Canada: The Canadian Current Account Index will come out at 3:30 PM ( GMT + 2 ) and is expected to come at -4B

Forex

Summary:

The Canadian economy might show some bearish trend versus major currencies after releasing the Canadian Current Account Index on 28-11-2022 at 3:30 PM (GMT +2) with an expected result of -4B. USDCAD might increase by 20-30 PIPS breaking the resistance level at 1.3455.

Fundamentals

The Canadian Current Account Index report for November on November 28, 2022, is due at 3:30 PM (GMT + 2). The Canadian Current Account Index is one of the major monthly indicators that affect the Canadian market widely, it measures the difference in value between exported and imported goods, services, and interest payments during the reported month. The goods portion is the same as the monthly trade balance. A higher-than-expected data is bullish for the CAD, and lower-than-expected data is bearish for the CAD. The data is expected to come out at -4B rather than the previous result of 2.7B which was bearish as well for the CAD. Bulls will most probably interfere and the CAD might show some bearish trend from 1.3441 to 1.3460.

Gold has increased sharply from the $1748 to $1763 level breaking the resistance level, and it is expected to increase further in the upcoming days affected by world inflation, the interest rate in Europe, U.S – China tensions, and the overall world political situation.

Major traders are holding their positions on Gold for further increases in prices.

Technical Analysis

USDCAD Daily Chart

Canada: The Canadian Current Account Index will come out at 3:30 PM ( GMT + 2 ) and is expected to come at -4B_1

The M15 chart for the USDCAD pattern shows a bullish engulfing with possible prices touching the 1.3460 level.

Support and resistance:

1.3415

1.3402

1.3390

Pivot: 1.3426

1.3463

1.3450

1.3439

Trading Recommendations

High Probability Scenario:

Long Above: 1.3450

Resistance TP1: 1.3460

Resistance TP2: 1.3473

Alternative Scenario:

Short Below: 1.3430

Support TP1: 1.3418

Support TP2: 1.3400

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Thomas

Energy

Fossil fuel producers benefited from sympathetic treatment in Egypt at the COP27 climate talks, government officials said, bringing their influence to bear in rushed final negotiations and frustrating those who hoped for a more ambitious outcome.

Officials said the host Egypt, a natural gas exporter and frequent recipient of funds from Gulf oil producers, was partly responsible, although the war in Ukraine and the subsequent European energy crisis also had an impact.

Egyptian officials have said their priority was to provide a conducive atmosphere for negotiations and act as a neutral mediator. The presidency denied that fossil fuel producers had been given sympathetic treatment.

"The end decision at COP27 was a compilation of inputs reached by consensus of all the UNFCCC parties who were all consulted," it said in a statement, referring to nearly 200 countries taking part in the summit under the U.N. Framework Convention on Climate Change.

Demands from environmental groups and scientists that governments and companies should leave oil and gas in the ground have had less traction this year, since European countries have scrambled to replace Russian gas.

The COP27 meeting yielded mixed results, with a hard-fought agreement on a fund for countries most harmed by climate change being welcomed by vulnerable nations, but a cover text that some officials said lacked ambition due to the influence of fossil fuel producers. The cover text summarises key outcomes of the summit.

"The cover decision and the mitigation work program does not fully reflect the urgency of the climate crisis and did indeed cater too much to the more fossil and backward-looking forces," said Espen Barth Eide, Norway's minister of climate and environment.

Some of the countries that had pushed hardest for the new fund for loss and damage simultaneously tried to weaken language around phasing down fossil fuels, he added.

Low-Emission Energy

The COP27 agreements are in line with what came out of the Glasgow meeting last year, to accelerate "efforts towards the phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies", rather than being strengthened to phasing down fossil fuels as some countries had pushed for.

It also included a new reference to "low emission and renewable energy". The Egyptian presidency said the language reflected part of the "just transition" adopted by all parties, which includes the use of hydrogen and nuclear energy to reduce emissions.

Egypt's COP27 President Sameh Shoukry acknowledged there had been "disappointment in certain quarters" but told reporters after the deal that "a single party cannot achieve all their ambition, and this does not take away from the value of what was reached".

For some, the Egyptian presidency had delivered a satisfactory deal by forging the agreement to set up a loss and damage fund. The idea had been resisted for years by some of the largest emitters, such as the United States and Europe, who were worried about the extent of liabilities.

Loss and damage was "the one thing we wanted a lot for ages, and that being solved at a COP being hosted by a developing country, that in itself is a great win because it shows their diplomatic strength," said Selamawit Wubet, an adviser to a group of countries highly vulnerable to climate change.

But climate activists and some delegates said little progress had been made on most other issues, contending that the tone had been set by fossil fuel producers who played a more public and prominent role in Sharm el-Sheikh than at previous summits.

'Difficult transition'

"It has now become quite clear that the transition away from fossil fuels is going to be a difficult one," said Pakistan's UN Ambassador Munir Akram, citing the impact of the war in Ukraine.

In the final 24 hours, the COP presidency held a meeting where calls from negotiators from countries and groups including Switzerland, the United States, Latin America and small island states, for Egypt to include language initially proposed by India to phase down all fossil fuels were unheeded, officials said. At least 80 countries supported such language, they said.

Some negotiators expressed concern that Egypt had advanced its proposal without thorough consultation, as major emitters and producers took a stand against more ambitious goals on limiting fossil fuel use.

The Egyptian presidency told Reuters the process was "praised by all parties for being focused and streamlined".

"The issue of phasing down all fossil fuels was not agreed upon by many countries," it said.

All Night Talks

Ahead of the final plenary meeting where a deal was struck just after 5:30 a.m. local time, a Reuters reporter saw some delegates caught off guard by the presidency's last-minute announcement of the session. Guards had to wake up some delegates sleeping on couches and chairs outside the plenary hall after 3 a.m., instructing them to go inside.

"It was very rushed towards the end," said Shauna Aminath, Maldives environment minister. "The normal procedure is that there would be more consultation and open dialogue on these things," she said.

The European Union, which had threatened to walk out, fell reluctantly in line to preserve the deal on loss and damage.

Egypt will hold the COP presidency until it hands over to the United Arab Emirates, an ally and a major hydrocarbons producer, in just under a year.

"Holding COPs in petro-states may seem counterproductive but actually we can't ignore these countries. They need to be engaged in the process and putting pressure on them as a COP host may provide bigger gains," said Mohamed Adow, founder of think tank Power Shift Africa.

Source: Reuters

Risk Warnings and Disclaimers

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Cohen

Political

Corruption and political dysfunction have belittled Iraqi sovereignty. Iran and Turkey have recently carried out simultaneous drone and missile attacks deep inside Iraqi Kurdistan. These assaults have caused casualties, stunted business and angered the Iraqi public. Further, such acts of aggression by its neighbours embarrass the Iraqi state and delegitimise its leaders who are in turn unwilling and unable to stand up for their country.

In attacking Iraq, Iran and Turkey are targeting their domestic audience. The Iranian regime is engulfed in countrywide anti-regime protests that were sparked by the murder of Mahsa Amini, a Kurdish woman, in September. Iran has sought to blame the protests on its Kurdish population. To deflect from events that invite a sense of deja vu of the 1979 revolution, the regime is attacking camps of Iranian opposition Kurdish groups that have been in Iraq for decades. Concurrently, Turkey has started a new military operation against the Kurdistan Workers' Party (PKK) in Iraq and the US-backed Syrian Democratic Forces militants in Syria accusing them of carrying out a recent terror attack in Istanbul. Akin to Iran, the Turkish government seeks to generate a boost of nationalism ahead of the 2023 elections.

Iran and Turkey are pushing against an open door in Iraq. Its military and political defences are down. Its response to such attacks has been feeble and feckless, amounting to little more than issuing statements. It had demonstrated a sliver of diplomatic heft when it filed a complaint against Turkey at the UN Security Council for killing nine civilians at a tourist resort in July. However, Baghdad has not dared take such action against Iran.

When Iran in March hit the home of a Kurdish energy executive in Erbil with a dozen ballistic missiles on unsubstantiated allegations that it was an Israeli base, many Iraqi leaders toed the Iranian line. Similarly, at the closed parliamentary session held on November 22 to discuss attacks on Kurdistan, several Iraqi representatives blamed Kurdistan Regional Government (KRG) and justified Iran's actions. Neither the Iraqi government nor the KRG have taken the proverbial grievance airing measures of summoning Tehran's ambassador and consul general or recalling their representatives in Tehran. In fact, as if out of sheer chutzpah, following its attacks inside Iraq, Iran called on the Security Council to shut down Iranian Kurdish groups in Iraq.

Such Iraqi weakness and lack of agency is embarrassing but not surprising. The rot in its corrupt and corrupting clientelist political system has escalated into a national security threat, beyond mere red tape or economic waste. Doing away with meritocracy in favour of sectarian patronage in the military had gutted its capacity and led to the loss of a third of the country to ISIS in 2014.

In jockeying for power at home, many Iraqi political factions find in Iran or Turkey a patron and protector. Iran abuses its sectarian affinity and geographic proximity to Iraqi and Kurdish factions. As a state, however, Iran has systematically invested in keeping Iraq weak and dependent.

Pro-Iran militias challenge the authority of the Iraqi state and carry out Iran's bidding in the region, as manifest in their attacks on Gulf states. Iran's influence inside the Iraqi government, coupled with direct and indirect attacks on Iraq's energy and power infrastructure, keeps Iraq hooked on Iranian overpriced electricity and gas imports. Another liability is Iraq's food security, which is also reliant on imports from Turkey and Iran. Together, Iran and Turkey are drying up Iraqi rivers. Although they seldom agree, Iran and Turkey welcome this irresolute Iraq. The October protests of 2019 were in part a nationalist backlash against such regional abuses and Iraqi acquiescence.

The presence of the PKK and various Iranian Kurdish groups in Iraqi Kurdistan go back decades but they make opportune excuses for fresh strikes by Turkey and Iran. Given its extreme vulnerability, the KRG is also a convenient target – it can neither deter attacks, nor defend itself or count on Iraq for support. The concerted Iranian and Turkish strikes have not even broken the influential cleric Moqtada Al Sadr's silence. The worst is yet to come should Iran carry out its threat of a cross-border military incursion joined by militias on the Iraqi side.

However, like their Shiite and Sunni political partners in the Iraqi government, the two ruling Kurdish parties have invested in weakening the Iraqi state, and seek out Iran and Turkey as patrons and protectors. KRG leaders become Iraqis selectively, when under attack, for example. With the use of violence, Iran and Turkey are seeking to change the Kurdish calculus – to see the presence of the PKK and the various Iranian Kurdish opposition groups as liabilities, not leverage.

Although the recent violent breach of Iraqi sovereignty does not target the US, it goes against the Biden administration's efforts to de-escalate tensions in the Middle East and to focus on the challenges posed by the great powers. Iran and Turkey's attacks both abuse and challenge this US stance, however. The US did condemn the Iranian attacks in particular, but the KRG has higher expectations, especially for greater air defence. However, to be heeded, such a request would have to come through Baghdad, which is unlikely. Per its strategic agreement with the Iraq, the US military mission there is narrowed to an advisory role and free from defence obligations. American hardware or not, Iraq seems to lack the political will to pursue procuring air defence systems.

The concurrent Iranian and Turkish attacks will test new Iraqi Prime Minister Mohammed Shia Al Sudani and his ability to stand up for his country's sovereignty. Foreign policy and national security are not Mr Al Sudani's strongest suits. But his domestic agenda focused on fighting corruption and mending Erbil-Baghdad ties is well-placed as building blocks for a state more able at standing up for itself. The scale and depth of corruption in the elite and state have resulted in a series of unpatriotic allegiances that cripple Iraq against national security threats. In the interim, better KRG-Baghdad security co-ordination could secure the country's borders and deny the neighbours further excuses. Only a clean and orderly house would enable Iraq to convincingly rally regional and international support for its sovereignty.

Source: The National News

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Devin

Political

Yemen nervously awaits signs that a truce involving all main factions can hold, despite a failure to renew it after the most recent deadline expired.

The truce is absolutely vital, not least because the main drivers in Yemen are now shaped by the fallout from the 2018 Stockholm Agreement as well as the global energy and food crisis.

Those living in Yemen are left to grapple with a cascading set of dire daily realities. The failure to achieve peace and restore the national government throughout the country is something to be squarely laid at the feet of the UN.

The agreement was badly rolled out. One of the pillars of the Stockholm Agreement was the Hodeidah Accord, which opened up the Red Sea port and associated road routes to ensure that food and other flows could increase to ease the threat of famine.

Last week, a representative of the Aden-based Southern Transition Council (STC), which is a partner with the national government, set out how what looked like a viable solution was, in fact, twisted by the implementation.

By overriding the safeguards on how trade and revenues are freed up, Houthi commanders and checkpoints were granted a gatekeeper. The consequences have been downplayed. The outcome is an escalatory cycle, according to the STC, that has granted the Houthi leadership "infinite" military and political capacity.

With its new space within the context of conflict, the Houthi leadership has taken the opportunity to be take a stand that is both stubborn and prolonging. "Maybe on the surface it looks like you might have a variable solution, but typically giving [the advantage] to one side causes the problem to become more complicated," is the view of one source in Aden.

Rising oil prices have given the Houthi leadership and its backers in Iran more cause to block an overarching solution in Yemen. As another Yemeni last week observed, the seas around the country's coast are the main route for energy exportation to Europe and the Houthis are trying to take advantage of this vantage point.

Escalation along that route is obviously something that European countries are very alert to, and the regimes hostile to the West are just as alert to the advantages of disruption of those corridors.

Iranian efforts to have another coast to launch attacks on the tanker lanes to Europe are holding Yemen hostage. This, for the Iranian leadership, is a potential pinch point that would allow Tehran to exercise pressure through escalation.

At a time when Iran's internal dynamic is one of siege by the opposition demonstrations, this gives Tehran an external card to play to ensure that the international community does not support the regime's opponents.

For the wartime administration in Yemen, this is a dire squeeze. This is particularly as the people who have fled the oppressive situation in Sanaa or the hardships across the frontlines wait for a return to their properties or towns in dire straits.

"On top of our own population, we have more than 3 million refugees from the north and we have more than a million that have come from Africa," said the STC representative. "Although there is pressure on our resources, the aid that is given by the international community is given to refugees. Whereas our own people who are suffering from this extra pressure are not getting anything."

A report published last week by the Italian Institute for International Political Studies drew interesting parallels between the situation in Yemen and the effects of stalemate in Libya, and how the energy economy played into the conflict's power balance there.

"In Yemen, the Houthis collect illegal fees and levies especially from oil and communications, also confiscating the assets and funds of individuals and entities," it noted. "In 2020-21, however, most of the Houthis' fuel income 'likely came from their control of the supply chain and sales via the Yemen Petroleum Corporation and the parallel market'."

The report also noted how the areas of Yemen that are oil hubs, while never unimportant, are now prized as revenue hubs in a way that was less so before. "Together with the import of oil derivatives, the export of crude oil represents the largest source of potential revenue for armed groups in Yemen," the report said.

Take that to the next level and there is the trap that Yemen can't currently escape. That of the families and extended social networks that are now bound up in a decade of fighting for local and national control.

Alistair Burt, the former UK minister of state for the Middle East and North Africa, put it well at an event organised by the Royal United Services last week.

"The benefits of war are evident to a man who has a gun and controls the checkpoint and can extract taxes and has more power over people that perhaps he's ever had in his life," Mr. Burt said. "So what is the incentive to that individual to bring an end to it? Where's the incentive to those holding the guns to stop the conflict?"

Where indeed, when the people of Yemen have been so badly let down by UN diplomacy, is the hope for viable solution.

Source: The National News

Risk Warnings and Disclaimers

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Winkelmann

Forex

Although the Fed may slow down the pace of interest rate hikes, the Fed has no intention of changing its hawkish stance yet, which still has strong support for the dollar. Meanwhile, even if the dollar has topped out, it is unlikely to keep moving lower for some time to come, and there is room for other currencies to bottom out and adjust repeatedly.

Of late, expectations of the Fed slowing the pace of interest rate hikes have been rising, with market trading biased towards the view that the Fed's tightening cycle is drawing to a close. The dollar saw a massive sell-off, but Fed officials are still busy releasing hawkish signals of continued rate hikes, repeatedly reiterating their determination to fight inflation and suggesting that the peak in interest rates will be higher than expected, which is still somewhat supportive of the dollar. In addition, news related to the geopolitical situation and fears of a global economic recession has added to the dollar's safe-haven appeal.

With interest rates rising further, the magnitude of the inverted yield curve continues to expand to the largest in four decades, and the risk of economic recession continues to rise. Even if the Fed continues to raise interest rates, it will consider the accumulated negative impact of rate hikes, and U.S. employment data and declining inflation are undoubtedly critical. This week will also see the release of the ADP employment number, the non-farm payroll report for November and personal consumption expenditures (PCE), etc. The market expects these data to be lower than the previous value, which may limit the dollar's further gains.

In the outlook for this week, investors should continue to pay attention to the speeches of Fed officials, especially in the "quiet period" before the interest rate meeting in December. Powell will also make a public appearance, and if he does not prevent the easing expectations of the recent financial market environment, the dollar could decline further.

The dollar has fallen sharply in the last two months and the "great top” may have passed. However, the closer the dollar gets to turning, the more volatile it may become. As the pace of Fed rate hikes remains greater than that of other central banks and the U.S. economy is rather resilient, the appeal of the dollar remains strong. Although it is difficult for dollar bulls to regain lost ground in the short term, the possibility that the dollar will surge higher again in the future cannot be ruled out before the inflection point of interest rate hikes arrives.

EURUSD

The dollar's recent weakness has played a key role in the euro's recovery as expectations of slowing U.S. inflation and policy shifts have risen. The dollar gained a slight "respite" last week due to relatively calm trading over the Thanksgiving holiday.

Nevertheless, inflation in the eurozone may not have peaked yet. It is expected that the preliminary value of Eurozone inflation for November, to be released on Wednesday, will show that price pressures in the Eurozone remain strong. The market believes that there is an 80% chance that the ECB will raise rates by another 75 basis points in December, and that the Fed may now be ready to slow the pace of rate hikes. However, the ECB is not yet ready, and the sporadic aggressiveness of monetary policy is one of the main reasons supporting the recent strength of the euro.

It is worth reminding that this week's speech by Christine Lagarde, President of the ECB, may release more forward-looking signals about the December meeting. While the ECB plans to raise interest rates further, it also acknowledges that the risk of an economic recession is still growing. Hit hard by soaring energy prices and supply chain disruptions, the Eurozone Manufacturing PMI arrives at 47.3 in November, below the boom-or-bust line for five consecutive months, dragging the overall economy down. This week the Eurozone will release the November economic sentiment index and the October unemployment rate, which are expected to remain low. If the economy continues to be weak, the appreciation trend of the euro may not be too smooth.

In the technical graph, the EURUSD continues its oscillation and breaks the level to the upside. It may continue its rally in the short term, with upper targets around 1.06 and 1.08; if the price retraces, watch for support around 1.0365 and 1.0240.

GBPUSD

Similar to the euro, the pound received a significant boost from a weaker dollar. Despite the weakening economic outlook, the U.K. job market continues to tighten, with the unemployment rate falling to 3.5% in the three months from June to August, the lowest level since 1974. And CPI rose 11.1% year-on-year in October, rising to a new 41-year high. Against the current backdrop of continued high inflation, the pace of interest rate hikes by the Bank of England is hard to change in the short term.

Earlier the UK government also announced new fiscal austerity measures. Compared to economic growth, the government still considers curbing inflation as its primary goal at the moment. The pound remains bullish in the short term.

Looking at the technical graphs, GBPUSD's gains are slightly weaker than EURUSD's, and there is still some room for upside in the short term. However, with the indicator RSI approaching overbought territory, the risk of a retracement after overbought needs to be borne in mind. Also, watch for resistance above around 1.2300, and previous resistance below of around 1.182 and 1.20 converted to support.

AUDUSD

In addition to expectations of a slowdown in interest rate hikes by the Fed, the Australian dollar, a commodity currency, has also been significantly impacted by the volatility of commodity prices. According to reports, confirmed cases of COVID-19 in China rose to 29,754 cases in a single day, reaching the highest level since the outbreak of the pandemic. As a result, there are fears that measures of blockade may be taken again, exacerbating the risk of a global recession, dragging down commodity demand, and making crude oil, copper, and other commodity prices be affected. Also, the blockade restricts trade between China and Australia, which is not good for the Australian dollar.

The market is now paying increased attention to the pandemic in Asia, and investors should also need to pay attention to China's official PMI and the Caixin China General Manufacturing PMI for November, which will be released this week.

In the technical graph, the AUDUSD continues to oscillate upward. But the currency pair is under pressure in at 0.6800 in the short term, and its two upward rushes have failed; oscillation in the short term is biased to weak and there is room for a continued downside. Support below the AUDUSD is near 0.6675 and 0.6600. However, a successful break above 0.6800 would add the currency pair's further upside momentum, with upper targets pointing to 0.6880 and 0.7000.

USDJPY

The latest expectations of the Fed's aggressive interest rate hike are obviously loosening, making the dollar fall sharply. Meanwhile, because of the power of the Japanese government intervention, the USDJPY also turns down, with the current round of yen depreciation trend may have temporarily ended.

Earlier data shows that core consumer prices in Tokyo rose to a 40-year high in November year-on-year and were above the central bank's 2% target for the sixth consecutive month, showing signs of expanding inflationary pressures. This also makes the yen's recent strength extremely solid, and even though the dollar repeatedly pulled up, the yen remained stable.

The technical graph shows that the medium to long-term trend of USDJPY may have reversed and that going short at highs is the best option. Last week the currency pair rebounded but with limited space, only rising to 142.0 before turning down, and has now fallen below support near 139.0, opening new downside with targets below once at 135.0 and near 132.0.

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Kevin Du

Cryptocurrency

The epic collapse of wunderkind Sam Bankman-Fried's $32bn (£27bn) crypto empire, FTX, looks set to go down as one of the great financial debacles of all time. With a storyline full of celebrities, politicians, sex and drugs, the future looks bright for producers of feature films and documentaries. But, to paraphrase Mark Twain, rumours of the death of crypto itself have been much exaggerated.

True, the loss of confidence in "exchanges" such as FTX – essentially crypto financial intermediaries – almost surely means a sustained steep drop in prices for the underlying assets. The vast majority of bitcoin transactions are done "off-chain" in exchanges, not in the bitcoin blockchain itself. These financial intermediaries are vastly more convenient, require much less sophistication to use and do not waste nearly as much energy.

The emergence of exchanges was a major factor fuelling cryptocurrencies' price growth and if regulators come down hard on them, the price of the underlying tokens will fall. Accordingly, bitcoin and ethereum prices have plummeted.

But a price adjustment alone is not the end of the world. The pertinent question is whether crypto lobbyists will be able to contain the damage. Until now, their money has been speaking volumes; Bankman-Fried reportedly gave $40m to support the Democrats in the US, and his FTX colleague Ryan Salame reportedly gave $23m to Republicans. Such largesse surely helped persuade regulators around the world to follow a wait-and-see approach to crypto regulation, rather than be perceived to be stifling innovation. Well, they waited, and with the FTX crash, we must hope that they saw.

But what will they conclude? The most likely path is to improve regulation of the centralised exchanges – the firms that help individuals store and trade cryptocurrencies "off chain". The fact that a multibillion-dollar financial intermediary was not subject to normal record-keeping requirements is stupefying, no matter what one thinks about the future of crypto.

Firms would face compliance costs, but effective regulation could restore confidence, benefiting firms aiming to operate honestly, which are surely the majority, at least if one weights these exchanges by size. Greater confidence in the remaining exchanges could even lead to higher crypto prices, though much would depend on the extent to which regulatory demands, particularly on individual identities, ultimately undermined demand. After all, the major transactions currently conducted with crypto may be remittances from rich countries to developing economies and emerging markets, and capital flight in the other direction. In both cases, the parties' desire to avoid exchange controls and taxes implies a premium on anonymity.

On the other hand, Vitalik Buterin, the co-founder of the ethereum blockchain and one of the crypto industry's most influential thinkers, has argued that the real lesson of FTX's collapse is that crypto needs to return to its decentralised roots. Centralised exchanges such as FTX make holding and trading cryptocurrencies much more convenient, but at the expense of opening the door to managerial corruption, just as in any conventional financial firm. Decentralisation can mean greater vulnerability to attack, but so far the largest cryptocurrencies, such as bitcoin and ethereum, have proven resilient.

The problem with having only decentralised exchanges is their inefficiency compared with, say, Visa and Mastercard, or normal bank transactions in advanced economies. Centralised exchanges such as FTX democratised the crypto domain, allowing ordinary people without technical skill to invest and conduct transactions. It is certainly possible that ways to duplicate the speed and cost advantages of centralised exchanges eventually will be found. But this seems unlikely in the foreseeable future, making it hard to see why anyone not engaged in tax and regulatory evasion (not to mention crime) would use crypto, a point I have long emphasised.

Perhaps regulators should push toward decentralised equilibrium by requiring that exchanges know the identity of anyone with whom they transact, including on the blockchain. Although this may sound innocent, it would make it rather difficult to trade on the anonymous blockchain on behalf of an exchange's customers.

True, there are alternatives involving "chain analysis", whereby transactions in and out of a bitcoin wallet (account) can be algorithmically examined, allowing the underlying identity to be revealed in some cases. But if this approach was always enough, and all semblance of anonymity could always be obliterated, it is hard to see how crypto could compete with more efficient financial intermediation options.

Finally, rather than simply banning crypto intermediaries, many countries may ultimately try to ban all crypto transactions, as China and a handful of developing economies have already done. Making it illegal to transact in bitcoin, ethereum and most other crypto would not stop everyone, but it would certainly constrain the system. Just because China was among the first does not make the strategy wrong, especially if one suspects that the main transactions relate to tax evasion and crime, akin to large denomination paper currency notes such as the $100 bill.

Eventually, many other countries are likely to follow China's lead. But it is unlikely that the most important player, the US, with its weak and fragmented crypto regulation, will undertake a bold strategy any time soon. FTX may be the biggest scandal in crypto so far; sadly, it is unlikely to be the last.

Source: The Guardian

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King Ten

Economic

It Is Only a Prelude to a Global Recession

The yield on the two-year and ten-year US Treasury inverted by 80bps, having been the worst period since February 1982. The inverted yield curve is the best leading indicator of recession over the past 50 years. Its trend has successfully echoed the global economic crises of 1980-1982, 1990-1991, 2000, and 2008, of which two severe crises, 1980-1982 and 2008, pierced the real estate bubbles in Europe and the United States. Unfortunately, this indicator is now giving another warning sign. History does rhyme: the world began to raise interest rates aggressively at the beginning of this year. Coupled with the intensification of geopolitical contradictions, the recession will be inevitable, but the severity is not yet known. However, as the lagging nature of monetary policy, the significant adverse impacts of increasing rates haven’t kicked in right now, perhaps when spring blossoms next year.

Can China Excel In the Global Recession?_1

Will China Be the Rescuer For the Economic Crisis?

In 2007, the U.S. economy suffered a serious illness because of the subprime mortgage crisis. However, China took its medicine. With the wise response of the Chinese government, spending 4 trillion yuan on infrastructure development, they effectively defused the severe global economic crisis in 2008 as a result. In the same way, if COVID-19 in 2020 is also a crisis, then it is the main pathogen of China's current economy. On the contrary, the United States and even the rest of the world have taken medicine this time. With bottomless quantitative easing and exports to China, they have also cured economic diseases. What about the current recession triggered by rising global interest rates? Will China be the Rescuer for the world?

More economists have voiced recently that China is the only one who can save the world from the global crisis, including Stephen Roach, who is the former chief economist at Morgan Stanley and senior researcher at Yale University. He believes that inflation will result in a pullback in spending that will likely affect the whole economy. And the growth and resilience of the Chinese economy may be the only factor preventing the world economy from sliding into a global recession. Meanwhile, Robin Brooks, chief economist of the Institute of International Finance (IIF), and Jonathan Fortun, an economist at IIF, also pointed out in a report that the future impact of the global economy mainly depends on the trajectory of the Russia-Ukraine conflict, which is expected to last into 2024. In 2023, the Eurozone economy is predicted to shrink by 2% and China will be the most powerful driving force of the whole economy.

Can China Excel In a Global Recession?

According to the report from two days ago, turkey prices in the United States have risen 20% year-on-year, which soared by 40% compared to 2020. And a survey reveals that 70% of Americans admit to spending less this Thanksgiving. In addition, surging prices of oil, heating bills, and rents have also severely shrunk the daily expenses of the American people. In order to reduce expenditure, more civilians choose public transportation and home cooking.

If the United States is in the prelude to a recession, then China may already be at the end of this recession cycle. As the current situation in the United States is getting even worse, while China has already experienced it in the second year of the pandemic. The high-speed rail station, which was once bustling, is now empty. And sparse passers-by and numerous closed shops have replaced the previously lively streets. Fears of the epidemic hovered in everybody's minds, distracting them from running their businesses. In addition, the recurrence of the epidemic this year has also dragged down the economy of China. If this continues, kinds of problems and risks will be exacerbated. After all, the economy is not just simple strings of numbers, 70% of China's wealth is in the house, and behind it is the fate and livelihood of countless people. We need to believe that glimmers of hope amid the gloom will soon be discerned.

It's time for China to exert all energies for the economy, rather than doubt its ability. China has always stored enough capacity to grow. Firstly, China has institutional superiority, you can feel the so-called “Chinese speed” in China. Secondly, China has an extremely comprehensive industrial chain and a completely stable environment that can hardly be affected by geopolitical crises. Finally, Chinese people have the qualities of industry and innovation, and the pursuit of a growing material culture is the greatest driving force for development. What's more, none of this has changed now.

In the 3 years of the pandemic, most countries have basically returned to normal, and the recovery of China is just a matter of time. If China's economy can get rid of COVID-19 gradually, the economic growth rate is expected to reach 3.5% this year and may exceed 5% next year, as predicted by the adviser of the People's Bank of China recently. From the latest measures unveiled by the Chinese government, including " 20 Measures to Guide Easing Covid Policy" and "16 Articles for Real Estate Finance", perhaps China can give the world encouraging data next year.

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