Interest rates and the Economy, China vs. cryptocurrency, and Government efforts to pass a new bill.
Key News This Week:
China bans bitcoin
Congress to agree on a spending bill
Read the Transcript
I’m John Bannan, from Comhlatech.com.
Before we get to the news, a quick update on the system. What a wild week that was for everyone in the markets, I was delighted to not be in the carnage at the beginning of the week.
However, we only caught the tail end of the rally that came as a relief from all the selling on Monday and Tuesday. Still, a win is a win, and a win in the markets this week is very welcome.
I am still expecting more volatility to come until we are well into October, let’s see.
So that was the system update, what was the news this week?
Big news week this week and top of the list was the Fed meeting. The ‘will they won’t they question’ was on the lips of every investor. Turns out they did the expected and changed nothing. However, they did say it could begin shrinking its stimulus program in November and potentially raise interest rates next year.
Interest rates have remained low since the beginning of the pandemic to help the economy as businesses closed down and a record number lost their jobs. Now, the Fed’s saying the economy’s on the up and up. And we could find out more after the group’s next meeting in November.
However, the news that really tanked the market at the beginning of the week was jitters around a too big to fail contagion in global markets.
I am speaking of real estate giant Evergrande. They are the 2nd largest property developer in China, with a $30B market cap — but it owes $300B to partners (To put that in perspective, it’s about 2% of China’s entire GDP!)
And it had an $83M in payment officially due yesterday.
So all eyes are on regulators:
As this may need a rare government bailout, but they allowed them to renegotiate a payment deadline earlier this month, so there may be a willingness to keep the company alive.
In this case, it’s not the size of the whale, it’s the size of the splash… as analysts worry Evergrande could default and affect the global economy.
That being said, even as no payment was made on Thursday, the company will not technically default unless it fails to make that payment within 30 days, so there is still time to get its house in order.
Speaking of China, they banned Bitcoin!
China may be the first to ban bitcoin, but it won’t be the last. I’ve said in past commentaries that sovereign nations have the power to regulate and eliminate any competitor to their own currencies. One country took that step on Friday.
China’s central bank has just made all cryptocurrency-related activities illegal. The value of bitcoin plunged overnight, but not as much as you would expect on such news, go figure.
Bottom line, what China did may well be repeated in other countries, so while crypto will be here to stay, it may not be the ones that are not accepted and regulated by Central banks including bitcoin.
In government news, House Speaker Nancy Pelosi is confident that Congress will agree on a new spending bill to avoid a potential government shutdown next week.
Efforts to pass a new budget are underway on Capitol Hill, where House Democrats earlier this week approved a measure to fund the government, suspend the debt ceiling and approve emergency aid such as disaster relief. Now it’s over to congress, let the games begin.
Fun Fact of the week: Would you believe it? Earth has 3 trillion trees!
If the new sum is accurate – and Yale University and other scientists think it is – the planet boasts roughly 420 trees for every living person. An earlier count pegged the global tree total at a mere 400 billion, but that study relied on less sophisticated methods.
However, in a more sobering find, the scientists calculated that roughly 15.3 billion trees are cut down each year, and humanity has reduced the Earth’s tree population by nearly half since civilization began. That’s a not-so-fun fact! We need to do better I think.
That’s it from me, it’s the weekend, time to down tools. Have a great weekend and thanks for watching. Take care and bye for now.