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The Critical Distinctions of CBDCs and Cryptocurrencies You Need To Know

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The Critical Distinctions of CBDCs and Cryptocurrencies You Need To Know


 

The subject of Central Bank Digital Currencies (CBDCs) is more pervasive than ever, with governments worldwide rushing to roll out their CBDCs, advocating that central bank digital currencies are like cryptocurrencies, only better. Citizens all over the world know this statement is false and vehemently oppose this new monetary system by lodging petitions and protests. However, a substantial proportion of society doesn’t recognize or even comprehend this age of digital technology. 

Today we’ll look at the difference between CBDCs and cryptocurrency and how they cannot be compared. That’s because one system will be used to enslave us, and the other will give us freedom and sovereignty.

 
When Did It All Start?

The two financial technologies are rooted in various digital currency initiatives, mostly coming into existence in the 1990s. The most significant difference is the digital currencies of that time were created to optimize payments primarily in a domestic setting. In other words, these digital currencies were intended to optimize the existing financial system by integrating with it.

An example is Finland’s eMoney system, Avant, in the 1990s, which was closely connected to its national currency and banking infrastructure. While some consider Finland’s eMoney to be the first CBDC, it is generally believed that the first actual CBDC to be released was the Bahamian Sand Dollar in October 2020. Although now, almost every country is actively working on a CBDC of some kind. 

In contrast to CBDCs, cryptocurrencies were initially created to replicate or even replace the existing financial system. In many cases, this meant they were internationally available to anyone with an internet connection. Two examples are David Chaum’s Ecash in the 1980s and Adam Back’s Hashcash in the 1990s.  Today, Adam is the CEO of Blockstream, one of the largest Bitcoin-related companies.

Then along came Bitcoin in 2008, boasted as the first cryptocurrency, created by a pseudonymous individual or group called Satoshi Nakamoto.  The first Bitcoin block contained a hidden message: "Chancellor on brink of second bailout for banks.” This was the headline of The Times newspaper on January 3rd, 2009, the same day Bitcoin went live.

Image source: https://bitcoinbriefly.com/21-million-bitcoin/

Bitcoin’s explicit intention is to replace the current financial system, and every prominent cryptocurrency that has come into being since that time shares this ethos. Whereas Bitcoin was created in response to the 2008 financial crisis, the CBDC was essentially created in response to cryptocurrencies. More to the point, CBDCs were created in response to alternative digital currencies of all kinds, be they public or private. 

For example, China began developing its digital Yuan in response to the country's rapid growth of financial technology companies during the 2010s. Similarly, the United States started developing its digital dollar in response to Facebook's digital currency, Libra, which was revealed in 2019 but never made it off the ground. On the other hand, Indonesia began developing its digital Rupiah in response to cryptocurrencies after the last bull run in 2017. 


Image source: Cointelegraph

Meanwhile, the Marshall Islands began developing its digital currency, dubbed the Marshallese sovereign, in response to developing CBDCs in other countries. Nevertheless, the common theme is centralized financial system control. This ultimately makes today's CBDCs different from their predecessors, which focused on payment optimization rather than centralized control. 

As such, we can define CBDCs as a type of digital currency centrally controlled by the government and requiring permission. Alternatively, we can define cryptocurrencies as virtual currency that is not controlled by anyone and does not require permission. 

CBDC’s and Cryptocurrency’s Underlying Implementations

Understanding how CBDCs and cryptocurrencies work under the hood is essential, starting with three definitions for the often misunderstood terms; Blockchain, Distributed Database (DDB), and Distributed Ledger technology. (DLT)

A blockchain is a specific type of distributed ledger technology. Notably, all Blockchains are distributed ledgers (DL), but not all distributed ledgers are blockchains. Permissionless or public blockchains are decentralized, meaning a single individual or institution does not control them. Instead, they are controlled by a vast network of unrelated individuals and institutions, so there's no single point of failure.

Distributed databases store data in a shared network rather than at a centralized location. This solution is for businesses that need to process huge amounts of structured and unstructured data, which could scale across networks. Consensus mechanisms such as Paxos or Raft control read/write permissions and establish secure communication channels among participants. However, these protocols assume that each participant cooperates in good faith, which limits their application to private networks under a centralized authority. 

Distributed Ledgers (DL) are like DDB protocols in that they maintain a consensus about the existence and status of a shared set of facts but do not rely on this assumption of good faith. They achieve this by leveraging strong cryptography to decentralize authority. They are different from generic distributed databases in two fundamental ways:

1. The control of the read/write access is genuinely decentralized, whereas it remains logically centralized for distributed databases.

2. Data integrity can be assured in adversarial environments without employing trusted third parties, whereas distributed databases rely on trusted administrators.


Image source: Blockchain Tutorial 

These terms are good to know because many countries claim their CBDCs will use a blockchain. However, countries claiming their CBDCs will use a Blockchain will use a distributed database because the Central Bank will centrally control it. It's possible that the officials making these statements don't know the difference or don't care to make the distinction. 

Some argue that the purpose of using the term ‘blockchain’ or ‘inspired by Bitcoin’ is to intentionally mislead the public into thinking the CBDC is just like a cryptocurrency. Although, it’s worth mentioning that a few regions seem to be planning to launch their CBDCs on cryptocurrency blockchains, such as the Marshall Islands, which has selected Algorand technology. But even then, it's likely that the central bank will still maintain total control of its CBDC because it would be issued as a token. 

What Is The Difference Between Coins And Tokens?

As we continue to be enlightened by this technology, the two different cryptocurrencies are often misrepresented, so here are the definitions of crypto coins and tokens.   

A cryptocurrency coin is native to its blockchain and is given as a reward to the miners (basically just powerful computers) that process transactions. Cryptocurrency coins also pay transaction fees on a cryptocurrency’s blockchain. For example, BTC is given as a reward to cryptocurrency miners that process transactions on the Bitcoin blockchain. These cryptocurrency miners also earned the transaction fees paid in BTC.

Conversely, a cryptocurrency token is a customizable digital asset that exists on a cryptocurrency’s blockchain. Unlike coins, which directly represent a proposed medium of exchange, crypto tokens represent an asset. These tokens can be held for value, traded, and staked to earn interest. Unlike coins, tokens can choose not to be bound to a single blockchain, gaining flexibility and becoming easier to trade.

Tokens are used with decentralized applications (DApps) and are usually built on top of an existing blockchain. One example is Markethive’s Hivecoin, currently being integrated into the Solana Blockchain.  Cryptocurrency tokens can be used for all sorts of things and have led to some exciting applications, such as decentralized finance (DeFi), non-fungible tokens (NFTs), and emerging crypto ecosystems in social media and marketing.   

The key takeaway here is that the creator of a cryptocurrency token can give themselves total control over the transfers of that token, the supply of that token, etc. Some stablecoins are cryptocurrency tokens that mirror the price of fiat currencies, primarily the US dollar. So, in the case of centralized stablecoins that are centrally controlled by the companies which issued them, any CBDCs issued as cryptocurrency tokens will likely work similarly. 

The Economics Of CBDCs And Cryptocurrencies

For context, let’s look at the economics of the current financial system. Central banks worldwide are tasked with encouraging economic growth while keeping inflation under control. They do this by raising and lowering interest rates. When interest rates are low, borrowing becomes cheap, making saving less attractive. This incentivizes individuals and institutions to spend rather than save, which increases economic growth. However, it also increases inflation as more money is circulated with low-interest rates.

When interest rates are high, borrowing becomes expensive, making saving more attractive. This incentivizes individuals and institutions to save rather than spend, which lowers economic growth. However, it also decreases inflation as there is less money in circulation when Interest rates are high.


Image source: PricedInGold.com

The big problem with this economic model is that money can easily be created, but taking it out of circulation is much more challenging. This inevitably leads to inflation in the long term. Long-term inflation wasn't a problem because fiat currencies were backed by gold. This limits how much money could be created in an economy because more gold had to be acquired to issue more money. 

However, this limit was lifted when the gold standard collapsed in 1971. And since then, we've seen what can only be described as long-term inflation, with the prices of many assets exploding in fiat terms while staying the same when priced in gold. 

However, it’s become clear that this inflation didn't show up in official inflation statistics until very recently because they have been adjusted and under-reported since they were introduced to make them seem less severe. This inflation is starting to appear in the official statistics, which means it's even worse than the authorities reveal.

Individuals and institutions took on record debt levels when interest rates were low, which means that raising interest rates too high would result in an economic catastrophe as these individuals and institutions would be unable to pay back their debts. 

It’s also apparent that many governments have record debt levels, and we're already seeing the first signs of default in some countries. In short, the money supply has grown so much that inflation is off the charts. And raising interest rates is not an option because of all the debt built up in the financial system over the years.

CBDC Economics

From the banks' perspective, CBDCs offer a solution to this situation. This is because, in a CBDC system, one of the many features is that it'll be possible for the central bank to destroy money as well as issue it easily. For starters, there'll be two types of CBDCs. Select individuals and financial institutions will use wholesale CBDCs, and regular folks like you and I will use Retail CBDCs. 


Image Source: Technode.global

This means there will be one financial system for the people in power and another for everyone else. Now, in addition, to being able to create and destroy money, Retail CBDCs will make it possible for central banks to; 

  • Freeze CBDC holdings. 
  • Set limits on CBDC holdings. 
  • Set expiry dates on CBDC holdings. 
  • Set location limits for where CBDCs can be spent.
  • Set time limits for when CBDCs can be spent. 
  • Set limits on how much CBDC can be spent. 
  • Decide what can and can't be purchased with CBDCs. 
  • Add a tax to every CBDC transaction. 
  • Automatically flag or block suspicious CBDC transactions.
  • Create custom CBDC limits for different individuals and institutions, depending on whatever criteria they decide. 
  • Implement negative interest rates by gradually deleting unspent CBDC holdings over time. 

Financial institutions have openly discussed all the above features of CBDCs. The craziest part is that a continued increase in centralized control is required to prevent the current financial system from imploding, at least as far as central banks and governments are concerned. 

Any alternative would involve giving up some or even all of the central banks' and governments' control over the financial system. They would much rather see the financial system burn to the ground than lose control of it. This is why the IMF has outright recommended countries use CBDCs to fight cryptocurrency adoption to maintain that control. Many institutions are even trying to wipe out the crypto industry.

Images sourced from imf.org.pdf

Cryptocurrency Economics

It depends on the coin or token we're discussing regarding cryptocurrency economics. Bitcoin’s BTC is the obvious choice to reference as an example since it's arguably the biggest crypto competitor to the current financial system. Unlike fiat currencies, BTC has a maximum supply of 21 million. This supply is created slowly over time, and every four years, the amount of new BTC being mined or created is cut in half. 

It's believed that the last BTC will be mind around 2140. As basic economics dictates, a gradual decrease in supply combined with the same or more demand results in a higher price. Over the years, Bitcoin has seen exponential adoption that has increased demand, while the new supply of BTC has been declining, resulting in the price action shown below. 


Image source: coinmarketcap.com

BTC’s gradual appreciation in price has incentivized millions of computers to process transactions on the Bitcoin blockchain, which has made it highly decentralized and, therefore, very secure. As a matter of fact, Bitcoin is believed to be the most secure payment network on the planet. 

The best part is that as BTC's price continues to climb, the Bitcoin blockchain will only continue to decentralize. This makes it the ideal base layer to build additional financial technologies, and many crypto projects and companies are leveraging the Bitcoin blockchain for its security. Because BTC is increasing in value over time, even relative to Gold, this creates a strong incentive to save rather than spend BTC.

 
The Custody Difference Between Cryptocurrencies and CBDCs. 

With cryptocurrencies, you have the option of self-custody, meaning you can keep your coins and tokens in a digital wallet that you entirely control. Because personal information isn't required to create a cryptocurrency wallet, all cryptocurrency transactions are pseudonymous by default. 

Unless you're holding cryptocurrency in your personal crypto wallet, chances are it's being stored in a custodial wallet, which includes cryptocurrency exchanges. This means that the crypto is technically owned by someone else under your name. You might think you have control over your crypto with such a setup, but in reality, the custodian only lets you make transactions so long as you abide by their terms and conditions.

Self-custody simply does not enter into the equation for CBDCs. If all the terms and conditions, or dare I say, restrictions mentioned above, didn't make it clear enough, the central bank will keep all your CBDC holdings and ultimately decide what you can or can't do with your digital money. 

Regarding privacy, I reckon this sentence from one of the CBDC reports from the Bank for International Settlements (BIS) sums it up “Full anonymity with CBDCs is not possible.” This is because the central bank needs to be able to track everything specifically to impose these sorts of totalitarian controls.

It goes without saying you’ll be required to complete the KYC protocol. Also, according to the World Economic Forum's Digital Currency report, central banks will assign your digital identity a dystopian social credit score, determining what you can and can't do. The result will be a total absence of privacy with CBDCs, which is a massive problem because privacy is required for financial freedom. 

CBDC transactions that don't belong to you will not be viewable, meaning only the central bank can see what's happening behind the scenes. This will also apply at the network level because the technology that underlies a CBDC will likely be a closed source. 

A View Of How Both Economic Systems Could Play Out

So what would a cryptocurrency-based economic system look like as opposed to a CBDC-based system? As mentioned above, BTC has been increasing in value over time, even relative to gold, creating a strong incentive to save rather than spend BTC. This makes a BTC-based economy analogous to one where interest rates are consistently high, meaning inflation would be very low or even negative. 

Logically, this means a BTC-based economy is also one where it would be more expensive to borrow, and that could limit economic expansion. In a worst-case scenario, this could lead to a deflationary death spiral, where spending decreases, resulting in lower prices, lower production, and so on, until the economy dies. 

The thing is that the threat of a deflationary death spiral is nothing more than a ‘fiat currency finance conspiracy theory,’ as evidenced by the fact that the economy has been deflationary for most of human history. This is simply because innovation makes everything cheaper as time goes on, and the deflationary trend only changes whenever a central bank decides to turn the money printer on.


Image source: Adioma.com

A BTC-based economy also doesn't necessarily require using BTC as the currency. BTC could become the hard money that backs a more elastic currency, the same way gold was used to back national currencies, and that system has worked out pretty well. Ironically, a CBDC-based economy would face the same sort of deflationary risks for similar reasons. 

For instance, a CBDC status is considered a safe-haven asset in the eyes of the average investor. Multiple central banks have noted this status as the primary reason they're not rushing with their CBDC rollouts. A CBDC could siphon billions or even trillions of dollars from the traditional financial system. And this includes government bonds, which are also seen as safe-haven assets and considered cash equivalents by experienced investors and regulators alike. 

The interest rates on government bonds determine the interest rates in the broader economy, which are dictated by supply and demand. If everyone started selling government bonds for CBDCs because of a financial or geopolitical crisis, this would cause the interest rates in the economy to skyrocket, eventually leading to a next-level, deflationary death spiral and, potentially, even a full-on government default and collapse. Even if central banks programmatically put measures in place to prevent this scenario, a CBDC economy would still put central banks in direct competition with commercial banks. 

The Bank for International Settlements admitted in its CBDC report, “a common theme is that maintaining bank profitability would be challenging.” The Bank for International Settlements also determined that the only way a bank could remain profitable would be to raise interest rates. That would make borrowing extremely difficult and result in substandard economic conditions due to deflation.

Although, it seems the financial elite has a solution, and that's a synthetic CBDC, which was defined by the World Economic Forum in their CBDC and stable coin report. A synthetic CBDC would involve having a centralized stablecoin issuer holding the assets backing its stablecoin with a country's central bank. As discussed in this article, the two largest regulated stablecoins are supported almost entirely by cash equivalents, and that’s 'code' for government debt. 

This is quite clever because it means everyone buying a regulated stablecoin is financing the US government by indirectly purchasing government debt, which keeps interest rates low and allows its fiat ponzi to continue.


Image Source: Markethive.com

A Positive Note To Wrap Up

After studying various reports and following these topics, there’s arguably no chance CBDCs will reach mass adoption. There are a few reasons for this; 

Firstly, the Bank for International Settlements found that only 4-12% of people in developed countries would voluntarily adopt CBDCs. This is significantly lower than the current adoption rates for cryptocurrency. The fact that financial institutions are studying cryptocurrencies to recreate the same adoption curve with CBDCs is evidence of that. 

Secondly, the people who know how to create distributed ledger technologies are better off working on a blockchain than a distributed database. Creating a cryptocurrency coin or token that does something useful and valuable can result in astronomical profits and no shortage of social approval. Being involved in creating a CBDC will generate a six-figure salary at best and be seen as the enemy of society in the eyes of many.

Last but not least, central banks are losing the narrative on CBDCs. The awareness of the masses is continually increasing, with hoards of concerned citizens making their voices heard worldwide, physically and virtually, on thousands of truth-seeking internet media. 

The more people become aware of how dystopian these CBDCs are, the harder it will be for governments to roll them out. We're already starting to see politicians in the United States and elsewhere propose bills to prevent their central banks from issuing CBDCs, and it's because they are aware their voters don't want the Digital ID/CBDCs. 

The “pen is mightier than the sword” is an adage coined in 1839, and this phrase remains commonly known and used 182 years later. Or perhaps we can use a more updated version of a “post is mightier than a gun.” So, get the word out to the unawakened to ensure they know the difference between Central Bank Digital Currencies and honest-to-goodness Cryptocurrencies. 

 

 

 

Editor and Chief Markethive: Deb Williams. (Australia) I thrive on progress and champion freedom of speech. I embrace "Change" with a passion, and my purpose in life is to enlighten people to accept and move forward with enthusiasm. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.
 

 

 

 

Tim Moseley

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Gold trades lower until you factor in dollar weakness

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Gold trades lower until you factor in dollar weakness

Gold would have traded lower today if it was not for the dollar's weakness. The dollar is currently down 0.543 points or 0.52% with the dollar index fixed at 104.615. Concurrently, gold futures basis most active April contract is trading up $7.00 or 0.40% and fixed at $1824.10. This means that dollar weakness accounts for over 100% of today’s gains in gold. The resulting net change of gold is based on the dollar weakness and fractional selling pressure in gold.

The same relationship between gold and the dollar can be seen in the physical or spot market. According to the Kitco Gold Index (KGX), spot gold is currently fixed at $1818.10 after factoring in today’s net gain of $6.90. On closer inspection dollar weakness resulted in spot gold gaining $9.80 with fractional selling pressure taking back $2.90 of those gains.

The question becomes what fundamental events could explain dollar weakness today? For that we need to look at two reports released today.

The first report revealed that new orders for manufactured durable goods decreased by $13 billion or 4.5% coming in at $272.3 billion.

The other report released today was pending home sales in January by the National Association of Realtors. This report revealed that pending home sales improved for the second consecutive month. Collectively all four U.S. regions posted that pending home sales increased by 8.1% month-over-month. However, when you look at the data year over year pending transactions decreased by 24.1%.

When you look at the durable goods and pending home sales (year-over-year) they both indicate that the economy in the United States is contracting. This seems to be the most plausible explanation for dollar weakness today which led to the fractional gains in gold.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

Tim Moseley

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Gold at risk of a major drop as prices at ‘pivotal point’ – analysts

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Gold at risk of a major drop as prices at 'pivotal point' – analysts

With the latest inflation numbers stressing out markets across the board, gold is at a "pivotal point," according to analysts who are not ruling out a deeper selloff if gold drops below $1,800 an ounce.

This week's big surprise was the hawkish Federal Reserve meeting minutes, which revealed that "a few" FOMC members were leaning towards a 50-basis-point hike instead of the more dovish 25-bps increase adopted at the February meeting.

On top of that, the Fed's preferred inflation measure — the annual core PCE price index — accelerated in January, coming in at 4.7% versus the expected 4.3%.

"There's a major reset in how high rates will go. People are now thinking over 6%. That's significant enough that it is breaking gold's back," OANDA senior market analyst Edward Moya told Kitco News.

If there is further momentum towards $1,800 an ounce, it could "get ugly" for gold, and prices could drop another $50, Moya added.

At the time of writing, April Comex gold futures were trading at $1,816.60 an ounce, down for the fifth week in a row.

"This is a pivotal point right here," Forex.com senior technical strategist Michael Boutros told Kitco News. "If we get a weekly close below $1,807-$1,805, you risk a big drop. And you could be looking at $1,750s."

It is the macro outlook that is weighing on gold. In January, the precious metal rallied on the idea that the Fed could cut rates at the end of 2023.

Now, the reality is starting to set in, Boutros explained. "And inflation numbers we got today are showing that. And that adjustment to higher rates is hitting the markets," he said.

The good news for gold is that this rate re-pricing is also impacting the equity space. And if the S&P 500 and the Dow keep falling, gold might see some support as the safety trade, Boutros noted. "That should put some sort of floor under gold's price," he added.

Geopolitical tensions are also not letting up, which is working in gold's favor in terms of finding a bottom in this downtrend.

"People are throwing around all these big words like 'nuclear threats.' It is the first anniversary of the war in Ukraine, and it is time for a reality check. The threat is there. And if that threat becomes more prominent on a global scale and if these talks continue to deteriorate, at some point, that will factor in," Boutros pointed out.

The volatility in the gold market is far from over, as prices can fall as quickly as they recover, said Gainesville Coins precious metals expert Everett Millman.

"Given gold's nature to have these quick selloffs and recoveries during times of panic, there is not an extremely strong floor right now. I wouldn't be surprised to see gold break below $1,700, with expectations that it would come back up pretty quickly if there is an escalation in Ukraine," Millman told Kitco News.

With markets realizing the difficulty in bringing inflation down to the Fed's 2% target, gold will remain vulnerable in the short term.

"There is some support at $1,750, but then you don't have anything major until possibly $1,730. This is a major change in sentiment," Moya said.

Next week's data

Analysts will monitor the macro data scheduled for next week for any signs of weakness after a solid start to the year.

"We cautioned that the stark contrast in weather between December's wintery, cold conditions … and January's almost spring-like temperatures played a big part in the strength of data," said ING's chief international economist James Knightley. "[Next] week, we will get a first test of that hypothesis with the ISM manufacturing and service sector reports for February."

Monday: U.S. durable goods orders, U.S. pending home sales,

Tuesday: U.S. CB consumer confidence

Wednesday: U.S. ISM manufacturing PMI

Thursday: U.S. jobless claims

Friday: U.S. ISM non-manufacturing PMI

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

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War-time economy and gold’s 2k target

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War-time economy and gold's $2k target

Gold is at a pivotal point as prices approach $1,800 an ounce. Analysts say that gold is at risk of a much deeper selloff if that support level is lost. Here's a look at Kitco's top three stories of the week:

3. The hawkish Federal Reserve minutes from February.

2. Gold's ticket to $2,000 is U.S. recession, and that is looking more likely, says Bloomberg Intelligence

1. Rising geopolitical uncertainty could create a war-time economy that drives gold to $2,000 – BCA

By Anna Golubova

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

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PCE inflation index jumps to 5382 YOY or 06 in January

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PCE inflation index jumps to 5.382% YOY or 0.6% in January

The preferred inflation index used by the Federal Reserve; the core Personal Consumption Expenditures (PCE) index jumped to its highest value since last summer. The core PCE increased by 0.6% in January when compared to the prior month, taking the year-over-year PCE to 5.382%. Today's PCE report was the result of surging consumer spending after a dramatic decline at the end of last year.

According to the BEA, "Personal income increased $131.1 billion (0.6 percent) in January, according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $387.4 billion (2.0 percent) and personal consumption expenditures (PCE) increased $312.5 billion (1.8 percent). The PCE price index increased 0.6 percent in January. Excluding food and energy, the PCE price index also increased 0.6 percent (table 9). Real DPI increased 1.4 percent and Real PCE increased 1.1 percent; goods increased 2.2 percent and services increased 0.6 percent."

The net result was strong declines in US equities and precious metals and gains in both US treasury yields and the dollar. This raises expectations that the Federal Reserve will raise rates by ¼% for the next three consecutive FOMC meetings. This also raises the expectations by market participants that the terminal fed funds rate will move to a higher target than 5.1%.

Most importantly, this report confirms that components of inflation remain sticky or persistent. This after an extremely hawkish monetary policy by the Federal Reserve has raised rates at the last eight consecutive FOMC meetings. The Fed raised its benchmark rate from near zero in March 2022 to 4.5% – 4.75% last month. It has also raised the probability of ½ a percent rate hike at the next FOMC meeting in March. According to the CME's Fedwatch tool, there is a 27% probability of that outcome.

Today's PCE report creates more bearish downside pressure for gold and silver. As of yesterday, gold futures were already priced below the opening price on January 3, the first trading day of the year.

Today's April gold futures gave up $8.80 or 0.48% and is currently fixed at $1818. March silver lost 2.66% or $0.57 and is currently fixed at $20.74 per ounce. Today's PCE report will only strengthen the resolve of the Federal Reserve to "do whatever it takes", to reduce inflation to their target level of 2%. However, their current target might be unachievable at least according to El-Erian, a Bloomberg Opinion columnist who doubts whether the Federal Reserve can achieve that goal. In fact, 3% to 3 ½% might be the new 2%.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

Tim Moseley

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The Seven stages of overcoming the new hawkish Federal Reserve’s policy and forward guidance

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The Seven stages of overcoming the new hawkish Federal Reserve's policy and forward guidance

Although the Federal Reserve implemented its first interest rate hike approximately one year ago, market participants went through various stages of accepting the new Federal Reserve’s narrative as fact. Oddly there are similarities to the way market participants went through a process of steps before they were able to accept and incorporate the forward guidance of the Federal Reserve. There are similarities between the steps needed for the American public to accept the new hawkish monetary policy of the Fed and overcoming a major life event such as grief.

Both events cause strong and overwhelming emotions, and the process of acceptance occurs through a series of steps that are quite similar to the seven stages of grief. In this article, we will look at the similarities between processing and accepting both scenarios.

Recently we have seen market participants move from disbelief to accepting that the Federal Reserve would implement the plan they laid out in December 2022. After the December FOMC meeting, when they released a report titled" Economic projections 2023 – 2025", which included the most current dot plot.

I entered the following question to Open AI’s GPT. "Can you compare the seven steps of grief to changes in the monetary policy of the Federal Reserve", and got the following reply?

"As an AI language model, I do not hold personal opinions, but I can provide an analogy to help illustrate how the seven stages of grief could be compared to the process necessary to accept the Federal Reserve's new hawkish monetary policy.

The seven stages of grief are a model developed by psychiatrist Elisabeth Kubler-Ross to describe the process that people go through when they experience significant loss. The stages are denial, anger, bargaining, depression, acceptance, testing, and integration.

Similarly, the process of accepting the Federal Reserve's new hawkish monetary policy may involve several stages. At first, there may be a feeling of denial or disbelief that the policy is necessary. Then, there may be anger or frustration about the potential consequences of the policy, such as higher interest rates or reduced economic growth.

Afterward, people may try to bargain, seeking ways to mitigate the impact of the policy or find alternatives. As the policy takes effect, there may be feelings of depression or anxiety about the unknown future. Eventually, however, people may come to accept the policy as necessary and begin testing it to see how it affects them.

Finally, the policy may be integrated into people's understanding of the economy and their financial decisions. This process may take time and may involve setbacks and adjustments along the way. However, ultimately, the acceptance of the new policy may lead to a more stable and prosperous economy in the long term."

While it is obvious that to compare the steps to overcome grief and the steps that market participants have taken to accept the new hawkish narrative of the Federal Reserve is a stretch, I believe that great insight can be gleaned from the AI platform.

Today’s decline in gold prices took the April futures contract below the opening of the first trading day on January 3. It is quite plausible that this most recent decline is a direct result of market participants accepting that the Federal Reserve "will do whatever it takes", to reduce inflation to their target level of 2%. I believe the recent decline in gold clearly demonstrates that market participants have accepted the new narrative of the Federal Reserve.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

Tim Moseley

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Federal Reserve minutes were released today But Wait There’s More

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Federal Reserve minutes were released today, "But Wait There's More"

I know it is a little cliché to use a phrase most recognized from late-night ads hawking everything from pots to knives, to discuss the FOMC minutes released today, but the minutes continue to send the same message to the American public. The Federal Reserve will continue and implement "more" rate hikes until "inflation is clearly on a path towards 2%."

The Fed's hawkish monetary policy seeks to raise its benchmark Fed funds rate to a target just above 5%, and keep that rate elevated until incoming data provide confidence that inflation is on a sustained downward path to 2%.

The minutes revealed that Federal Reserve members almost unanimously anticipate that it is appropriate to raise its Fed funds rate by 25 basis points at the next FOMC meeting scheduled to be held in March, although two officials favored a larger 50 basis point hike.

"Market participants interpreted incoming data as pointing to moderating inflation risks. Against this backdrop, market participants judged that the FOMC would likely slow the pace of rate increases further at the current meeting, and respondents to the Desk's Survey of Primary Dealers and Survey of Market Participants widely expected the Committee to implement a ¼ percentage point increase in the target range for the federal funds rate."

According to Bloomberg News, "US central bankers raised interest rates by a quarter-point, moderating their action after a half-point hike in December and four consecutive jumbo-sized 75 basis-point increases. The move lifted the benchmark policy rate into a range of 4.5% to 4.75%. Both Chair Jerome Powell and the minutes indicated that officials are prepared to raise rates further to produce a broader slowdown in the economy that tamps down inflation."

The release of the Fed minutes today created bullish momentum for the dollar and concurrently more sustained bearish momentum for gold. The dollar gained 0.36% today or 37 points fixing the dollar index at 104.485.

As of 5:10 PM EST, the most active April contract of gold futures is down $8.30 or 0.45% and fixed at $1834.20. Today's decline effectively sealed the fate of gold's strong price decline in February. Gold pricing is now below the opening price of January 3, the first trading day of the year.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

Tim Moseley

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The Power of Patience: Long-Term Investing Strategies for a Shaky Economy

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The Power of Patience: Long-Term Investing Strategies for a Shaky Economy


The current economic climate is characterized by instability, uncertainty, and volatility, making it challenging for investors to navigate the financial markets. The COVID-19 pandemic has profoundly impacted the global economy, leading to market disruptions, supply chain disruptions, and widespread business closures. In addition, political and economic tensions in many parts of the world have contributed to a volatile and uncertain financial environment.

As a result of these challenges, investors are understandably worried about their investments and financial stability. They are wondering how to protect their portfolios from the effects of a shaky economy and avoid the pitfalls of short-term thinking. In times like these, it's important to remember that long-term investing strategies are more powerful than ever before.

In this post, we will explore the benefits of long-term investing, its principles, and some challenges of investing in a shaky economy. We will also discuss different long-term investing strategies and how to balance long-term and short-term financial goals.

Key Principles of Long-Term Investing

Long-term investing is a strategy that involves holding investments for an extended period, typically over five or more years. However, simply holding investments for a long time is not enough to achieve long-term goals. Instead, investors must follow key principles to help them achieve their financial objectives.

One of the key principles of long-term investing is diversification. Diversification involves spreading investments across asset classes, industries, and geographies to reduce risk. By investing in a variety of assets, investors can avoid putting all their eggs in one basket and can help mitigate the impact of market volatility. For example, if an investor puts all their money into one stock, they risk losing all their money if that stock performs poorly. However, spreading their money across several stocks and other asset classes reduces their risk and potential losses.

Another important principle of long-term investing is asset allocation. Asset allocation involves determining the right mix of asset classes to achieve an investor's long-term goals. This involves considering the investor's risk tolerance, time horizon, and financial goals. For example, an investor with a long time horizon and high-risk tolerance may choose to allocate more of their portfolio to equities, while an investor with a shorter time horizon and lower risk tolerance may choose to allocate more of their portfolio to fixed-income investments.

Finally, risk management is another important principle of long-term investing. Risk management involves identifying potential risks and taking steps to mitigate those risks. This may involve diversifying investments, investing in lower-risk assets, and implementing strategies to protect against market downturns. By managing risk effectively, investors can reduce their exposure to potential losses and help achieve their long-term financial goals.

Benefits of Long-Term Investing

Long-term investing is a strategy that involves holding investments for an extended period, typically over five or more years. One of the key benefits of long-term investing is the power of compounding interest, which is the ability of an investment to generate earnings on its earnings over time. Compounding can be especially powerful over long periods, as small gains can grow into substantial wealth.

Another benefit of long-term investing is the "time in the market" approach. This approach involves buying and holding investments for the long term rather than trying to time the market by buying and selling based on short-term market fluctuations. This can help investors avoid making rash decisions based on emotions or market noise, leading to costly mistakes.

In addition to the power of compounding and the time in the market approach, there are several other benefits to long-term investments that are worth considering:

1. Reduced transaction costs: Long-term investing can help reduce the impact of transaction costs, such as brokerage fees and commissions. By holding investments for an extended period, investors can avoid the need to buy and sell frequently, which can lead to unnecessary costs.

2. Diversification: Long-term investing allows investors to build a diversified portfolio of assets across various asset classes, sectors, and geographies. A diversified portfolio can help reduce risk and volatility by spreading investments across different types of assets that are not highly correlated with each other.

3. Greater potential for higher returns: Long-term investments have historically produced higher returns than short-term investments. While there is always a level of risk involved in investing, the potential for higher returns over the long term can help offset that risk.

4. Peace of mind: Long-term investing can help investors avoid the stress and anxiety of predicting short-term market movements. By focusing on a long-term strategy and staying invested even during market downturns, investors can enjoy greater peace of mind knowing that they are investing long-term and not just trying to chase short-term gains.

Long-term investing has numerous benefits and can help investors weather the storm during a shaky economy. While short-term market fluctuations may be concerning, it's important to stay focused on the long term and remember that patience and discipline can ultimately pay off.

Weathering Market Volatility

Market volatility is one of the biggest challenges of investing in a shaky economy. Market volatility refers to the degree of variation of a stock's price or a market's value. When markets are volatile, prices can swing wildly, and investors can be tempted to make rash decisions.

However, it's important to remember that market volatility is normal in investing. In fact, volatility allows investors to earn higher returns over the long term. By maintaining a long-term perspective and resisting the temptation to make knee-jerk reactions to market fluctuations, investors can help avoid costly mistakes.

There are also several strategies that investors can use to minimize risk and manage emotions during times of market volatility. These include dollar-cost averaging and value investing.

Strategies for Long-Term Investing

Investors can use several different long-term investment strategies to achieve their goals. Some popular strategies include buy and hold, dollar-cost averaging, and value investing.

Buy and hold involves investing and holding investments for the long term, regardless of short-term market fluctuations. This strategy is based on the belief that over the long term, markets tend to rise and that by holding investments for a long time, investors can benefit from the power of compounding.

Dollar-cost averaging involves investing a fixed amount of money regularly, regardless of market conditions. This strategy can help investors avoid the temptation to time the market and help smooth out market volatility's impact.

Value investing involves seeking out undervalued investments and holding them long-term. This strategy is based on the belief that the market sometimes misprices investments and that investors can benefit from their eventual correction by identifying undervalued assets.

Balancing Short-Term and Long-Term Goals

While long-term investing is essential, balancing long-term and short-term financial goals is vital. Short-term goals can include saving for a down payment on a home, paying off debt, or funding a child's education. Long-term goals include retirement savings, investing in a business, or leaving a financial legacy for future generations.

Establishing an emergency fund is one way to balance short-term and long-term goals. An emergency fund is a reserve of cash or liquid assets that can be used to cover unexpected expenses, such as a job loss, medical bills, or a major home repair. By having an emergency fund, investors can avoid selling investments during market volatility or economic uncertainty.

Another way to balance short-term and long-term goals is to establish a savings plan. A savings plan can include the following:

  • Automatic contributions to an investment portfolio.
  • A regular contribution to a 401(k) or IRA.
  • A dedicated savings account for short-term goals.

By establishing a savings plan, investors can progress toward both short-term and long-term financial goals. 

 

Why Markethive Remains Your Best Bet for Long-Term Investment

In today's economic climate, investing in the right opportunities is crucial to achieving long-term financial success. With the current economic uncertainties and market volatility, finding stable and profitable investment opportunities can be challenging. However, one opportunity that has been in development since 1996 is the Markethive project, now gaining attention among entrepreneurs as the best long-term investment in this shaky economy.

Markethive is a blockchain-powered social market network that combines social media, digital marketing tools, and cryptocurrency to create a unique platform for entrepreneurs and small businesses. The platform offers a range of features, including blogging, email marketing, and social media sharing, to help businesses increase their online visibility, reach new customers, and grow their bottom line.

One of the critical reasons why Markethive is the best long-term investment is that it is built on blockchain technology. Blockchain technology provides a secure decentralized network resistant to hacking, fraud, and manipulation. This means that the Markethive platform is protected against cyber-attacks and data breaches, which is a major concern for businesses in today's digital landscape.

Another reason Markethive is a great long-term investment is its use of cryptocurrency. The platform has its cryptocurrency, Hivecoin, to power transactions on the network. Hivecoin has started gaining a significant following among cryptocurrency enthusiasts, and its value is expected to increase after it has been listed on the exchanges and as the platform grows.

Moreover, Markethive has a clear and transparent roadmap for growth and development. The company has a dedicated team of developers, marketers, and entrepreneurs who are focused on expanding the platform's features and user base. The company has also established partnerships with leading companies in the blockchain and digital marketing industries, further boosting its credibility and potential for growth.

Furthermore, Markethive is designed to benefit its users and community, not just its investors. The platform is built on decentralized and community-driven technology principles, and it rewards its users for their contributions through a unique rewards program. This program enables users to earn Hivecoins for various activities on the platform, such as blogging, sharing content, and referring new users. This means that users can benefit from the success of the platform in the long term, not just its investors.

Markethive Entrepreneur One Program (E1)

The E1 program offers subscribers various benefits to help them achieve their business goals faster and more efficiently. From advanced marketing automation tools to blockchain-based security and privacy features, the E1 program has everything you need to take your online business to the next level.

The E1 program offers entrepreneurs and small business owners access to powerful marketing tools, training, and support, as well as the opportunity to participate in the Incentivized Loan Program. Becoming an E1 member will be an excellent long-term investment in your business and future. 

Here are some of the benefits of the E1 program:

1. Advanced Marketing Automation Tools: Markethive's E1 program offers advanced marketing automation tools that can help you streamline your marketing efforts and save time, including email autoresponders, lead capture pages, and more.

2. Incentivized Loan Program (ILP): One of its key benefits is the Incentivized Loan Program (ILP), which allows members to earn equity in Markethive through their ongoing participation and contributions to the community. This provides a long-term incentive to stay engaged with the platform and build a successful business over time. It is achieved through the monthly $100 E1 subscription fees. All ILP holders will receive some percentage of the company's net revenue for 20 years with an option to roll it over or end it on the 20th year.

3. Advertising Impressions: Every month, E1 subscribers receive a certain number of advertising impressions that they can use to promote their business, products, or services on the Markethive platform. These impressions can be used to display banner ads, text ads, or sponsored content and can be targeted to specific audiences based on demographics, interests, and other criteria. The number of advertising impressions allocated to E1 subscribers varies. Because Markethive has a growing and active user base, these impressions can help drive significant traffic and exposure to your business.

4. Unlimited Advertising Co-op: The Markethive E1 program also offers access to an unlimited advertising co-op, which can help you get your business in front of more potential customers and drive more sales. The advertising co-op is a valuable feature of the Markethive E1 program that provides subscribers with an affordable and effective way to promote their businesses and products. E1 subscribers can access high-quality advertising that would otherwise be out of reach and build a community of entrepreneurs who can help each other achieve their goals.

Considering all of these benefits together, it's clear that the E1 program is an investment in your business that is well worth making. And, because Markethive is constantly evolving and improving, now is the perfect time to get on board and start taking advantage of all that the platform has to offer.

But that's not all. It's also worth noting that the E1 program is a long-term investment that can benefit you, your children, and future generations. By subscribing to the E1 program, you're laying the foundation for a successful online business that can provide you with passive income for years to come.

And for those with an E1 program subscription, it's worth considering getting more before the opportunity is gone forever. As the platform continues to grow and evolve, the value of the E1 program will only increase as the sales will close when the Wallet is released. Then you can only get it from the exchange from those willing and ready to sell. It makes sense to lock in your subscription now while you still can.

Conclusion

Long-term investing is a powerful strategy for building wealth, even in a shaky economy. By following fundamental principles of diversification, asset allocation, and risk management, investors can help protect their portfolios and achieve their long-term goals. By weathering market volatility, using different long-term investing strategies, and balancing short-term and long-term financial goals, investors can build a solid financial foundation for the future. With patience and discipline, anyone can become a successful long-term investor.

The Markethive project is the best long-term investment in this shaky economy. With its secure and decentralized blockchain technology, use of cryptocurrency, a clear roadmap for growth and development, and community-driven rewards program, Markethive offers a unique and profitable investment opportunity for subscribers and general users alike. By becoming an E1 Member, you can position yourself for long-term financial success while supporting a platform designed to help small businesses and entrepreneurs thrive in today's digital economy. So why wait? Subscribe today and start taking your online marketing efforts to the next level while building generational wealth!

 

ecosystem for entrepreneurs

 

About: Prince Chinwendu. (Nigeria) Rapid and sustainable human growth is my passion, and getting a life-changing opportunity into the hands of people is my calling. Empowering entrepreneurs provides me with enormous gratification. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.

 

 

 

 

Tim Moseley

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Changing expectations of the Fed’s forward guidance pressure gold lower

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Changing expectations of the Fed's forward guidance pressure gold lower

The Federal Reserve first spoke about its forward guidance at last year’s Jackson Hole Economic Symposium. Specifically, it was Chairman Powell’s keynote speech that delivered the blow to the American public about its intent to raise rates and keep those elevated rates in place until the Fed hits its 2% inflation target.

After the December FOMC meeting the Federal Reserve released its economic projections for 2023 – 2025 including the most recent dot plot. The dot plot is the Fed’s mechanism for predicting future rates by calling on 17 Fed officials to vote on future monetary policy. In the case of the December dot plot, it revealed an overwhelming consensus that the Fed would raise rates to a target of just over 5%, and keep rates elevated for the entire calendar year of 2023.

Although the Federal Reserve has maintained its policy, it was market participants' expectations that have recently shifted from disbelief to an acceptance that the Fed will not likely back off its extremely hawkish monetary policy. This includes continued rate hikes and maintaining those elevated rates throughout the year.

During February market sentiment regarding the forward guidance of the Federal Reserve shifted from uncertainty to acceptance. That resulted in gold trading under pressure for the last three consecutive weeks. On the first full trading day of the week (due to shortened trading hours yesterday on Presidents’ Day) gold is once again trading under pressure. As of 3:25 PM EST, the most active April futures contract is down $5.30 or 0.29% and fixed at $1844.80.

While it is true that inflation has been declining since the Federal Reserve began raising rates in March of last year, recent data suggests that inflation is not diminishing as quickly as the Federal Reserve had hoped. The jobs report for January coming in well over the forecast of 188,000 versus 517,000 combined with the most recent inflation reports suggests that inflation remains elevated and persistent in certain sectors.

The most recent data has cemented the idea that the Federal Reserve will maintain its hawkish monetary policy with a real possibility of two more rate hikes and most importantly maintain the new elevated rates throughout 2023.

By Gary Wagner

Contributing to kitco.com

Time to Buy Gold and Silver

Tim Moseley

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Gold prices can go lower but now is the time to build a strategic position – Incrementum’ Ronald-Peter Stferle

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Gold prices can go lower, but now is the time to build a strategic position – Incrementum' Ronald-Peter Stöferle

Now is the time for investors to look at building a strategic position in the gold market, according to one market strategist, as prices are expected to struggle in the near term due to rising bond yields on the short end of the curve.

In an interview with Kitco News, Ronald-Peter Stöferle, managing partner and fund manager at Incrementum AG and one of the authors of the annual In Gold We Trust report, said that he is expecting to see lower gold prices in the near term as markets begin to price in further aggressive monetary policy action from the Federal Reserve.

Persistently higher inflation has prompted markets to price in a 21% chance that the Federal Reserve will raise interest rates by 50 basis points next month. These shifting expectations have pushed the yield on U.S. two-year notes above 4.6%, its highest level since 2007.

At the same time, the yield on one-year notes is above 5%. Stöferle noted that when looking at inflation expectations, real bond yields are currently seeing positive returns.

"This is a tough environment for gold and I expect to see further downside risks in the next couple of weeks," he said.

The comments come after April gold futures ended last week in neutral territory at around $1,850 an ounce. Markets are closed Monday for the Presidents' Day long weekend.

However, Stöferle added that the gold market continues to show relative strength despite the selling pressure. He explained that he sees the price action and resilient strength in gold as the market calling out central bankers' hawkish rhetoric.

The rise in shorter-term bond yields has pushed the inverted yield curve to its widest level in 40 years. Stöferle said that this market trend indicates that it's only a matter of time before the U.S. falls into a recession and the Federal Reserve is forced to unwind its aggressive tightening.

Stöferle said that he expects that as soon as unemployment starts to rise, the Fed will quickly loosen interest rates.

"In the 2022 In Gold We Trust, we said that central bankers are doves in hawkish clothing and nothing we have seen has changed this view," he said. "As soon as credit markets tighten, there's no way the Fed or any central banker will stay hawkish."

While there is growing optimism in the marketplace that the U.S. can avoid a recession, Stöferle said that many investors have underestimated the time lag in monetary policy. He added that the Federal Reserve has already made its policy mistake and it's only a matter of time before something breaks.

 Commerzbank lowers mid-year gold price forecast to $1,800 due to shifting interest rate expectations

Not only has the Federal Reserve raised interest rates by 450 basis points this tightening cycle, but it has also reduced its balance sheet by $500 billion. Stöferle said that it's only a matter of time before the economy feels the effects of reduced liquidity in the marketplace.

"It's like being in a room that is losing oxygen. At first, you might not notice anything, but then it gets harder to breathe. Soon, you are rushing to the exits, hoping to get out before it's too late," he said. "Not only is the risk of a recession rising, but I think we could see a major fiscal crisis."

In this environment, Stöferle said that now is the time to take advantage of lower gold prices and build a strategic position ahead of the second half of the year. He added that one strategy investors should look at is building a position through cost averaging, where you look to buy at successively lower prices.

Despite lower prices in the near term, Stöferle said that gold prices are still on track to end the year above $2,000 an ounce.

By Neils Christensen

For Kitco News

Time to Buy Gold and Silver

Tim Moseley

The Artist that came out of the Winter