Monday's Markets Update (August 14,2023)

15 Aug 2023 by rate3

On Monday, Nasdaq was boosted by technicals, helped by a jump in shares of Nvidia and joined by other megacap stocks, including Alphabet and Amazon. Nonetheless, BTC continued its bearish side-move. Other news: Coinbase launched a grassroots movement. The Japanese economy grew faster than expected. The libertarian candidate who seeks to abolish the Central Banks is leading in the Argentinian presidential election.

Crypto

Coinbase launches Stand With Crypto Alliance to counter anti-crypto legislation and foster grassroots movement.
Comment

This initiative is highly important. We definitely need a grassroots movement to influence politicians whose position on crypto is simply unacceptable and harms the country's future and its competitive stance on the world stage.

According to a recent survey, 63% of Americans believe that cryptocurrency is a legitimate investment, and 55% believe that it has the potential to revolutionize the financial system. However, many politicians remain skeptical of cryptocurrency, and some have even proposed legislation that would ban it outright. This is despite the fact that cryptocurrency has the potential to create jobs, boost economic growth, and make the financial system more efficient.

A grassroots movement could help to educate politicians about the benefits of cryptocurrency and persuade them to adopt more supportive policies. It could also help to build public support for cryptocurrency and make it more difficult for politicians to ban it.

In addition to the survey data, here are some other reasons why a grassroots movement is needed to support cryptocurrency:

Cryptocurrencies are becoming increasingly popular around the world. According to Statista, the number of cryptocurrency users worldwide reached ~100 million in 2022-23.
Cryptocurrencies have the potential to disrupt the traditional financial system. For example, they could make it easier for people to send and receive money internationally, and they could reduce the need for banks.
Cryptocurrencies could create new jobs and boost economic growth. For example, they could create jobs in the mining, trading, and development of cryptocurrencies.
Macroeconomics

The Japanese economy grew at a faster-than-expected pace of 1.5% in the second quarter of 2023, led by a rebound in exports and a decline in imports. This was the second straight quarter of expansion and the fastest pace since the fourth quarter of 2020.

Comment

Fed monetary policy is misguided and counterproductive. The Japanese government kept interest rates low, allowing businesses to access credit more easily. In contrast, bankers all over the World are blindly following the Fed's lead, raising interest rates, which is making the inflation problem worse, by not allowing businesses to re-adjust and to start cutting production costs.

According to the Bank of Japan, the average lending rate for small businesses in Japan was 0.9% in June 2023. This is significantly lower than the average lending rate for small businesses in the United States, which was 4.7% in June 2023. The lower interest rates in Japan made it easier for businesses to borrow money to increase goods export.

The Fed's monetary policy is based on the assumption that raising interest rates will cool the economy and bring down inflation. However, this assumption is based on the outdated notion that inflation is caused by too much money chasing too few goods. In reality, inflation is caused by a variety of factors, including supply chain disruptions, the war in Ukraine, and rising energy prices. Raising interest rates will not address these underlying causes of inflation, and it is likely to make the problem worse.

The Argentine central bank raised its key interest rate to 118% in an emergency move on August 14th, as financial markets reacted to Javier Milei's surprise victory in the primary election. Milei is a far-right politician who opposes the central bank and his victory spooked investors.

Comment

There is a growing discontent with old, unqualified, and arrogant central bankers and the atrocious totalitarian financial system they have imposed on us all over the world. In Argentina, people made this clear by supporting a libertarian candidate who proposes, among other things:

Shuttering the Central Bank: Javier Milei believes that the Central Bank is the root of Argentina's economic problems. He has proposed shuttering the Central Bank and replacing it with a free market system.
Cutting taxes: Milei believes that taxes are too high in Argentina and that they stifle economic growth. He has proposed cutting taxes across the board, including income taxes, corporate taxes, and sales taxes.
Reducing government spending: Milei believes that the government spends too much money and that this is a major cause of Argentina's economic problems. He has proposed reducing government spending by 50%.
These proposals are exactly what we need all over the world right now. We need to get rid of bureaucratic red tape, allow free market forces to work properly, and abolish the central banking system, which constrains our basic freedoms and prevents economic growth.

Currencies

The offshore yuan depreciated to 7.30 per dollar, its weakest level in over nine months, as disappointing economic data and another interest rate cut weighed on the currency. The PBoC lowered its one-year MLF rate by 15 basis points to 2.5%, while new bank loans in China tumbled 89% in July.

The Chinese economy grew by 0.4% in the second quarter of 2023, the slowest pace in over two years. The unemployment rate in China rose to 5.5% in July, the highest level since February 2020. The value of the Chinese yuan has fallen by more than 5% against the US dollar in the past year.

Comment

The Chinese government is trying to alleviate the consequences of a prolonged lockdown, which put millions of people out of work and had a devastating impact on the Chinese economy. In an effort to stimulate growth, the Chinese central bank has maintained a very low interest rate, even as inflation has risen in other parts of the world. However, the Chinese economy is still struggling, as the US economy, a major Chinese export market, has slowed down.