Monday Bytes 1/13/2020

Written by Malik Corbett

Over the weekend the cryptocurrency market rallied and even though the U.S. and Iran seem to back away from the brink of war last week, many investors are still worried. This week is set up to be an important one for global markets. U.S. and China trade officials are supposed to sign a phase one deal; however there is little known about what’s in the deal and if there is enough concessions on both sides to stave off a protracted trade war which has been going on for two (2) years. The biggest question on many investors minds is; will there be a phase two?  

A Concerning Data Point for the U.S. Dollar 

Something strange is happening with the greenback. Typically, when there are times of geopolitical tensions and conflict, investors allocate into safe haven assets such as the U.S. dollar. On January 3rd of this year the United States killed a top Iranian general of the special Qud Forces, Qasem Soleimani. Despite the geopolitical conflict in the middle east the dollar barely moved and actually edged down until the crisis between the two countries had subsided. There has been a call by many to move away from the U.S. dollar as the world’s currency and instead replace it with a basket of currencies. 

Source: Market Watch

I don’t believe this trend will diminish anytime soon. In fact as the dollar becomes more and more weaponized through sanctions and tariffs by the U.S. government as a tool to resolve disputes, countries around the world are looking for ways to get around these economic hardships. For example, China has developed an alternative payment and settlement system called the Cross-border Interbank Payment System or CIP which had an 80% growth in terms of value in 2018 with participating countries such as Russia, Turkey and some African nations who are exposed to U.S. sanctions. 

China Ambition to Usurp the Current Western Financial System is Real     

On Monday Bloomberg Crypto reported that the Chinese Communist Party has published a book on digital currencies for its high ranking official members. According to Bloomberg, the textbook covers artificial intelligence, blockchain and cryptocurrencies so that its members can be educated on the nascent technologies and how it fits within the country’s audacious quest as the next global superpower. China is leading its global peers in the study of digital currencies. Meanwhile in the United States there has been little news coming out of Washington as it relates to legislation of what could be the biggest disrupter to western Fintech, blockchain and cryptocurrency. The chances that the U.S. government will focus on smart legislation at this time is slim as Congress is stuck in an impeachment process as well as 2020 presidential election will sure grab most of the country’s focus this year.

Interesting Reads Over the Weekend   

Title: With the state’s help, Chinese technology is booming

Source: Economist

Link: Click Here

Title: Eurozone governments rein in borrowing despite ultra-low rates

Source: FT.com

Link: Click Here

Title: Working paper: Rising protectionism and global value chains – Quantifying the general equilibrium effects

Source: European Central Bank

Link: Click Here

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