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Hard Numbers: OPEC+ ain’t eager to pump, Mexico woos Trump with drug bust, Bitcoin to the moon, Merkel’s book is a blockbuster, Quake hits the Golden State
1,100: Mexican authorities in the northern state of Sinaloa seized over 1,100 kilograms of fentanyl late on Tuesday in the largest drug bust of its kind in the country’s history. Taking deadly drugs off the street is always a good thing, but critics of the Mexican government say authorities are strategically timing major busts to curry favor with the incoming US administration.
103,000: The price of the cryptocurrency token Bitcoin reached $103,000 on Thursday, breaking its previous record as speculators bet big on a friendly regulatory environment. President-elect Donald Trump appointed Paul Atkins, a crypto promoter, to the Securities and Exchange Commission, prompting the market run.
200,000: Former German Chancellor Angela Merkel’s new book, “Freedom: Memoirs 1954-2021,” is set to become Germany’s bestselling book this year, with 200,000 copies already sold in the week after release. At over 700 pages, you’d expect a juicy nugget or two, but early reviews expressed disappointment that Merkel doesn’t spill much tea on other world leaders and historic events — or reflect on the legacy of some controversial policies, such as welcoming large numbers of refugees and pursuing closer ties with Russia and China.
7.0: A magnitude 7.0 earthquake struck off the coast of Northern California on Thursday morning, triggering evacuation warnings along coastal areas from San Francisco all the way to southern Oregon. Fortunately, a tsunami did not develop, and minimal damage took place from the shaking.
Hard Numbers: North Koreans killed in Russia, Ireland approaches crucial vote, Pakistan locks down over Khan, Bitcoin to the moon!
500: Ukrainian media reported Sunday that a strike on North Korean forces operating in the Kursk region of Russia killed at least 500 troops, though Pyongyang has not (and probably won’t) confirm the figures. If true, it would be the first major casualty incident for the Korean People’s Army while fighting Ukraine, and the sheer number of deaths at once may be difficult for Pyongyang to explain at home.
20: The left-leaning Irish nationalist party Sinn Fein is polling at 20% ahead of elections on the Emerald Isle on Friday, neck-and-neck with the ruling Fine Gael party at 22%. Sinn Fein looks likely to be able to block Fine Gael and its coalition partner from forming a majority government, but it would need to majorly outperform polling to take charge of the government itself as other parties have sworn not to cooperate.
150: Pakistan’s government on Sunday blocked expressways leading into the capital, Islamabad, shut down cell phone and internet service, and placed shipping containers across major thoroughfares amid mass protests calling for the release of former Prime Minister Imran Khan. The ex-cricket-star-turned-politician is facing 150 criminal charges (all of which he denies) and has been serving a three-year prison sentence since last year.
100,000: The cryptocurrency known as Bitcoin reached a value of $100,000 per token on Friday, a record high fueled by the expectation of a friendlier environment for crypto under the incoming Trump administration. Ten years ago, it was trading for about $350.Hard Numbers: Israel expands humanitarian zone, Bitcoin bounces, Italy’s Meloni loses in court, OECD prices remain high, A very late book return
84,653: The price of bitcoin hit a record high of $84,653 on Monday afternoon on hopes that President-elect Donald Trump will offer cryptocurrency-friendly policies. A year ago, bitcoin sold for about $37,000.
7: An immigration court in Italy has rejected Prime Minister Giorgia Meloni’s bid to detain Europe-bound asylum-seekers in Albania. The judge ruled that seven Bangladeshi and Egyptian men brought to Albania by an Italian warship must be taken to Italy and remain there as they await a decision on their asylum application.
30: Though the inflation rate has cooled across wealthy countries, average price levels across the OECD remained about 30% higher in September 2024 than in December 2019, before COVID and Russia’s invasion of Ukraine sent inflation surging.
51: A book called “The Early Work of Aubrey Beardsley” was returned to a public library in Massachusetts last week. The book was due for return on May 22, 1973, making it 51 years late. President-elect Donald Trump has vowed that China’s government will pay the fine. (Just kidding.) The Worcester Public Library does not charge late fees.Crime fighter cruises to victory in El Salvador
Salvadorans voted overwhelmingly on Sunday to reelect President Nayib Bukele, the self-styled “world’s coolest dictator” – even though the constitution says he can’t serve a second term. Provisional results show he won 83% of the vote.
Bukele came to power five years ago promising to clean up rampant crime and corruption that had turned El Salvador into a lawless state. Today, 75,000 people, or 1.7% of the country’s adult population, are in jail, which is the highest incarceration rate in the world.
Despite criticism for his authoritarian methods, and accusations that his government colludes with the very gangs he vowed to stamp out, Bukele remains wildly popular. Pre-election polls had his main rivals receiving barely 12% of the vote between them.
Bukele's second term faces challenges, however, as poverty remains high and the IMF describes the country’s fiscal situation as "fragile." Since 2019, extreme poverty has doubled and almost half the population is food insecure. Bukele’s economic reforms have been unorthodox: In 2021, the government declared Bitcoin legal tender, attracting attention but also criticism for its volatility. Today, Bukele says El Salvador’s investments in the cryptocurrency are in the black, but it remains to be seen if he has as much success tackling poverty as he did crime.
Hard Numbers: Imran Khan faces new sentence, Russia gets economic upgrade, Philippines and Vietnam join hands in South China Sea, Germany makes big Bitcoin seizure
10: Pakistan’s former Prime Minister Imran Khan and former Foreign Minister Shah Mahmood Qureshi were sentenced Tuesday to 10 years in prison for leaking state secrets. While Khan is already serving a three-year term on corruption charges, this is Qureshi’s first conviction. The new ruling comes just a week before general elections on Feb. 8. Khan’s political party, Pakistan Tehreek-e-Insaf, called it “a sham case” and plans to challenge the decision in a higher court.
2.6: Is President Vladimir Putin’s military spending spree paying off? Russia’s GDP is expected to grow 2.6% in 2024, according to the International Monetary Fund, which is 1.5 percentage points higher than its October forecast. For 2025, the IMF sees GDP growth for Russia easing to just 1.1%.
2: Philippine President Ferdinand Marcos Jr. signed two memorandums of understanding with Vietnam on Tuesday to boost cooperation on maritime security in the South China Sea. Vietnam also agreed to a five-year trade deal to supply up to two million tons of white rice to Manila. China, which is less than thrilled by such agreements between its neighbors, launched military drills in the disputed waters earlier this month as the US and Philippines initiated their exercises in the region.
50,000: German authorities on Tuesday seized 50,000 Bitcoins worth nearly $2.17 billion in Saxony. While no charges have been filed yet, police suspect that two men who purchased the cryptocurrency did so with profits from a piracy website. Police are investigating unauthorized commercial exploitation of copyrighted works and money laundering.
US regulators give a huge kiss to crypto
The past year and a half has been brutal for cryptocurrencies, as a barrage of bad news, scandals, and bankruptcies fanned suspicions about the credibility of digital coin.
But US federal regulators on Wednesday gave the industry a huge boost of confidence by authorizing some of the world’s largest financial firms to begin offering Exchange Traded Funds (known as ETFs) linked to Bitcoin, the most prevalent crypto currency.
ETFs will enable investors to park their money in funds that contain Bitcoin, rather than investing in the currency itself — this offers a buffer against the volatility associated with buying and selling Bitcoin directly.
Supporters say it’s a huge step towards normalizing cryptocurrencies and opening them up to a wider pool of less risk-tolerant investors. Critics say the move will end in tears as crypto-risks are transfused into the traditional financial sector’s bloodstream.
One person who’s happy about the news? El Salvador’s president Nayib Bukele, who made Bitcoin legal tender three years ago. Anticipation of the ETF decision has pulled his country’s bet on the currency nearly $13 million back into the black in the past few days. Whether that will help to dispel wider questions about the wisdom of his move remains to be seen, but when you’re up you’re up – and right now he’s up.
The dollar is dead, long live the dollar
Every now and then, a story about some country seeking to diversify away from the US dollar kicks off a frenzy about the inevitable collapse of dollar dominance. Lately, there’s been more than a few such headlines, including:
- Russia embracing the Chinese yuan for much of its global trade
- Saudi Arabia considering invoicing oil exports to China in yuan
- France buying gas from China in yuan
- Brazil and China agreeing to ditch the dollar for bilateral trade
- BRICS countries planning to develop a new reserve currency
- Kenya promising to ditch the dollar for oil purchases
- ASEAN members discussing dropping the dollar for cross-border payments
- India settling some trade in rupees
Naturally, these have provided a fertile ground for gold bugs, crypto shills, hyperinflation truthers, techno-libertarians, anti-imperialists (read: anti-US zealots), and run-of-the-mill grifters to stoke fear about the dollar’s imminent death and its supposedly catastrophic consequences for the United States and the global economy.
But even mainstream media outlets and smart, well-meaning analysts have gotten swept into the current wave of hysteria.
Doomsayers offer numerous reasons for the dollar’s demise. They point to everything from China’s meteoric rise to superpower and the emerging multipolarity of the global system, to America’s stagnant productivity growth, chronic fiscal deficits, monetary expansion, growing debt burden, trade wars, financial fragility, and imperial overreach, to challenges from disruptive technologies like central bank digital currencies and crypto-assets.
Yet rumors of the dollar’s death are greatly exaggerated. Going by most usage measures, the dollar remains incontrovertibly dominant in global trade and finance, if a little less so than at its apex.
Whereas most currencies are only used domestically or in cross-border transactions that directly involve the currency’s issuer, the dollar continues to be widely used for funding, pricing, trade invoicing and settlement, and cross-border borrowing and lending even when the US is not involved.
While the dollar’s share of the central banks’ $12 trillion foreign exchange reserves has indeed declined since 1999, it is still nearly twice that of the euro, yen, pound, and yuan combined – the same as it was a decade ago. Its nearest competitor for global currency status, the euro, accounts for barely 20% of central bank reserves compared to the dollar’s 58%, followed by the Japanese yen at 5%. The much-touted Chinese yuan lags far behind at under 3% of foreign exchange reserves.
Even China, in an environment of intensifying geopolitical competition with the US and having just witnessed Washington’s weaponization of the dollar against Russia, has had no choice but to continue accumulating dollar-denominated assets.
Why has dollar dominance remained so sticky? In large part, it’s because incumbency is self-reinforcing. People use dollars because other people use dollars; dollar dominance begets continued dollar dominance.
But it’s not just turtles all the way down. The dollar has inherently desirable features: It is at once highly stable, liquid, safe, and convertible. And US financial markets are by far the largest, deepest, and most liquid in the world, offering an abundance of attractive dollar-denominated assets foreign investors can trade. No other market comes remotely close. As we saw during the recent banking panic, every time turmoil roils global markets, the dollar strengthens as investors flock to the most plentiful and liquid safe assets in existence. In fact, the dollar emerged from the crisis nearly as strong as it’s been in 20 years relative to other major currencies.
Ultimately, investors want to hold dollar assets because America’s economic, political, and institutional fundamentals inspire credibility and confidence. The US has the world’s strongest military, the best research universities, the most dynamic and innovative private sector, a general openness to trade and capital flows, relatively stable governing institutions, an independent central bank, sound macroeconomic policies, strong property rights, and a robust rule of law. People all over the world trust the US government to safeguard the value of their assets and honor their rights over them, making the dollar the ultimate safe-haven currency and US government bonds the world’s most valued safe assets.
None of this means that the dollar’s advantage can’t slip, of course. After all, every reserve currency that came before the dollar was dominant until the very moment it ceased to be.
For much of the 19th century, the global currency of choice was the British pound, owing to the British Empire’s vast territorial reach, economic supremacy, and advanced banking and legal system. It was only definitively displaced by the US dollar once the US had become an economic superpower. Following World War II, US GDP accounted for roughly half of the world total, so it made sense for the dollar to be the global means of exchange, unit of accounting, and store of value.
America’s economic supremacy has since waned, its share of global output now a fraction of what it was in 1945. This trend has led many to worry that the dollar will soon follow in sterling’s footsteps. But there’s a big difference between now and then: When the pound lost its status, there was another currency on the sidelines ready to take its place. Today, there is no such challenger.
Of the putatively serious candidates to dethrone “King Dollar,” the euro is not a viable alternative because of Europe’s persistent fragmentation. Despite having a sizeable economy, well-developed financial markets, decently free trade and capital openness, and generally robust institutions, Europe lacks true capital markets, banking, fiscal, and political union.
Ever since the 2009 eurozone crisis, European bond markets have been much more fragmented and shallower than America’s, leaving investors with a dearth of high-quality euro-denominated assets. While the pandemic did push the EU to finally issue common debt to fund recovery efforts, that move alone was not sufficient to boost the euro’s international role, as markets know that even if full fiscal and financial integration was on the horizon – a big if – political integration isn’t.
The Chinese yuan, meanwhile, is not a viable alternative because of Beijing’s authoritarian and statist bent. In fact, Xi Jinping’s policy preferences – economic self-reliance, financial stability, common prosperity, and political control of the economy – run directly counter to his global-currency ambitions.
Despite its growing role in the global economy and long-standing desire to unseat the dollar, China lacks the investor protections, institutional quality, and capital market openness required to internationalize a yuan that is still not fully convertible overseas. Persistent currency and capital controls, an opaque banking system with too many non-performing loans, spotty contract enforcement, and often arbitrary and draconian regulations will all continue to undermine Beijing’s efforts to elevate the yuan.
Last and most definitely least, so-called cryptocurrencies like Bitcoin are not a viable alternative because they are speculative assets with no intrinsic or legislated value. By contrast, as legal tender, the US dollar is backed by America’s current and future wealth – and by the US government’s ability to tax it.
I say “so-called” cryptocurrencies because these digital tulips are not really currencies or money: they are very expensive and slow to transact in, they can rarely be used to pay taxes or buy groceries, and they are far too volatile to be useful as means of payment, stores of value, or units of account. Nor are they truly decentralized, as the FTX meltdown proved.
To be clear, it’s not completely accepted that losing reserve currency status would be a bad thing for the United States. In the 1960s, France’s then-finance minister Valéry Giscard d’Estaing famously claimed that being the issuer of the global reserve currency afforded America an “exorbitant privilege,” allowing it to borrow cheaply from the rest of the world and live beyond its means.
But there’s a downside (or “exorbitant burden”) to USD reserve status: Foreigners’ insatiable appetite for dollar assets pushes up the dollar’s value, making American exports artificially expensive, harming American manufacturers, increasing American unemployment, suppressing American wages, forcing America to run chronic deficits, and widening American inequality. One could argue that the US should welcome – and, indeed, work toward – a smaller role for the dollar, and that contenders like China and Europe should be loath to replace it.
The most serious threat to dollar dominance might come not from abroad (Europe, China) or from beyond (cyberspace) but from within. The United States is still the most powerful nation on earth, but it’s also the most politically divided and dysfunctional of all the major industrial democracies. The single biggest risk to the dollar’s global status is that growing inequality, tribalism, polarization, and gridlock eventually undermine trust in America’s stability and credibility.
At the end of the day, though, no matter how much the dollar seems to lose its shine, global currency status is about relative – not absolute – advantages. Without a viable challenger, it’s very unlikely that the dollar will lose its special role anytime soon – for better or worse. You can’t replace something with nothing.
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The Graphic Truth: Crypto's annus horribilis
Crypto bros can't wait for 2022 to be over. The year kicked off with cryptocurrencies riding the wave of the global post-pandemic economic boom. But then Russia's war in Ukraine upended global markets and worsening inflation prompted central banks to start hiking rates, which slashed investors' appetite for risk. What's more, a string of scandals — mainly the collapses of the TerraUSD stable coin and the FTX crypto exchange — undermined overall trust in crypto, leading to the worst annual performance in the industry's history. We track how Bitcoin and Ethereum, which together accounts for more than half of global crypto transactions, have traded since the beginning of the year.