In case the U.S. economy wasn't hurting enough already, the Federal Reserve has a message for Americans: It's about to get much more painful.

Fed Chair Jerome Powell made that amply clear this week when the central bank projected its benchmark rate hitting 4.4% by the end of the year — even if it causes a recession.

"There will very likely be some softening of labor market conditions," Powell said on Wednesday. "We will keep at it until we are confident the job is done."

In plain English, that means unemployment. The Fed forecasts the unemployment rate to rise to 4.4% next year, from 3.7% today — a number that implies an additional 1.2 million people losing their jobs.

"I wish there were a painless way to do that," Powell said. "There isn't."

Hurt so good?

Here's the idea behind why boosting the nation's unemployment could cool inflation. With an additional million or two people out of work, the newly unemployed and their families would sharply cut back on spending, while for most people who are still working, wage growth would flatline. When companies assume their labor costs are unlikely to rise, the theory goes, they will stop hiking prices. That, in turn, slows the growth in prices. 

But some economists question whether crushing the job market is necessary to bring inflation to heel.

"The Fed clearly wants the labor market to weaken quite sharply. What's not clear to us is why," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a report. He predicted that inflation is set to "plunge" next year as supply chains normalize.

The Fed fears a so-called wage-price spiral, in which workers demand higher pay to stay ahead of inflation and companies pass those higher wage costs on to consumers. But experts disagree that wages are the main driver of today's red-hot inflation. While worker pay has risen an average of 5.5% over the last year, it's been eclipsed by even higher price increases. At least half of today's inflation comes from supply-chain issues, noted former Fed economist Claudia Sahm in a tweet.

Sahm noted that lower-wage workers today have both benefitted the most from pay increases and been hurt the most by inflation — inflation driven by higher spending by wealthy households rather than people lower down the ladder.

Rising rates, falling jobs

While the exact relationship between wages and inflation remains under debate, economists are much clearer on how raising interest rates puts people out of work.

When rates rise, "Any consumer item that people take on debt to buy — whether that's automobiles or washing machines — gets more expensive," said Josh Bivens, research director at the Economic Policy Institute.

That means less work for the people making those cars and washing machines, and eventually, layoffs. Other parts of the economy sensitive to interest rates, such as construction, home sales and mortgage refinancing, also slow down, affecting employment in that sector.

In addition, people travel less, leading hotels to reduce staffing to account for lower occupancy rates. Businesses looking to expand — say, a coffee shop chain opening a new branch —  are more hesitant to do so when borrowing costs are high. And as people spend less on travel, dining out and entertainment, those hoteliers and restaurateurs will have fewer customers to serve and eventually cut back on staff.

"In the service economy, labor is the biggest component of your cost structure, so if you're looking to cut costs, that's where you'll look first," said Peter Boockvar, chief investment officer at the Bleakley Financial Group.

While in Boockvar's view hiking rates is needed, the Fed's tactics strike him as aggressive. "I just have a problem with the [Fed's] rapidity and scale," he said. "They're coming on so fast and strong, I'm just worried the economy and markets can't handle it."

Layoffs ahead

In the meantime, the Fed's existing rate hikes have put about 800,000 job losses in the pipeline, according to predictions from Oxford Economics.

"When we look at 2023, we see almost no net hiring in the first quarter and job losses of over 800,000 or 900,000 in the second and third quarter combined," said Nancy Vanden Houten, Oxford's lead U.S. economist.

Others predict an even harder landing, with Bank of America expecting a peak unemployment rate of 5.6% next year. That would put an additional 3.2 million people out of work above today's levels.

Some policy makers and economists have called out the Fed's aggressive rate hike plans, with Senator Elizabeth Warren saying they "would throw millions of Americans out of work" and Sahm calling them "inexcusable, bordering on dangerous."

Powell promised pain, and many are questioning just how much pain is necessary.

"Inflation will come down quite a bit faster if we actually hit a recession. But the cost of that is going to be much bigger," said Bivens said.

The danger, he added, is that the Fed has set off a runaway train. Once unemployment starts rising sharply, it's hard to make it stop. Rather than neatly halting at the 4.4% rate projected by Fed officials, the jobless numbers could easily keep rising.

"This idea that there's an inflation dial that the Fed can just haul on really hard and leave everything else untouched, that's a fallacy," Bivens said.

Instead of the soft landing for the economy the Fed says it's aiming for, Bivens added, "we are now pointing the plane at the ground pretty hard and hitting the accelerator."


https://www.cbsnews.com/news/fed-interest-rates-unemployment-inflation/

LONDON, Sept 23 (Reuters) - Global government bond losses are on course for the worst year since 1949 and investor sentiment has plummeted to its lowest since the financial crisis, BofA Global Research said in a note on Friday.

This year’s dramatic bond tumble threatens credit events and a potential liquidation of the world’s most crowded trades, including bets on the dollar that have taken the greenback to multi-year highs against other currencies and bets on U.S. technology stocks, the bank said.

Bond funds recorded outflows of $6.9 billion during the week to Wednesday, while $7.8 billion was removed from equity funds and investors plowed $30.3 billion into cash, BofA said in a research note citing EPFR data.

Investor sentiment is the worst it has been since the 2008 global financial crash, the note said.

U.S. markets appear set for another volatile day. Wall Street futures fell on Friday as investors fretted over the prospect of an economic downturn and a hit to corporate earnings from the U.S. Federal Reserve's aggressive policy tightening moves to quell inflation. The S&P 500 is down nearly 5% this month and approaching its mid-June bear market lows.

Treasury yields, which move inversely to bond prices, were again rising after hitting their highest level since 2011 on Thursday, with the U.S. benchmark 10-year yield recently around 3.76%.

The bond crash “threatens liquidation of (the) world's most crowded trades” including long dollar and long U.S. tech, BofA wrote.

BofA said investors faced more inflation, interest rates and recession shocks, adding a bond crash meant that a high in credit spreads and low in stocks had not yet been reached.

Aggressive rate hikes from major central banks to contain inflation, even as growth slows, has unnerved world markets and sparked a fresh surge in bond yields this week.



https://www.reuters.com/markets/europe/global-markets-flows-urgent-2022-09-23/

Would you run away to avoid conscription? What will be the effect on RF economy?

The United States may regard itself as a “leader of the free world,” but an index of development released in July 2022 places the country much farther down the list.

In its global rankings, the United Nations Office of Sustainable Development dropped the U.S. to 41st worldwide, down from its previous ranking of 32nd. Under this methodology – an expansive model of 17 categories, or “goals,” many of them focused on the environment and equity – the U.S. ranks between Cuba and Bulgaria. Both are widely regarded as developing countries.

The U.S. is also now considered a “flawed democracy,” according to The Economist’s democracy index.

As a political historian who studies U.S. institutional development, I recognize these dismal ratings as the inevitable result of two problems. Racism has cheated many Americans out of the health care, education, economic security and environment they deserve. At the same time, as threats to democracy become more serious, a devotion to “American exceptionalism” keeps the country from candid appraisals and course corrections.

‘The other America’

The Office of Sustainable Development’s rankings differ from more traditional development measures in that they are more focused on the experiences of ordinary people, including their ability to enjoy clean air and water, than the creation of wealth.

So while the gigantic size of the American economy counts in its scoring, so too does unequal access to the wealth it produces. When judged by accepted measures like the Gini coefficient, income inequality in the U.S. has risen markedly over the past 30 years. By the Organization for Economic Cooperation and Development’s measurement, the U.S. has the biggest wealth gap among G-7 nations.

These results reflect structural disparities in the United States, which are most pronounced for African Americans. Such differences have persisted well beyond the demise of chattel slavery and the repeal of Jim Crow laws.

Scholar W.E.B. Du Bois first exposed this kind of structural inequality in his 1899 analysis of Black life in the urban north, “The Philadelphia Negro.” Though he noted distinctions of affluence and status within Black society, Du Bois found the lives of African Americans to be a world apart from white residents: a “city within a city.” Du Bois traced the high rates of poverty, crime and illiteracy prevalent in Philadelphia’s Black community to discrimination, divestment and residential segregation – not to Black people’s degree of ambition or talent.

More than a half-century later, with characteristic eloquence, Martin Luther King Jr. similarly decried the persistence of the “other America,” one where “the buoyancy of hope” was transformed into “the fatigue of despair.”

To illustrate his point, King referred to many of the same factors studied by Du Bois: the condition of housing and household wealth, education, social mobility and literacy rates, health outcomes and employment. On all of these metrics, Black Americans fared worse than whites. But as King noted, “Many people of various backgrounds live in this other America.”

The benchmarks of development invoked by these men also featured prominently in the 1962 book “The Other America,” by political scientist Michael Harrington, founder of a group that eventually became the Democratic Socialists of America. Harrington’s work so unsettled President John F. Kennedy that it reportedly galvanized him into formulating a “war on poverty.”

Kennedy’s successor, Lyndon Johnson, waged this metaphorical war. But poverty bound to discrete places. Rural areas and segregated neighborhoods stayed poor well beyond mid-20th-century federal efforts.

In large part that is because federal efforts during that critical time accommodated rather than confronted the forces of racism, according to my research.

Across a number of policy domains, the sustained efforts of segregationist Democrats in Congress resulted in an incomplete and patchwork system of social policy. Democrats from the South cooperated with Republicans to doom to failure efforts to achieve universal health care or unionized workforces. Rejecting proposals for strong federal intervention, they left a checkered legacy of local funding for education and public health.

Today, many years later, the effects of a welfare state tailored to racism is evident — though perhaps less visibly so — in the inadequate health policies driving a shocking decline in average American life expectancy.

Declining democracy

There are other ways to measure a country’s level of development, and on some of them the U.S. fares better.

The U.S. currently ranks 21st on the United Nations Development Program’s index, which measures fewer factors than the sustainable development index. Good results in average income per person – $64,765 – and an average 13.7 years of schooling situate the United States squarely in the developed world.

Its ranking suffers, however, on appraisals that place greater weight on political systems.

The Economist’s democracy index now groups the U.S. among “flawed democracies,” with an overall score that ranks between Estonia and Chile. It falls short of being a top-rated “full democracy” in large part because of a fractured political culture. This growing divide is most apparent in the divergent paths between “red” and “blue” states.

Although the analysts from The Economist applaud the peaceful transfer of power in the face of an insurrection intended to disrupt it, their report laments that, according to a January 2022 poll, “only 55% of Americans believe that Mr. Biden legitimately won the 2020 election, despite no evidence of widespread voter fraud.”

Election denialism carries with it the threat that election officials in Republican-controlled jurisdictions will reject or alter vote tallies that do not favor the Republican Party in upcoming elections, further jeopardizing the score of the U.S. on the democracy index.

Red and blue America also differ on access to modern reproductive care for women. This hurts the U.S. gender equality rating, one aspect of the United Nations’ sustainable development index.

Since the Supreme Court overturned Roe v. Wade, Republican-controlled states have enacted or proposed grossly restrictive abortion laws, to the point of endangering a woman’s health.

I believe that, when paired with structural inequalities and fractured social policy, the dwindling Republican commitment to democracy lends weight to the classification of the U.S. as a developing country.

American exceptionalism

To address the poor showing of the United States on a variety of global surveys, one must also contend with the idea of American exceptionalism, a belief in American superiority over the rest of the world.

Both political parties have long promoted this belief, at home and abroad, but “exceptionalism” receives a more formal treatment from Republicans. It was the first line of the Republican Party’s national platform of 2016 and 2020 (“we believe in American exceptionalism”). And it served as the organizing principle behind Donald Trump’s vow to restore “patriotic education” to America’s schools.

In Florida, after lobbying by Republican Gov. Ron DeSantis, the state board of education in July 2022 approved standards rooted in American exceptionalism while barring instruction in critical race theory, an academic framework teaching the kind of structural racism Du Bois exposed long ago.

With a tendency to proclaim excellence rather than pursue it, the peddling of American exceptionalism encourages Americans to maintain a robust sense of national achievement – despite mounting evidence to the contrary.


https://theconversation.com/us-is-becoming-a-developing-country-on-global-rankings-that-measure-democracy-inequality-190486

In its global rankings, the United Nations Office of Sustainable Development dropped the U.S. to 41st worldwide, down from its previous ranking of 32nd.

The U.S. is also now considered a “flawed democracy,” according to The Economist’s democracy index.

Argentina’s central bank raised its benchmark interest rate Thursday in a bid to prop up its currency and curb inflation nearing 100%.

The central bank boosted its benchmark Leliq rate by 5.5 percentage points to 75%, according to an emailed statement. The move comes a day after data showed consumer prices jumped nearly 79% a year in August, the fastest pace in 30 years. It was the bank’s ninth rate hike this year.

The bank’s board of directors also added in the statement that it intends to reduce the level of short-term debt held by the central bank next year, but didn’t provide more specifics.

Earlier this week, central bank President Miguel Pesce and Economy Minister Sergio Massa affirmed, in a meeting with International Monetary Fund Managing Director Kristalina Georgieva their commitment to implement the country’s $44 billion deal with the IMF. A key element of the accord includes keeping interest rates above the rate of inflation.

What Bloomberg Economics Says

“The new rate hike catches up with the rise in current and expected inflation — but may not be sufficient to tame inflation or boost reserves. The substantial uncertainty on inflation and the persistent risk that the peso may soon see a sharper depreciation undermine the ability of the new rate to convince households to save or investors to have a position in pesos.”

—Adriana Dupita, Latin America economist

Economists surveyed by the central bank forecast inflation will accelerate to 95% by the end of the year.

Central banks across Latin America have raised rates this year to combat high inflation, but prices have continued to stay hot as high levels of all-cash workers and businesses make monetary policy less effective than in developed economies. Argentina’s central bank made incremental rate increases early in the year but over the past three months has ramped up its hikes, with a combined 23 percentage point increase since July.

Pesce and Massa face added pressure after they allowed a devalued exchange rate for the month of September for producers of soy — the nation’s biggest export — in a bid to replenish the country’s dwindling international reserves.

The central bank has been propping up the official peso rate, currently at 143 per dollar. The blue-chip swap rate, an implied exchange-rate based on the difference in prices between Argentine stocks and their American depositary receipts, stands at 297 per dollar.

https://finance.yahoo.com/news/argentina-hike-interest-rates-75-200117136.html

Earlier this week, central bank President Miguel Pesce and Economy Minister Sergio Massa affirmed, in a meeting with International Monetary Fund Managing Director Kristalina Georgieva their commitment to implement the country’s $44 billion deal with the IMF. A key element of the accord includes keeping interest rates above the rate of inflation.

National Transportation Safety Board says over 10,000 lives could be saved annually

The National Transportation Safety Board (NTSB) is officially recommending that all new cars and trucks be equipped with alcohol detection devices.

The decision comes following an investigation into a head-on collision that took place on New Year's Day 2021 in Avenel, California, between a speeding SUV being driven by an impaired driver and a pickup truck that left nine dead.

​"Technology could’ve prevented this heartbreaking crash — just as it can prevent the tens of thousands of fatalities from impaired-driving and speeding-related crashes we see in the U.S. annually," NTSB Chair Jennifer Homendy said in a report.

"We need to implement the technologies we have right here, right now to save lives."​

The NTSB, which has no regulatory authority itself, has told the National Highway Traffic Safety Administration (NHTSA) that it should implement a requirement for the systems along with a program that would incentivize automakers and consumers "to adopt intelligent speed adaptation systems that would prevent speed-related crashes" even when alcohol is not involved.

According to the NTSB, there were 11,654 fatalities occurred in alcohol-impaired crashes in 2020, which represented approximately 30% of all accident-related deaths.

NHTSA is already working on the topic as the infrastructure bill signed into law by President Biden in 2021 included a requirement for all vehicles to be equipped with passive alcohol interlocks, which would make them inoperable if a high blood alcohol level is detected. The law dictates that regulations be developed within three years and gives automakers two years to comply, but allows the Department of Transportation to extend the periods, if technically necessary.

Unlike the systems currently mandated by states for drivers convicted of DUI offenses, which require them to breathe into a tube before starting their vehicles. NHTSA and 17 automakers have been developing and testing a passive breath test and a touch system that uses infrared light to measure the blood alcohol level through the skin as part of the DADSS (Driver Alcohol Detection System for Safety) program.

Details on how the final version of the technology will operate are still being worked out, but the current aftermarket interlock systems typically cost around $60 to $150 to install and $60 to $80 per month to calibrate and monitor remotely, according to manufacturer LifeSaver.

Jay Stanley, a senior policy analyst for the ACLU, said the organization applauds efforts to save lives, but that this technology raises concerns about the mishandling of personal information.

"There are a lot of ways that safety can be improved that don't involved invading people's privacy. Keeping the data in the vehicle would help address that," Stanley said.

"I hope the regulators recognize the seriousness of this issue and don't mess around with how the information collected is managed by the automakers."

NHTSA says on its website that "in order to be considered for widespread deployment, the DADSS technology must be seamless, accurate, and precise, and unobtrusive to the sober driver. It must also be proven reliable to be installed in the vehicle fleet and publically favorable."

https://www.foxbusiness.com/lifestyle/ntsb-vehicles-alcohol-detectors-law

the infrastructure bill signed into law by President Biden in 2021 included a requirement for all vehicles to be equipped with passive alcohol interlocks, which would make them inoperable if a high blood alcohol level is detected. The law dictates that regulations be developed within three years and gives automakers two years to comply, but allows the Department of Transportation to extend the periods, if technically necessary.

An endemic shortage of chips costing anywhere from 50 cents to $10 is slowing down swathes of the $600 billion semiconductor industry, Taiwan Semiconductor Manufacturing Co.’s top executive warned Tuesday.

The persistent deficit of such low-end chips is holding up production in key segments of the supply chain, Chief Executive Officer C. C. Wei told attendees at a tech symposium. ASML Holding NV of the Netherlands is struggling to obtain $10 chips for its extreme ultraviolet lithography systems, or EUVs, he said. TSMC has dozens of the machines, which are critical for packing more power onto smaller slivers of silicon. Elsewhere, a 50-cent radio chip has been holding up the production of $50,000 cars, Wei said, without elaborating.

The world’s largest contract chipmaker can no longer meet demand for low-end chips at legacy factories, and it is building new plants, Wei said, suggesting that even mature chips may cost more in the months ahead. These include a new 28-nanometer factory in China that will begin production in the fourth quarter, according to TSMC Vice President Y. L. Wang. Shortages are showing up as a result of automakers adding more features to cars and increasing the silicon used by 15% every year, while smartphones now require two to three times the number of power management chips they did five years ago, Wei said.

“The age of an efficient, globalized supply system has passed,” he said, noting that production costs are also increasing due to more countries racing to build fabs at home. “Costs are swiftly rising, including inflation.”

While demand is generally dwindling, logistics snarls and chronic component shortages continue to plague some industry players. Applied Materials Inc. said this month its order backlog is increasing as it struggles to get enough supply of semiconductors to make its equipment, while Nvidia Corp. said it encountered trouble getting support chips including power converters and transceivers to make as many data center products as it wanted to.

It is possible that by the end of the year or early next year, “we are more in control of those supply constraints,” ASML CEO Peter Wennink told analysts after reporting results in July. “Having said that, there are no guarantees there.”


https://finance.yahoo.com/news/tsmc-chief-says-penny-chips-053352249.html

A pair of exchange-traded funds that would mirror the personal portfolios of members of Congress may be coming soon.

The Unusual Whales Subversive Democratic Trading ETF (ticker NANC) and the Unusual Whales Subversive Republican Trading ETF (KRUZ) would analyze the financial disclosure of lawmakers from both parties and their spouses and dependent children to construct a portfolio of between 500 and 600 holdings, according to a regulatory filing Thursday. When a position is reported as sold, the ETFs will offload the security as well.

The proposed funds would tap into a controversy over stock transactions made by lawmakers that sparked a flurry of bills to overhaul or update a 2012 law that governs disclosure, which have largely stalled despite bipartisan support. Currently, members of Congress are required to disclose any securities transactions valued at more than $1,000 within 45 days.

While it’s unclear if packaging lawmakers’ portfolios into an ETF will generate returns, it will almost certainly produce buzz, said Bloomberg Intelligence ETF analyst James Seyffart.

“It’s a fixation of the online trading community and financial Twitter to track what politicians are doing,” Seyffart said. “I’m not sure what kind of longevity this strategy will have, but I think they will drum up a lot of interest and if these things start beating the market, I think they could garner more than enough assets to be profitable.”

The funds will only focus on equity holdings, the filing said. Both ETFs would charge a 1% expense ratio. Michael Auerbach and Christian Cooper will serve as portfolio managers.

https://news.yahoo.com/etfs-track-stock-trades-us-214203963.html

António Guterres said money raised should be diverted to vulnerable nations suffering losses caused by climate crisis

Countries should impose windfall taxes on fossil fuel companies and divert the money to vulnerable nations suffering worsening losses from the climate crisis, the United Nations secretary general has urged.

António Guterres said that “polluters must pay” for the escalating damage caused by heatwaves, floods, drought and other climate impacts, and demanded that it was “high time to put fossil fuel producers, investors and enablers on notice”.

“Today, I am calling on all developed economies to tax the windfall profits of fossil fuel companies,” Guterres said in a speech to the UN general assembly on Tuesday. “Those funds should be redirected in two ways – to countries suffering loss and damage caused by the climate crisis and to people struggling with rising food and energy prices.”

Guterres’s appeal came in his most urgent, and bleakest, speech to date on the state of the planet, and the will of governments to change course.

His first words were: “Our world is in big trouble.”

“Let’s have no illusions. We are in rough seas. A winter of global discontent is on the horizon, a cost-of-living crisis is raging, trust is crumbling, inequalities are exploding and our planet is burning,” he told the assembly. “We have a duty to act and yet we are gridlocked in colossal global dysfunction. The international community is not ready or willing to tackle the big dramatic challenges of our age.”

The lacerating speech, delivered at the UN headquarters in New York, echoes calls from activists, and the European Union, to tax major oil and gas firms currently enjoying record profits in the wake of Russia’s invasion of Ukraine. In July, Exxon announced it had made a record quarterly profit of $17.8bn, while Chevron unveiled its own three-month record profit, of $11.6bn. BP, meanwhile, made a $8.5bn profit in the same period.

Under Guterres’s proposal, revenue from the taxes would flow to predominantly developing countries suffering “loss and damage” from global heating, to be invested in early warning systems, mopping up from disasters and other initiatives to build resilience. Vulnerable countries are poised to leverage the UN general assembly week to ask rich nations for a “climate-related and justice-based” global tax to pay for loss and damage.

Guterres has previously accused governments of having an “addiction” to fossil fuels and has called new investments in oil, coal and gas “moral and economic madness”.

But his speech on Tuesday was particularly pointed, delivered on the grand dais of the general assembly and following the secretary general’s recent visit to Pakistan, where floods from what he called “a monsoon on steroids” have submerged a third of the country and displaced millions of people.

“Our planet is burning,” Guterres said, calling on world leaders to to end their “suicidal war against nature”.

“The climate crisis is the defining issue of our time,” he added. “It must be the first priority of every government and multilateral organization. And yet climate action is being put on the back burner – despite overwhelming public support around the world.”

“We have a rendezvous with climate disaster … The hottest summers of today may be the coolest summers of tomorrow. Once-in-a-lifetime climate shocks may soon become once-a-year events. And with every climate disaster, we know that women and girls are the most affected. The climate crisis is a case study in moral and economic injustice.”

Governments must stage an “intervention” to break their addiction to fossil fuels, Guterres said, by targeting not only the extractive companies themselves but the entire infrastructure of businesses that support them.

“That includes the banks, private equity, asset managers and other financial institutions that continue to invest and underwrite carbon pollution,” said the secretary general.

“And it includes the massive public relations machine raking in billions to shield the fossil fuel industry from scrutiny. Just as they did for the tobacco industry decades before, lobbyists and spin doctors have spewed harmful misinformation. Fossil fuel interests need to spend less time averting a PR disaster – and more time averting a planetary one.”

Guterres said it was “high time to move beyond endless discussions” and deliver finance for vulnerable countries and for wealthy nations to double adaption funding by 2025, as they promised to do at UN climate talks in Scotland last year. A further round of talks, known as Cop27, will take place in Egypt in November, in which loss and damage is set to be a central issue.

Although governments have agreed to restrain global heating to 1.5C above pre-industrial times, almost all countries are lagging in their efforts to cut greenhouse gas emissions quickly enough to avoid this level of heating and therefore avert catastrophic climate impacts.

Emissions have already rebounded to pre-pandemic levels and an analysis this week showed there are plenty of known fossil fuel reserves in the world still left to burn – enough to unleash 3.5tn tons of greenhouse gases, which would smash the carbon budget before we get to 1.5C seven times over.


https://www.theguardian.com/world/2022/sep/20/un-secretary-general-tax-fossil-fuel-companies-climate-crisis

As President Biden rolls out a blueprint for future regulations

The US Department of Justice has tapped more than 150 federal prosecutors to form a team keenly focused on cracking down on cryptocurrency-related crimes, it announced on Friday.

Dubbed the Digital Asset Coordinators Network, this group will be led by the DoJ's National Cryptocurrency Enforcement Team (NCET). The assembled attorneys will, it's hoped, receive training to understand cryptocurrency technologies, gain technical expertise, and learn how best to investigate and prosecute criminal cases.

"Developments in digital assets have created a new landscape for criminals to exploit innovation to further significant criminal and national security threats domestically and abroad," Assistant Attorney General Kenneth Polite Jr said in a statement.

"Through the creation of the DAC Network, the Criminal Division and the National Cryptocurrency Enforcement Team will continue to ensure that the Department and its prosecutors are best positioned to combat the ever-evolving criminal uses of digital asset technology."

Eun Young Choi, who was previously the Senior Counsel to the Deputy Attorney General, will lead the NCET. Choi said cryptocurrency crimes are complicated and require prosecutors with expertise from different areas, such as tax, national security, or environment.

"Digital-asset crimes are truly multidisciplinary," she told the Wall Street Journal. "They are cross-border, complex, and challenging investigations and they require a certain level of competency."

The Digital Asset Coordinators Network's launch is part of a wider effort by the US government to regulate the cryptocurrency industry.

President Biden signed an executive order in March promising to roll out policies and rally agencies to better protect folks and businesses from the risks of digital assets, keep the country's economy stable and secure, and prevent illicit financial crimes.

On Friday, the White House emitted details of a framework developed over six months by government officials as a result of that order. The framework lays out what federal agencies and departments need to do next.

It's pretty extensive. It includes stepping up efforts to regulate cryptocurrency platforms and other non-bank payment providers; make cross-border payments easier; ensure digital assets can be used fairly and inclusively by all; improve cybersecurity at financial orgs; investigate boosting the security and reducing the environmental impact of cryptocurrencies; track the energy use of digital assets; extend rules against illicit finance to crypto-coins and tokens; and disrupt criminals who rely on digital assets.

It also calls for the exploration of a US Central Bank Digital Currency – a digital dollar of some kind – that can be used for payments perhaps as an alternative to independent crypto-coins and tokens.

At this stage, it's all planning, research, and brain storming. Hard policies and rules and regulations will be developed over time as the federal government converges on a plan for cryptocurrencies, seemingly to mitigate the downsides and tackling crime without going as far as banning it or the like. The tokens can be used for legit purposes, after all.

Drilling down into the plans, the Office of Science and Technology Policy and the National Science Foundation will develop a Digital Assets Research and Development Agenda to boost research into cryptography, cybersecurity, and blockchain technologies.

The Department of Energy and the Environmental Protection Agency will be tasked with monitoring the environmental impact of mining cryptocurrencies and carrying out financial transactions.

"The United States has an interest in responsible financial innovation, expanding access to safe and affordable financial services, and reducing the cost of domestic and cross-border funds transfers and payments, including through the continued modernization of public payment systems," President Biden's order stated. ®


https://www.theregister.com/2022/09/17/doj_cryptocurrency_crime/

With the IRS hiring more employees, here’s who agents may target for audits

As the Democrats’ spending plan moves closer to a House vote, one of the more controversial provisions — nearly $80 billion in IRS funding, with $45.6 billion for “enforcement” — has raised questions about who the agency may target for audits.

IRS Commissioner Charles Rettig said these resources are “absolutely not about increasing audit scrutiny on small businesses or middle-income Americans,” in a recent letter to the Senate.

However, with the investment projected to bring in $203.7 billion in revenue from 2022 to 2031, according to the Congressional Budget Office, opponents say IRS enforcement may affect everyday Americans.

“Our biggest worry in this is that the burden for these audits will land on Walmart shoppers,” Rep. Kevin Brady, R-Texas, said Tuesday on CNBC’s “Squawk Box.”

Overall, IRS audits plunged by 44% between fiscal years 2015 and 2019, according to a 2021 Treasury Inspector General for Tax Administration report.

While audits dropped by 75% for Americans making $1 million or more, the percentage fell by 33% for low-to-moderate income filers claiming the earned income tax credit, known as EITC, the report found.

Ken Corbin, chief taxpayer experience officer for the IRS, said returns claiming the EITC have “historically had high rates of improper payments and therefore require greater enforcement,” during a May House Oversight Subcommittee hearing.

Since many lower-income Americans are wage earners, these audits are generally less complex and many may be automated.

“The resources to modernize the IRS will be used to improve taxpayer services — from answering the phones to improving IT systems — and to crack down on high-income and corporate tax evaders who cost the American people hundreds of billions of dollars each year,” according to a Treasury official.

The department estimated in a 2021 report that the funding may cover about 87,000 employees, which has been widely reported. However, these hires may include a range of positions, such as auditors, customer service and IT workers, the Treasury clarified in a statement to CNBC on Wednesday.

https://www.cnbc.com/2022/08/09/with-new-agents-heres-who-the-irs-may-target-for-audits.html

(Bloomberg) -- US firms that do most of their business at home will fare better than those exposed to Europe, where a recession is all but guaranteed, according to Goldman Sachs Group Inc. strategists.

A Goldman team led by David Kostin say that while the path of US growth may be “uncertain,” the economic situation in Europe is dire.

“Despite concerns that investors have about the US equity market, we believe it offers greater absolute and risk-adjusted return potential than recession-plagued European markets,” they wrote in a note.

Goldman’s preference for US exposure comes during what is turning out to be a particularly tough year for business in Europe amid a gas crisis, soaring inflation and tightening central-bank policy. In dollar terms, the Stoxx Europe 600 has lagged the S&P 500 this year and a Goldman basket of US firms with 100% domestic sales has outperformed one tracking those with high sales to Europe.

The strategy is one of four that Kostin’s team has identified to drive equity performance through the end of the year, the others being stocks with high quality fundamentals, so-called value shares, and big dividend payers.

“Investors concerned about economic contraction should own dividends -- either via futures or through individual stocks,” the strategists wrote. “Dividends offer investors exposure to S&P 500 fundamental growth while minimizing exposure to equity valuation risk.”

Kostin and his team are keen on quality stocks that score highly on metrics including strong balance sheets as well as stable sales and earnings growth. They expect the S&P 500 to end 2022 at 4,300 points, or 5.7% higher than Friday’s close, assuming Federal Reserve tightening leads to a continued deceleration in US economic growth.

Mirroring Goldman’s preference for cheaper stocks, Barclays Plc strategists including Matthew Joyce turned overweight on value stocks in Europe on Monday, saying that higher-for-longer rates aren’t yet reflected in value and growth.



https://finance.yahoo.com/news/us-economy-safer-bet-dire-082748483.html

(Bloomberg) -- Crypto investors who have been celebrating this week’s overhaul of Ethereum’s blockchain may have to deal with an unwelcome guest at their party: US Securities and Exchange Commission Chair Gary Gensler.

Gensler on Thursday signaled that a feature of the network’s software could lead to tokens being considered securities by the SEC. While Gensler was careful to say he wasn’t speaking about any digital coin specifically, his comments add to questions about the Wall Street regulator’s views on Ether, which is the second-biggest virtual currency.

Gensler has said that Bitcoin, the largest cryptocurrency, isn’t covered by the agency’s securities rules. However, he’s been less unequivocal on Ether. That stance contrasts with that of the agency during the Trump administration and comments made by the top US derivatives regulator, which considers Ether to be a commodity -- a legal label that places the token outside of the SEC’s purview.

On Thursday, Gensler took issue with a feature of Ethereum’s new upgraded blockchain, which has been dubbed the “Merge.” He said that a process known as “proof-of-stake,” in which coin holders can earn financial rewards by allowing a network to use some of their assets, could fall under securities rules. Ether had used the “proof-of-work” method that Bitcoin uses to run its blockchain.

Crypto firms are seeking to avoid the security label because it carries investor-protection requirements that many say are incompatible with with the asset class. “There is a full disclosure obligation on these projects,” Gensler told reporters.

Figuring out if the process of staking Ether -- or earning a return by permitting the revamped Ethereum to deploy the coin -- leads to a security involves complicated legal analysis, according to Brett Harrison, president of FTX.US.

“Perhaps the staking in such a system might be considered an investment contract of some kind and that is really an open question,” Harrison said on Bloomberg Television.

Harrison added that there are multiple kinds of staking, adding to the complexity. These include directly participating in the network to get rewards, achieving the same goal indirectly and a very different opportunity set of putting coins into a decentralized finance protocol.


https://finance.yahoo.com/news/sec-chair-gensler-raises-concerns-010743255.html

The speculative fiction writer has teamed up with crypto pioneer Peter Vessenes to launch Lamina1, a layer-1 blockchain designed to give creators the tools they’ll need to launch their own projects in the metaverse.

Neal Stephenson coined the term “metaverse” in his 1992 novel Snow Crash. Now, with the metaverse emerging from the realm of science fiction into reality, the author is back as the confounder of Lamina1, a new company that aims to provide the framework for an “open metaverse” – in other words, one that’s more aligned with the core vision of web3, and which prioritizes independent creators over corporations.

Many marketers have probably never heard of Stephenson, but almost all by this point will have heard of the metaverse – an as-of-yet poorly-defined virtual space that’s commonly described as being the next evolutionary stage of the internet and which is built upon blockchain technology, rendering it (at least in theory) completely free from the top-down control that’s come to dominate the flow of information in the web2 era.

Unlike Snow Crash – and the various visions of the metaverse that are being broadcasted by companies such as Meta – Lamina1 does not offer any long-term prognosis for the future of the metaverse. Rather, it aims to provide the foundational tools that technical and creative developers will need to bring their own various projects to life. “Despite my 30-plus-year history of being ‘the metaverse guy,’ I feel uneasy about trying to predict or dictate what [the metaverse] is going to be, or what it ought to be, because the way that technologies develop in the real world is that people find uses for them,” Stephenson says. “The best thing one can do at this point is to help contribute infrastructure and provide tools that the people who are going to build the metaverse will find useful ... I’m more looking forward to being surprised.”

He quotes the author William Gibson, who’s often credited with inventing the cyberpunk subgenre: “The street finds its own uses for things.” (It’s worth noting that “The Street” is the name that Stephenson gives to the metaverse’s main throughway in Snow Crash.)

Still, driven by the promise of huge potential profit, many companies have been attempting (some would argue prematurely) to find uses for the street, generating hype about the metaverse as if it’s already arrived. “You can tell when someone says ‘we’re building a metaverse,’ or ‘our metaverse’ that they don’t quite understand the basic concept,” Stephenson says. “There is only a metaverse – the metaverse.”

Lamina1 is by no means alone in its efforts to build an open metaverse. In July, a cohort of leading web3 brands – including The Sandbox, Dapper Labs and Decentraland – united to form the Open Metaverse Alliance for Web3 (OMA3).

As its name suggests, Lamina1 has been designed as a layer-1 blockchain, meaning it will be able to establish its own rules and validate its own transactions. (Bitcoin and Ethereum are also both Layer-1 chains.) As Stephenson describes, “the advantage to starting your own [blockchain] is that you can make engineering decisions to suit your own purposes, as opposed to just kind of being along for the ride with somebody else’s system.”

Stephenson founded Lamina1 earlier this year alongside Peter Vessenes, an early and influential crypto pioneer who serves as the company’s chief executive and chief cryptographer. On August 25, the company announced that it had hired creative strategist and product expert Rebecca Barkin as president. Barkin and Stephenson had met during their tenures at Magic Leap, an augmented reality (AR) company that released its first headset in 2018. Barkin – who says she was brought onboard in part “to bring order to chaos and really get everything off the ground” – describes Lamina1 as being “purpose-built to enable experiences in the metaverse, with an emphasis on things that we know matter, [such as] data storage, on-chain interoperability, identity, commerce and of course quality and ease of use. By really emphasizing those things, we can really help grow a real community.”

Barkin also underscores the need, as she sees it, for the web3 community to reflect on and learn from the past in order to build a better future: “We have the opportunity here to undo some of the decisions that we all made for convenience or lack of knowledge early on in the web2 era,” she says, “and really return a lot of that power to creators and consumers ... There’s a cultural movement towards agency and ownership ... We want to be a part of that. We want to be the leaders of it and say, ‘look, you have a lot to offer the world, and we want to be the place where you come to do it.’”


https://www.thedrum.com/news/2022/09/06/neal-stephenson-how-lamina1-building-metaverse-the-people

As I’ve shared many times before I’m a financial advisor and I come across these types of savings/investing platforms and Acorn is one I’ve recently done a little bit of research on.  The retirement plan I advise for used to have it as an option for its plan but has since take it away (not sure why).