Crypto Could Shatter Public Trust In Banks, Warns European Central Bank Official

Watching sweaty 13-year-olds lose their minds to a performance by rapper Flo Rida at a bar mitzvah for the son of a finance executive in 2023, Evan Osnos felt something in America had changed.

For decades the richest teenagers have booked big talent for private performances, a splurge disturbingly documented by the MTV reality show My Super Sweet 16. But recent years have seen a proliferation in the number of people who can “blow a hundred and fifty grand on a Thursday” to have the Foo Fighters play in their backyard, drummer Charles Ruggiero tells Osnos.

There are now more than 800 billionaires in the US, up from 66 in 1990, Osnos writes. Between President Donald Trump’s first and second inaugurations alone, the scale of their wealth more than doubled. In The Haves and Have-Yachts: Dispatches on the Ultrarich (Scribner, June 3), Osnos, a staff writer at the New Yorker, peers into these extraordinary fortunes. The collection of his 2017-2024 reporting for the magazine, with new epilogues, illuminates how America birthed a wealth disparity that has destabilized the foundations of the country and now threatens to swallow it whole.

In the wake of the first Trump election, “It was clear that the essential fault line in American politics was inequality,” Osnos writes. But he argues that this rupture was not as new as our outrage about it. The widening wealth gap had been architected by the most affluent over decades through politics, policy and moral concessions made in the name of self preservation.

The US’s 2016 obsession with a disenfranchised working class and a minimum wage that rose just 20% over 25 years was misguided, Osnos writes — or at least oversimplified. “That ignored the effects of seclusion among members of the governing class, who helped disfigure our political character by demonizing moderation and enfeebling the basic functions of the state. We — or they, depending on where you stand — receded behind gracious walls,” he says.

Indeed, Osnos notes how the actual walls around homes in Greenwich, Connecticut — a hedge fund mecca, it has one of the highest concentration of billionaires in the country — grew so high that neighboring municipalities introduced zoning restrictions to prevent the spread of these so-called “f--- you” walls to their towns.

In his final address in the Oval Office, a weary President Joe Biden issued a warning about what he saw as a looming crisis: “Today, an oligarchy is taking shape in America of extreme wealth, power and influence that literally threatens our entire democracy, our basic rights and freedoms, and a fair shot for everyone to get ahead,” he said. At Trump’s inauguration days later, “There were so many billionaires on stage that the leaders of Congress were relegated to the audience,” Osnos writes.

The question that hangs over Have Yachts is whether the US has reached a point of no return. If, as future Supreme Court Justice Louis Brandeis warned in 1913, men have amassed fortunes “so powerful that the ordinary social and industrial forces existing are insufficient to cope with it.”

In the wake of the world wars (whose role in fortifying the middle class Osnos otherwise ignores), some US millionaires took note of discontent roiling Europe. Facing backlash against the inequality forged in the Gilded Age, they “consented to reform,” directing their fortunes toward public good and agreeing to higher taxes.

Many economic corrections made under President Franklin D. Roosevelt, such as fortifying unions and raising the minimum wage, “were borne by the American ruling class,” wrote Peter Turchin in End Times: Elites, Counter-Elites, and the Path of Political Disintegration. Between 1925 and 1950, the US reduced the number of millionaires from 1,600 to fewer than 900, Osnos writes.

But what Osnos notes again and again is the sheer resiliency of fortunes, and of those who aspire to keep them.

While inequality narrowed through the 1970s in a “Great Compression,” by the 1980s the rich had gained momentum and wealth, and — tired of concessions in the name of societal reform — threw their money into politics to push for more favorable taxes, less regulation and less scrutiny. Today, he reports, America finds itself in “a golden age of tax avoidance.” Compared to the 1970s, the marginal tax rate for the richest has been slashed by more than half, and the estate tax was largely dismantled.

Last week, Republicans in Congress advanced a tax bill that includes almost $4 trillion in tax cuts, which would disproportionately benefit wealthier households, according to Yale University’s Budget Lab. The ones who pay taxes, that is. As one jilted wealth manager for a Getty heir found out, the desire to be ethical with their fortune was not as strong as the desire to shield it from taxes: “The system will always do whatever it can to preserve itself,” the wealth manager tells Osnos.

Osnos’ reporting suggests that over the past 60 years, many of the wealthiest Americans have been complicit in the modern conservative agenda, which John F. Kennedy adviser John Kenneth Galbraith in 1963 called, “One of man’s oldest, best financed, most applauded, and, on the whole, least successful exercises in moral philosophy. That is, the search for a truly superior moral justification for selfishness.” For the holy promise of lower taxes and less regulation, the rich embraced “a vision of politics that forgave cruelty as the price of profit,” Osnos writes.

A more equal distribution of wealth and more funding of public benefits such as education, health care and housing could do a great deal to ease the tensions roiling society, the book posits. But the world’s richest instead appear to be increasingly tightening their grips around swelling fortunes, withdrawing ideologically and even geographically.

Some have responded to the feelings that society is growing more unstable by preparing for the end of it. In pockets of Silicon Valley, many are known to have some kind of “apocalypse insurance,” Osnos writes — a bunker or “hideaway” in the event civilization collapses. “The fears vary, but many worry that, as artificial intelligence takes away a growing share of jobs, there will be backlash against Silicon Valley.” Reddit co-founder Steve Huffman, for example, has stockpiled motorcycles, guns and food.

Perhaps the ultimate embodiment of this desire to live separately is the yacht — peak luxury, with an ocean as your moat from the plebes. In 2022, the US lived through the “greatest boom in the yacht business that’s ever existed,” one yacht broker tells Osnos, a consequence of the rich getting much, much richer and practicing social distancing in extremis. And as the enclaves of the rich become increasingly isolated from the rest of the world and its woes, the boats are getting bigger. A gigayacht, Osnos writes, is “the most expensive item that our species has figured out how to own.”

It isn’t enough to show that you’re better than an average person, one wealthy yacht guest explains to Osnos. It’s about proving you’re of a higher status than even your peers. “You have a driver, and I have a driver. You can fly privately, and I fly privately. So, the one place where I can make clear to the world that I am in a different f---ing category than you is the boat.”

The thing about being megarich is that it feels good. Having so much while so many have naught can make you feel special. There is a subtle but necessary self-delusion required — and the jump from believing yourself worthy of an enormous fortune to believing yourself broadly superior because of it is not a hard one to make. Plus, as Osnos writes, luxury is nice. It might also be a little addictive. A support group for white-collar criminals was described to Osnos by its founder as a meeting for “guys detoxing from power and influence.”

Reporting his feature on yachts, Osnos travelled to the world’s gravitational center for ostentatious wealth: Monaco. Unable to afford a local hotel on a magazine expense budget — but versed enough in wealth to know all actual deals are reserved for those who don’t need them — he asked for help. Put up in a members-only club for visiting yachters, he says, “Inside my cabin, I quickly came to understand I would never be fully satisfied anywhere else again.”

The next morning, eating an omelet on his perfect balcony, staring down at a man on a “mid-tier” yacht in the marina, Osnos identifies a new feeling: “A surprising sensation started in my chest and moved outward like a warm glow: the unmistakable pang of superiority.”

Source: Bloomberg Europe

A junior member of German Chancellor Friedrich Merz’s cabinet proposed a new tax on internet platforms like Alphabet Inc.’s Google and Meta Platforms Inc.’s Facebook, a move that could stoke further trade tensions with the US.

Culture Minister Wolfram Weimer said in an interview with Stern magazine that digital services are on his “agenda” and he sees a tax of 10% as “moderate and legitimate,” adding that his ministry is drafting legislation.

Big US tech companies “do billions in business in Germany with very high margins and benefit enormously from our country’s media and cultural content and infrastructure,” said Weimer, a media entrepreneur prior to his appointment. “But they pay hardly any taxes, invest too little and give far too little back to society.”

The announcement of the initiative wasn’t coordinated with other ministries, according to a government official, who asked not to be identified discussing internal processes. But it aligns with Merz’s coalition agreement, which calls for a taxation of digital companies, the official added.

The proposal comes at a delicate moment in US-European relations. Alleging that the European Union engages in unfair trade practices, including value-added taxes, President Donald Trump’s administration plans to introduce a 50% tariff on all EU imports. The levies are currently on hold until July 9 to give time for a deal to be reached.

Washington is already gearing up to hit back at countries with tax regimes deemed unfair. A package of fiscal legislation that’s making its way through Congress includes a section dubbed a “revenge tax,” which would take aim at countries that levy “digital services taxes” on US companies.

The issue could overshadow Merz’s long-awaited visit to meet Trump. After starting his term earlier this month, the German chancellor has been seeking to secure a spot on the president’s schedule to discuss a range of issues from trade to support for Ukraine.

Earlier this week, Merz raised the prospect of retaliation against US tech companies if the trade conflict with the Trump administration escalates. Favorable tax treatment for US firms like Google “can be changed,” the 69-year-old conservative said Monday in Berlin. “But I don’t want to escalate this conflict. I want to solve it together.”

Weimer’s proposal could complicate efforts to defuse tensions. “We are serious” about the digital levy, he said in the interview that was published on Thursday.

The former editor of the Die Welt newspaper, which belongs to Bild-publisher Axel Springer SE, added that he had invited “the leadership of Google as well as key industry representatives” to hold discussions over alternatives to a tax, “including possible voluntary commitments.”

Source: Bloomberg Europe

Germany’s central bank is under growing pressure to consider repatriating its gold reserves from the United States, as Donald Trump’s return to the White House stokes concerns over the reliability of the Federal Reserve, according to Reuters.

Roughly one-third of Germany’s 3,352 tonnes of gold—the world’s second-largest national reserve—is stored at the Federal Reserve Bank of New York, a Cold War-era arrangement which also helped bolster U.S. ties.

But with geopolitical dynamics shifting, that decision is reportedly facing renewed scrutiny.

“Trump wants to control the Fed, which would also mean controlling the German gold reserves in the U.S.,” Michael Jaeger, vice-president of Germany’s Taxpayers Federation, told Reuters. “It’s our money, it should be brought back.”

The organization has formally called on the Bundesbank and the Finance Ministry to repatriate the gold, said Reuters.

Markus Ferber, a member of the European Parliament from the ruling Christian Democrats, echoed those concerns, telling Reuters that “Trump is erratic and one cannot rule out that someday he will come up with creative ideas how to treat foreign gold reserves.”

The Bundesbank responded that it still considers the New York Fed “a trustworthy, reliable partner,” Reuters reported. However, the article notes that public broadcasters ZDF and ARD have recently raised questions about the safety of the U.S.-held reserves.

Germany previously repatriated 300 tonnes of gold between 2014 and 2017. But with new geopolitical uncertainties, Ferber believes the Bundesbank should now prioritize diversification.

Source: Investing

The European Union has gained leverage in trade talks with the United States after a U.S. court cast doubt on the legality of Washington's "reciprocal" tariffs, EU officials said on Friday.

A U.S. federal appeals court temporarily reinstated President Donald Trump's tariffs on Thursday, a day after a U.S. trade court ruled that Trump had exceeded his authority in imposing the duties and ordered an immediate block on them.

"The uncertainty as to the legality of the 'reciprocal' tariffs certainly gives us extra leverage," one EU official close to the talks said. "The talks will continue, as formally we still look for zero-for-zero tariffs."

The EU was willing to discuss some non-trade barriers with the U.S., EU officials said, but would not touch the EU's taxation system -- such as the value added tax or digital tax -- or food safety standards.

The EU officials said the uncertainty created by the court rulings and the Trump administration's tariff policy had a positive aspect for Europe, which was seen by markets as an oasis of stability in comparison.

"This is the watchword: uncertainty. It is impossible to know what the status of the tariffs will be next week, not to mention next month," one of the EU officials said.

"If you want sane, stable, even boring, rules-based order and predictable business environment, Europe is the place for you."

Meanwhile, some European companies, worried over the uncertainty and possible major hits to their business, are holding their own talks with U.S. authorities.

Volkswagen CEO Oliver Blume said his company was holding "fair" and "constructive" talks with the U.S. government on tariffs and wanted to make further investments in the country.

Blume, speaking to German newspaper Sueddeutsche Zeitung, said that Volkswagen's main contact in Washington was U.S. Commerce Secretary Howard Lutnick.

Earlier this week, sources told Reuters that Germany's carmakers were in talks with Washington over a possible tariff deal.

The European Commission conducts all trade negotiations on behalf of the 27-nation bloc and companies, or even individual EU countries, cannot legally get a deal outside that framework.

EU-US TRADE TALKS

The European Commission would not comment on the U.S. court rulings because they were internal U.S. procedures.

But it said trade talks between Brussels and Washington would continue, with Europe sticking to its offer of mutual zero tariffs on industrial goods.

"There's no change in our approach, we proceed as planned with both technical and political meetings next week," a Commission spokesperson said.

EU Trade Commissioner Maros Sefcovic in a post on the X social media platform said he held a phone call with Lutnick on Friday.

"Our time and effort fully invested, as delivering forward-looking solutions remains a top EU priority. Staying in permanent contact," Sefcovic said on X.

More trade talks between the U.S. and the EU are scheduled for next week, on the sidelines of the OECD Ministerial Council Meeting in Paris on June 3-4.

The EU officials said the U.S. courts' rulings validated the EU view that the sweeping "reciprocal" tariffs, imposed on all goods from the EU and many other countries around the world on April 2, were unjustified.

They also said that while U.S. courts did not question Washington's 25% tariffs imposed on European steel, aluminium and cars, the rulings could also play a role in the EU's efforts to get those tariffs lowered or removed.

Source: Reuters

India will urge the US to drop all the tariffs imposed on April 2 as it adopts a tougher negotiating stance in the wake of legal challenges to President Donald Trump’s signature trade policy, people with knowledge of the matter said.

The South Asian nation will push aggressively to scrap the 10% baseline tariff imposed by Trump on trading partners, the people said, asking not to be named as discussions are private. The US had rejected a similar demand when Indian Commerce Minister Piyush Goyal met with his US counterpart Howard Lutnick earlier this month, according to a separate official who asked to remain anonymous.

India will also push back on Washington’s proposed rules of origin, which mandate that at least 60% of a product’s value be added locally to qualify as made-in-India and receive benefits under the deal, the people said. India has countered with a proposal to lower the threshold to around 35%.

A representative for India’s Ministry of Commerce and Industry didn’t immediately reply to a request for comment.

A vast majority of Trump’s global tariffs were deemed illegal and blocked by the US trade court on Wednesday, though a federal appeals court offered temporary relief from the ruling a day later.

The shift in stance shows that the legal challenges to the tariffs are prompting some nations to rethink how they approach trade negotiations with the Trump administration. US National Economic Council Director Kevin Hassett said earlier this week that India was among the countries that are close to securing a deal.

It’s unclear if Trump will budge on the universal tariff. Earlier this month, the US president stated he would “always” impose a minimum 10% duty on trading partners, though he added that “there could be an exception.” In the US–UK trade deal, the first one struck by his administration, the baseline tariff remained in place.

While officials in New Delhi are closely following the court proceedings, they also say that negotiations will continue as before. A US trade team plans to visit New Delhi next week to advance the discussions.

India was among the first nations to initiate trade talks with the US this year, with Prime Minister Narendra Modi making notable efforts to appease the White House by offering concessions on a range of issues from trade to immigration. His government has spoken to the US about a deal structured in three tranches, with the aim of reaching an interim agreement before July.

Even before the last court rulings, India had begun signaling a more assertive stance in the talks. After China’s defiance of Trump produced a truce with the US that lowered tariffs significantly, India threatened retaliatory duties on some US goods in response to Washington’s duties on steel and aluminum.

The shift also comes amid growing frustration in New Delhi over Trump’s insistence he used trade as a bargaining chip to secure a ceasefire between India and Pakistan.

Source: Bloomberg Europe

US Treasuries are on track to deliver their first monthly loss this year, buffeted by renewed tariff uncertainty and growing anxiety over mounting levels of government debt.

A Bloomberg index that tracks the bonds is down more than 1.2% in May after all maturities came under pressure. The 30-year yield rose for a third consecutive month, its longest losing streak since 2023, while yields on two- and 10-year tenors posted their first monthly increase this year.

The poor monthly performance reflects the growing headwinds Treasuries face as the US administration’s unpredictable policies shake investor confidence. May saw a resurgence in worries over the US budget deficit as Donald Trump wrestles with Congress over a bill that promises to cut taxes.

“I don’t think there’s a dislocation in bond markets, but you do need to price for the deficit,” said Timothy Graf, head of EMEA macro strategy at State Street Markets in London. “We do still see 5% on 10 notes as the target here.”

The yield on the 10-year bond was steady at 4.42% on Friday.

To be sure, Treasuries gained this week as buyers locked in elevated yields and weaker-than-expected economic data boosted demand.

That momentum may be sustained if statistics due later Friday show PCE inflation and personal spending are cooling, backing the case for further Federal Reserve cuts. Money markets are pricing about 50 basis points of reductions by December.

Signs the economy is stumbling would support shorter-dated maturities in particular, which are more sensitive to Fed policy. The outlook for long bonds remains challenging, however, particularly given supply of safe assets globally is rising.

Goldman’s Waldron Says Bond Traders Fear Debt More Than Tariffs.

Citigroup Inc. strategists including Dirk Willer see the term premium in 10-year US Treasuries — the extra return investors demand to own longer-term debt instead of a series of shorter ones — rising another 50 basis points in the next year as competition for buyers heats up. It rose to a decade-high earlier this month.

At Man Group, portfolio manager Henry Neville is tracking the gap between where the 10-year yield actually trades versus its theoretical fair value.

While Treasuries’ favored status as a traditional safe haven has kept yields much lower than their fair value, the gap has been shrinking.

It’s averaged 150 basis points since 2020, the lowest spread for any decade since the 1960s, according to Neville’s analysis. Between May 2023 and July 2024, the gap was below 100 basis points for 15 straight months, the longest-ever consecutive run below that threshold.

“Persistent readings below 100 are for me the key tell that the dollar and dollar assets may be losing their luster,” he wrote in a note published Friday.

As waning demand from international investors forces domestic buyers to soak up more of the supply, it’s “not difficult” to imagine 30-year yields at 6%, or even higher, said Mark Dowding, chief investment officer at RBC BlueBay Asset Management.

He says positioning for steeper curves — where long-dated bonds underperform shorter ones — may act as a better risk-off hedge than simply betting on lower yields.

Source: Bloomberg Europe