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Monday 12.12.2016

Blockchain Lures Central Banks as Danes Consider Minting E-Krone

There’s a growing number of central banks questioning the point of printing paper money. In Denmark, the wardens of cash are now looking into producing a virtual currency instead, which they predict will make crime harder and oversight easier. The Danes aren’t alone. Britain and Sweden are blazing a trail in Europe. Singapore and Canada have already tested blockchain-based currency systems for Internet payments.

Governor Lars Rohde, whose job as of 2017 will no longer include overseeing a cash printing press in Copenhagen, says pros include lower transaction costs. But the risks are considerable. It’s uncharted territory, and the potential unintended consequences have the scope to upend the economy.

The Danish central bank will outsource its cash production from 2017. Finland will mint the coins but a decision has yet to be made on who will print Denmark’s bank notes. Though cash won’t completely disappear, Denmark is exploring cheaper and more efficient alternatives. The central bank estimates that the total cost to society of using paper money is at least double that of relying on credit and debit cards.

At this point, the challenges of developing an electronic currency aren’t technological. “We’re not preoccupied with the technology, because we know that issue well,” Rohde said in a Dec. 5 interview in the Danish capital. Cash is only used in about 20 percent of Danish transactions. What’s more, it represents less than one-third of the money supply and therefore can’t be considered a safety net should the electronic payments system stop functioning.

Inflation-hit Venezuela to pull largest bill from circulation

Venezuela, mired in an economic crisis and facing the world's highest inflation, will pull its largest bill, worth two U.S. cents on the black market, from circulation this week ahead of introducing new higher-value notes, President Nicolas Maduro said on Sunday.

The surprise move, announced by Maduro during an hours-long speech, is likely to worsen a cash crunch in Venezuela. Maduro said the 100-bolivar bill will be taken out of circulation on Wednesday and Venezuelans will have 10 days after that to exchange those notes at the central bank.

Critics slammed the move, which Maduro said was needed to combat contraband of the bills at the volatile Colombia-Venezuela border, as economically nonsensical, adding there would be no way to swap all the 100-bolivar bills in circulation in the time the president has allotted.

Central bank data showed that in November, there were more than six billion 100-bolivar bills in circulation, 48 percent of all bills and coins. Authorities on Thursday are due to start releasing six new notes and three new coins, the largest of which will be worth 20,000 bolivars, less than US$5 on the streets.

Will Amazon Go replace jobs? 'I don't think we can stop it,' author says

Amazon's new concept convenience store doesn't just save money, it saves shoppers' time. That, however, is part of what makes the rise of the robots unstoppable, one expert said.

At a time when a growing number of observers have lamented the potential impact of growing automation on flesh and bone workers, the retail giant introduced something that may be a game-changer. On Monday, Amazon announced a new Seattle location, Amazon Go, that has no registers.

Instead, shoppers scan into the store with their free Amazon Go app, shop as normal, and leave the store with the items billed to their Amazon.com account. "With Amazon, it's not just about reducing labor costs at all — they've come up with something disruptive," Martin Ford told CNBC's "Power Lunch" this week.

"I don't think there is anyone that doesn't hate standing in line at a retail store, and they've figured out a way to basically get rid of those lines," he said. "So this is something that is not just about eliminating jobs, it's going to create enormous advantages for consumers. So it's an inevitable process."

Breaking down Trump's impact on Wall Street

Central Bank Gold Demand Could Accelerate on Growing Federal Debt

Inflation can be understood as the destruction of a currency’s purchasing power. To combat this, investors, central banks and families have historically stored a portion of their wealth in gold. I call this the Fear Trade.

The Fear Trade continues to be a rational strategy. Since President-elect Donald Trump’s surprise win a month ago, the Turkish lira has plunged against the strengthening U.S. dollar, prompting President Recep Erdogan to urge businesses, citizens and institutions to convert all foreign exchange into either the lira or gold. Most obliged out of patriotism, including the Borsa Istanbul, Turkey’s stock exchange, and the move has helped support the currency from falling further.

Venezuela, meanwhile, has dire inflationary problems of its own. Out-of-control socialism has led to an extreme case of “demand-pull inflation,” economists’ term for when demand far outpaces supply. Indeed, the South American country’s food and medicine crisis has only worsened since Hugo Chavez’s autocratic regime and the collapse in oil prices. The bolivar is now so worthless; many shopkeepers don’t even bother counting it, as Bloomberg reports. Instead, they literally weigh bricks of bolivar notes on scales.

“I feel like Pablo Escobar,” one Venezuelan bakery owner joked, referring to the notorious Colombian drug lord, as he surveyed his trash bags brimming with worthless paper money. Because hyperinflation has destroyed the bolivar, the ailing South American country sold as much as 25 percent of its gold reserves in the first half of 2016 just to make its debt payments. Venezuela’s official holdings now stand at a record low of $7.5 billion.

Iran and Boeing Sign $16.6 Billion Deal on Sale of 80 Aircraft

Iran and Boeing signed a deal for the sale of 80 airplanes on Sunday, five weeks before the inauguration of President-elect Donald J. Trump, whose Republican supporters in Congress have tried to block any aircraft sales to Iran.

Iran’s national airline, Iran Air, said that it had signed an agreement with Boeing, an American manufacturer, to purchase the aircraft, at a total cost of $16.6 billion.

In September, the Treasury Department gave approval for Boeing and its European competitor, Airbus, to sell planes to Iran. Boeing confirmed the deal, saying that the contract was reached within the terms of the government license that the department had issued.

The sale includes 50 twin-jet, narrow-body 737 planes and 30 long-range, wide-body 777 aircraft. The first airplanes are scheduled for delivery in 2018, with the entire order being fulfilled over 10 years.

Larry Kudlow: Trump to End Obama's 'War Against Business'

Veteran financial guru Larry Kudlow, who served as the Donald Trump campaign's senior economic adviser, predicts to Newsmax TV that President-elect Donald Trump is assembling the type of cabinet “to end the White House war against business that we've experienced under the Obama administration.”

“There has been a war against business from day one and that is going to end,” Kudlow told Steve Malzberg on “America Talks Live.” “I think Trump's Cabinet picks have been very good and very skillful,” said Kudlow, a Newsmax Finance Insider, radio talk-show host and CNBC senior contributor.

Kudlow deflected criticism that there are too many millionaires and billionaires being appointed to Trump’s Cabinet. “I just think it's nonsense. I mean I like people with success, Trump likes people who have success,” said Kudlow — host of "The Larry Kudlow Show" and author of "JFK and the Reagan Revolution: A Secret History of American Prosperity," written with Brian Domitrovic and published by Portfolio.

“They will serve the country well,” Kudlow said of Trump’s picks so far. In fact, wealthy appointees may actually be more trustworthy, said Kudlow, who was a key architect of Trump’s tax platform and has served as an informal adviser to the President-elect.

IMF's Christine Lagarde 'confident' as trial begins

The International Monetary Fund’s managing director Christine Lagarde said she was confident she had done nothing wrong on the eve of a court hearing about a state payout in 2008 to a French businessman.

Lagarde is due to stand trial on Monday over her role in a €400m (£335m) payment to Bernard Tapie when she was France’s finance minister in the government of former conservative president Nicolas Sarkozy.

Lagarde is accused of negligence leading to misuse of public funds by improperly approving a decision to allow an out-of-court arbitration in the dispute with Sarkozy supporter Tapie.

She could face up to a year in jail and a fine of €15,000 if convicted. A guilty verdict would risk plunging the IMF into a new leadership crisis; Lagarde took over in 2011 when Dominique Strauss-Kahn quit amid a sex scandal. “Negligence is a non-intentional offence. I think we are all a bit negligent sometimes in our life. I have done my job as well as I could, within the limits of what I knew,” she said on France 2 television.

Sears Canada takes gamble on groceries as losses more than double

Sears Canada, which has been struggling with store closures and sagging sales, said Friday it will venture into the grocery business in an effort to lure shoppers.

The Toronto-based retailer said it has signed a partnership with two specialty supermarket operators to run food markets at some of its revamped locations.

The company declined to provide further details. But executive chairman Brandon G. Stranzl said he is confident the agreement will bring customers to Sears more frequently.

“A grocery store, you might go to two or three times a week,” Stranzl said in an interview. “A department store you might go to once a month ... once a quarter or something.” The announcement came as Sears Canada reported its third-quarter loss more than doubled from the same time last year. “We’re not, obviously, happy with where the business is financially,” Stranzl said.

Gregory Mannarino-They Can't Have Real Money Competing with Fake Money

Is A Recession Coming? Trump's Economic Plans Could Clash With The Fed's, With Drastic Consequences

Among Donald Trump’s plans for boosting the American economy are, according to most economists, textbook responses to a recession: a tax cut (mostly for the wealthy), a $1 trillion stimulus package and a surge in defense spending. The only problem is that we’re no longer in one, so deploying such measures at this time could be not just counterproductive, but disasterous, some experts say.

Coupled with the Federal Reserve’s likely decision on Dec. 14 to raise the interest rate—a form of contractionary monetary policy that pushes up other interest rates, like those of auto loans and credit card debt, and is meant to rein in inflation and prevent economic instability—Trump’s proposals, many worry, could throw the U.S. economy into a new crisis.

The Fed has said it would wait to increase its target for the federal funds rate until the economy has sufficiently picked up steam, delaying the hike in both September and November on account of inflation stubbornly staying below 2 percent and only moderate job growth. The central bank uses the interest rate as a monetary policy tool by lowering it to encourage more borrowing and investment in times of recession and raising it to inspire more savings while the economy is booming.

Since the recession, the Fed has kept it at or near zero as part of America's economic recovery effort, but on Dec. 14, the Fed is expected to begin a series of incremental federal funds rate increases with mild impacts on the economy. If Trump has his way, however, those hikes could, by necessity, be far from incremental.

New Evidence: Obamacare Is Not Saving Lives

Proponents of the health reform law that became known as the Affordable Care Act (ACA) often argued that thousands of Americans were dying every year because of a lack of health insurance, and passing the proposed law would save thousands of lives every year. Opponents disputed those claims, and suggested that the law would not save lives, and would instead make people worse off and might even cost lives.

Now, new data shows that a U.S. life expectancy dropped in 2015 – a year after the major provisions of the ACA went into effect – and for the first time since 1993, when the drop was attributed to the AIDS epidemic, a flu outbreak, and an spike in homicide rates. While the relationship between health insurance and mortality might still be debated – and it is certainly too early to say that the ACA is as bad as the AIDS epidemic – one thing is clear: There is no evidence that the ACA is, on net, saving lives.

In 2009, during the run-up to the passage of a health care reform bill, Rep. Bill Pascrell (N-NJ) claimed on the House Floor that “as many as 22,000 Americans die each year because they don’t have health insurance.” A few months later, prior to the Senate vote on what became the Affordable Care Act (ACA), then-Majority Leader Harry Reid (D-NV) upped the ante, claiming that, “45,000 times this year – nearly 900 times every week, more than 120 times a day, on average every 10 minutes, without end – an American died as a direct result of not having health insurance.”

Both of these claims were based on academic or think-tank studies, which had previously been called into question on methodological grounds by Richard Kronick, then an academic and former Clinton-administration official, who was serving in the Obama administration as a deputy assistant secretary of HHS at the time the ACA was passed. Kronick re-analyzed existing data and found that when controlling for initial health status, smoking status, and body mass index, there was no difference in mortality between those with employer-sponsored health insurance and those who were uninsured.

In Case You Missed It: The New Clinton Inc. Is Open For Business

It wasn’t until the day after the U.S. presidential election Mrs. Clinton appeared before the public to give her concession speech. Giving a concession speech the day after, rather than the night of, is quite the break of tradition. It may have been done before, but as far as recent memory serves, it hasn’t. (Too be clear, I’m speaking of when the candidate has already made “the call,” and conceded.)

During that speech I made the following observation to a colleague: “This looks more like a business PR rollout than a concession speech.”

It would appear that “observation” proved more exacting than even I first thought. And to add further weight, I’ll use Mrs. Clinton’s latest appearance, along with a few other tell-tale signs which, I believe, help bolster that argument.

With that said, let me just make clear: This is all conjecture on my part. I’m looking at this purely through a business perspective, which intrigues me, just as I did previous. The political side, or implications is for others to discuss, or discern.

Ron Paul on Trump-Carrier deal, Jim Rickards on the Trump economy

Trump's election is causing extreme swings in the US economy

After the election of Donald Trump, it appears that various measures of the US economy — from consumer confidence to bond markets to inflation expectations — have zoomed in extreme directions.

The latest example of these extreme reactions in the US economy came from Friday's University of Michigan consumer confidence survey. While the index jumped to the highest level in almost two years, it also showed that the mood of the country is extremely bifurcated.

From Richard Curtin, the chief economist of the UMich Survey, in the release: "When asked what news they had heard of recent economic developments, more consumers spontaneously mentioned the expected positive impact of new economic policies than ever before recorded in the long history of the surveys. To be sure, an equal number volunteered negative judgments about prospective economic policies, but the frequency of those negative references was less than half its prior peak levels whereas positive references were about twice its prior peak."

Put another way, although an equal number of people were optimistic as pessimistic, the rate of positive responses was around twice as high as the previous record. Also of interest, the groups that were the most negative on the new economic policies were those with college degrees and people living in the Northeast, both demographics that exit polls show voted more for Hillary Clinton.

EU: Central Bank Will Continue Quantitative Easing Next Year

The European Central Bank (ECB) announced on Dec. 8 that it would extend its bond-buying program through December 2017 rather than end it in March as it originally intended. Starting in April, however, the bank will decrease its bond purchases from 80 billion euros ($85 billion) a month to 60 billion euros a month. The bank also announced it would keep its benchmark interest rate at zero.

The bank's governing council said in a press release that the bond-buying program, known as quantitative easing, could be extended again if necessary. The institution also said it may expand the size of the program at any time if the eurozone's financial outlook worsened. After the announcement, ECB President Mario Draghi said the bank would change how it buys bonds. Currently, the bank focuses on buying riskier bonds. But under the new strategy, it could start buying bonds issued by European countries with yields less than the ECB's deposit rate (now at -0.4 percent), such as German short-term debt.

The ECB began its quantitative easing program in March 2015, initially spending 60 billion euros a month and later increasing its purchases to 80 billion euros a month. But the program is controversial: Some European governments believe it is key to supporting the eurozone's fragile economic recovery, while others (Germany in particular) believe it unfairly burdens German savers.

The dispute plays into the ongoing conflict between Northern and Southern European countries. Indebted Southern European states have benefited from the ECB's monetary policies, but some of their northern counterparts have criticized it, wary of what they perceive to be a wealth transfer mechanism. With the most recent announcement, the ECB seems to be trying to appeal to both regions by continuing the program while scaling down its purchases.

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