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Vitor Constâncio

@VMRConstancio

24 May

Bitcoin tumbled again. Finally, American authorities seem to be awakening for the real problems with bitcoin and other crypto-assets. “The US Treasury announced on Thursday that any crypto transfers worth more than $10,000 must be reported” to the tax administration 1/11

Obviously, that works only for honest citizens and firms. Importantly, the Treasury text recognises that “Cryptocurrency already poses a significant detection problem by facilitating illegal activity “ The problem is the absolute anonymity they ensure 2/.

There are various types of blockchain technology, open decentralised or permissioned ones. Crypto assets use the forme, and no one can access the true identity of entities transacting in the network using a number and a password only they know. A paradise for criminals.3/

Read 11 tweets

Vitor Constâncio

@VMRConstancio

13 May

CBs must keep their nerve with no change in their stance or views on the economy. Despite all warnings about temporary supply glitches & one-off effects on inflation, media and markets are in a frenzy about inflation data for the US April inflation, 4.2% yoy and 3% for core.1/

The EA numbers are much lower, 1.6% and 0.8%. I expected 2% for the EA and more than 3% for the US (markets were expecting 3.6%). The oil price went negative for a few days in March 2020 and was still around $21 in April 2020, implying a huge base effect for March/April 2021.2/

Markets reacted sharply. In 2 days, the US 10Y yield went up from 1.6 to 1.69 now. In the EA the average increase is now also 9 b.p. Stocks are going down (especially tech in the US). VIX, the “ fear index” had a spike but still fat from several previous peaks. 3/

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Vitor Constâncio

@VMRConstancio

14 Apr

A day of victory for crypto-assets and for bitcoin in particular. It is also a day that establishes these blockchain-based crypto tokens as a Wall-Street adopted asset class in competition with other types of investment. They are not currencies. 1/

A new Exchange (Coinbase), specialized in crypto-assets was launched and traded in NASDAQ. It attained an initial value of ±100 billion dollars of capitalization. Much higher than the company that owns the NY Stock Exchange and not much below Blackrock (± 120 bn) or GE !! 2/

Bitcoin itself reached 64000 dollars per coin before dropping a bit. As I tweeted some time ago, bitcoin cannot be a full-fledged currency because it cannot be a stable unit of account or an usual means of exchange because the higher and higher valuations undermine that. 3/

Read 6 tweets

Vitor Constâncio

@VMRConstancio

31 Mar

Bloomberg published an interesting article bloomberg.com/news/features/… about the Brexit effects on financial instruments trading in Europe.See this chart on the trading of stocks displacement from London to continental cities 1/

Swap trading has also moved to the EU, inverting previous positions 2/

Regarding derivatives clearing, the EU Commission fixed up toJune 2022 the “temporary legal permit Brussels ..to give EU banks access to UK clearing houses” Then comes the unavoidable displacement process away from a third country without an agreement about services trade. 3/3

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Vitor Constâncio

@VMRConstancio

30 Mar

There is a growing chorus in “market literature” about the alleged coming back of the inflation spectre. Inflation is increasing this year because of oil and pent-up demand one-off effects. Still, the hawks are invoking all possible inflation causes to justify their warnings.1/

However, all official institutions, national and international, are not forecasting high inflation. Taking into account this year`s one-off shocks, the FED projects inflation this year and next to be only 2.4% and 2%, and the ECB forecasts the pow levels of 1.5% and 1.2% 2/

Disregarding those predictions, hawks mention all possible drivers to justify their inflation scare. From fiscal deficits, regardless of private demand and economic slack, to attempting to resurrect zombie monetarism of yore based on recent temporary money increases. 3/

Read 11 tweets

Vitor Constâncio

@VMRConstancio

16 Feb

A potential problem is looming, and the media are pursuing a new story that builds on the following chain of reasoning: 1) higher inflation is coming;2) if CBs increase interest rates debts will explode and recession may ensue; 3) CBs are caught in an impossible dilemma 1/12

It´s perhaps too complex for some tweets, but.. Registered inflation this year is bound to be higher than present forecasts, resulting from one-off price spikes and base effects That will not start a sustained high inflation process, but temporary higher inflation is possible 2/

For example, Euro Area inflation increased suddenly from several months at -0.3% to +0.9% in Jan. This jump resulted mostly from several base effects, especially the change to German VAT. Inflation expectations increasing but higher in the US than in the EA 3/

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