I am yet to write the final installment Can Retail Investors Still Make Outsized Returns? (if you haven’t read it yet, checkout part 1 and part 2). There is so much happening in the markets that the finale will have to wait a bit.
Earlier in one of my briefings, I’d mentioned about the Fed chairman promising to deliver a speech on the possibility of a central bank sponsored digital currency in September. Well, that did not happen.
In his last post-FOMC press conference, he answered questions on CBDC but did not take a definitive stand - either for it or against it. He brushed it off by saying that it will be a government decision - meaning the matter will be decided by the Congress.
Back in June, the Congress already held a hearing on the prospects of a digital dollar. The discussions were led by Elizabeth Warren. She’s in favour of it and so is the Biden administration. She also made it clear that a central bank-backed digital dollar would drive out bogus digital currencies meaning Bitcoin, stablecoins and the likes.
This was always a threat that Bitcoin could face. However, yesterday the crypto currency market got a boost because of encouraging news from the BIS. The BIS issued a report from a consortium of the leading central banks in the world including the Fed examining a world where CBDCs coexisted with private cryptocurrencies; Bitcoin was up 10% on this news.
One has to see if the standalone Fed report that will be out soon will be as friendly as the BIS communique. If so, the Democrat Congress that will be voting for the Fed Chairman’s renomination in February won’t be that happy.
As a member of the Banking, Housing and Urban Affairs Committee and Chairwoman of the Sub-committee for Economic Affairs, Elizabeth Warren is vested with a lot of power within the current administration and is close to the President. She has openly declared her displeasure on reappointing Jay Powell for another term. So, it will be interesting to see if we will have a new Chairman or not.
Meanwhile, an obscure country in the Himalayas, which has no real economic significance to the global economy - Bhutan - has announced that it is collaborating with Ripple to develop their CBDC. Most Americans may struggle to spot Bhutan on a map. While this may not have any economic impact, it does augur symbolic significance.
If there is any country in the world that can be classified as fully ESG-compliant, it will have to be Bhutan. Long before the current US administration and other sovereign nation states were preparing to remake the world order around climate change action, Bhutan was already compliant. They have stringent controls on the use of fossil fuels and even restrictive caps the number of tourists being admitted each year into the country.
Ripple would be happy to showcase this project to the rest of the world on how they can help a country to introduce CBDC. I think the introduction of CBDC will be revolutionary. No doubt, China is leading on this front. In another report, I will discuss about its implications and how it might affect the common man.
So, there we go. Thanks for reading Breezy Briefings. If you enjoyed this, I'd really appreciate if you could take a second and tell a friend. Honestly. It makes such a big difference.
Forward this email. Recommend the newsletter. Share on Twitter, WhatsApp, LinkedIn, Slack, wherever!
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.