Bank of England governor lashes out at cryptocurrency mania

Mark Carney, Governor of the Bank of England, joined a number of other well-known figures in attacking cryptocurrencies. He urged regulators around the world to monitor them as strictly as other financial assets.

Mark Carney is a Canadian economist who once worked for Goldman Sachs and was Governor of the Bank of Canada. He is now Governor of the Bank of England and Chair of the G20's Financial Stability Board.

Carney rails against cryptocoin "speculative mania".

Speaking at the Scottish Economics Conference in Edinburgh, Carney criticized what he called "global speculative mania" that has caused the rise in the price of cryptocoins. He said the coin offerings should be held to the same standards as other financial assets saying:"Being part of the financial system brings enormous privileges, but with them great responsibilities."

Financial market participants and governments are worried about the potential of cryptocoins to be used for illicit purposes. At the same time, some cryptocoins such as Ripple are developing payment platforms that will be useful for banks and others. However, some think that the volatility around bitcoin and other cryptocoins has contributed to volatility in the February financial markets.

Carney's criticism

Carney feels that cryptocoins are failing as they are a poor store of value. However, the system is still developing. Much of the activity now is as Carney notes speculative so traders are not considering the coins as a store of value but as a speculative investment. After all there have been huge price gains by many cryptocoins.

Carney also notes that cryptocoin prices look like bubbles:"The prices of many cryptocurrencies have exhibited the classic hallmarks of bubbles, including new paradigm justifications, broadening retail enthusiasm and extrapolative price expectations, reliant in part on finding the greater fool." While some may be fooled, others are making great gains. Many invested in cryptocurrencies would agree that prices will drop but see this as a positive correction in the price movements. The bubbles do bring investment funds into the area that can aid development.

There have been substantial drops in cryptocoin prices of late, including bitcoin, but as mentioned many consider this as positive and there is as yet no sign of any complete collapse. The corrections may purge the market of some speculators. Many cryptocoins are developing their platforms for various purposes.

Carney lists other concerns such as the use of the coins for money laundering, terrorism financing, and tax evasion. These are problems and show the need for regulations.

Carney's criticism follows that of Agustin Carstens, manager of the Bank for International Settlements, who claimed that bitcoin had become "a combination of a bubble, a Ponzi scheme and an environmental disaster."

Bitcoin miners in Canada

Carney's reference to bitcoin as an environmental disaster no doubt refers to the tremendous amount of power used in bitcoin mining. MIners search the world looking for places such as Iceland where power is cheap. Even Canada is developing mines in the provinces of Quebec, Manitoba, and B.C. where power is relatively cheap. Hydro-Québec may consider raising its rates for cryptocurrency miners, the utility said. Requests are pouring in to get permission to establish the mines in the province. Spokesperson Marc-Antoine Pouliot claimed that more than 100 cryptocurrency mining companies had expressed interest in coming to Quebec as its power costs are low. He said: "We've had such an important volume (of requests) that there are questions being asked on the tariff offered and the quantity of clients we'll be able to plug in."

Not all cryptocoins have miners and some that do have far lower power consumption than bitcoin.

Bank of England group studying risks of cryptocurrencies to financial stability

The Financial Policy Committee of the Bank of England a body that monitors risks in financial markets, is in the process of carrying out a study of the risks that cryptocurrencies pose to financial stability in the UK. The Financial Stability Board will make a report to the G20 leading industrial and developing countries in Argentina regarding the implications of crytptocurrencies to financial stability.

Carney said that in his own view crypto-assets did not seem to pose any material risks to financial stability,.

Published previously in Digital Journal

American, billionaire and philanthropist George Soros may be head of Ukrainian National Bank.

There are several reports about billionaire American business tycoon and philanthropist, George Soros, possibly being the next head of the Ukrainian National Bank (NBU).

Ukrainian president, Petro Poroshenko, seems to like appointing foreigners to top cabinet posts and gives them immediate Ukrainian citizenship: US-born Natalie Jaresko became finance minister, Lithuania's Aivaras Abromavicius economy minister and Aleksandre Kvitashvili - from Georgia - health minister. Hours before the vote in the parliament that installed them, all three were granted Ukrainian citizenship by President Petro Poroshenko. Jaresko was former president and CEO of Western NIS Enterprise Fund(WNISEF) a project funded by the U.S. Agency for International Development (USAID).

 The APA reports that Ukraine’s Channel 112 reported the information about the Soros candidacy derived from sources in Verkhovna Rada and people close to Petro Poroshenko. Soros is not the only foreigner among candidates for the head of the Bank with the former head of the International Monetary Fund(IMF) Dominique Strauss-Kahn also said to be in the running. There are also representatives of the US Federal Reserve system among the five candidates.

 The Ukraine would not be unique in having a foreigner as head of their central bank. The United Kingdom has Mark Carney, a Canadian, as the governor of the Bank of England. Carney was formerly governor of the Bank of Canada and before that he worked for years for Goldman Sachs in several countries. Nationality becomes less of a factor than being able to serve North American and European global capital.

 The current head of the NBU is Valeria Gontareva who was appointed just back in June. She apparently has just recently submitted a letter of resignation after a report from the Parliamentary Committee on Finance and Banking asked for an urgent report on the status of the Ukrainian monetary system as well as asking Poroshenko to dismiss Gontareva.

 Soros has been active in financing NGO's throughout now independent countries that used to be part of the Soviet bloc and he helped promote the Rose revolution in Georgia. He has also promoted the work of anti-government NGO's in the Ukraine: Ercis Kurtulus, head of the Social Transparency Movement Association (TSHD) in Turkey, said in an interview that "Soros carried out his will in Ukraine and Georgia by using these NGOs .." Whoever heads up the NBU will have a tough job trying to stabilize the hryvnia, the Ukrainian currency. As with the Russian ruble, the hryvnia has had a huge fall in value. Back on November 11, Bloomberg reported: The currency dropped 6.2 percent to an all-time-low 15.84 per dollar by 3:30 p.m. in Kiev, down 18 percent since the central bank loosened its management of the exchange rate a week ago. The Ukrainian Equities Index slid 6.4 percent, the most among 93 global gauges tracked by Bloomberg. The yield on the sovereign’s benchmark Eurobonds approached record highs.

The Bank co-ordinates its activity with the government through a council of 15 members. The president Petroshenko is a member of the council. The Ukraine will be a government by the billionaires for the billionaires, should Soros head the NBU. Poroshenko, the chocolate king, is also a billionaire along with Soros and is one of the Ukrainian oligarchs.

Canadians have record consumer debt levels

Officials have been warning Canadians to cut back on borrowing as consumer debt levels rose but a report issued by TransUnion today (August 23) shows debt is at record levels.

The report shows average non-mortgage debt of Canadians is $26,221 in the second quarter of 2012. This is an increase of 192 dollars from the first quarter. The Credit Bureau began tracking average consumer debt levels only in 2004. The present level is the highest yet.

This is the second consecutive quarter of growth in the average. The growth in debt is happening across Canada except for a slight dip this quarter in Saskatchewan and Alberta has a decreased annual growth.

Mark Carney has consistently warned that the increasing consumer debt levels are a threat to the economy and that levels are too high. However, in the short term this spending will keep the economy afloat. Thomas Higgins of Transunion said:

“When I look at the recent comments from the Bank of Canada, that they don’t foresee there will be a change in interest rates for 12 to 18 months, and now that some of the media attention on Europe’s issues has died down, I would not be surprised to see the latest rise [in debt levels] continue...Maybe people are thinking that they don’t need to tighten their borrowing too much, that they have a bit of leeway.”

The data used to analyse the data includes credit card debt and car loans, installment loans and lines of credit. Although lines of credit are the largest source of non-mortgage debt, in the most recent quarter the largest increase in debt was for car loans. Higgins suggested that during the recession people put off buying big ticket items. Now the the economy is recovering somewhat they are beginning to buy them again.

In spite of the high levels of debt Canadians are repaying debt. Bankruptcies are at historic lows! However if the economy should take a turn for the worse or interest rates rise many Canadians could fall behind in payments as debt payments became much more burdensome. On the other hand if Canadians all suddenly started paying off their debt warns analyst Ben Rabidoux economic growth could slow.

Jeffrey Schwart of Consolidated Credit Counseling Services warned that Canadians need to include debt repayment and savings in their budget and must learn to live within their means. A Bank of Montreal poll showed that 27% of Canadians between 18 to 34 have not started any savings for retirement. Many Canadians also have no money set aside for emergencies.

Given the constant advertising that produces desires for the latest goods and given often readily available credit with low interest rates it should not be too surprising that many Canadians find themselves unable to save any money from one paycheck to the next. Often each month they may find themselves sliding further into debt.

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