JPY dips would be quickly bought into based on recent market chatter. A hike goes a bit further towards solving the root cause of yen weakness – even it’s only a marginally better option.
In a note late last week, Deutsche Bank says the currency’s decline is warranted and finally marks the day where the market realizes that Japan is following a policy of benign neglect for the yen.
We have long argued that FX intervention is not credible and the toning down of verbal jawboning from the finance minister overnight is on balance a positive from a credibility perspective. The possibility of intervention can’t be ruled out if the market turns disorderly, but it is also notable that Governor Ueda played down the importance of the yen in his press conference today as well as signalling no urgency to hike rates. We would frame the ongoing yen collapse around the following points.
Yen weakness is simply not that bad for Japan. The tourism sector is booming, profit margins on the Nikkei are soaring and exporter competitiveness is increasing. True, the cost of imported items is going up. But growth is fine, the government is helping offset some of the cost via subsidies and core inflation is not accelerating. Most importantly, the Japanese are huge foreign asset owners via Japan’s positive net international investment position. Yen weakness therefore leads to huge capital gains on foreign bonds and equities, most easily summarized in the observation that the government pension fund (GPIF) has roughly made more profits over the last two years than the last twenty years combined.
There simply isn’t an inflation problem. Japan’s core CPI is around 2% and has been decelerating in recent months. The Tokyo CPI overnight was 1.7% excluding one-off effects. To be sure, inflation may well accelerate again helped by FX weakness and high wage growth. But the starting point of inflation is entirely different to the post-COVID hiking cycles of the Fed and ECB. By extension, the inflation pain is far less and the urgency to hike far less too. No where is this more obvious than the fact that Japanese consumer confidence are close to their cycle highs.
Negative real rates are great. There is a huge attraction to running negative real rates for the consolidated government balance sheet. As we demonstrated last year, it creates fiscal space via a $20 trillion carry trade while also generating asset gains for Japan’s wealthy voting base. This encourages the persistent domestic capital outflows we have been highlighting as a key driver of yen weakness over the last year and that have pushed Japan’s broad basic balance to being one of the weakest in the world. It is not speculators that are weakening the yen but the Japanese themselves.
The bottom line, Deutscxhe concludes, is that for the JPY to turn stronger the Japanese need to unwind their carry trade. But for this to make sense the Bank of Japan needs to engineer an expedited hiking cycle similar to the post-COVID experiences of other central banks. Time will tell if the BoJ is moving too slow and generating a policy mistake. A shift in BoJ inflation forecasts to well above 2% over their forecast horizon would be the clearest signal of a shift in reaction function. But this isn’t happening now.
The Japanese are enjoying the ride.
Finally, it goes without saying that the only true circuit-breaker for yen weakness is lower US yields/weak US macro, which is unlikely until the election if, as so many now speculate, there has been a directive by the Biden admin to make the economy look as good as possible ahead of the elections, even if that means manipulating the data to a grotesque degree.
One added complexity for MoF/BoJ is that their two options for tackling yen weakness indirectly adds upward pressure to global rates/yields. They’re caught between a rock and a hard place… and speculators know (enjoy) this.
And finally there is China: the longer BOJ/MoF does nothing to curb the collapse of the yen, a move which is seen a pumping up the country’s exporting base at the expense of other mercantilist nations such as China, the higher the probability Beijing will retaliate against Tokyo by devaluing its own currency. At which point all hell will break loose.
Stablecoin Volumes Are Tracking A Record $15 Trillion On Ethereum Alone
By Marcel Kasumovich, Deputy CIO of Coinbase Asset Management
Crypto sparked a renaissance in real-time payments. Sleepy you say? Time for a wake-up call – payment solutions are at the cutting edge of crypto’s integration into the mainstream, and it has plenty of competition.
“You’re probably used to crypto transactions, expecting me to bring out another guest for an eight-minute commentary while we wait for confirmation. But that’s old crypto. Are you ready for the new crypto world? Watch very closely…don’t blink…and that’s it,” John Collison exclaimed while illustrating a transaction on crypto rails with Stripe, a leading payment network that he co-founded. It was a seamless user experience, unlike the company’s initial foray into bitcoin in 2014.
Both PayPal and Stripe are now harnessing the power of stablecoins into their familiar user interfaces. This strategic move effortlessly brings users onto the blockchain – point, click, and it’s done. It’s the new trend, too. Traditional companies are bringing users onchain. There’s the crypto we see in noisy headlines and those working quietly to monetize the technology, like PayPal and Stripe. And they combine for a staggering 62% share of online payment software processing.
Digital payments may not seem like the exciting promise of the future. Yet, they are at the cutting edge. Digital payments are taking a rising share of a rapidly growing market as the world moves away from cash. Global payments are measured in the hundreds of trillions, and the digital payment market has risen from a modest $10 billion in 2017 to a projected $200 billion in 2030. We all live it, and the bulk of the transactions are small value, a coffee here, a donut there.
The process is so seamless that we seldom pause to consider how it actually works. Poorly, as it happens. Users expect to be able to pay whenever it’s convenient. Settling your restaurant bill, you don’t care that it’s outside of banking hours. You just want a simple form of payment – and that’s not cash. During the time between you tapping your card and accounts being settled, a middleman provides credit to make sure it all clears. And it’s expensive at 2.3% of transaction value.
One man’s profit margin is another’s invitation to disrupt. The typical narrative of disruption involves a wildly successful company losing its innovation edge, and missing market inflection points. Polaroid made the first instant camera in 1948 and dominated markets from floppy disks to film. Revenue peaked in 1991 and the company was unable to pivot to the new digital era, declaring bankruptcy ten years later. Learning from such histories, companies are now more adaptive.
We see this clearly in payments. Efficiency is precisely what brought PayPal and Stripe back to crypto. Transaction speeds have improved exponentially, now clocking at milliseconds, and costs have plunged to fractions of a cent. It helps that crypto tech fails fast – revealing resilience and weakness quickly. For instance, the resilience of USDC is now supporting its entry into the mainstream while Bored Apes Yacht Club weakness persists, down 90% off previous cycle highs.
Why now? Why not! Stablecoins are demonstrating their prowess as payment tools. Transaction volumes are tracking new highs this month, running at ~$15 trillion annualized on Ethereum alone (Figure 1). The efficiency gain is clear – instant and final settlements mean that your late-night coffee and donut purchases bypass the need for credit intermediaries. The middleman is dead, although living vibrantly through tools like Stripe that deliver users a familiar experience.
Users don’t care that it’s crypto. They want a great experience. Businesses don’t care, either. They are optimizing operating efficiency for profit. As crypto matures, so too does its value proposition. Crypto is the protagonist of real time payments and like any great innovation, it fosters competition. What’s unique with payments is that the competition comes from both private and government organizations, with regulatory stagnation working in favor of both.
Look beyond regions traditionally seen as leaders in innovation. The United States remains a beacon of creative talent behind innovation. But users are moving slowly, lagging in fintech adoption. After all, US users are accustomed to fees, don’t mind the service, and paying for points on expensive intermediation is a pastime. Real-time settlement systems adopted, like FedNow, are for business applications, not for consumers. It’s new players like India at the cutting edge.
The Unified Payment Interface (UPI), India’s real-time payment solution, was developed by the central bank in 2016. It integrates peer-to-peer real-time payments, directly competing with crypto technologies. Last year, UPI integrated 522 commercial banks covering 300 million active users and 117 billion transactions. Different from developed regions, intermediaries were not disrupted as these are largely new users. Cash was disrupted at the expense of the central bank.
Payments stand at the cutting edge of crypto’s future. User experience is paramount. Integrating into the regulatory mainstream will accelerate users onchain, just as service providers did for the internet. Crypto unlocked the real-time settlement innovation, but will face competition. It is a world that argues for being chain-agnostic. The data between Ethereum, Bitcoin and UPI will integrate to the highest of standards and security. That’s the road to making onchain the new online.
