In recent months, Bitcoins have been all the rage especially as the crypto-currency has begun to climb in value. The spike has once again shone a light on the digital currency as a potential alternative to fiat currencies, which currently is witnessing all kinds of volatility thanks to Brexit, central banks’ thirst for printing, and massive deficit spending. While many investors see a positive future for the alternative currency, the true test of Bitcoin will be if a nation adopts the currency. The adoption of Bitcoin as a national currency will bring with it a plethora of financial securities but at the cost of eliminating the ability of central banks to print currency endlessly.
What is it?
Bitcoin was born out of a desire for online payments to be conducted among peer to peer systems with the elimination of a third party or middleman such as Paypal. Since its inception, Bitcoin has evolved into a myriad of entities ranging from being an investment vehicle, digital currency, community, and more importantly, the potential to be an alternative monetary system. It’s in this last point where Bitcoin’s greatest potential lies, if the trend continues; it could forever change how people and government conduct business.
Is it Money?
Despite making headlines, Bitcoin is still unknown to many. A study conducted by the Coin Center has found that 2/3 of Americans have no knowledge about the digital currency and of those that did know, 80% never have used it. This is one of the major impediments for Bitcoin in its quest to become an established currency. When Bitcoins are mentioned, the primary concern for people is whether or not it is money? Many people think of it more as a credit than actual currency such as Dollars, the Euro, Rubles, etc. In order to better understand if Bitcoins are money, one must understand how money is defined. Money is primarily defined by the following characteristics:
Durability – Be able to withstand wear and tear. Thanks to technology, Bitcoin as a digital unit of currency can, in theory, last into perpetuity.
Divisible – Ability to divide into small units allowing consumers to purchase products at any price. Bitcoin is more divisible than any existing currency, allowing users to go into thousandths place for a transaction, if need be.
Scarce – Must be limited and not so easily obtained. Unlike fiat currency, which is not capped and can be printed endlessly (as it is now around the world), Bitcoin production is capped at 21 million, at which point no more will be produced. This fact alone makes Bitcoin more stable than gold which is not firmly capped and supplies remain somewhat unbounded depending on mining activity.
Portable – Is it easy to carry? Due to its digital nature, Bitcoins can be carried on phones, tablets or computers anywhere and anytime.
Acceptability – Must be widely accepted as a medium of exchange. This is currently one of the uphill battles for Bitcoin. It is gaining momentum globally but as a relatively new currency, it needs to continue to increase its recognition. Nevertheless, relative to many minor currencies of weaker economic nations, Bitcoins appear to be accepted more so.
Stability– The value of the currency must remain relatively constant over long periods of time. As a new currency with few investors, Bitcoins liquidity is more volatile due to the effect of every transaction on the digital currency’s price, but with time this issue will subside as more investors and users partake into the currency decreasing its precariousness. In addition, the upper cap of Bitcoin production will serve as an anchor for price stability due to the fact that no more can be created. In theory, this parameter would invalid many national currency, if not all. The US Dollar, perhaps one of the most trusted and strongest currencies, has lost almost 100% of its value in the last several decades.
Thus, by the six generally accepted measures defining a currency as money, Bitcoins appears to fit the mold.
The 2008 financial crash as well as the economic uncertainty that has followed in the past decade has caused many to begin questioning the financial systems and philosophies that govern them around the world. As a result, shifts to populist leadership have begun to take root in many countries as well as the call for overhauling their respective economic systems. The confidence crisis will not be solved by any one leader or system but rather how money is handled in these respective countries. Under the current global monetary system, established in Bretton Woods and its subsequent modifications, all the nations in the world have fiat currencies. Fiat currencies are monies that are backed by the promise of the government that issues it and nothing else. This greatly diverges from what use to be practiced where currency was anchored to some tangible commodity that had an intrinsic value such as gold and/or silver. The root cause, albeit perhaps a simplified explanation herein, of many economic crises is due to use of fiat currency. Fiat currencies are not secured to anything, thus allowing central banks to scheme for ways to “alter” its value. Their tools of choice are printing more and using the additional money created out of thin air to “eliminate” any debt and deficit spending but such free reign to produce money comes at a dire consequence; devaluation or inflation. Inflation is an indirect tax on a nation’s population. Unrestricted spending leads to massive currency printing, which eventually is paid for by the citizens through inflation that can go unchecked sometimes as history has demonstrated in Weimar Germany, Zimbabwe, and now Venezuela, to cite a few extreme cases.
Enter Bitcoin. The implementation of Bitcoin as a national currency will yield immense benefits for a nation over time. While many countries dread ceding financial authority of their currency, the benefits of Bitcoin implementation as national currency will outweigh the costs for all countries but especially third world nations with smaller economies. Most economies around the world ultimately operate based on the consumer’s confidence, which has been eroding ever since the 2008 financial downturn. Bitcoin remedies the issue of public trust in the economic system. With smaller nations, the adoption of Bitcoin will allow them to restore not only their public’s confidence but attract foreign investments because there is a source of stability in the country; business loves stability. No longer can a nation’s currency be devalued by social welfare, war, debt, or redistribution of wealth especially to help ensure political ambitions. But pursuing such a policy does not come without costs. A national adoption of Bitcoin renders a nation impotent when it comes to the ability to control reserves, printing additional currency, or any other type of monetary policy.
Such surrender of financial ability forces a paradigm shift for governments in how they operate. The ultimate benefit is for a nation’s citizen, government can no longer squander hard earned tax money on fruitless projects, redistribution to other segments of society in order to secure votes and influence, and send money to finance projects for corporate or foreign allies at the cost of running up the national debt with no remorse. Legislators complacent in the status quo system view the separation of currency and state as anathema to the concept of government due to the fact that it reduces their ability to carry out spending, sometimes massively, without checks. In addition, the thought of such a radical departure is only viewed as such due to the fact that nations were technologically unable to do so until now thanks to the advancement in computing as well as blockchain technology.
The adoption of Bitcoin as an official currency by any nation actually demonstrates that government’s adherence of fiduciary responsibility to its citizens. In doing so, a government handicaps itself in being able to run to the printing press and debase their currency all the while reducing citizen’s wealth through inflation. Instead, the government returns to what it should be doing, which is justify every item in a budget as well as balance it. This in itself will cause a government to become more transparent and reduce corruption greatly as well as strengthen democracy.
Perhaps the biggest challenge will be the ability of government to borrow. This will hamper economic growth due to the fact that government and business have become acclimated to artificial growth by the government increasing its debt holdings especially in recent decades, therefore creating economic expansion that was never wholly justified or possible without careless financial management. This shift will have a detrimental effect on citizens and nations alike.
Another downside to an adoption of Bitcoin by one or a few nations is the surrender of a powerful weapon, devaluation of currency. The continual back and forth bickering between the US, China, EU, etc. about currency devaluation is only possible when central banks control a fiat currency, once a nation surrenders that ability, they are no longer able to fight on equal footing against a fiat currency-based nation. This could have negative effects in the interim for such a nation’s industries when it comes to exporting goods. Finally, the establishment of Bitcoin will have a large effect on the concept of credit as is known in its current form. Markets will need to devise a new way for credit creation in a world absent of fiat currency and what it means to have credit.
As Bitcoin continues to grow in popularity and garner more attention by investors, everyday users and even politicians, the inevitable reality of Bitcoin becoming a national currency is on the horizon. Such a currency contains the potential to prevent the financial roller coaster that is being observed in nations such as Venezuela and Zimbabwe. Yet, in the interim, early adopters will face many challenges and impediments as they transition into a Bitcoin-based monetary system but such bumps will pay off in the long term.
The CIIE: A gorgeous chorus of integrated world economy
The 2nd China International Import Expo (CIIE) will be held in Shanghai, China from November 5th to 10th. Iran will participate in Country Exhibition, Business Exhibition and Hongqiao International Economic Forum (HIEF). Here, I would like to introduce the CIIE to Iranian friends.
The 1st CIIE achieved great success. On November 5th to 10th, 2018, the first CIIE was successfully held in Shanghai, China, with a profound influence around the world. First, the scale of the exhibition was large. Covering a total area of 300,000 square meters, 172 countries and international organizations participated, and 3,617 overseas companies took part in the exhibition, fully reflecting the strong appeal of the Chinese market. Second, the level of the exhibition was high. More than 220 of the world’s top 500 companies participated in the exhibition, and more than 300 new products and technologies were first released. Third, the result of the exhibition was rewarding. More than 800,000 exhibitors and purchasers attended the conference, concluding contracts over US$57.8 billion.
During the 1st HIEF, Chinese President Xi Jinping attended the opening ceremony and delivered a keynote speech. More than 30 foreign heads of states and international organizations delivered speeches and more than 4,500 delegates attended the forum. The Country Exhibition covered all five continents, including developed countries, developing countries and least developed countries. The Country Exhibition pavilions had different styles, highlighting their own characteristics, and making full use of high-tech means and diverse forms to display their unique regional culture and distinct advantageous industries, including goods trade, service trade, industrial development, investment, tourism and specialty.
The second CIIE is quite worth expecting. Namely, its scale will be even larger. The exhibition area has increased from 300,000 to 330,000 square meters. More than 170 countries, international organizations, over 3,000 exhibitors and 400,000 purchasers have signed up for the exhibition. There will be more than 200 supporting and facilitating activities, such as interpretation of economy policies, release of research reports, international cultural exchange, corporate promotion, as well as sellers and buyers’ matching negotiations. Its quality will be further upgraded. The exhibitors are more diversified. The number of companies in the world’s top 500 and leading industrial enterprises exceeds that of the first CIIE, and there will be even more visitors and international purchasers. Professional, high-quality, cutting-edge and featured exhibits will be more concentrated and the quality will be further improved. Its innovation will be much stronger. This year, for the first time, the CIIE news release platform will be set up. The Chinese ministries and local governments will jointly interpret important policies. International organizations and research institutions will release annual reports and industrial reports respectively. The CIIE will continue to be chosen as an ideal platform by participating companies to launch their products and technologies, the number of which is expected to overpass last year’s. Innovative exhibition forms such as quality life, technology life, and artificial intelligence will give participants a first-class experience.
As a major feature and highlight of the CIIE this year, there will be more than 60 countries participating in the Country Exhibition, covering an area of about 30,000 square meters. The theme of HIEF this year is “Openness, Innovation, Cooperation, and Win-win”. More than 50 important speakers from political, business and academic fields including WTO Director-general, UNCTAD Secretary-general, Nobel laureate in economics and leaders of global top 500 enterprises, will jointly explore the new trend of global economic development, share their views and insights on meeting new challenges, overcoming difficulties, and finding ways for further developing globe economy in the new era.
The open and cooperative CIIE will never end. The CIIE was first initiated, planned, deployed, and promoted by President Xi Jinping in person. As an event to be held on an annual basis, the CIIE will feature good performance, good results and continued success in the years to come. Adhering to the global governance concept of extensive consultation, joint contribution and shared benefits, the CIIE welcomes countries to share China’s development dividends. It provides new opportunities for countries to expand exports to China, but also develop trade relations with third countries. It builds a new platform for countries to demonstrate national development achievements and to explore global economic and trade issues. It injects new impetus to global trade and world economic growth. Upholding the spirit of openness and cooperation, the CIIE is not a China’s solo show, but rather a chorus of countries of all over the world. Working together with the international community, China is willing to develop the CIIE into an effective channel for the goods, technologies and services from the world to enter the Chinese market, an open and cooperative platform for countries around the world to strengthen cooperation and exchanges and conduct international trade, an international public product to promote economic globalization. China is willing to make joint efforts with the world to construct an open world economy, build a community with a shared future for mankind, and facilitate better development of global trade and world economy.
I believe that Iranian companies participating in this year’s CIIE will be warmly welcomed with the world-famous Persian carpets, saffron, handicrafts and etc…The Iran Country Exhibition High-Tech Pavilion will open a new window for China and other countries as well to perceive and further understand Iran’s technological strength and advanced products with its featured products in the fields of IT, energy, environment, nano, biology and health. As an important hub along the Silk Road , Iran’s voice and view will be heard at HIEF and spread to the rest of the world.
Here, I wish CIIE a gorgeous chorus of the integrated world economy and having a long-lasting profound impact of the world.
From our partner Tehran Times
Modi’s India a flawed partner for post-Brexit Britain
With just two weeks to go until Britain is scheduled to exit the European Union, Boris Johnson and his ministers are understandably focused on the last-minute dash to formulate a workable Brexit deal with the EU. Once this moment has passed, however, either Johnson or whoever replaces him as PM will come under intense pressure to deliver the trade deals Brexit side supporters have so talked up since 2016.
One such envisaged deal is with India. Seven decades after securing independence from Britain’s colonial empire, New Delhi has the world’s seventh-largest economy and one of its fastest growth rates. The prospect of deeper trade ties with Asia’s third-largest economy has been a major feature of the pitch for a “Global Britain” that extends the UK’s reach beyond the continent, and Johnson himself made a big thing of expanding economic ties with India while campaigning to become PM.
Unfortunately, any plans to kickstart trade agreements with India will run into problems, and not just over immigration and visa issues. India is on the verge of a serious economic downturn, hit by job losses and decreasing levels of foreign investment. With growth slowing down, Indian PM Narendra Modi has fallen back on his aggressive brand of Hindu nationalism to galvanise public support, a gambit that has most recently resulted in his government’s controversial move to strip automony from Kashmir.
Bad time for a UK-India trade deal
Whereas only a few years ago India was held up as one of the world’s fastest growing economies and an enticing prospect for global trade and investment, Moody’s new projection of a 5.8% growth rate represents a danger to Narendra Modi’s promise of a $5 trillion economy. Recently released figures show India’s GDP growth falling for the fifth successive quarter, to a six-year low of 5.2%.
India’s economic woes are reflected in patterns of foreign investment. Around $45 billion has been invested in India from abroad over the last 6 years. The downturn in the country’s economic fortunes has seen a record $4.5 billion of shares sold by foreign investors since June this year. These economic problems are linked to Modi’s failure to carry through on economic reforms promised when he came to power in 2014, when a number of structural problems were seen as inhibiting external trade relationships.
India currently has over 1,000 business regulations and more than 3,000 filing requirements, as well as differing standards for social, environmental and human rights. These have been sticking points in the moribund trade deal negotiations between India and the EU, and Brexit advocates have not explained how they plan to overcome these hurdles.
Hostility to foreign companies
Structural issues are only part of the problem. Another key concern is the Indian government’s adversarial attitude towards foreign investors. Despite Modi’s promises to make India an attractive place to do business, his government has continued protectionist policies that throttle the country’s ability to attract outside capital.
One issue is retrospective taxation. Under Modi’s predecessor, Manmohan Singh, several British and international firms were hit with sizeable, legally dubious tax bills by the Indian government. Modi came to power on a promise of ending retrospective tax bills being imposed on overseas companies, and yet British firms such as Vodafone and Cairn Energy still find themselves pursued through the courts for back-dated tax bills, despite the protections they should enjoy under the bilateral investment treaty between India and the UK.
Vodafone’s case involved its 2007 acquisition of a stake in cellular carrier Hutchinson Essar. While the deal did not take place in India, New Delhi determined Vodafone still owed $5 billion in taxes on the overseas transaction. After the Indian Supreme Court dismissed the claim in 2012, India’s previous government introduced a new law to tax transactions of this nature that retroactively applied to cases going back to 1962. Modi attacked this “tax terrorism” at the time, but his government has continued its dogged pursuit of Vodafone in the courts.
Cairn Energy has faced an equally arduous struggle with the Indian Ministry of Finance, which in 2014 blocked the British firm from selling its 10% stake in Cairn India and subsequently demanded $1.6 billion in taxes. Indian officials used the 2012 law to justify their actions, violating the bilateral investment treaty and breaking one of Modi’s own campaign promises in the process.
Immigration laws a further sticking point
This recent history should already give British businesses pause, but the most obvious obstacle in any trade negotiations between UK and India will be the issue of immigration. The Centre For European Reform has argued post-Brexit trade will be closely linked to opening up UK borders to workers from partner countries, but a UK Commons Foreign Affairs Select Committee report in June highlighted how Britain’s immigration restrictions on Indian workers, students and tourists has already impacted bilateral trade relations. The report noted how the UK has slipped from being India’s 2nd largest trade partner in 1999 to 17th in 2019, adding that skilled workers, students and tourists are deterred from coming to the UK by the complicated, expensive and unwelcoming British migration system.
It is unlikely the Modi government will agree to any UK-India trade deal that doesn’t guarantee a relaxing of immigration rules that will allow a free flow of people as well as goods and capital between the two countries. The question is whether the British government, which has veered ever more closely towards a Brexit-fuelled populism at odds with relaxed border controls, will be flexible enough to sign up to this.
Given these issues, are Britain’s hopes for a post-Brexit dividend in Indian trade dead on arrival? Unless Modi’s government starts living up to international standards and honouring his country’s investment agreements with British companies, “Global Britain” may not get much further with India than it has with the US.
A more effective labour market approach to fighting poverty
is still the most reliable way of escaping poverty. However, access to both
jobs and decent working conditions remains a challenge. Sixty-six per cent of
employed people in developing economies and 22 per cent in emerging economies
are in either extreme or moderate working poverty, and the problem becomes even
more striking when the dependents of these “working poor” are considered.
Thus, it is not just unemployment or inactivity that traps people in poverty, they are also held back by a lack of decent work opportunities, including underemployment or informal employment.
Appropriate labour market policies can play an important role in the fight to eradicate poverty, by increasing access to job opportunities and improving the quality of working conditions. In particular, labour market policies that combine income support for jobless people with active labour market policies (ALMPs).
The new ILO report What works: Promoting pathways to decent work shows that combining income support with active labour market support allows countries to tackle multiple barriers to decent work. These barriers can be structural, (e.g. lack of education and skills, presence of inequalities) or temporary (e.g. climate-related shocks, economic crises). This policy combination is particularly relevant today, at a time when the world of work is being reshaped by global forces such as international trade, technological progress, demographic shifts and environmental transformations.
that combine income support with ALMPs can help people to adjust to the changes
these forces create in the labour market. Income support ensures that people do
not fall into poverty during joblessness and that they are not forced to accept
any work, irrespective of its quality. At the same time, ALMPs endow people
with the skills they need to find quality employment, improving their
employability over the medium- to long-term.
New evidence gathered for this report shows that this combination of income support and active support is indeed effective in improving labour market conditions: impact evaluations of selected policies indicate how people who have benefited from this type of integrated approach have higher employment chances and better working conditions.
One example of how this combined approach can produce results is the innovative unemployment benefit scheme unrolled in Mauritius, the “Workfare Programme”. This provides workers with access to income support and three different types of activation measures; training (discontinued in 2016), job placement and start-up support. The programme was also open to those unemployed people who were previously working in an informal job. By extending coverage to the most vulnerable workers, the scheme has helped reduce inequalities and unlock the informality trap.
Another success came through a public works scheme implemented in Uruguay as part of a larger conditional cash transfer programme, the National Social Emergency Plan (PANES). The programme was implemented during a deep economic recession and carefully targeted the poorest and most vulnerable.
Beneficiaries of PANES were given the opportunity to take part in public works. In exchange for full-time work for up to five months, they received a higher level of income support as well as additional job placement help. This approach reached a large share of the population at risk of extreme poverty and who lacked social protection. The report indicates that providing both measures together was critical to the project’s success.
The effects of these policies on poverty eradication cannot be overestimated. By tackling unemployment, underemployment and informality, policies combining income support with ALMPs can directly affect some of the roots of poverty, while enhancing the working conditions and labour market opportunities for millions of women and men in emerging and developing countries.
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