China's technological advancement is undeniable. The country has made impressive progress in many emerging and critical technology domains thanks to significant investments in research and development. China is emerging as a global leader in a variety of fields, from artificial intelligence to quantum computing. As China gains technological dominance, it threatens to outcompete Western powers and disrupt the current world order.

China's Technological Advancement and its Global Implications

In recent years, China has emerged as a global leader in science and technology. China has gained a significant advantage over Western democracies by establishing a leadership position in high-impact research across a range of critical and emerging technology domains. The country's dominance extends to 37 out of the 44 technologies tracked by ASPI, including defence, space, robotics, energy, biotechnology, artificial intelligence (AI), advanced materials, and key quantum technology areas. Notably, some of the world's top ten research institutions for specific technologies are based in China, and they produce nine times the number of high-impact research papers as the second-ranked country, which is usually the United States.

It's worth noting that China's technological advancement strategy is a deliberate design supported by long-term policy planning. The growth of the country's technology sector is a national priority. In fact, the Chinese Academy of Sciences ranks highly, often first or second, in many of the 44 technologies included in the Critical Technology Tracker.

China's Attraction of Foreign Talent: Implications for Innovation and Security

China's investment in science and technology is not limited to domestic initiatives. To strengthen its research and development capabilities, the country has been actively seeking to attract foreign talent, particularly from the Five-Eyes countries. The Five-Eyes countries are known for their advanced research institutions and universities, which include the United States, Canada, the United Kingdom, Australia, and New Zealand.

China has been offering attractive incentives, such as research grants, funding for scientific projects, and subsidized housing, to attract talented researchers from these countries. Many researchers from these countries have been enticed by the generous funding and the opportunity to work with top Chinese researchers in their field of expertise.

The presence of these foreign researchers in China has contributed significantly to the country's scientific output. One-fifth of high-impact research papers in China are authored by researchers with postgraduate training in a Five-Eyes country. This is a clear indication of China's commitment to building a strong knowledge-based economy by leveraging the expertise of researchers from around the world.

This strategy, however, has not been without controversy. Some Western democracies have expressed concern that these programs will result in the transfer of intellectual property and sensitive information to China. As a result, some countries have begun to limit the flow of talent to China, particularly in sensitive areas such as artificial intelligence and advanced materials. For example, the United States has tightened visa policies for Chinese researchers, particularly those working on sensitive technologies.

Trade war

The trade war between China and the United States reflects Western democracies' concern about China's growing dominance in the technology sector. The Trump administration launched the trade war in 2018 to address the US trade deficit with China and to force China to change some of its economic policies, including intellectual property theft. The underlying reason for the trade war, however, was a fear that China's rapid technological advancements would threaten America's technological superiority and global influence.

The trade war resulted in the United States imposing tariffs on Chinese goods, which had a significant impact on China's economy. China, on the other hand, retaliated by imposing tariffs on American goods, sparking a multi-year trade war. The trade war caused disruptions in global supply chains, increased business costs, and a decrease in international trade.

Despite the negative effects of the trade war, China has continued to invest in its technology sector, expanding its dominance in critical and emerging technology domains. This situation emphasizes the importance of Western democracies developing a long-term strategy to address China's technological advancements rather than resorting to short-term solutions such as trade wars.

China's Technology Advancements: Global Impact in Short and Long Term

China's technological advancements have the potential to shape the world in both the short and long term. In the short term, China's dominance in critical technologies and effective strategies for commercializing research breakthroughs could give it a significant advantage in the global supply of certain technologies. This could have far-reaching consequences for other countries, particularly in industries like defense and technology.

In the long term, China's research leadership positions it to not only excel in current technological development but also in future technologies that have yet to be discovered.

The information contained in Amarii Holdings website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

Cryptocurrency has come a long way since its inception in 2009 with the launch of Bitcoin. Over the years, the industry has grown exponentially, with new cryptocurrencies emerging and existing ones gaining popularity.

However, as the market has matured, it is time for the industry to move beyond its focus on NFTs and embrace digital tokenization as a more viable and sustainable use case.

Larry Fink, the Chairman and CEO of BlackRock, stated in his annual letter to shareholders that tokenizing asset classes offers the prospect of driving efficiencies in capital markets, shortening value chains, and improving liquidity. This statement underscores the immense potential of digital tokenization, particularly in terms of the benefits it can offer to investors.

Digital tokenization refers to the process of creating digital tokens on a distributed ledger or blockchain that represent ownership or value in an underlying asset, which can include securities such as stocks and bonds, or even physical assets. The key benefits of tokenization include increased liquidity, faster settlement, lower costs, and bolstered risk management. These digital tokens can be traded and settled on a blockchain, which can help streamline the settlement process, reduce costs, and increase efficiency.

One of the primary advantages of digital tokenization is increased investor accessibility. Because fractional ownership of tokenized assets lowers the barrier to entry and allows investors to invest in smaller increments, it can open up investment opportunities to a broader range of investors. This has the potential to democratize investment opportunities and level the playing field for individual investors.

Although NFTs have received a lot of attention and popularity in recent years, their functionality as an investment vehicle is limited. This is due to the fact that NFTs primarily serve as unique digital assets and do not necessarily represent ownership or value in a tangible asset. As a result, they have limited investment potential and may not be as appealing to institutional investors.

In contrast, digital tokenization of securities can provide greater transparency, accessibility, and liquidity to investors. Tokenized securities can be traded and settled on a blockchain, which can help to streamline the settlement process, cut costs, and improve efficiency. Fractional ownership of tokenized securities can open up investment opportunities to a broader range of investors because it lowers the barrier to entry and allows them to invest in smaller increments.

Larry Fink notes that developing markets such as India, Brazil, and Africa are already beginning to reap cost benefits from digital payments while many developed countries, including the U.S., are lagging in innovation and still experiencing relatively high payment costs. Digital tokenization can help address this issue by providing a more efficient and cost-effective way to trade and settle financial assets.

NSE-RA: Revolutionizing Securities Trading in India through Tokenization

The National Stock Exchange of India's (NSE) initiative to launch a platform for the issuance and trading of digital tokens representing various securities is a groundbreaking example of successful tokenization. The platform, known as NSE-RA (NSE-Real Asset), aims to revolutionize the way securities are traded and held by creating a secure and efficient ecosystem for digital securities.

Companies can use the NSE-RA platform to create digital tokens that represent their securities, such as shares, bonds, and other financial instruments, and these tokens can be bought and sold on a blockchain-based platform. This contributes to the simplification of the process of issuing and trading securities, lowering transaction costs and increasing efficiency. Because all transactions are recorded on the blockchain and can be easily audited, the platform provides greater transparency and security for investors.

The NSE-RA platform has already piqued the interest of several Indian companies, and it is expected to help drive the growth of tokenization in the Indian securities market. By reducing the role of intermediaries, increasing accessibility, and providing more efficient and cost-effective trading, this platform has the potential to transform the traditional securities market.

One of the key benefits of the NSE-RA platform is that it helps to democratize access to investment opportunities by lowering the entry barrier for investors. The platform allows investors to invest in smaller increments, allowing a broader range of investors to participate. It can also facilitate fractional ownership of tokenized securities, allowing investors to diversify their portfolios and better manage risk.

BRZ Stablecoin: Advancing Tokenization in Brazil's Financial System

One example of successful tokenization in Brazil is the creation of BRZ, a stablecoin pegged to the Brazilian real, which was launched by the fintech company Transfero Swiss. The BRZ stablecoin is backed by a reserve of Brazilian Reals and can be used for a variety of purposes such as remittances, payments, and trading. The Ethereum blockchain, which provides transaction transparency and immutability, serves as the foundation for the token.

BRZ has gained significant traction in Brazil, with an increasing number of merchants and businesses accepting it as payment and several Brazilian cryptocurrency exchanges trading it. Furthermore, the BRZ token's stability, which is pegged to the Brazilian Real, has made it an appealing alternative for Brazilians seeking to avoid the volatility of other cryptocurrencies such as Bitcoin or Ethereum.

The success of BRZ has paved the way for further advancements in tokenization and blockchain-based solutions in Brazil, with several startups and companies investigating the potential of these technologies to improve financial inclusion, lower transaction costs, and increase transparency in the Brazilian financial system.

Chaka and Trove: Revolutionizing Nigeria's Investment Landscape

Chaka's partnership with Trove to launch Nigeria's first digital securities trading platform is an excellent example of successful tokenization in an African country. The platform allows Nigerian investors to buy and sell fractional shares of stocks and other financial instruments listed on the Nigerian Stock Exchange using digital tokens. The platform has been designed to make it easy for investors to invest in the Nigerian capital market by lowering the entry barriers and increasing accessibility to investment opportunities.

The platform increases transparency for Nigerian investors, lowers transaction costs, and improves trading efficiency. It also allows investors to diversify their portfolios by investing in a variety of financial instruments such as stocks, bonds, and ETFs. The platform's launch is a significant step toward democratizing access to investment opportunities in Nigeria, Africa's largest economy.

Chaka's digital securities trading platform has seen significant interest from investors since its launch in 2019. The company has reported a 400% increase in user registrations, and it has processed over $300 million worth of trades[1]. The platform's success has also attracted significant investments, including a Chaka secured $1.5 million in pre-seed funding in 2020 to accelerate the growth of its investment platform in West Africa. The funding round was led by Breyer Capital and 4DX Ventures.[1]

Moving Beyond NFTs: Embracing Digital Tokenization

As the cryptocurrency market continues to mature, it is time for the industry to move beyond its focus on NFTs and embrace digital tokenization as a more viable and sustainable use case. Digital tokenization of securities can provide investors with increased accessibility, transparency, and liquidity, while also offering benefits in terms of fraud prevention and regulatory oversight. As Larry Fink notes, tokenization offers the prospect of driving efficiencies in capital markets, shortening value chains, and improving cost and access for investors. It is time for the industry to take heed of this message and move towards a more mature and sustainable future.

The information contained in Amarii Holdings website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

https://www.ft.com

Banks are designed to fail - and they do

Banks fail. When they do, those who stand to lose scream for a state rescue. If the threatened costs are big enough, they will succeed. This is how, crisis by crisis, we have created a banking sector that is in theory private, but in practice a ward of the state.

https://www.wsj.com

Yellen Says U.S. Could Move to Protect Deposits at Other Banks

Treasury Secretary Janet Yellen said Tuesday that the federal government could step in to protect depositors at additional banks if regulators see a risk of a run on the banking system. Ms. Yellen delivered remarks at a gathering of the American Bankers Association in Washington as she and other federal officials try to shore up confidence in the U.S.

https://www.ft.com

Executive pay at Silicon Valley Bank soared after big bet on riskier assets

Executive pay at Silicon Valley Bank soared after the bank embarked on a strategy to boost profitability by buying riskier assets exposed to rising interest rates, according to a Financial Times analysis of securities filings and people familiar with the matter.

https://www.ft.com

Four ways to fix the bank problem

Banks are designed to fail. And so they do. Governments want them to be both safe places for the public to keep their money and profit-seeking takers of risk. They are at one and the same time regulated utilities and risk-taking enterprises.

https://newsletter.pragmaticengineer.com

Amazon doubling down on RTO (return to office)

👋 Hi, this is Gergely with a bonus, free issue of the Pragmatic Engineer Newsletter. We cover one out of four topics in today's subscriber-only The Scoop issue. To get full issues twice a week, subscribe: One month ago - on 17 February - Amazon announced its new remote work policy.

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Why Investors Are Piling into African Startups

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George Porter

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Texas Republicans have written a bill to ban Chinese students from all colleges and universities, including the A&M and Univ of Texas systems:

capitol.texas.gov/tlodocs/88R/bi…

1,176

3:27 AM • Mar 11, 2023

NEWSLETTER RECAP

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Crybaby Capitalism and the Risks of Inflation and Market Crashes

The failure of Silicon Valley Bank, followed by the decision by US authorities to bail out all depositors, has sparked a heated debate. While some commend the move as a precaution against a larger financial disaster, I believe it was the wrong option. The action establishes a hazardous precedent by

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The Rise and Risks of the Shadow Banking System

The Federal Reserve's decision to maintain historically low interest rates has made it challenging for banks to maintain profitability through traditional lending methods. As a result, banks have shifted their investment strategy towards securities in recent years. This shift is part of a bro

Marathon Continues...

The Federal Reserve's decision to maintain historically low interest rates has made it challenging for banks to maintain profitability through traditional lending methods. As a result, banks have shifted their investment strategy towards securities in recent years. This shift is part of a broader trend of expansion in the shadow banking system, which comprises a complex network of financial institutions and transactions operating outside the traditional banking system. Hedge funds, money market funds, and special purpose vehicles (SPVs) are among the entities that make up the shadow banking system. While the shadow banking system provides credit to businesses and individuals, it also poses significant risks to the stability of the financial system, contributing to systemic risk.

The increased investment in securities by banks highlights the interconnectedness of the traditional banking system and the shadow banking system. This connection raises concerns about the potential transmission of risks and vulnerabilities across the financial system. It is important to examine the implications of this trend for financial stability and consider measures to mitigate the risks associated with the expansion of the shadow banking system.

The increased investment in securities by banks demonstrates the interconnectedness of the traditional banking system and the shadow banking system.

The Growth and Risks of the Shadow Banking System

The shadow banking system has grown in importance as a component of the financial system in recent decades. The term "shadow bank" was coined by economist Paul McCulley in a 2007 speech at the annual financial symposium hosted by the Kansas City Federal Reserve[1]. The shadow banking system refers to financial intermediaries that fall outside the realm of traditional banking regulations[3]. Its roots can be traced back to the 1970s, when financial innovations like securitization and derivatives first appeared. These advancements enabled banks to offload risks from their balance sheets, resulting in the formation of new entities such as mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) (CDOs).

To control their own risks, banks initially used securitization and derivatives. However, as these financial instruments became more popular, they were used for a broader range of purposes, such as the formation of new investment entities and the funding of various projects. As a result, what is now known as the shadow banking system grew.

The shadow banking system is comprised of several financial institutions and transactions. It includes firms like hedge funds, money market funds, and special purpose vehicles (SPVs), which perform comparable functions to regular banks but are not subject to the same regulations and control. These companies frequently use more leverage than typical banks and may participate in riskier activities such as investing in complicated financial instruments or lending to high-risk clients.

Although the shadow banking system has increased credit availability, it also poses significant risks to the financial system's stability. Companies in the system are intricately linked, which can result in rapid risk spread and widespread financial system collapse. The failure of a single large investment bank, Lehman Brothers, set off a chain reaction of failures and caused credit markets to freeze in 2008.

In response to the concerns raised by the shadow banking industry, regulators have taken a number of steps to strengthen oversight and reduce the potential for systemic risk. Among these measures are the implementation of capital buffers for banks, increased reporting requirements for shadow banking companies, and initiatives to reduce reliance on short-term funding sources.

Bob and Amarii Repo Transaction

Here's an example of how the repo market works:

Bob is a trader at a bank, and he needs to borrow $10 million to finance a Bob agreed to sell the US Treasury securities to Amarii for $90 million in cash. The $10 million haircut represents the difference between the market value of the Treasuries and the amount of cash that Amarii is lending to Bob.

1. Bob transferred the US Treasury securities to Amarii as collateral for the loan. This means that if Bob defaults on the loan, Amarii can sell the Treasuries to recover his funds.

2. Amarii held the US Treasury securities as security and lent Bob $90 million for one day.

3. Bob used the $90 million in cash to finance his trade, with the agreement that he would repurchase the Treasuries from Amarii the next day for $90.9 million.

4. The next day, Bob bought back the Treasuries from Amarii for $90.9 million, including $900,000 in interest. This meant that Amarii earned $900,000 in interest for lending Bob the cash.

5. Bob repaid the loan, and Amarii returned the Treasuries to Bob. The repo transaction was complete.

Benefits and Risks of the Repo Market for Short-term Funding

Understanding the repo market is critical to understanding the shadow banking system, which heavily relies on it for short-term funding for high-risk investments. Financial institutions borrow and lend money in the repo market using securities such as US Treasuries as collateral. The average daily aggregate repo and reverse repo outstanding in the United States is $4.3 trillion, with repo averaging $2.5 trillion, according to recent data.

This allows them to obtain funding at a lower cost than other options, such as bank loans or bond issuances. The repo market, on the other hand, can be a source of systemic risk, especially during times of stress when it can quickly dry up, leaving financial institutions with limited access to funding. Furthermore, the use of Treasuries as collateral in the repo market can lead to complex interconnectedness among financial institutions, increasing the risk of financial system contagion.

The shadow banking system has evolved into an important component of the financial system, delivering benefits such as credit availability and financial innovation. But, it also poses substantial hazards to the financial system's stability. The total size of the shadow banking system worldwide is estimated to be around $52 trillion in assets, which is a 75% increase since the financial crisis ended. The 2008 financial crisis brought these vulnerabilities to light, prompting considerable governmental measures aimed at enhancing oversight and decreasing systemic risk.

The crisis highlighted the interdependence of the shadow banking system with the traditional banking system, emphasizing the importance of a coordinated regulatory response to address systemic concerns. Notwithstanding considerable regulatory reforms, constant attention is required to ensure that the risks posed by the shadow banking system are effectively addressed. Future financial crises remain a major threat in the absence of proper oversight and regulation.

The Role of Shadow Banking in Systemic Risk

Systemic risk refers to the possibility of a collapse of the entire financial system, leading to a severe economic slowdown or even depression. This type of risk differs from idiosyncratic risk, which is specific to a particular asset or entity and can be mitigated by prudent portfolio management. Systemic risk cannot be mitigated since it impacts the entire financial system. The shadow banking system plays a significant role in systemic risk. Many shadow banking companies rely heavily on short-term funding, which can be volatile and prone to unexpected withdrawals. This can cause liquidity crises, where several institutions must sell assets simultaneously to meet their obligations, leading to asset price drops and financial instability. The 2008 financial crisis is an example of this kind of crisis.

Secondly, the shadow banking system generates leverage and interconnection, which increase the risk of systemic failure. Many shadow banking companies use leverage to increase their returns, which can exacerbate losses if investments perform poorly. Additionally, the shadow banking system is connected to the standard banking system and the broader financial system. Any difficulties in one part of the system can quickly spread to other areas, causing systemic failure.

To mitigate systemic risk from the shadow banking system, regulators have implemented new laws for money market funds, increased capital and liquidity requirements for banks, and improved transparency and monitoring of the securitization market. Nonetheless, given the continued expansion and evolution of the shadow banking industry, systemic risk remains a significant concern for financial stability. Therefore, it is crucial for regulators and policymakers to remain vigilant and proactive in identifying and addressing potential systemic risks in the financial system.

The information contained in Amarii Holdings website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

The Federal Reserve's decision to maintain historically low interest rates has made it challenging for banks to maintain profitability through traditional lending methods. As a result, banks have shifted their investment strategy towards securities in recent years. This shift is part of a broader trend of expansion in the shadow banking system, which comprises a complex network of financial institutions and transactions operating outside the traditional banking system. Hedge funds, money market funds, and special purpose vehicles (SPVs) are among the entities that make up the shadow banking system. While the shadow banking system provides credit to businesses and individuals, it also poses significant risks to the stability of the financial system, contributing to systemic risk.

The increased investment in securities by banks highlights the interconnectedness of the traditional banking system and the shadow banking system. This connection raises concerns about the potential transmission of risks and vulnerabilities across the financial system. It is important to examine the implications of this trend for financial stability and consider measures to mitigate the risks associated with the expansion of the shadow banking system.

The increased investment in securities by banks demonstrates the interconnectedness of the traditional banking system and the shadow banking system.

The Growth and Risks of the Shadow Banking System

The shadow banking system has grown in importance as a component of the financial system in recent decades. The term "shadow bank" was coined by economist Paul McCulley in a 2007 speech at the annual financial symposium hosted by the Kansas City Federal Reserve[1]. The shadow banking system refers to financial intermediaries that fall outside the realm of traditional banking regulations[3]. Its roots can be traced back to the 1970s, when financial innovations like securitization and derivatives first appeared. These advancements enabled banks to offload risks from their balance sheets, resulting in the formation of new entities such as mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) (CDOs).

To control their own risks, banks initially used securitization and derivatives. However, as these financial instruments became more popular, they were used for a broader range of purposes, such as the formation of new investment entities and the funding of various projects. As a result, what is now known as the shadow banking system grew.

The shadow banking system is comprised of several financial institutions and transactions. It includes firms like hedge funds, money market funds, and special purpose vehicles (SPVs), which perform comparable functions to regular banks but are not subject to the same regulations and control. These companies frequently use more leverage than typical banks and may participate in riskier activities such as investing in complicated financial instruments or lending to high-risk clients.

Although the shadow banking system has increased credit availability, it also poses significant risks to the financial system's stability. Companies in the system are intricately linked, which can result in rapid risk spread and widespread financial system collapse. The failure of a single large investment bank, Lehman Brothers, set off a chain reaction of failures and caused credit markets to freeze in 2008.

In response to the concerns raised by the shadow banking industry, regulators have taken a number of steps to strengthen oversight and reduce the potential for systemic risk. Among these measures are the implementation of capital buffers for banks, increased reporting requirements for shadow banking companies, and initiatives to reduce reliance on short-term funding sources.

Bob and Amarii Repo Transaction

Here's an example of how the repo market works:

Bob is a trader at a bank, and he needs to borrow $10 million to finance a Bob agreed to sell the US Treasury securities to Amarii for $90 million in cash. The $10 million haircut represents the difference between the market value of the Treasuries and the amount of cash that Amarii is lending to Bob.

1. Bob transferred the US Treasury securities to Amarii as collateral for the loan. This means that if Bob defaults on the loan, Amarii can sell the Treasuries to recover his funds.

2. Amarii held the US Treasury securities as security and lent Bob $90 million for one day.

3. Bob used the $90 million in cash to finance his trade, with the agreement that he would repurchase the Treasuries from Amarii the next day for $90.9 million.

4. The next day, Bob bought back the Treasuries from Amarii for $90.9 million, including $900,000 in interest. This meant that Amarii earned $900,000 in interest for lending Bob the cash.

5. Bob repaid the loan, and Amarii returned the Treasuries to Bob. The repo transaction was complete.

Benefits and Risks of the Repo Market for Short-term Funding

Understanding the repo market is critical to understanding the shadow banking system, which heavily relies on it for short-term funding for high-risk investments. Financial institutions borrow and lend money in the repo market using securities such as US Treasuries as collateral. The average daily aggregate repo and reverse repo outstanding in the United States is $4.3 trillion, with repo averaging $2.5 trillion, according to recent data.

This allows them to obtain funding at a lower cost than other options, such as bank loans or bond issuances. The repo market, on the other hand, can be a source of systemic risk, especially during times of stress when it can quickly dry up, leaving financial institutions with limited access to funding. Furthermore, the use of Treasuries as collateral in the repo market can lead to complex interconnectedness among financial institutions, increasing the risk of financial system contagion.

The shadow banking system has evolved into an important component of the financial system, delivering benefits such as credit availability and financial innovation. But, it also poses substantial hazards to the financial system's stability. The total size of the shadow banking system worldwide is estimated to be around $52 trillion in assets, which is a 75% increase since the financial crisis ended. The 2008 financial crisis brought these vulnerabilities to light, prompting considerable governmental measures aimed at enhancing oversight and decreasing systemic risk.

The crisis highlighted the interdependence of the shadow banking system with the traditional banking system, emphasizing the importance of a coordinated regulatory response to address systemic concerns. Notwithstanding considerable regulatory reforms, constant attention is required to ensure that the risks posed by the shadow banking system are effectively addressed. Future financial crises remain a major threat in the absence of proper oversight and regulation.

The Role of Shadow Banking in Systemic Risk

Systemic risk refers to the possibility of a collapse of the entire financial system, leading to a severe economic slowdown or even depression. This type of risk differs from idiosyncratic risk, which is specific to a particular asset or entity and can be mitigated by prudent portfolio management. Systemic risk cannot be mitigated since it impacts the entire financial system. The shadow banking system plays a significant role in systemic risk. Many shadow banking companies rely heavily on short-term funding, which can be volatile and prone to unexpected withdrawals. This can cause liquidity crises, where several institutions must sell assets simultaneously to meet their obligations, leading to asset price drops and financial instability. The 2008 financial crisis is an example of this kind of crisis.

Secondly, the shadow banking system generates leverage and interconnection, which increase the risk of systemic failure. Many shadow banking companies use leverage to increase their returns, which can exacerbate losses if investments perform poorly. Additionally, the shadow banking system is connected to the standard banking system and the broader financial system. Any difficulties in one part of the system can quickly spread to other areas, causing systemic failure.

To mitigate systemic risk from the shadow banking system, regulators have implemented new laws for money market funds, increased capital and liquidity requirements for banks, and improved transparency and monitoring of the securitization market. Nonetheless, given the continued expansion and evolution of the shadow banking industry, systemic risk remains a significant concern for financial stability. Therefore, it is crucial for regulators and policymakers to remain vigilant and proactive in identifying and addressing potential systemic risks in the financial system.

The information contained in Amarii Holdings website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

https://www.wsj.com

A Chinese Businessman's Trek From Beijing Gadfly to Steve Bannon Confidant to Fraud Suspect

Chinese businessman Guo Wengui, who gained attention by lobbing corruption allegations at Beijing from a Manhattan penthouse and later launched a media company with Trump confidant Steve Bannon, was arrested Wednesday and accused of orchestrating a $1 billion fraud.

https://www.wsj.com

Baidu's ChatGPT Rival Launches to Mixed Reviews

BEIJING-At an intimate event space in Baidu Inc.'s Beijing headquarters on Thursday, the Chinese search giant's Chief Executive Robin Li sought to wow an in-person and online audience by introducing its AI-powered chatbot, Ernie Bot.

https://www.wsj.com

WSJ News Exclusive | TikTok CEO's Message to Washington: A Sale Won't Solve Security Concerns

WASHINGTON-TikTok's boss has a message for the Biden administration and Congress: A sale won't resolve America's national-security concerns over the popular video app. Chief Executive Shou Zi Chew said in an interview that divesting the company from its Chinese owners- a move the U.S.

https://www.wsj.com

Jerome Powell Says Fed Is Prepared to Speed Up Interest-Rate Rises

WASHINGTON-Chair Jerome Powell said the Federal Reserve would consider raising interest rates by a larger half percentage point this month and was likely to lift rates higher than previously expected this year to cool an economy that has shown surprising strength.

https://www.theverge.com

OpenAI co-founder on company's past approach to openly sharing research: "We were wrong"

Yesterday, OpenAI announced GPT-4, its long-awaited next-generation AI language model. The system's capabilities are still being assessed, but as researchers and experts pore over its accompanying materials, many have expressed disappointment at one particular feature: that despite the name of its parent company, GPT-4 is not an open AI model.

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Luke Sophinos

@lukesophinos

This guy acquires companies for breakfast, lunch, and dinner.

But never sells them.

The coolest software billionaire you've never heard of

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Fossil Future: Why Global Human Flourishing Requires More Oil, Coal, and Natural Gas—Not Less

Marathon Continues...

During the Great Depression, for example, the government created the FDIC to insure bank deposits up to a certain amount rather than bailing out all depositors. In the case of Silicon Valley Bank, bailing out all depositors encourages risky behavior by both depositors and banks, creating a moral hazard. Furthermore, it establishes a dangerous precedent that may lead to future bank failures and bailouts.

A better strategy would have been to allow Silicon Valley Bank to fail while providing assistance to other banks in the form of loans and guarantees to avoid wider systemic issues. We can see from historical examples that there are alternative approaches that protect financial system stability without creating moral hazards.

The Hazards of Bailing Out Depositors

Moral hazard is a well-known concept that has received a lot of attention in the context of bank bailouts. Depositors may become less cautious about monitoring the bank's risk-taking activities if they believe their funds are guaranteed to be protected by the government in the event of a bank failure. This, in turn, may encourage banks to take on more risk, resulting in more bank failures. The 2008 financial crisis was a prime example of this, with the US government bailing out several large banks, prompting accusations of moral hazard.

These systems seek to impose losses on the bank's shareholders, bondholders, and other unsecured creditors, including depositors who have funds that exceed their country's guarantee limit. By departing from this criterion, the United States has created a moral hazard in which banks and depositors take excessive risks knowing they will be bailed out if the worst happens. This sets a dangerous precedent because it shifts the costs of the bank's failure to taxpayers and other financial institutions rather than imposing losses on those who bear the greatest risk.

Silicon Valley Bank's recent decision to bail out all depositors has raised concerns that it may undermine the principles of bank resolution systems. These systems seek to impose losses on the bank's shareholders, bondholders, and other unsecured creditors, including depositors who have funds that exceed their country's guarantee limit. By departing from this criterion, the United States has created a moral hazard in which banks and depositors take excessive risks knowing they will be bailed out if the worst happens. This sets a dangerous precedent because it shifts the costs of the bank's failure to taxpayers and other financial institutions rather than imposing losses on those who bear the greatest risk.

Succor Capitalism

Succor A kind of capitalism in which the government offers financial help or bailouts to failing firms and financial institutions in order to prevent their collapse is referred to as bailout capitalism. The term "succor" relates to the government's role in rescuing distressed firms. It signifies to provide relief or support in times of difficulty.

Succor Capitalism has been criticized for undermining free-market ideals by reducing business accountability and erasing the consequences of bad decisions. This method may create a moral hazard by encouraging reckless behavior and expose taxpayers to the risks of bailing out failing businesses. Despite these criticisms, Succor Capitalism has grown in popularity in recent years as governments have intervened to keep large financial institutions from collapsing during economic downturns.

Succor Capitalism: The Role of Government Intervention in Times of Crisis

Succor capitalism has become an important component of the American economic system, especially during times of crisis. During the COVID-19 pandemic, the US government intervened with unprecedented stimulus packages and loan programs aimed at keeping businesses afloat and protecting jobs. These efforts amounted to trillions of dollars[1].These measures have received both support and criticism, with some arguing that they are necessary to avoid economic collapse and others expressing concerns about the long-term effects of increased government intervention.

However, the concept of aid capitalism is not new in America. The government has a long history of intervening to help failing businesses, especially those deemed critical to national security or the economy. The airline industry, for example, has received numerous government bailouts over the years, including during the 2008 financial crisis. In 2009, the government also bailed out the automobile industry to keep it from collapsing during the Great Recession.

The Moral Hazard of Government Bailouts - Lessons from the Panic of 1873

The Panic of 1873, a catastrophic economic collapse that lasted six years, is one example. Many businesses and banks failed during this period, resulting in widespread unemployment and poverty. The National Bankruptcy Act of 1867 was enacted by the US government to assist struggling businesses and sectors. This act allowed corporations to declare bankruptcy and receive protection from creditors[1]. The act was the first to include protection for corporations, and it prompted the development of modern bankruptcy laws that emphasize rehabilitating debtors in distress with a limited emphasis on punishing them[1].

The bailouts and financial aid granted to failing organizations and sectors produced a sense of moral hazard, in which corporations and banks became less careful about taking risks, knowing that the government would come to their rescue if they failed.

This led to greater risky behavior and contributed to the subsequent economic bubbles and financial catastrophes, such as the Panic of 1893 and the Great Depression. While the government's efforts during the 1873 Panic served to alleviate acute economic distress, the long-term implications on the banking industry were negative.

The National Bankruptcy Act of 1867 was enacted to provide relief to individuals and businesses that were unable to pay their debts[1]. The act allowed debtors to file for bankruptcy and have their debts discharged, giving them a fresh start. However, the bailouts and financial aid granted to failing organizations and sectors produced a sense of moral hazard[1]. Moral hazard refers to the risk that individuals or organizations will take on more risk because they know they will be bailed out if things go wrong[1].

The information contained in Amarii Holdings website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

While the Chinese yuan has been rising in prominence on the international stage, it is unlikely to become the world's predominant reserve currency anytime soon. This is because China's leaders are not actively seeking such a role for their currency.

The Chinese government has been deliberate in its approach towards advocating for the yuan as a reserve currency. While China's rising prominence in the international financial system has led to some increase in the yuan's use in cross-border transactions, it is unlikely to become the world's predominant reserve currency in the near future. This is partly due to China's awareness of the challenges and responsibilities that come with such a role, including the need to maintain a stable exchange rate and control inflation. As a developing country facing numerous economic challenges, China may not be ready to take on the added pressures of being a reserve currency country.

Moreover, China's leaders are cautious about the political implications of having a reserve currency. The US has historically used the dollar's status as a tool for national security purposes, and China does not want to be vulnerable to such tactics. Additionally, being a reserve currency country often requires running a trade deficit, which could be perceived as a sign of weakness by China's leadership and citizens. Hence, China's approach towards advocating for the yuan as a reserve currency is driven by both economic and political considerations.

The link between Reserve Currency Status and Current Account Deficits

It is useful to clarify these concepts first in order to comprehend the connection between reserve currency status and current account deficits.

A country experiences a current account deficit when it imports more goods and services than it exports, which causes a net outflow of money. This imbalance must be paid for by a mix of foreign borrowing, asset sales to foreign buyers, and restrictions on foreign investment. A current account deficit, then, indicates that a nation is a net borrower from the rest of the globe.

A reserve currency is a currency that is frequently used to settle international trade and that central banks and other financial institutions hold in substantial quantities as a store of value. In the international financial system, this grants the issuing nation important benefits including cheaper borrowing rates and more monetary policy flexibility.

Thus, why could a nation be forced to put up with ongoing current account deficits in order to issue enough debt held by non-residents?

One way to approach this is to think about how a country's capital account and trade balance (i.e., the difference between exports and imports) relate to one another (i.e., the flow of financial assets between the country and the rest of the world). A country's trade balance and capital account balance must always be equal under a basic model of international commerce and finance since any transaction that includes the inflow or outflow of products or services also involves the inflow or outflow of financial assets.

A nation must establish an equivalent obligation for foreign investors to hold in order to issue debt or other financial assets to such investors. This obligation may be represented by money or other financial assets. Nonetheless, the nation must make sure that there is enough demand from non-residents for its liabilities in order to maintain reserve currency status.

Maintaining a current account deficit, which results in a net outflow of money from the economy, is one strategy to generate this demand. The financial assets of the issuing nation, such as corporate debt or government bonds, may then be purchased with this outflow. The nation can sustain a steady demand for its liabilities and continue to issue enough of them to support reserve currency status by continuously producing financial assets that can be bought.

In other words, a reserve currency country effectively borrows from the rest of the world by accepting persistent current account deficits in order to generate a consistent flow of financial assets that may be retained as reserves. The country's status as a reserve currency makes it feasible for it to borrow at cheaper interest rates than other nations and to issue debt that is highly sought after by overseas investors.

It's important to note that there are some cons to this correlation between reserve currency status and current account deficits. Running a big and ongoing current account deficit in particular can render a nation vulnerable to rapid changes in investor sentiment or changes in the state of the global economy. Nonetheless, reserve currency status may provide important advantages in terms of access to money and influence in the international financial system for nations who are able to maintain a stable balance of payments.

Challenging the Myth of Complete Exchange Rate Flexibility for Reserve Currency Status

The idea that a country must have complete exchange rate flexibility in order to attain reserve currency status is a commonly held myth. In reality, there have been several instances where countries have achieved reserve currency status without possessing a completely flexible exchange rate system.

US dollar

During the era of the gold-exchange standard, which lasted from the end of World War II until the early 1970s, the US dollar was a notable example. The Bretton Woods Agreement and System created a collective international currency exchange regime based on the US dollar and gold[1]. The countries agreed to keep their currencies fixed (but adjustable in exceptional situations) to the dollar, and the dollar was fixed to gold[2].Under this system, the value of the US dollar was fixed to the price of gold, and other countries could exchange their dollars for gold at a fixed rate. This effectively restricted the flexibility of the US dollar's exchange rate.

Despite this lack of complete flexibility, the US dollar was still able to achieve reserve currency status during this period. This was due in part to the fact that the US was the largest economy in the world and a major player in international trade and finance. Additionally, the Bretton Woods system, which established the gold-exchange standard, was largely designed to maintain the primacy of the US dollar in the international financial system.

British pound

Another example of a country that achieved reserve currency status without possessing completely flexible exchange rate systems is Great Britain. In the late 19th and early 20th centuries, the British pound sterling was the dominant reserve currency in the world despite Britain maintaining a fixed exchange rate system known as the gold standard[1].Under the gold standard, the value of the pound was fixed to the price of gold, which limited the flexibility of its exchange rate. However, Britain's dominance in international trade and finance, as well as the stability and reliability of its financial institutions, made the pound a highly sought-after currency for international transactions and reserve holdings.

Furthermore, Britain's imperial expansion and the establishment of the sterling area, a network of countries that used the pound as their primary currency, also contributed to the pound's reserve currency status. By maintaining close economic ties with other countries through the sterling area, Britain was able to maintain demand for the pound and strengthen its position as a global reserve currency.

The examples of the US dollar under the gold-exchange standard and the British pound under the gold standard demonstrate that complete exchange rate flexibility is not a necessary condition for achieving reserve currency status. Rather, a combination of factors including the size and importance of a country's economy, its role in international trade and finance, and the stability and attractiveness of its financial markets can all contribute to the attainment of reserve currency status.

While the Chinese yuan is rising in prominence and has the potential to become a major reserve currency, it is unlikely to become the dominant global reserve currency for a long time to come. This is due to the fact that China would have to fundamentally shift its economic model and take on significant responsibilities, as well as the Chinese government's cautious approach to pushing for such a role. Ultimately, the global reserve currency status of a currency is determined by a complex set of economic, political, and historical factors that cannot be reduced to a single measure such as exchange rate flexibility.

Personal Notes

I've lived in Taiwan for a while, and I must say that this country has the most incredible weather. Taiwan has been suffering from a comparatively mild winter season while other regions of the world are dealing with brutal winters. It is usually pleasant to go outside without a heavy jacket on even the coldest days because the temperature seldom falls below 15 degrees Celsius. As February draws to a close, I can already feel the warmth of spring approaching, As the end of February approaches, I can already sense the arrival of spring and eagerly look forward to the arrival of summer.

The information contained in Amarii Holdings website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

The low interest rate environment following the 2008 financial crisis created a situation where banks faced a difficult challenge. The traditional source of revenue for banks, lending money to borrowers, was no longer yielding the same returns it once had. With the Federal Reserve keeping interest rates at historically low levels, it was difficult for banks to earn a decent return on their loans. This prompted banks to seek alternative sources of revenue to maintain profitability.

One such alternative was securities investments, particularly AFS securities, which provided higher yields than traditional lending. Banks were attracted to the flexibility that AFS securities provided. These securities could be easily sold if conditions changed, without the need to revalue the entire portfolio, as would be necessary with HTM securities.

However, this flexibility came at the cost of increased volatility and risk. AFS securities are marked-to-market, meaning that they are valued based on current market conditions. This creates an element of volatility in a bank's capital base, as the value of these securities can fluctuate rapidly. The regulatory capital for banks with over $700 billion in assets is directly impacted by the volatility of available-for-sale (AFS) securities[1]. AFS securities are financial assets that are not held for trading or held to maturity, but rather are intended to be sold in the future. The value of these securities can fluctuate based on market conditions, which can lead to volatility in regulatory capital for banks[1].

Bob Bank and Amarii Bank

Let's consider a scenario where interest rates rise and there are fewer deposits in the market. In such a situation, the demand for loans decreases, and banks may find it difficult to lend the funds they have on hand. As a result, banks may choose to invest in bonds as an alternative way to earn income.

Bob Bank and Amarii Bank both purchase a bond with a face value of $1,000, a coupon rate of 5%, and a maturity period of five years. At the time of purchase, the bond is trading at par value, meaning it is priced at $1,000.

Now, let's assume that over the next two years, interest rates rise fast, and there is a decrease in deposits. As a result, the bond's market value falls to $900.

Bob Bank decides to designate the bond as "held-to-maturity" (HTM), which means that it will remain on Bob Bank's balance sheet at its original cost of $1,000, regardless of any changes in the bond's market value over the five-year period. This means that if the bond's market value falls to $900, Bob Bank will not have to report any loss on its balance sheet.

On the other hand, Amarii Bank decides to designate the same bond as "available-for-sale" (AFS), which means that any changes in the bond's market value will be reflected on Amarii Bank's balance sheet. If the bond's market value falls to $900, Amarii Bank will have to report a loss of $100 on its balance sheet.

In this scenario, Bob Bank has the advantage of not having to report any loss on its balance sheet, even though the market value of the bond has decreased. However, Bob Bank will not be able to take advantage of any increase in the bond's market value in the future, as the bond will remain on its balance sheet at its original cost.

On the other hand, Amarii Bank will have to report a loss on its balance sheet if the bond's market value falls below its original cost. However, if the bond's market value increases in the future, Amarii Bank will be able to take advantage of the increase and report a gain on its balance sheet.

AFS Securities: Banks' New Favorite Rollercoaster Ride"

It's interesting to note that there has been a significant increase in the amount of available-for-sale (AFS) securities held by US banks, according to data from the Federal Reserve. According to, the total amount of AFS securities held by banks increased by $1.31 trillion (46.89%) between Q3 2019 and Q4 2021, which is a much larger increase than the $131 billion mentioned in the original question. The total amount of AFS securities held by these banks reached $3.5 trillion in Q4 2020.[1]

A report by the Bank for International Settlements (BIS) also confirms that the share of AFS securities in the portfolios of major banks in advanced economies rose significantly in the first half of 2020.[1] This report highlighted that banks that relied more on non-traditional activities, including investment banking and trading, and had more exposure to corporate bonds and mortgage-backed securities, tended to hold a higher share of AFS securities.

However, the report also emphasized the increased risks associated with holding AFS securities during the pandemic, including higher volatility, increased uncertainty, and potential liquidity risks. In fact, the BIS found that banks with a higher share of AFS securities experienced greater market value losses during the pandemic-induced market downturn in March 2020.

These findings suggest that the pandemic-induced monetary policy response did have an impact on the situation with banks holding large amounts of AFS securities, as lower interest rates and asset purchase programs increased demand for higher-yielding securities. However, this shift in strategy also came with added risks, particularly during a period of increased market volatility and uncertainty.

The Stress Test Paradox: Why Some Banks Get a Pass

The Dodd-Frank Act, passed in 2010, mandated stress testing requirements for certain banks and financial institutions in the aftermath of the 2008 financial crisis. The Federal Reserve is responsible for enforcing stress testing requirements based on the size and complexity of the financial institution. The Dodd-Frank Act categorizes institutions into four groups, with each group subjected to different stress testing requirements.

1. Category I institutions include bank holding companies with $250 billion or more in total consolidated assets or nonbank financial companies designated as systemically important by the Financial Stability Oversight Council.

2. Category II includes bank holding companies with total consolidated assets between $100 billion and $250 billion

3. Category III includes those with assets of between $50 billion and $100 billion.

4. Category IV includes bank holding companies with total consolidated assets of less than $50 billion.

The stress test frequency and reporting requirements vary depending on the category of institution. Category I and Category II institutions undergo stress tests annually and are required to publicly disclose the results. Category III and Category IV institutions also undergo stress tests but are not required to publicly disclose the results. The Federal Reserve conducts supervisory stress tests on all Category I, II, and III institutions annually. However, Category IV institutions are not subject to supervisory stress tests. Nonetheless, they are still subject to regulatory scrutiny and may be required to provide their stress test results to regulators upon request.

A Risky Game of Regulatory Arbitrage

The emergence of the shadow banking system as a significant source of systemic risk in the global financial system is a cause for concern. One of the main drivers behind the growth of shadow banking has been the use of AFS assets by traditional banks, which allows them to avoid regulatory capital charges that come with holding these assets. This creates an arbitrage opportunity for shadow banks, enabling them to earn higher returns by taking on more risk without holding as much capital as traditional banks.

Historical events have shown that shadow banking can be highly leveraged and engage in maturity transformation, which creates liquidity risks. The interconnectedness between traditional banks and shadow banks can also transmit risks between the two sectors, leading to a contagion effect during a financial crisis. The 2008 financial crisis, for example, highlighted the dangers of this interconnectedness and the potential for shadow banking to contribute to a systemic crisis.

Banks that rely more on non-traditional activities, such as investment banking and trading, tend to hold a higher share of AFS securities. As a result, they are more likely to create regulatory arbitrage opportunities for shadow banks, indirectly contributing to the growth of the shadow banking system. This poses significant risks to the stability of the financial system, and regulators need to address the issue of regulatory arbitrage in order to mitigate the risks posed by the shadow banking system.

Personal Notes

To ensure that we are consistently providing our readers with valuable insights, I suggest that we publish Micro Thoughts every Tuesday, twice a month. This will give us the opportunity to focus on specific issues affecting the United States and provide regular updates on those topics. Continuing the publication of Macro Thoughts every Thursday is vital to provide our readers with a comprehensive understanding of the world. These articles will concentrate on global events and analyze their possible impact on the United States. Overall, I believe that by incorporating both micro and macro thoughts and publishing on a regular schedule, we can greatly improve the quality and relevance of Marathon Macro.

The information contained in Amarii Holdings' website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

https://www.wsj.com

The U.S. Is Not Yet Ready for the Era of 'Great Power' Conflict

Clint Hinote returned from a deployment in Baghdad in the spring of 2018 to a new assignment and a staggering realization. A classified Pentagon wargame simulated a Chinese push to take control of the South China Sea. The Air Force officer, charged with plotting the service's future, learned that China's well-stocked missile force had rained down on the bases and ports the U.S.

https://www.wsj.com

Elon Musk's Latest Reveal? His Tesla Management Team

Usually, the cars are the stars. But this week, Elon Musk went out of his way to highlight Tesla Inc.'s management team-even if Wall Street was eager for an update on efforts to develop a new, cheap electric car.

https://www.telegraph.co.uk

Vladimir Putin is about to make shock gains

Russia has stopped the bleeding and learned from its mistakes. We must be prepared for a nasty blow

https://www.wsj.com

Putin's Secret Weapon on Energy: an Ex-Morgan Stanley Banker

Russia urgently needs to develop new markets for its oil and gas companies, with Western sanctions cutting into the backbone of its economy. It's relying on a 37-year-old former Morgan Stanley banker to keep profits flowing.

https://www.slowboring.com

Why are young liberals so depressed?

Fresh episode of Bad Takes is out today, all about the war on fake license plates. Earlier this month the CDC released the results of its Youth Risk Behavior Survey of American teenagers. The findings have been much discussed, with the focus largely and understandably on the fact that teenage girls are suffering from extraordinarily high levels of sadness and depression.

https://www.wsj.com

WSJ News Exclusive | U.S. to Expand Troop Presence in Taiwan for Training Against China Threat

WASHINGTON-The U.S. is markedly increasing the number of troops deployed to Taiwan, more than quadrupling the current number to bolster a training program for the island's military amid a rising threat from China. The U.S. plans to deploy between 100 and 200 troops to the island in the coming months, up from roughly 30 there a year ago, according to U.S.

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From Africa to the globe!

Meet Africa’s future tech giants. By securing international investments, these 11 SMEs are positioned to create jobs, provide solutions to their communities and drive positive impact across the African continent and the world!

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Fossil Future: Why Global Human Flourishing Requires More Oil, Coal, and Natural Gas—Not Less

Marathon Continues...

Learning from Paul Volcker

The years that Paul Volcker served as the Federal Reserve's chairman, from 1979 to 1987, are fascinating to me. For his efforts to reduce rising inflation in the United States in the late 1970s and early 1980s, Volcker is well known.

From the late 1960s, inflation has been a recurring issue in the American economy, reaching double-digit levels by the middle of the 1970s. It was commonly assumed that the Federal Reserve had lost control of the situation after previous attempts to fight inflation had failed.

In 1979, when Volcker became the new chairman of the Fed, he made bringing inflation under control his primary goal. He followed a stringent monetary strategy, increasing interest rates and limiting the amount of money in circulation. While doing so caused a severe recession, it also managed to lower inflation.

I also recognize the unexpected repercussions of Volcker's decisions. Since the recession was longer and more severe than expected, many people and businesses experienced substantial unemployment and financial hardship. Also, the Fed's high interest rates caused the dollar to appreciate significantly, which reduced the competitiveness of US exports and fueled the expansion of trade imbalances.

More Lenient Approach to Monetary Policy

The United States' economy was still recuperating from the recession caused by Volcker's tight monetary policy in the early 1980s in the mid-1980s. While inflation was under control, the economy continued to struggle, with high unemployment and weak growth.

In order to address these concerns, Volcker began to relax monetary policy. He gradually reduced interest rates, making borrowing more affordable and accessible to consumers and businesses alike. This, in turn, resulted in higher spending and investment, which aided economic growth.

Volcker's more lenient approach to monetary policy was also influenced by global economic factors. In the mid-1980s, many other countries, including Japan and Germany, were experiencing strong economic growth. This put pressure on the U.S. to adopt more expansionary policies in order to remain competitive.

Deep Dive into history

High inflation and unemployment rates were plaguing the economy, and the Federal Reserve was under pressure to take action. Paul Volcker, the Fed Chairman at the time, knew that he had to implement a tight monetary policy to combat inflation[1].

This policy, however, led to a recession in 1981-82, which put pressure on sectors of the economy reliant on borrowing, such as manufacturing and construction. Unemployment grew from 7.4% at the start of the recession to nearly 10% a year later. Despite repeated calls from Congress to loosen monetary policy, Volcker maintained that failing to bring down long-run inflation expectations would result in more serious economic circumstances over a much longer period of time.[1].

But Volcker persisted and his hard work paid off. His more accommodative monetary policy had some success in encouraging economic development. Unemployment dropped from 10.8% in late 1982 to 5.3% in early 1989. The success on the inflation front was accompanied by a gradual decline in the unemployment rate.[1].

Thanks to Volcker's actions, the brutal stagflation that tormented the nation in the latter stages of the Great Inflation of 1965 to 1982 came to an end. However, his policy did cause a revival of inflation. By the time Volcker stepped down as Fed Chairman in 1987, inflation had risen again[1].

When I think back on Paul Volcker's term as Federal Reserve Chairman in the early 1980s, I can't help but notice the mixed outcomes of his tight monetary policy. On the one hand, his initiatives helped to combat stagflation and stabilize the economy. Yet, by the time he left his job in 1987, inflation had risen again.

This serves as a reminder that while difficult decisions and short-term sacrifices may be required for long-term economic stability, they are not infallible solutions. To avoid repeating past mistakes, policies must be constantly reassessed and adjusted. The resurgence of inflation following Volcker's tenure emphasizes the importance of maintaining vigilance and flexibility in monetary policy.

The Federal Reserve's Decision

The Federal Reserve raised its benchmark interest rate by 25 basis points in February 2023. This was in line with expectations, as some analysts had predicted a 50 basis point hike[1]

In February 2023, the Federal Reserve chose to increase its key interest rate by 25 basis points in response to rising inflation. While this decision was a cautious one, I personally believed that a more aggressive approach was necessary and that a 50 basis point increase would have been more appropriate.

Choosing to only raise interest rates by 25 basis points can be compared to Paul Volcker's more lenient approach to monetary policy in the mid-1980s. Volcker gradually lowered interest rates and loosened monetary policy in an attempt to stimulate economic growth. This approach ultimately led to inflation coming roaring back in the late 1980s.

With the current level of excessive inflation, the Federal Reserve must take the necessary steps to bring it under control. This will most likely entail more rate hikes and an increase in unemployment, which may cause short-term economic damage.

History has shown that being too lenient on inflation can have disastrous effects, as was the case during the Paul Volcker era. Tightening monetary policy may cause a short-term recession and increase unemployment, but it is critical for long-term economic stability.

Taking Action Against Inflation

Inflation could escalate out of control if the Federal Reserve does not take necessary action. As a result, it is critical to confront inflation head on, even if it means making temporary compromises.

Although it is difficult to tolerate short-term suffering for long-term benefit, we must remember that the alternative is far worse. We must learn from history in order to avoid making the same mistakes again.

Further rate hikes and an increase in unemployment are needed to get inflation under control, even if it means short-term pain. Failing to take sufficient action now could have disastrous ramifications in the future, as we saw during the Paul Volcker era.

Unemployment Risks from Rate Hikes

As the Federal Reserve prepares for further rate hikes to tackle inflation, it is important to be transparent and clear in their messaging about the potential for higher unemployment rates in the near future. I believe that by doing so, the public can be prepared and the shock and uncertainty that may arise can be minimized.

To manage expectations and prevent excessive panic or anxiety, the Federal Reserve should communicate clearly and directly with the public about the potential impact of rate hikes on employment. It is crucial to highlight that short-term pain may be necessary for long-term economic stability.

Furthermore, the Federal Reserve must work with other government agencies and organizations to design and implement initiatives that will support and assist those who may be affected by greater unemployment.

While the Federal Reserve takes steps to guarantee long-term economic stability, it is critical to communicate openly and provide assistance to people who may face an increase in unemployment. The detrimental impact of rising unemployment on individuals and the economy as a whole can be mitigated via clear communication and joint efforts.

Personal Notes

I am filled with hope and excitement for this upcoming spring season. After enduring the haze of COVID-19 for the past two years, this spring is shaping up to be the best one in three years. I plan to do more traveling and exploring, both within Taiwan and possibly even abroad. It's important to remember that the Marathon doesn't stop, and neither should we in our pursuit of success and fulfillment.

The information contained in Amarii Holdings website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

The Belt and Road Initiative: Connecting China and Africa

The Belt and Road Initiative (BRI) is a Chinese foreign policy project that aims to promote economic and infrastructural development across Asia, Europe, and Africa. One of the key beneficiaries of the BRI has been Africa, where Chinese investment and infrastructure projects have played a significant role in promoting economic growth and development. In this blog post, we will explore how China's Belt and Road Initiative has helped Africa and examine the criticisms and controversies that have arisen as a result.

A number of infrastructure development projects, including the building of roads, railroads, ports, and airports, as well as the expansion of energy and communication networks, are part of the Belt and Road plan. China has made significant investments in these initiatives to establish a contemporary Silk Road that connects Asia, Europe, and Africa.

China has signed bilateral trade agreements with 40 African countries[1]. In addition, China has pledged to import USD 300 billion of African products by 2025 and has signed agricultural cooperation agreements with 20 African countries and regional organizations since 2012[2][3].

China's Growing Middle Class and Investment in Africa

Many African nations send raw commodities and natural resources to China, making them significant commercial partners for that nation. These resources, which are crucial to China's quickly expanding economy, include minerals, oil, and agricultural goods. In response, China has grown to be a significant exporter of products and services to Africa, including construction materials, machinery, electronics, and textiles.

The rise of China's middle class is one of the primary drivers of trade with Africa. The middle class in China has been growing quickly in recent years as more and more people relocate to metropolitan regions and earn more money for their discretionary spending. Demand for consumer products including electronics, apparel, and home appliances has increased as a result. African markets have grown in importance for Chinese companies eager to take advantage of this expanding demand.

In 2022, China's trade with Africa reached $254 billion[2], nearly five times that of the United States which had a total of $83.6 billion in two-way trade with Africa in 2021[3]. This is a significant increase from 2020 when China's total two-way trade with Africa was estimated to be $615.2 billion[4], and the United States' two-way trade with Africa was estimated to be $56 billion[4]. The U.S. goods trade deficit with China was $310.3 billion in 2020[4], while the U.S. services trade surplus with China was $24.8 billion in 2020[4].

China's Infrastructure Investment in Africa

China has invested $23 billion in infrastructure projects in Africa between 2007 and 2020, more than any other country or international bank[1][2]. China's development banks provided $23 billion in financing for infrastructure projects in sub-Saharan Africa from 2007 to 2020, more than double the amount lent by such banks in the United States, Germany, Japan and France combined[2]. China is presently involved in infrastructure project in 35 African countries. A concentration of projects is to be found in Angola, Nigeria and Sudan[3]. Chinese SOEs are financing and building an expansion of the port at Lamu in Kenya[4]. Although China's commitment may not be enough to meet Africa's investment financing gap solely, it is seen as crucial by many[4]..

China has made significant investments in Africa's energy sector in addition to supporting infrastructural projects. Lack of accessible and dependable electricity has hampered economic growth in many African nations. By supporting the building of power plants and transmission networks that enhance access to electricity, Chinese investment has helped to alleviate this problem. By increasing productivity and fostering job creation, this has aided in the promotion of economic growth and development.

China's Energy Investment in Africa

China's relationship with Africa's energy sector has been one of significant investment and commitment. With a pledge of $49 billion in loans to African governments for 128 energy projects from 2000-2021, China has financed 56 power plants in Africa with a total capacity of 25 gigawatts through policy bank loans and foreign direct investment[1]. Most of these power plants are hydropower[1]. This is part of China's outward direct investment strategy, which includes infrastructure projects and financing in other countries[2]. Despite this, China remains the world's largest carbon dioxide emitter and continues to build coal-fired power plants[4]. As the largest financier of African infrastructure projects, China has participated in over 200 African infrastructure projects, filling critical finance gaps left by Western institutions or traditional development finance institutions. Furthermore, China's investment in Africa's energy sector extends beyond fossil fuels, with potential for Chinese companies to enter the renewable energy market in the future.

In addition to investing in traditional energy infrastructure, China has also been actively involved in supporting Africa's transition to renewable energy. China's investments in solar energy in Africa have been particularly notable, with Chinese companies involved in several large-scale solar power projects across the continent.

JinkoSolar supplied solar panels for a 250 MW solar power project in Egypt, which is expected to power around one million homes[1]. JinkoSolar has also supplied solar panels to other countries such as Turkey and India[4]. In addition, JinkoSolar will begin manufacturing solar panels in Florida and supply NextEra Energy with up to 2,750 megawatts of high-efficiency solar modules[5]. Similarly, Chinese companies have been involved in the construction of large-scale solar power projects in countries such as South Africa, Ghana, and Morocco. By investing in renewable energy infrastructure, China is helping to promote sustainable development in Africa, while also creating new opportunities for Chinese companies in the continent's rapidly growing clean energy sector.

Survey Results Show Beijing's Impact on the Region

According to a survey conducted by the Ichikowitz Family Foundation, China is the most influential foreign power in Africa and its influence is widely viewed as a good thing. The survey found that 76% of respondents said Beijing has a positive effect on the region. Respondents with a positive view of China highlighted the country's concrete impact on their lives, citing the importance of cheap Chinese goods as well as Beijing's investment in infrastructure, job creation, and bilateral loans for African states. In addition, another survey by YouGov-Cambridge Globalism Project revealed that despite steep declines in support for China globally, Beijing still is seen favorably by many in Africa.

The information contained in Amarii Holdings' website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

We discussed the importance of the semiconductor industry and how it plays a critical role in the production of many modern electronic devices, such as smartphones, computers, and cars. We also highlighted the popularity of investing in this sector, particularly in the four companies known as A.N.T.S. - ASML, NVIDIA, TSMC, and Samsung. These companies are leaders in the semiconductor industry and are highly sought-after investments due to the growing demand for electronic devices.

In addition to investing in the A.N.T.S. companies - ASML, NVIDIA, TSMC, and Samsung - it may also be worth considering investments in smaller, mid-cap and small-cap companies that are connected to one of these larger companies. Some examples of such companies include MRVL, CGNX, MLNX, XCRA, ACXC, and FLXG. These smaller companies may benefit from their connection to the A.N.T.S. companies, as they may have access to the latest technologies and markets through these larger companies. Additionally, the success of the A.N.T.S. companies can potentially have a positive impact on the stock prices of these smaller companies, making them more attractive investments for those looking to invest in the semiconductor industry.

MRVL, or Marvell Technology Group, is a mid-cap company that is connected to the A.N.T.S. company Samsung. Marvell is a global leader in the design, development, and sale of a wide range of semiconductor products, including those for networking, storage, and wireless communications. In recent years, the company has been working closely with Samsung on the development of advanced semiconductor technologies, including those for 5G networking and artificial intelligence. This partnership with Samsung has allowed Marvell to access the company's expertise and resources in these areas, which has helped Marvell to grow and expand its business. Marvell and Samsung have a strong partnership in the development of advanced semiconductor technologies, and Marvell has been working with Samsung on the development of 5G networking and AI technologies, among others.

CGNX, or Cognex Corporation, is another mid-cap company that is connected to the A.N.T.S. company ASML. Cognex is a leader in the development and production of machine vision systems, which are used to automate the inspection and analysis of products in a variety of industries. The company has a strong relationship with ASML, which is a leading provider of photolithography systems used in the production of semiconductors. This relationship allows Cognex to access ASML's expertise and resources in the field of photolithography, and helps the company to stay at the forefront of semiconductor production technology. Cognex is a leader in the development and production of machine vision systems, and has a strong relationship with ASML, a leading provider of photolithography systems used in the production of semiconductors.

LRCX, or LAM Research Corporation, is a mid-cap company that is connected to the A.N.T.S. company TSMC. LAM Research is a leading provider of equipment used in the production of semiconductor devices, such as microchips and memory chips. The company has a close partnership with TSMC, which is a leader in the provision of semiconductor manufacturing services and a major player in the semiconductor industry. This partnership with TSMC allows LAM Research to access the company's expertise and resources in the field of semiconductor production, and helps LAM Research to stay competitive in the market for equipment used in the production of semiconductor devices. LAM Research is a leading provider of equipment used in the production of semiconductor devices and has a close partnership with TSMC, a leader in the provision of semiconductor manufacturing services.

XCRA, or Xcerra Corporation, is a small-cap company that is connected to the A.N.T.S. company TSMC. Xcerra is a global leader in the design and production of test and handling solutions for the semiconductor industry, and has a strong relationship with TSMC, the largest semiconductor foundry in the world and a leader in the production of advanced microchips. This partnership with TSMC allows Xcerra to access the company's expertise and resources in the field, and helps Xcerra to stay competitive in the market for semiconductor test and handling solutions. Xcerra is a global leader in the design and production of test and handling solutions for the semiconductor industry, and has a strong partnership with TSMC, the largest semiconductor foundry in the world.

ACXC, or Acacia Communications, is another small-cap company that is connected to the A.N.T.S. company ASML. Acacia is a leading provider of high-speed coherent optical interconnect products, which are used to transmit data over long distances at high speeds. The company has a close partnership with ASML, which is a leading provider of photolithography systems used in the production of semiconductors. This partnership with ASML allows Acacia to access the company's expertise and resources in the field of photolithography, and helps Acacia to stay at the forefront of technology in the market for high-speed coherent optical interconnect products. Acacia is a leading provider of high-speed coherent optical interconnect products and has a close partnership with ASML, a leading provider of photolithography systems.

FLXG, or FlexGen Power Systems, is a small-cap company that is connected to the A.N.T.S. company NVIDIA. FlexGen is a leader in the development and production of advanced energy storage systems, which are used to store electricity for use in a variety of applications, including renewable energy systems and grid stabilization. The company has a strong partnership with NVIDIA, which is a leader in the production of graphics processing units (GPUs) used in a variety of applications, including gaming, professional visualization, and deep learning. This partnership with NVIDIA allows FlexGen to access the company's expertise and resources in the field of GPU production, and helps FlexGen to stay competitive in the market for advanced energy storage systems. FlexGen is a leader in the development and production of advanced energy storage systems and has a strong partnership with NVIDIA, a leader in the production of GPUs.

The semiconductor industry plays a critical role in the production of many modern electronic devices and is a popular sector for investment. The A.N.T.S. companies - ASML, NVIDIA, TSMC, and Samsung - are leaders in this industry and are highly sought-after investments due to the growing demand for electronic devices. In addition to considering these larger companies, it may also be worth considering mid-cap and small-cap companies that are connected to one of the A.N.T.S. companies, such as MRVL, CGNX, MLNX, XCRA, ACXC, and FLXG. These smaller companies may benefit from their connection to the A.N.T.S. companies and the success of these larger companies can potentially have a positive impact on their stock prices.

As we welcome the new year, it's hard to believe that Chinese New Year is approaching Taiwan. The year 2023 is upon us and with it comes the Year of the Tiger. It's been a challenging few years with the ongoing COVID-19 pandemic, but it's important to find ways to celebrate and find joy in the midst of it all. If there is one thing that I believe everyone should experience in their lifetime, it's Chinese New Year in Taiwan. The colorful decorations and delicious food make it an experience not to be missed.

The information contained in Amarii Holdings' website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

The Rise of the Petroyuan: How China and Saudi Arabia's Relationship Could Shake Up the Global Oil Market

China and Saudi Arabia are two of the world's biggest players in the global oil market, and their relationship could have significant implications for the future of the Petroyuan. We will explore the reasons why the Petroyuan is gaining traction, and how China and Saudi Arabia's relationship could contribute to its rise.

What is the Petroyuan?

The Petroyuan is a term that refers to the use of the Chinese yuan (CNY) as a global reserve currency for oil transactions. The Petroyuan is gaining traction because of China's growing demand for oil, and its desire to reduce its reliance on the US dollar (USD) as the dominant currency for oil transactions.

Why is the Petroyuan Gaining Traction?

There are several reasons why the Petroyuan is gaining traction. First, China is the world's largest importer of oil, and it is looking for ways to reduce its reliance on the USD for oil transactions. The Petroyuan offers China an alternative to the USD, and allows it to conduct oil transactions in its own currency. This can help to reduce China's exposure to the USD, and can give it more control over its oil imports.

Second, the Petroyuan offers oil-producing countries a new way to sell their oil to China. Rather than being forced to accept the USD as payment, oil-producing countries can now sell their oil to China in CNY. This can give them more flexibility and options when it comes to conducting oil transactions, and can help them to diversify their reserves away from the USD.

Third, the Petroyuan is part of China's broader plan to internationalize the yuan and make it a more global reserve currency. By increasing the use of the yuan in oil transactions, China can increase the demand for the yuan and make it more attractive to other countries. This can help to boost the yuan's value, and can make it a more viable alternative to the USD.

How Could China and Saudi Arabia's Relationship Contribute to the Rise of the Petroyuan?

China and Saudi Arabia are two of the world's biggest players in the global oil market, and their relationship could have significant implications for the rise of the Petroyuan.

First, China and Saudi Arabia have a strong economic relationship. China is Saudi Arabia's largest trading partner, and Saudi Arabia is China's top source of oil imports. This relationship gives them both a strong incentive to support the Petroyuan, and to use the yuan for oil transactions.

Second, China and Saudi Arabia have a strategic partnership that is focused on energy cooperation. In 2017, China and Saudi Arabia signed a memorandum of understanding on energy cooperation, which includes a commitment to increase the use of the yuan in oil transactions. This strategic partnership could help to accelerate the adoption of the Petroyuan, and could make it a more viable alternative to the USD.

Third, China and Saudi Arabia are both members of the Shanghai Cooperation Organization (SCO), which is a political, economic, and military alliance that includes eight other countries. The SCO could provide a platform for China and Saudi Arabia to promote the Petroyuan, and to encourage other SCO members to use the yuan for oil transactions.

China's decision to use the Shanghai exchange for yuan energy deals with Gulf nations is a big deal for several reasons. In this blog post, we will explore why this decision is significant, and what it could mean for the global oil market.

What is China's Decision to Use the Shanghai Exchange for Yuan Energy Deals with Gulf Nations?

China's decision to use the Shanghai exchange for yuan energy deals with Gulf nations is part of its broader plan to internationalize the yuan and make it a more global reserve currency. By using the Shanghai exchange for yuan energy deals, China can increase the use of the yuan in oil transactions, and make it more attractive to other countries.

This decision is significant because it shows that China is serious about increasing the use of the yuan in oil transactions, and that it is willing to take steps to make the yuan a more viable alternative to the US dollar (USD).

Why is China's Decision a Big Deal?

There are several reasons why China's decision to use the Shanghai exchange for yuan energy deals with Gulf nations is a big deal.

First, it shows that China is committed to increasing the use of the yuan in oil transactions, and that it is willing to take steps to make the yuan more attractive to other countries. This decision could help to accelerate the adoption of the yuan as a global reserve currency, and could make it a more viable alternative to the USD.

Second, it could help to boost the Shanghai exchange, and make it a more important player in the global oil market. By using the Shanghai exchange for yuan energy deals, China could attract more international investors to the exchange, and could help to increase its liquidity and competitiveness.

Third, it could have significant implications for the global oil market, and could shake up the dominant role of the USD. By using the yuan for oil transactions, China could reduce its reliance on the USD, and could give it more control over its oil imports. This could have significant implications for the USD, and could make it less dominant in the global oil market.

The information contained in Amarii Holdings' website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

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Nat Bullard

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China's wind and solar power projects generated 1,190 terawatt-hours in 2022.
That's more than all of Russia or Japan generated in 2021.
The only national electricity generation systems bigger than China wind+solar: India, US...China.

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8:30 PM • Feb 15, 2023

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Fossil Future: Why Global Human Flourishing Requires More Oil, Coal, and Natural Gas—Not Less

Marathon Continues...

This discovery of Van Tharp through Jack Schwager's book 'Market Wizards' was a turning point in my trading journey. I had been struggling to find a consistent approach to the markets, and his teachings, as featured in the book, provided me with the framework I needed to take my trading to the next level.

Before I discovered Van Tharp, I was trading based on intuition and gut feeling, without considering the risks involved in each trade. However, after studying his work, I realized the importance of having a well-defined risk management strategy and a strong understanding of trading psychology.

The teachings of Van Tharp shifted my paradigm and gave me a new perspective on trading. I learned about position sizing and the importance of determining my maximum acceptable risk per trade. This allowed me to make informed decisions about the size of my trades and better manage my risk.

Tharp's focus on trading psychology was also a revelation for me. I had never considered the impact that emotions and mental state could have on my trading. But by understanding the role of psychology in trading, I have been able to develop a more disciplined and effective approach to the markets.

The Power of Position Sizing

The concept of position sizing, as taught by Van Tharp, is a crucial aspect of successful trading. By determining my maximum acceptable risk per trade, I have been able to set clear guidelines for the size of each trade I make. This has been invaluable in helping me to manage my risk effectively and make informed decisions.

For example, let's say I have a $100,000 portfolio and I have determined that my maximum acceptable risk per trade is 1%. This means that I am willing to risk $1,000 on each trade. I can then use this information to determine the size of my trades, based on the value of the instrument I am trading.

Suppose I am considering trading a stock that is valued at $50. To determine my position size, I would divide my maximum acceptable risk of $1,000 by the value of the stock, which is $50:

$1,000 ÷ $50 = 20 shares

So, in this scenario, I would only purchase 20 shares of the stock, even if I have the funds to buy more. By limiting my position size in this way, I can minimize the impact of any losses on my overall portfolio.

It is important to note that the value of the instrument being traded, as well as its volatility, can impact the size of the position. For example, if I am trading a highly volatile stock, I may choose to limit my position size even further, to ensure that any potential losses do not have a significant impact on my portfolio.

The concept of position sizing has been a game changer for me, as it has helped me to better understand the risks involved in each trade and make informed decisions. I am grateful to Van Tharp for introducing me to this concept and helping me to become a more successful trader.

Risk Management in Action: A Tale of Two Traders

John

John was eager to make a profit in the markets, but he was not familiar with the concept of risk per trade. So, he started trading without considering the potential impact of his trades on his portfolio.

In his first trade, John selected a straw that represented 10% of his portfolio, or $10,000. Unfortunately, the market went against him, and he lost 10% of his portfolio, or $10,000. Undeterred by this setback, John continued to trade without considering his risk.

In his second trade, John again selected a straw that represented 10% of his portfolio. The market once again went against him, and he lost another 10% of his portfolio, or $10,000. Despite his losses, John was still determined to make a profit and continued to trade without limiting his risk.

In his third trade, John decided to take a bigger risk and selected a straw that represented 15% of his portfolio, or $15,000. Unfortunately, the market went against him once again, and he lost 15% of his portfolio, or $15,000.

Despite his losses, John continued to trade recklessly. In his fourth trade, he selected a straw that represented 20% of his portfolio, or $20,000. The market once again went against him, and he lost 20% of his portfolio, or $20,000.

In his fifth trade, John decided to take an even bigger risk and selected a straw that represented 25% of his portfolio, or $25,000. The market finally favored him, but it was too late. John's portfolio had declined from $100,000 to $30,000, a 70% loss.

John realized that his lack of risk management had cost him dearly. If he had considered risk per trade, he could have minimized the impact of any losses and protected his portfolio from such a significant decline. From this experience, John learned the importance of limiting risk per trade and making informed decisions about the size of his trades.

Amarii

Amarii was eager to make a profit in the markets, but he knew that it was important to manage risk. So, he started trading with a focus on risk per trade, limiting his risk to 2% of his portfolio, or $2,000, on each trade.

In his first trade, Amarii selected a straw that represented 2% of his portfolio. The market went against him, and he lost 2% of his portfolio, or $2,000. Despite this setback, Amarii continued to trade with discipline, limiting his risk to 2% per trade.

In his second trade, Amarii again selected a straw that represented 2% of his portfolio. The market once again went against him, and he lost another 2% of his portfolio, or $2,000. Despite this loss, Amarii was still confident in his approach and continued to limit his risk to 2% per trade.

In his third trade, the market once again went against Amarii, and he lost 2% of his portfolio, or $2,000. Despite this loss, Amarii continued to trade with discipline, limiting his risk to 2% per trade.

In his fourth trade, the market favored Amarii, and he made a 2% profit on his portfolio, or $2,000. Encouraged by this success, Amarii continued to trade with discipline, limiting his risk to 2% per trade.

In his fifth trade, the market once again favored Amarii, and he made another 2% profit on his portfolio, or $2,000. By consistently limiting his risk to 2% per trade, Amarii was able to minimize the impact of any losses and protect his portfolio from significant declines.

At the end of the five trades, Amarii's portfolio had declined from $100,000 to $96,000, a 4% loss. Amarii realized that his discipline in limiting his risk per trade had allowed him to minimize his losses and maintain a healthy portfolio. From this experience, Amarii learned the importance of risk management and the benefits of limiting risk per trade.

The Impact of Van Tharp's Principles

Back in 2006, I was searching for a way to improve my trading. I had tried countless strategies and techniques, but I just couldn't seem to find a consistent approach that worked for me. That all changed when I discovered Van Tharp, a renowned trader, author, and educator.

Through his teachings at the Van Tharp Institute, I came to understand the importance of risk management and trading psychology in trading. His emphasis on position sizing and determining my maximum acceptable risk per trade helped me to make more informed decisions about the size of my trades. This gave me the confidence to take calculated risks, which allowed me to minimize my losses and maximize my profits.

Additionally, Van Tharp's focus on trading psychology was a game-changer for me. I learned how to manage my emotions and stay disciplined, which helped me to remain calm and focused even in the face of losses. This was key to my success as a trader and allowed me to make more consistent profits over time.

Van Tharp was a pivotal moment in my trading journey. His teachings on risk management and trading psychology transformed my approach to the markets and helped me achieve my financial goals. I highly recommend his work to any trader looking to improve their skills.

Aligning Systems with Personal Values

The concept of aligning their trading system with their personal values and beliefs helps them stay focused on their long-term goals, instead of being caught in the trap of chasing the latest trend or jumping from one system to another.

Van Tharp's emphasis on trading psychology is a key aspect of his teachings and a critical factor for success in the markets. He stresses the importance of developing a strong and resilient mindset, which involves overcoming limiting beliefs and emotional baggage, and cultivating a positive and confident outlook.

By incorporating these principles, traders can trade with greater clarity and purpose. They have a clear understanding of what they want to achieve in the markets, and their trading system aligns with those goals. Adopting Van Tharp's teachings can be a game-changer for traders looking to improve their skills and achieve their financial goals.

When the Super Bowl is over and the Eagles, my team, have not won, it can be discouraging for a die-hard football fan like myself. However, the time between football seasons provides a fantastic opportunity to shift my attention to other sports, such as the thrilling English Premier League (EPL) of soccer.

The information contained in Amarii Holdings' website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

The UK's economy has been struggling with several major issues that have contributed to its current economic situation. The productivity crisis has resulted in a lack of economic growth, making it difficult for the country to keep pace with other advanced economies. The energy crisis has also put a strain on the economy, with high energy costs affecting both businesses and consumers. Furthermore, the isolation resulting from Brexit has made it more difficult for the UK to participate in the global economy and has limited its ability to trade with its largest trading partner, the European Union.

This combination of factors has resulted in a projected contraction of 0.6% in 2023, making the UK economy one of the worst performing advanced economies. The Bank of England finds itself in a challenging position, trying to balance the need to keep inflation in check with the need to keep the economy stable. With a benchmark rate of 4%, it is difficult for the bank to bring inflation down without causing a collapse of the economy and the property market.

The UK is at the bottom of this table, with a projected economic contraction of 0.6% in 2023 combined with projected growth of 0.9% in 2024 being equivalent to annualised economic growth after taking account of inflation of 0.1% over two years.

Additionally, the high inflation rate has been a major concern for the UK economy. In December 2022, the Consumer Prices Index (CPI) in England rose by 10.5% in the 12 months to December 2022, down from 10.7% in November and 11.1% in October, but it still remains a significant problem. The high inflation rate makes it difficult for businesses to plan and invest in the future, as they are unable to predict how much their costs will rise.

Impact of Brexit on the UK Economy

The UK's exit from the European Union, commonly referred to as Brexit, has had a major impact on the country's economy. With the EU being the UK's largest trading partner, the isolation has resulted in trade difficulties and has impacted the country's ability to participate in the global economy. The lack of access to the EU's single market has resulted in increased trade barriers, such as tariffs and customs checks, which have increased the cost of trade and made it more difficult for businesses to operate. This has led to reduced trade, which in turn has had a negative impact on the UK's overall economic growth.

In addition, the UK's exit from the EU has resulted in a loss of access to the EU's talent pool, which has made it more difficult for businesses to attract and retain highly skilled workers. This has resulted in reduced competitiveness and has hindered the country's ability to grow its economy. Furthermore, the exit has resulted in increased uncertainty, as businesses are unsure about the future of trade and investment in the country. This has led to reduced investment and has put the UK at a disadvantage compared to other countries in the EU.

Brexit has had a significant impact on the UK economy, reducing trade intensity and leaving the economy 5.5% smaller than it would have been without Brexit. It has also contributed to inflation, labor shortages, and a squeeze on public services. These effects were widely debated during and after the referendum on UK membership of the European Union.

The Fix that won't work

The Four 'E's plan proposed by Jeremy Hunt focuses on promoting enterprise, investing in education, creating employment opportunities, and ensuring prosperity is spread everywhere in the UK. The plan aims to make the UK the most prosperous country in Europe by addressing key economic challenges and promoting growth. The enterprise component aims to encourage innovation and entrepreneurship, while the education component focuses on investing in skills and training to improve the workforce. The employment component aims to create job opportunities and reduce unemployment, while the everywhere component aims to ensure prosperity is spread across all regions and communities in the UK. Overall, the Four 'E's plan is aimed at boosting the UK's economy and improving the standard of living for all its citizens.

The employment component of the plan aims to create new job opportunities and reduce unemployment, which will have a positive impact on the standard of living for citizens across the UK. The focus on everywhere ensures that prosperity is spread across all regions and communities, so that everyone has the chance to benefit from the country's economic success.

By taking a comprehensive approach to economic growth and prosperity, the Four 'E's plan is aimed at making the UK the most prosperous country in Europe. The plan is designed to be inclusive and to benefit all citizens, regardless of their background or location. With a focus on innovation, education, employment, and prosperity for everyone, the Four 'E's plan represents a new way of thinking about economic growth and development in the UK.

The Four 'E's plan proposed by Jeremy Hunt may not succeed in stopping high unemployment and high inflation for several reasons. Firstly, the plan may lack a comprehensive strategy to address the root causes of high unemployment and high inflation, such as declining productivity, lack of investment in the right sectors, and the effects of Brexit. Simply promoting enterprise, investing in education, and creating job opportunities may not be enough to address these underlying challenges.

Secondly, the plan may not effectively address the unequal distribution of prosperity across the UK. While the "everywhere" component aims to ensure prosperity is spread across all regions and communities, it may not provide a specific solution to address regional imbalances in economic growth and job opportunities.

Lastly, the implementation of the plan may face challenges such as limited budget, lack of political will, and resistance from stakeholders, which may limit its effectiveness in achieving its objectives.

Therefore, without a comprehensive strategy and effective implementation, the Four 'E's plan may not succeed in stopping high unemployment and high inflation.

The information contained in Amarii Holdings' website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

With an inflation rate of 6.41 percent in January 2023, the most recent CPI measurement put us in the Viper Era of the economic cycle. The fresh CPI numbers for March 2023, which are expected to be 5.64, show a drop in inflation, indicating that the cycle is entering the Hawk Period.

Given that high inflation frequently results in higher interest rates and tighter monetary policy, which can have a negative influence on stock prices, this drop in inflation may have a favorable effect on the stock market. The likelihood of the U.S. Federal Reserve adopting a more accommodating monetary policy might encourage economic expansion and raise stock prices, which would be advantageous for companies wishing to expand and invest.

Hence, as we enter the Hawk Era, the anticipated drop in the CPI may support the bull market trend together with the possibility of an accommodating monetary policy. The stock market is a complicated system that is impacted by a wide range of elements and circumstances, thus it is vital to keep in mind that future market performance cannot be anticipated with confidence.

Marathon Macro Week 7

Making Informed Decisions with the DIMS Daily Quant Watch

The DIMS Daily Quant Watch is a valuable tool that provides objective market analysis and insights into the current state of the economy. While it has not yet confirmed the Hawk Era, it remains an important indicator of the potential future trajectory of the market.

It is important to keep in mind that the era classifications provided by the DIMS Market Intelligence Tool are not definite predictions of future market conditions, but rather a framework for understanding economic trends. As we move forward, we should continue to monitor economic indicators and developments to make informed decisions about investments and other financial decisions.

While we can not predict with certainty what the future will hold, we can use the insights provided by the DIMS Market Intelligence Tool to help guide our decisions and navigate the complexities of the market. Stay tuned for updates as the situation evolves.

High Probability of Recession Looms, But Severity Remains Uncertain

According to recent data, there is a high likelihood of a recession occurring within the next 24 months, with a probability of 91.3%. While the timing and severity of the recession are uncertain, this high probability should be a cause for concern for those in the financial industry. The projections for the 12 and 6-month periods also show significant probabilities of 73.3% and 65.3%, respectively.

While the likelihood of a recession over the next two years is strong, it is vital to remember that the recession's severity is unpredictable. With the present market movements toward the hawk era and the new bull market, it is feasible that the recession will not be as bad as some estimates indicate.

The hawk era offers the possibility of a long stretch of economic expansion, which might lessen the effects of a prospective recession. Investors and companies should keep an eye on economic indications and be ready to put policies in place to lessen the possible negative effects of a recession.

Final Thoughts

As seen by the drop in inflation and the prospect for supportive monetary policy, the economy appears to be shifting from the Viper Era to the Hawk Era.

As time goes on, it is crucial to monitor economic indicators and be ready to modify investment strategy as necessary. The Market Segment provides a number of ETFs that investors may take into consideration, however cash and commodities may still be used as safe-haven investments.

It is also worth noting that the DIMS Daily Quant Watch remains a valuable tool for objective market analysis and insights. While it has not yet confirmed the Hawk Era, it's still an important indicator of the potential future trajectory of the market.

The information contained in Amarii Holdings website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

I believe that the Federal Reserve might consider raising its benchmark for inflation, also known as the target inflation rate, from 2% to 3%. While this decision would not be made lightly, as it would have both potential pros and cons for the economy, I think that there are some compelling reasons why the Fed might choose to take this action.

The Federal Reserve, the central bank of the United States, has a long-term goal of maintaining price stability, with an inflation rate of 2% per year. This goal was officially announced in January 2012, when the Federal Reserve released a statement outlining its monetary policy strategy and its commitment to maintaining price stability over the long run. In this statement, the Federal Reserve stated that it "seeks to achieve an inflation rate of 2 percent over the longer run," and that it "will conduct monetary policy to support these goals and will continue to review and, as appropriate, revise its approach to policy implementation." Since then, the Federal Reserve has consistently reaffirmed its commitment to maintaining an inflation rate of 2% over the long run as part of its efforts to promote maximum employment, stable prices, and moderate long-term interest rates.

The Impact of an Increased Target Inflation Rate on Consumer Spending and Economic Growth

The Federal Reserve's decision to potentially raise its benchmark for inflation, also known as the target inflation rate, from 2% to 3% could potentially stimulate economic expansion through the creation of a proclivity among consumers to make purchases sooner rather than later. As prices rise at a more rapid pace, consumers may feel a sense of immediacy to obtain goods and services before they become even more expensive in the future. This heightened demand can drive economic growth by prompting businesses to increase production and hire additional workers in order to meet the demand. This can generate a virtuous cycle, as more hiring and production can lead to even more economic activity, further driving growth. In contrast, if the Fed does not raise its target inflation rate, there may be less incentive for consumers to make purchases in a timely manner, potentially dampening economic growth.

The Potential advantage Impact of Higher Borrowing Costs on Individuals and Businesses

One potential advantage of the Federal Reserve raising its target inflation rate to 3% is that it could lead to increased production and hiring by businesses. When prices are rising at a more rapid pace, consumers may feel more inclined to make purchases sooner rather than later, as they anticipate prices continuing to rise in the future. This heightened demand can prompt businesses to augment production in order to meet the demand, and may also result in the hiring of additional workers to assist with the increased production. This can contribute to further economic activity and expansion, as more hiring and production can lead to even greater demand for goods and services. Conversely, if the Fed does not raise its target inflation rate, there may be less incentive for consumers to make purchases promptly, which could lead to reduced demand for goods and services and potentially less economic growth.

For example, let's say that Bob is considering buying a new car. If the Fed raises the target inflation rate to 3%, Bob may feel more inclined to purchase the car sooner rather than later, as she expects prices to continue rising in the future. If Bob decides to make the purchase, it would increase demand for cars and potentially lead to increased production and hiring by car manufacturers. This increased economic activity could contribute to overall economic growth. In order to meet the increased demand, car manufacturers may need to ramp up production and hire additional workers to help with the increased workload. As more cars are produced and sold, there may be even more demand for cars and related goods and services, such as car insurance. 

The Potential Negative Impact of Higher Borrowing Costs on Individuals and Businesses

One potential con of raising the target inflation rate to 3% is that it could lead to higher borrowing costs for individuals and businesses. When the cost of borrowing money increases, it can make it more difficult for people to afford to take out loans for things like homes, cars, and education. It can also make it more expensive for businesses to borrow money for things like expansion or new equipment. This could dampen economic growth by reducing the amount of money that is available for people to spend on goods and services, as they are having to devote a larger portion of their budget to paying off loans. Additionally, higher borrowing costs could make it more difficult for businesses to afford to take on new projects or hire additional workers, further slowing economic growth.

For example, let's say that Bob is considering taking out a loan to buy a new home. If the Fed raises the target inflation rate to 3%, it could lead to higher borrowing costs for Bob, as lenders may charge higher interest rates on loans. This could make it more expensive for Bob to borrow the money he needs to buy the home. As a result, Bob may need to cut back on other expenses in order to afford the higher monthly loan payments. Alternatively, Bob may decide to delay the home purchase until he can save up more money or until borrowing costs come down. In either case, higher borrowing costs could reduce Bob's ability to spend money on other goods and services, which could dampen economic growth.

Raising the Federal Reserve's target inflation rate to 3% could potentially have both pros and cons for the economy. On the one hand, it could stimulate economic growth by encouraging consumers to make purchases sooner rather than later, leading to increased production and hiring by businesses. On the other hand, it could lead to higher borrowing costs for individuals and businesses, decrease the value of money, and make it more difficult for people on fixed incomes to afford necessities. Ultimately, the decision to raise the target inflation rate to 3% would not be made lightly, as it would have significant consequences for the economy.

The information contained in Amarii Holdings' website and newsletters is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. This information is not intended to constitute individual investment advice or to be tailored to your personal financial situation. The views and opinions expressed in these publications are those of the publisher and editors and are subject to change without notice. The information may become outdated and there is no obligation to update it. Any use of this information is at your own risk and Amarii Holdings accepts no liability for any loss or damage resulting from your reliance on it. You should consult with your financial advisers before making any investment decisions to determine if a particular investment is suitable for your needs.

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S.L. Kanthan

@Kanthan2030

USA has $$$ for wars but not for sustainable energy transition. China accounted for whopping HALF of the global spending on solar, wind, electric cars etc. last year.

Investment:

China: $546 billion
EU: $180 billion
USA: $114 billion
India: $17 billion

From: Bloomberg NEF

142

2:39 PM • Feb 2, 2023

BOOK

Woke, Inc.

• Inside Corporate America's Social Justice Scam
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Marathon Continues...