Politicians and investors weigh in on global economy
Arguably, the world’s most important economic event — the World Economic Forum 2023 Davos conference — took place from Jan. 16 – 20 this year. The main focus of almost every conversation was on the global recession and other effects of inflation. However, crypto and blockchain technology were also, notably, a part of the conversation.
Inflation affecting markets globally
Most countries are battling inflation following the COVID-19 pandemic that started in late 2019. As a result, the key theme at the Forum in Davos, Switzerland, was how countries could work around the financial crisis.
The event was held under the tagline “Cooperation in a fragmented world.” Its panelists and keynote speakers included prominent politicians and figures such as South African President Cyril Ramaphosa, former US Secretary of State Henry Kissinger, World Health Organization Director-General Tedros Ghebreyesus, UN Secretary-General Antonio Guterres, JPMorgan CEO Jamie Dimon, actor Idris Elba, and many more.
Participants couldn’t help but talk about the ongoing crypto bear market. They mocked the industry, as the ‘norma’ crypto Lambos were nowhere to be seen at the moment. In the midst of the mockery was an orange Mercedes with an “incognito’ owner, seen parked in the open with crypto phrases all over it. Here is what else was discussed about crypto and macro finance during the forum.
Day 1
China’s reopening and its potential influence on the global economy
The Organisation for Economic Co-operation and Development (OECD) Secretary-General Mathias Cormann spoke about China’s reopening following the series of lockdowns it had been under in the wake of the COVID-19 pandemic.
Cormann believes that after lifting the restrictions, China could be a game changer in the world’s inflation issues. Notably, the country has the lowest inflation rates recorded at the moment. The current country rate is at around 1.8% at the moment, while the US is at 6.5% and the UK at 10.5%
The Secretary-General also said that China’s reopening could have an overwhelmingly positive influence. China has enacted plans to open up its economy again and allegedly was able to contain the further spread of the coronavirus. It has also been ramping up its crypto efforts.
Though crypto remains banned in mainland China, the digital yuan/ e-CNY has been receiving benchmarking upgrades lately. crypto.news recently reported that e-CNY now has a smart contract capability.
Scaramucci bets on bitcoin breaching the $35,000 mark
Former short-lived White House director of communications and founder of an investment firm SkyBridge Capital Anthony Scaramucci, revealed that his fund expects that bitcoin (BTC) can reach the $35,000 level. He added that SkyBridge would have a good year if it did that. The fund has invested in bitcoin, ethereum (ETH), solana (SOL), and algorand (ALGO). He also revealed the company could enter the structured credit market to increase its diversity after the 2022 losses.
Day 2
Idris Elba urges to step up efforts in fighting poverty
Actor Idris Elba and his wife, Sabrina Dhowre Elba, appealed to business and political leaders to support developing countries with investment instead of general humanitarian aid. The Goodwill Ambassadors for the United Nations’ International Fund for Agricultural Development called upon the attendants’ fast-paced financial support for those challenged with food scarcity and climate change.
Dhowre Elba shed light on the food crises in Haiti, Somalia, and Sudan, focusing on the troubles of small-scale farmers who lack access to vital resources. Yet, they produce a third of the food on the planet.
Recession casts a long shadow
The imminent global recession prospect also dominated headlines on that day. A World Economic Forum survey highlighted that two-thirds of private and public sector chief economists predict a global recession this year. In addition, 18% predict it is “extremely likely,” which is twice as many as in the September 2022 survey.
WEF managing director Saadia Zahidi mentioned that the current high inflation, high debt, low growth, and high fragmentation environment are factors reducing incentives for investments necessary to see growth and raise the world’s vulnerable living standards.
EU’s green proposals to counter Biden’s Inflation Reduction Act
Ursula von der Leyen, President of the European Commission, mentioned her institution was formulating a new law targeting the region’s green industries to make Europe the home of clean tech and innovation.
The new law, Net-Zero Industry Act, will focus its investments on strategic projects of the whole supply chain. Leyen notes the European Union will be looking into simplifying and fast-tracking new clean tech production sites in the region.
IMF chief says growth will bottom out in 2023 and spike in 2024
Kristalina Georgieva, International Monetary Fund Managing Director, noted that the days of the IMF providing regular global growth downgrades are almost ending. In a follow-up statement, she mentioned that the global growth in 2023 is expected to slow down, and based on their projection, it will be by half a percentage point down vis-a-vis 2022.
The good news, as Georgieva states, is that 2024 will be the year the world will see an economic upside worldwide. In addition, she says that even with central banks potentially cutting interest rates, the world is not quite there yet since inflation could be slowing down, albeit still quite high.
As for China, she stated that as much as GDP would increase, we might not again see the days of the country contributing around 40% to global growth.
Day 3
$1.4 trillion wiped from the crypto market, Lambos gone
When the World Economic Forum was last held, Bitcoin traded at around $30,000 after a steep fall from its all-time high in November 2021. Since then, the crypto industry has seen $1.4 trillion wiped off, causing more reservations about how companies were splashing their money over the past year. Several companies that attended last year were nowhere to be seen this year.
Usually, the Promenade is the main street in Davos, where companies and governments take over cafes and shops for the conference week. Last year, there were crypto firms from all walks of life, which was not the case this time. There has been a huge slide with even fewer crypto firms with flashy storefronts.
During the event, someone packed a flashy orange “bitcoin car” outside the Blockchain Hub on the Promenade. The tires and license plate were printed with the words “in crypto, we trust.” The license plate had the Ukrainian flag and the name Kuna, a Ukrainian crypto exchange. However, the identity of the car owner was not confirmed at the time.
Credit Suisse CEO says outflows are down, with overhauls increasing
Ulrich Koerner, the chief executive officer of the global investment bank Credit Suisse said that the bank is seeing a sharp decrease in client outflows as it progresses with its strategic overhaul.
In November, Credit Suisse’s shareholders approved a capital raise of $4.2 billion, which will fund the bank’s transformation as part of the changes. Notably, the Saudi National Bank will become the bank’s largest interest holder with a 9.9% stake. As Korner puts it, the move towards a “new Credit Suisse” was going well.
Ripple CEO optimistic about winning the XRP vs. SEC case
Brad Garlinghouse, Ripple CEO, said he was hopeful of a resolution in its favor with the US SEC within the first half of 2023. Stressing the importance of the outcome, he said the Ripple case is not just for his startup but also for the entire crypto industry in the US.
Garlinghouse added that they are willing to settle, but for that to happen, the SEC should make it clear that XRP is not a security.
Day 4
Bank of England to hike rates
Governor of the Bank of France Francois Villeroy de Galhau believes that the European Central Bank interest rates could rise by summer. The ECB 2% deposit rate will rise, most certain to 2.5% in the next month. Then, it will reach 3.2% by July, a downgrade compared to the 3.5% investors priced at the start of the month.
Mario Centeno, Governor of the Bank of Portugal, added that more rate hikes can be expected over time, with more meetings coming up. Hence, the ECB is facing a tricky task whereby some economists caution that an aggressive hiking cycle could be detrimental to growth. Notably, the latest ECB projections see a 0.5% growth for the eurozone in 2023 and a 1.9% growth in 2024.
Major economic risk as US debt ceilings
The US economy has slowed since the Fed began raising interest rates last year. However, as the year started, the finance and tech CEOs at the WEF were optimistic about the economy in 2023 but saw one major risk.
The US economy is at risk of defaulting on its debt, which has never happened in modern history. Politicians are wrangling over the rising country debt breaching the limit of $31.4 trillion. As a result, the US lawmakers are contemplating on whether to increase the debt ceiling to reduce the pressure that will be felt by its citizens or not.
The US hit teh satutory limit last month however, members of the Republican Political party are holding out on raising the debt ceiling in pursuit to negotiate changes in federal spending with the White House before a bill is drafted.
As such, the nation now hangs in the greatest economic uncertainty in its history as it may end up defaulting on its debt obligations which would spell economic catastrophe. Treasury’s Janet Yellen confirmed on Monday that they have taken several measures to hold the country from defaulting on its debt as they wait for House of Representatives to pass the bill to raise the debt ceiling.
US debt defaulting confirmed?
Although the nation is looking for means to evade the almost imminent fate of a debt default, reports are out that Bank of America, the nation’s second largest bank is ready to tackle a debt default. The bank’s CEO, Brian Moynihan told CNN on Monday that they are prepared for the event which seems more and more likely by day in America.
He also added that their preparations will cover similar events in other countries around the world. Moynihan said that one hopes that such financial events don’t happen but hope is not a way out so one has to prepare. These developments are critical as the looming collapse of the US Dollar would instigate further collapse of currencies from other countries.
The collapse would also bleed out to crypto and stock markets as people would cash out to try and mitigate the rising costs of living. These developments have caused an uproar on social media platforms with some people unearthing how the Federal Reserve came to be.
The same Twitter user criticized the US Government for its trend of overprinting money and adjusting interest rates as a solution to every financial issue claiming that is condemning the dollar to devaluation like all other fiat currencies.
Another user said that Biden’s administration is trending on a loose ground. He explained that the current track of events are only going to defer the debt to the next Congress. The user suggested the introduction of blockchain and web3 technology to overhaul the US financial system.
Davos crypto attendees distance themselves from FTX and Bankman-Fried
The community of attendees at Davos tried to distance themselves from the FTX saga and its founder, who is now facing serious charges, and wanted to maintain their reputations, which is important in running a crypto-related service. Ripple’s CEO, Garlinghouse, compared SBF to Bernie Madoff, who ran the largest Ponzi scheme in history.
Bitcoin Mercedes owner hits back at critics
After crypto executives at the event criticized the car by saying that it was bad for the industry’s reputation after the 2022 market crash, the owner hit back. Michael Chobanoan, Kuna founder, confirmed he was the car’s owner and said the only reason he parked the car at the location was convenience.
Chobanoan stated that if someone made bad decisions and lost their money, it was their fault, not his car’s. His comments attracted criticism and some social media users did not welcome them.
Jamie Dimon says rates will rise above 5% due to ‘underlying’ inflation
Jamie Dimon, the JPMorgan Chase CEO, noted that the US Federal Reserve might need to increase the interest rates beyond the 5.1% terminal rate in December. He noted that there is a lot of underlying inflation, which will not go away quickly; hence he thought that the rates might go higher than 5% to 6% if a mild recession kicks in.
Day 5
IMF chief says global economic outlook is much better though not yet stable
Kristalina Georgieva, IMF chief, speaking at the closing session of the WEF, noted that growth prospects picked up in recent months. However, she warned that there shouldn’t be over-optimism.
Georgieva noted that the growth is slightly better than everyone expected it to be some months ago, but it doesn’t mean it’s good. She added that inflation, however, appears to be leaning in the right direction.
The IMF growth projection, she highlights, mentions that the year could still be a painful one worldwide. In addition, she said that there was a risk that stronger growth in China would increase energy prices, making the inflation fight harder.
What is next?
Overall, the outlook on the global economy, recession and inflation seems to be slightly better than the headlines surfacing in the media.
Meanwhile, technology decoupling, protectionism, and geopolitical rivalry have altered the business and political landscape even more, causing potential risks and rewards. As for what is next, economists are curious about what measures different governments will implement to evade an ongoing recession and economic downturn
