News
Will Global Rate Hikes Set Off a Global Debt Bomb?
Raising interest rates is a necessary but insufficient measure to combat inflation. To reduce inflation to 2 percent, central banks must significantly reduce their balance sheets, which has not yet occurred in local currency, and governments must reduce spending, which is highly unlikely. The most challenging obstacle is also the accumulation of debt. The so-called expansionary policies have not been an instrument for reducing debt, but rather for increasing it. In the second quarter of 2022, according to the Institute of International Finance (IIF), the global debt-to-GDP ratio will approach 350 percent of GDP. IIF anticipates that the global debt-to-GDP ratio will reach 352 percent by the end of 2022.
Harvard paper to central banks: Buy Bitcoin!
Bitcoin was invented to circumvent the world’s central banks, so the idea that those banks would start buying Bitcoin in bulk ranks somewhere from counterintuitive to far-fetched. But after Western governments froze Russia’s foreign exchange reserves early this year, speculation mounted that some central banks would acquire cryptocurrency as a form of insurance against financial blockades from the U.S. and its allies. In the months since, it has remained little more than speculation. But the idea has remained a fixation among Bitcoin investors, who tend not to support U.S. foreign policy objectives, and who view it as a good thing that crypto could provide a workaround.
Nomura warns seven emerging economies face currency crisis danger
Nomura has warned that seven countries - Egypt, Romania, Sri Lanka, Turkey, Czech Republic, Pakistan and Hungary - are now at a high risk of currency crises. The Japanese bank said that 22 of the 32 countries covered by its in-house "Damocles" warning system have seen their risk rise since its last update since May, with the largest increases in the Czech Republic and Brazil. It meant the sum of the scores generated on all 32 by the model had increased sharply to 2,234 from 1,744 since May.
UK May Need Digital Pound, Bank of England's Jon Cunliffe Says
Jon Cunliffe, deputy governor at the Bank of England (BoE), said the U.K. may need a digital British pound as he discussed whether the collapse of crypto exchange FTX would influence the country's decision to issue a government-controlled digital currency. Although he initially thought there was no connection between the FTX debacle and the central bank's work on a central bank digital currency, Cunliffe said on Monday that he understands the concerns. "Over the past few days, I have had a few comments both to the effect that the collapse of FTX shows that we need to get on and issue a digitally native pound – and to the effect that FTX shows that we do not need do so," Cunliffe said at a conference at the Warwick Business School in Coventry, England.
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