Facing Shortfalls, Pension Managers Turn to Risky Bets

The graying of the American employee is a math drawback for Farouki Majeed. It’s his job to take a position his means out. Mr. Majeed is the funding chief for an $18 billion Ohio college pension that gives retirement advantages to greater than 80,000 retired librarians, bus drivers, cafeteria staff and different former staff. The issue is that this fund pays out extra in pension checks yearly than its present staff and employers contribute. That hole helps clarify why it’s billions in need of what it must cowl its future retirement guarantees.

“The bucket is leaking,” he mentioned. The answer for Mr. Majeed—in addition to different pension managers throughout the nation—is to tackle extra funding threat. His fund and plenty of different retirement programs are loading up on illiquid belongings resembling personal fairness, personal loans to corporations and actual property.

So-called “various” investments now comprise 24% of public pension fund portfolios, in response to the latest knowledge from the Boston School Middle for Retirement Analysis. That’s up from 8% in 2001. Throughout that point, the quantity invested in additional conventional shares and bonds dropped to 71% from 89%. At Mr. Majeed’s fund, alternate options had been 32% of his portfolio on the finish of July, in contrast with 13% in fiscal 2001.

This technique is paying off in Ohio and throughout the U.S. The median funding return for all public pension programs tracked by the Wilshire Belief Universe Comparability Service surged to almost 27% for the one-year interval ending in June. That was one of the best consequence since 1986. Mr. Majeed’s retirement system posted the identical 27% return, which was its strongest-ever efficiency primarily based on information courting again to 1994. His private-equity belongings jumped almost 46%.

A majority of these blockbuster positive aspects aren’t anticipated to final for lengthy, nevertheless. Analysts anticipate public pension-fund returns to dip over the subsequent decade, which is able to make it tougher to cope with the core drawback dealing with all funds: They don’t have sufficient money to cowl the guarantees they made to retirees. That hole narrowed in recent times however remains to be $740 billion for state retirement programs, in response to a fiscal 2021 estimate from Pew Charitable Trusts.

This public-pension predicament is the results of many years of underfunding, profit overpromises, unrealistic calls for from public-employee unions, authorities austerity measures and three recessions that left many retirement programs with deep funding holes. Not even the 11-year bull market that ended with the pandemic or a fast U.S. restoration in 2021 was sufficient to assist pensions dig out of their funding deficits utterly.

Demographics didn’t assist, both. Prolonged lifespans brought about prices to soar. Wealthy early-retirement preparations and a wave of retirees world-wide additionally left fewer lively staff to contribute, widening the distinction between the quantity owed to retirees and belongings available.

Low rates of interest made the pension-funding drawback much more tough to unravel as a result of they modified long-held assumptions about the place a public system might place its cash. Pension funds pay advantages to retirees via a mixture of funding positive aspects and contributions from employers and staff. To make sure sufficient is saved, plans undertake long-term annual return assumptions to mission how a lot of their prices can be paid from earnings. These assumptions are at present round 7% for many funds.

There was a time when it was potential to hit that concentrate on—or larger—simply by shopping for and holding investment-grade bonds. Not anymore. The extremely low rates of interest imposed by central banks to stimulate development following the 2008-09 monetary disaster made that just about inconceivable, and shedding even just a few share factors of bond yield hindered the purpose of posting regular returns.

Pension officers and authorities leaders had been left with a vexing resolution. They may shut their funding gaps by decreasing advantages for current staff, chopping again public companies and elevating taxes to pay for the bulging obligations. Or, since these are all tough political decisions and courts have a tendency to dam any efforts to chop advantages, they may take extra funding threat. Many are selecting that possibility, including dollops of actual property and private-equity investments to the once-standard guess of bonds and shares.

This shift might repay, because it did in 2021. Beneficial properties from private-equity investments had been an enormous driver of historic returns for a lot of public programs within the 2021 fiscal yr. The efficiency helped enhance the combination funded ratio for state pension plans, or the extent of belongings relative to the quantity wanted to satisfy projected liabilities, to 85.5% for the yr via June, Wilshire mentioned. That was a rise of 15.4 share factors.

These bets, nevertheless, carry potential pitfalls if the market ought to fall. Illiquid belongings resembling personal fairness usually lock up cash for years or many years and are far more tough to promote throughout downturns, heightening the danger of a money emergency. Various belongings have tripped up cities, counties and states prior to now; Orange County famously filed for chapter in 1994 after losses of greater than $1.7 billion on dangerous derivatives that went bitter.

The heightened concentrate on various bets might additionally end in heftier administration charges. Funds pay about two-and-one-half share factors in charges on various belongings, almost 5 occasions what they pay to spend money on public markets, in response to analysis from retired funding marketing consultant Richard Ennis. Some funds, consequently, are avoiding various belongings altogether. One of many nation’s best-performing funds, the Tampa Firefighters and Police Officers Pension Fund, limits its investments to publicly traded shares and bonds. It earned 32% within the yr ending June 30.

It took some convincing for Mr. Majeed, who’s 68 years outdated, to change the funding mixture of the Faculty Workers Retirement System of Ohio after he turned its chief funding officer. When he arrived in 2012, there was a plan below technique to make investments 15% of the fund’s cash in one other kind of other asset: hedge funds. He mentioned he thought such funds produced lackluster returns and had been too costly. Altering that technique would require a feat of public pension diplomacy: Convincing board members to roll again their hedge-fund plan after which promote them on new investments in infrastructure initiatives resembling airports, pipelines and roads—all below the unforgiving highlight of public conferences. “It’s a tricky room to stroll into as a CIO,” mentioned fund trustee James Rossler Jr., an Ohio college system treasurer. It wasn’t Mr. Majeed’s first expertise with politicians and fractious boards.

He grew up in Sri Lanka because the son of a distinguished Sri Lanka Parliament member, and his preliminary funding job there was for the Nationwide Growth Financial institution of Sri Lanka. He needed to consider the feasibility of factories and tourism initiatives. He got here to the U.S. in 1987 along with his spouse, received an M.B.A. from Rutgers College and shortly migrated to the world of public pensions with jobs in Minneapolis, Ohio, California and Abu Dhabi. In Orange County, Calif., Mr. Majeed helped persuade the board of the Orange County Workers Retirement System to cut back its reliance on bonds and put more cash into equities—a problem heightened by the county’s 1994 chapter, which occurred earlier than he arrived.

His 2012 transfer to Ohio wasn’t Mr. Majeed’s first publicity to that state’s pension politics, both; he beforehand was the deputy director of investments for one more of the state’s retirement programs within the early 2000s. This time round, nevertheless, he was in cost. He mentioned he spent a number of months presenting the board with knowledge on how current hedge-fund investments had lagged behind expectations after which tallied up how a lot the fund paid in charges for these bets. “It was not a reasonably image at that time,” he mentioned, “and these paperwork are public.” Trustees listened. They lowered the hedge-fund goal to 10% and moved 5% into the real-estate portfolio the place it might be invested in infrastructure, as Mr. Majeed needed.

What cemented the board’s belief is that portfolio then earned annualized returns of 12.4% over the subsequent 5 years—greater than double the return of hedge funds over that interval. The board in February 2020 signed off on one other request from Mr. Majeed to place 5% of belongings in a brand new kind of other funding: personal loans made to corporations. “Again once I first received on the board, in case you would have instructed me we had been going to have a look at credit score, I might have instructed you there was no means that was going to occur,” Mr. Rossler mentioned. The private-loan guess paid off spectacularly the next month when determined corporations turned to non-public lenders amid market chaos sparked by the Covid-19 pandemic. Mr. Majeed mentioned he added loans to an airline firm, an plane engine producer and an early-childhood schooling firm impacted by the widespread shutdowns. For the yr ended June 30, the newly minted mortgage portfolio returned almost 18%, with greater than 7% of that coming in money the fund might use to pay advantages.

The system’s whole annualized return over 10 years rose to 9.15%, effectively above its 7% goal. These positive aspects closed the yawning hole between belongings available and guarantees made to retirees, however not utterly. Mr. Majeed estimates the fund has 74% of what it wants to satisfy future pension obligations, up from 63% when he arrived. Mr. Majeed is now eligible to attract a pension himself, however he mentioned he finds his job too absorbing to think about retirement simply but. What he is aware of is that the pressures forcing a cutthroat seek for larger returns will make his job—and that of whoever comes subsequent—exponentially tougher. “I believe it’s going to be very robust.”

By: Heather Gillers

Heather Gillers is a reporter on The Wall Street Journal’s investing team. She writes about pensions, municipal bonds and other public finance issues. She previously worked at the Chicago Tribune, the Indianapolis Star, and the (Aurora, Ill.) Beacon-News. She can be reached at (929) 384 3212 or heather.gillers@wsj.com.

Source: https://www.wsj.com/

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“Location Selector”. Willis Towers Watson. “Asset Management 2020 – A Brave New World” (PDF). Retrieved March 3, 2021. OECD For examples, see “Local Government Law Library”. Archived from the original on 6 September 2012. Retrieved 15 May 2011. “The 20 largest pension funds of the globe”. http://www.consultancy.uk. 27 October 2017. Retrieved 2018-03-11. [1] Top 100 Largest Public Pension Rankings by Total Assets Budget of the United States Government, FY2022, published May 28, 2021. Value as of September 30, 2020 Office of Management and Budget Retrieved June 13, 2021 Superannuation Statistics, March 2021. Value as of June 1, 2021. Retrieved June 1, 2021 2020年度第3四半期運用状況 GPIF “Annual Survey of Large Pension Funds and Public Pension Reserve Funds” (PDF). OECD. 2016-04-21. Retrieved 2016-10-28. Budget of the United States Government, FY2022, published May 28, 2021. Value as of September 30, 2020. Office of Management and Budget Retrieved June 13, 2021 Budget of the United States Government, FY2022, published May 28, 2021. Value as of September 30, 2020. Office of Management and Budget Retrieved June 13, 2021 Financial Statements of the Thrift Savings Fund December 31, 2020 and 2019. As of December 31, 2020. Thrift Savings Fund. Retrieved May 14, 2021 “Default”. Retrieved 2020-07-04. “CPP Fund Totals $317 Billion at 2017 Fiscal Year-End”. http://www.cppib.com. Retrieved 2018-02-24. “Page d’accueil”. Caisse de dépôt et placement du Québec | Investisseur institutionnel de long terme | Gestionnaire d’actif. “CalPERS Reports Preliminary 4.7% Investment Return for Fiscal Year 2019-20”. Retrieved 2021-03-03. “The world’s 300 largest pension funds – year end 2014”. Willis Towers Watson. “Performance – Ontario Teachers’ Pension Plan”. http://www.otpp.com. “Current Investment Portfolio – CalSTRS.com”. Retrieved 2021-03-03. https://www.pfzw.nl/over-ons/pers/paginas/kwartaalberichten.aspxhttp://www.emol.com/noticias/economia/2015/01/23/700604/donde-estan-invertidas-las-platas-de-los-trabajadores-en-chile.html Asher, Mukul (22 January 2021). “How the EPFO can improve as India’s largest social security provider”. Moneycontrol. “Annual Announcement of Financial Statements 2020”. “OMERS – 2020 Annual Report Highlights”. Retrieved 2021-03-03. Official WebSite of PREVI – English Version“STRS Ohio’s Impact”. “Assets Under Management & No.of Subscribers | NPS Trust”. “FRR 2012 Annual Report” (PDF). “NPRF”. Archived from the original on 2017-02-10. Retrieved 2020-05-03. “Choose an Industry SuperFund”. Industry Super. http://www.previ.com.br Official Website of PREVI “ΜΕΤΟΧΙΚΟ ΤΑΜΕΙΟ ΠΟΛΙΤΙΚΩΝ ΥΠΑΛΛΗΛΩΝ | Μ.Τ.Π.Υ.”“Official website of Mandatory Provident Fund Schemes Authority”. EPFPFRDA[2]Archived November 2, 2010, at the Wayback Machinehttp://www.csspp.rohttp://pio.rs/eng/“Armed Forces Pension Fund”. 29 USC § 1002 – Definitions | Title 29 – Labor | U.S. Code | LII / Legal Information Institute. Law.cornell.edu. Retrieved 2013-07-18. Federal Reserve Statistical Release, Financial Accounts of the United States, Fourth Quarter 2016Archived 2018-01-04 at the Wayback Machine, see pp.94-99. Values as of December 31, 2016. Federal Reserve Board of Governors. Reported March 9, 2017. Retrieved May 18, 2017

4 Missteps For Banks To Avoid When Migrating Payment Services To The Cloud

Banks and financial services providers can realize the efficiency and cost savings of cloud-based payments by taking proactive steps to guard against these common mistakes, notes Rustin Carpenter, a Global Payments Solution Leader for Cognizant’s Banking & Financial Services Industry Services Group.

The cloud’s lure of simplification is a powerful incentive for payment providers, as its role enabling modernization and permanently switching off legacy applications. Where banks struggle, however, is in shaping a strategy to get their payment services to the cloud. By understanding the common missteps, banks can create a plan for payment migration that maximizes benefits while minimizing risks.

The pandemic was a digital tipping point for banks, forcing them to implement in just a few months capabilities that otherwise would have taken several years. Research published in 2019 found that financial services firms lagged in adoption of public cloud infrastructure as a service (IaaS), with just 18% broadly implementing IaaS for production applications, compared to 25% of businesses overall.

Now many banking leaders we talk with are taking a serious look at cloud-based payment services, motivated by the age and complexity of their core payment applications as well as their business’s growing confidence in the security of cloud platforms such as Google Cloud, Microsoft Azure and Amazon Web Services (AWS). As banks contemplate migrating payment services to the cloud, here are some common mistakes to avoid that will ensure a smoother journey:

1. Assuming the cloud is cheaper.

Cloud-based services are indeed less expensive to run — once applications and services have been migrated. To manage a successful payments migration, be aware of the costs along the journey. The cloud can be a heavy lift. While banks and financial services providers often consider themselves proficient at consolidation and rationalization, the extensiveness required for cloud migration frequently far exceeds the effort of previous initiatives. For example, we helped a bank reduce its infrastructure footprint by 25% and lower its total cost of ownership by migrating its applications to the cloud.

That outcome, however, required careful analysis of the bank’s application source code and development of a migration strategy and cloud deployment architecture, as well as assessing and migrating more than 800 applications over three years. Cloud-based services are more streamlined and less expensive to operate, but accurately budgeting for the upfront time and resources of a cloud payment migration is challenging due to the many unknowns. Careful attention to planning is critical for a realistic cost assessment.

2. Underestimating the amount of prework.

The cloud promises to reduce complexity but getting to that point takes a thoughtful migration plan that’s complete and doesn’t skimp on details. What steps will be taken to ensure there’s no disruption to clients? Which applications make sense to retain and manage in-house, and which can be leveraged as payments as a service? For instance, fund disbursements for a retail consumer bank that administers 529 plans are typically a low-volume service for which cloud automation is a great fit, replacing paper checks with significantly less costly cloud-based payments.

But when it comes to payments as a service, managing risk and ensuring value also come into play. Wire transfers might appear to be good candidates for migration to cloud payments, but if most of the bank’s transfers are for high net worth individuals with equally high customer lifetime value, then the transfers may require levels of personalized service best handled with an on-premise platform rather than in the cloud. A well thought out strategy that addresses all impacts and value opportunities helps bank leaders avoid the unintended consequences that keep them awake at night.

3. Failure to prioritize.

A payments migration needs to be phased in a way that provides strategic competitive advantage. Setting priorities is key. For example, a bank may choose to align its payments migration with a specific strategy, such as a planned de-emphasis on branch offices. Another approach is to migrate the costliest payment applications first. Some banks may reserve cloud adoption for when they’re ready to add new payments capabilities.

Each bank’s path to cloud payments is nuanced, yet there’s often a feeling among banking leaders that moving to the cloud is an all-or-nothing proposition. That is, payments are either entirely cloud-based or all on premise. A more realistic goal is to craft a migration roadmap for a hybrid environment that accommodates both types of infrastructure for the near future, and to then prioritize and phase the payments migration in a way that makes strategic sense.

4. Testing in a dissimilar environment.

Replicating legacy operating environments for testing is expensive, so it’s not uncommon for banks to settle on environments that are similar but not identical — though the variation often leads to production environment errors that can derail cloud migration efforts. Performance falls short of expectations, typically due to the tangle of payment applications resulting from years of mergers and acquisitions.

For example, post-merger banking platforms often utilize more than one legacy payment hub, and there’s little chance that a bank’s current IT staff fully understands or can predict the unintended consequences for the hubs when making changes to the platform. Don’t fret over creating the perfect testing environment. Rather, build an environment that’s as close as possible.

By avoiding these common missteps, payment providers can reap the benefits of a simplified, modern infrastructure and application environment and minimize the risks.

To learn more, please visit the digital payments section of our website or contact us.

Rustin “Rusty” Carpenter leads payments solutions within Cognizant’s Banking & Financial Services’ Commercial Industry Solutions Group (ISG). In this role, he works with group leaders and client-facing teams to elevate Cognizant’s client relevance, industry expertise and challenge-solving capabilities. Over his career, he has developed deep and broad expertise in payments and the emerging alternative and digital/mobile payments arenas. He is a frequent speaker on these topics at conferences worldwide and serves as a board advisor to fin-techs in all areas of payments and fraud prevention/mitigation.

Carpenter most recently was Head of Sales & Service, NA for ABCorp. Previously, he ran the Instant Issuance business for North America at Entrust Datacard; served as COO for Certegy Check Services, N.A.; was General Manager, NA for American Express Corporate Services; and completed multiple assignments at Andersen Worldwide and Dun & Bradstreet. Rustin has a Bachelor of Arts degree from Denison University and an MBA in finance from Rutgers Graduate School of Management. He can be reached at Rustin.Carpenter@cognizant.com

Source: 4 Missteps For Banks To Avoid When Migrating Payment Services To The Cloud

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What The New Outlook For Social Security Means For You

Whew! The pandemic had a smaller impact on the Social Security trust funds — that is, Social Security’s solvency — than many feared during the depths of the pandemic downturn.

According to the new 2021 annual report from the Social Security Trustees, the depletion date for the combined trust funds —retirement and disability — is 2033 without any changes to program benefits. That would be when today’s 54-year-olds reach Social Security’s Full Retirement Age. Still, that’s one year earlier than last year’s 2034 estimate.

Depletion date or insolvency doesn’t mean bankruptcy — far from it. Funding from payroll tax receipts will be enough to pay 78% of promised benefits after the combined Social Security trust funds depletion date is reached.

“The trust fund report should be seen as a strength,” says Eric Kingson, professor of social work and public administration at Syracuse University and co-author with Nancy Altman of “Social Security Works for Everyone: Protecting and Expanding the Insurance Americans Love and Count On.”

What the Social Security Trustees Said

The report, Kingson said, “provides information for Congress and the public on what needs to be done to maintain benefits.”

And Altman, president of Social Security Works, chair of the Strengthen Social Security Coalition and a rumored possible Biden appointee to run the Social Security Administration, said this when the Trustees report came out on Wednesday: “Today’s report shows that Social Security remains strong and continues to work well, despite a once-in-a-century pandemic. That this year’s projections are so similar to last year’s proves once again that our Social Security system is built to withstand times of crisis, providing a source of certainty in uncertain times.”

But the Social Security Trustees are strikingly cautious about their estimates involving the impact of the pandemic on the Social Security trust fund and its sister trust fund for Medicare, the federal health insurance program primarily for people 65 and older.

Despite the dry language of actuaries, the uncertainty is apparent.

Employment, earnings, interest rates and gross domestic product (GDP) dropped substantially in the second quarter of 2020, the worst economic period of the pandemic. As a result, the decline in payroll-tax receipts which pay for Social Security benefits eroded the trust funds, though the drop in payroll taxes was offset somewhat by higher mortality rates.

“Given the unprecedented level of uncertainty, the Trustees currently assume that the pandemic will have no net effect on the individual long range ultimate assumptions,” they write.

The Pandemic and Social Security Solvency

But, they add, “At this time, there is no consensus on what the lasting effects of the Covid-19 pandemic on the long-term experience might be, if any.”

The Trustees say they “will continue to monitor developments and modify the projections in later reports.”

Translation: the status quo remains and the forecast for the pandemic’s effect on Social Security’s solvency is cloudy.

Odds are the coming Social Security financing shortfall won’t get sustained attention from either the Biden administration or Congress despite the need to take action before 2034.

The Trustees aren’t too happy about that.

Their report says: “The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them. Implementing changes sooner rather than later would allow more generations to share in the needed revenue increases or reductions in scheduled benefits… With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.”

The Political Outlook for Social Security Reforms

But the Biden administration and its Congressional allies are instead focused on threading the political needle for an ambitious $3.5 trillion infrastructure spending package, while also dealing with the fallout from the chaotic withdrawal from Afghanistan.

Leading Republican legislators have called for so-called entitlement reform (think Social Security benefit cuts), but that’s a tough sell in the current Democratically controlled Congress.

“Does the report mean the timetable argues for real concrete action on [addressing solvency issues of] Social Security? Probably not. Will it revive the rhetoric that the sky is falling? Sure,” says Robert Blancato, national coordinator of the Elder Justice Coalition advocacy group, president of Matz Blancato and Associates and a 2016 Next Avenue Influencer in Aging.

The issue over how best to restore financial solvency to Social Security isn’t going away. That’s because the program is fundamental to the economic security of retired Americans. Social Security currently pays benefits to 49 million retired workers and dependents of retired workers (as well as survivor benefits to six million younger people and 10 million disabled people).

However, the tenor of the longer-term solvency discussion has significantly changed in recent years.

To be sure, a number of leading Republicans still want to cut Social Security retirement benefits to reduce the impending shortfall. Their latest maneuver is what’s known as The TRUST Act, sponsored by Utah Sen. Mitt Romney.

It calls for closed-door meetings of congressionally appointed bipartisan committees to come up with legislation to restore solvency by June 1 of the following year. The TRUST act would also limit Congress to voting yes or no on the proposals. No amendments allowed.

What’s Different About Future Social Security Changes

AARP, responding to the Trustees report news, came out vehemently against The TRUST Act’s closed-door reform plan. “All members of Congress should be held accountable for any action on Social Security and Medicare,” AARP CEO Jo Ann Jenkins said.

“The concern seems to be they would look to cuts first, versus a more comprehensive approach,” says Blancato. A more comprehensive approach could include tax increases for the wealthy and technical changes to the Social Security system.

Something else that’s different is that liberals are no longer trying to simply stave off benefit cuts and preserve the program exactly as it is — the main tactic since Republican Newt Gingrich was House Majority Leader in the mid-1990s. That have bigger and bolder ideas.

Most Democratic members of Congress have co-sponsored legislation to expand Social Security or voted in support of incremental increases in benefits, such as providing more for the oldest old and a new minimum Social Security benefit equal to at least 125% of the poverty level (that translates to $16,100 for a household of one).

Addressing Social Security’s shortfall and paying for the new benefits, with the Democrats’ plans, would come from tax hikes, ranging from gradually raising the 6.2% payroll tax rate to hiking or eliminating the $142,800 limit on annual earnings subject to Social Security taxes to some combination of these.

But Social Security benefit cuts are off the negotiating table for the Democrats.

“Biden has made a commitment not to cut and to make modest improvements in benefits,” says Kingson. “He won’t back off that.”

The President has pushed for raising the Social Security payroll tax cap so people earning incomes over $400,000 would owe taxes on that money, too. He has also backed raising the minimum Social Security benefit to 125% of the poverty level.

The Good News for Social Security Beneficiaries

One more piece of Social Security news to keep in mind: Social Security recipients are likely to get a sizable cost-of-living adjustment (COLA) to their benefits in 2022. The exact amount will be announced in October and estimates vary widely, from 3% to as high as 6%. A 6% increase would be the highest in 40 years.

But there’s a catch: Medicare Part B premiums for physician and outpatient services — a significant portion of Medicare’s funding —will also go up due to inflation. And those premium payments usually come right out of monthly Social Security checks.

The Trustees report says the estimated standard monthly Medicare Part B premium in 2022 will be $158.50, up about 7% from $148.50 in 2021 and a 9.6% total increase since 2020. (Monthly premiums are based on income, though, and can exceed $500 for high earners.)

The Trustees report says Medicare’s Hospital Insurance Trust Fund (HITF) has enough funds to pay scheduled benefits until 2026, unchanged from last year. Medicare’s finances stayed stable during the pandemic, with people over 65 largely avoiding elective care. The pandemic “is not expected to have a large effect on the financial status of the [Medicare] trust funds after 2024,” the Trustees report noted.

Like Social Security, the trust fund behind Medicare Part A (which pays for hospitals, nursing facilities, home health and hospice care) is primarily funded by payroll taxes. There will be enough tax income coming in to cover an estimated 91% of total scheduled benefits once the trust fund is insolvent.

Medicare Part D, which covers prescription drugs, is mostly funded by federal income taxes, premiums and state payments.

But the political story about Medicare is less about its projected 2026 shortfall and more about momentum toward expanding the program. The Biden administration has proposed adding hearing, visual and dental care to Medicare benefits, something also being pushed by Sen. Bernie Sanders (I-Vt.) At this time, it’s unclear how those new benefits would be paid for, though they wouldn’t affect the trust fund.

Follow me on Twitter or LinkedIn. Check out my website.

Next Avenue is public media’s first and only national journalism service for America’s booming older population. Our daily content delivers vital ideas, context and perspectives on issues that matter most as we age.

Source: What The New Outlook For Social Security Means For You

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A NASA Scientist Explains Why The Weather is Becoming More Extreme

Across China and Western Europe in July, the amount of rain that might typically fall over several months to a year came down within a matter of days, triggering floods that swept entire homes off their foundations. In June, the usually mild regions of Southwest Canada and the US’s Pacific Northwest saw temperatures that rivaled highs in California’s Death Valley desert. The severe heat was enough to buckle roads and melt power cables.

Yesterday, a landmark United Nations report helped put those kinds of extreme events into context. By burning fossil fuels and releasing planet-heating greenhouse gases into the atmosphere, humans are fueling more dangerous weather. Researchers have been able to connect the dots between greenhouse gas emissions and climate change for decades.

But the new report showcases a big leap forward in climate science: being able to tie the climate crisis directly to extreme weather events like the June heatwave, which would have been “virtually impossible” without climate change according to recent studies.

The Verge spoke with Alex Ruane, one of the authors of the new report and a research physical scientist at the NASA Goddard Institute for Space Studies. He walks us through the phenomena that’s supercharging extreme weather events. And he explains why scientists have gotten so much better at seeing the “human footprint” in each weather disaster.

This interview has been lightly edited for length and clarity.

The new United Nations report ties many changes in extreme weather to a more intense water cycle. What is the water cycle and how does it affect the weather?

The water cycle is basically the way that we track moisture moving through the climate system. So it includes everything from the oceans to the atmosphere, the clouds, ice, rivers, lakes, the groundwater, and the way that those things move and transfer moisture and water from place to place.

So when we’re talking about the intensification of the water cycle, we’re basically saying things are moving faster. Air is pulling the moisture out of the oceans and out of the land faster. It’s moving more moisture from place to place on the planet. And when it rains, it can come down hard.

The fundamental difference is that there is more energy in the system. There’s more heat. And as the temperature goes up, there is an overall increase in the amount of moisture that the air is trying to hold. So that means when a storm happens, there’s more moisture in the air to tap into for a big, heavy downpour.

It also means that when air moves over a region, it has the potential to suck more moisture out of the ground more rapidly. So the same phenomenon is leading both to more intensive rainfalls and floods and precipitation, and also to more stark drought conditions when they do occur.

How are people affected by those changes?

So, I personally live in New York City. We are affected by the water cycle, for example, when there’s a heavy downpour it can flood subway stations. It can lead to surface flooding in rivers and streets that can affect transportation.

Other parts of the world have different engagements with the water cycle. They may be concerned about the snow fall or river floods that affect broad areas. And then of course huge parts of the world are concerned about drought. When we look at something like drought, it doesn’t just affect agriculture. It also affects ecosystems and urban parks. It affects water resources and infrastructure like power plants and roads and buildings.

So in all of these climate factors, we see that more than one sector is affected by these changes. We also see that if you take any specific thing that we care about, like agricultural fields, they are affected by more than just one type of climate change.

A specific set of climate conditions can lead to two extremes at the same time. So for example, heat and drought often go together because as conditions become drier, all of that sunshine, all of that energy, all of that heat goes into warming the air. That is a reinforcing cycle that can make hot and dry conditions even more extreme.

The big picture, as we’re seeing it, is that climate change is affecting all of the regions on Earth, with multiple types of climate changes already observed. And as the climate changes further, these shifts become more pronounced and widespread.

I’ve read that “weather whiplash” is becoming more common because of climate change — what is “weather whiplash”?

This idea that you can go from extreme to extreme very rapidly is giving society this sensation of a whiplash. This is part of the idea of an intensified water cycle. The water is moving faster, so when a wet condition comes it can be extremely wet. And then behind it could be a dry condition that can quickly get extremely dry.

That type of shift from wet to dry conditions is something that we explore and understand in our climate models, but the lived experience of it can be quite jarring — and not just uncomfortable, but a direct challenge for ecosystems and other things that we care about in society. They really are connected in many cases to the same types of phenomenon, and this new report connects the dots between this phenomenon and our human footprint.

How do scientists study how climate change affects extreme weather events?

There have been big steps forward in the methodologies and the scientific rigor of detection and attribution studies, which is another way of saying: understanding the human influence on these events.

The basic idea behind the extreme event attribution is that we need to compare the likelihood that an event would have happened without human influences against the likelihood of that event happening, given that we have influenced the climate.

We are able to use observational records and our models to look at what conditions were like before there was strong human influence. We look at what we call a preindustrial condition, before the Industrial Revolution and land use changes led to greenhouse gas emissions and other climate changes.

If we can understand how likely events would have been before we had our climate influences, and then compare it against the likelihoods today with those climate change influences factored in, that allows us to identify the increased chance of those events because of our influence. It allows us to attribute a human component of those extreme events.

How have researchers gotten so much better at attributing extreme weather events to climate change?

This is a really exciting, cutting-edge field right now. Methodological advances and several groups that have really taken this on as a major focus of their efforts have, in many ways, increased our ability and the speed at which we can make these types of connections. So that’s a big advantage.

Every year, the computational power is stronger in terms of what our models can do. We also use remote sensing to have a better set of observations in parts of the world where we don’t have weather stations. And we have models that are designed to integrate multiple types of observations into the same kind of physically coherent system, so that we can understand and fill in the gaps between those observations.

The other thing, of course, is when you look at any single attribution study, you get a piece of the picture. But what the new report does is bring them all into one place and assesses them together, and draw out larger messages. When you look at them all together, it is a much stronger and more compelling case than any one single event. And this is what the scientific community is showing us, that these things are part of a larger pattern of change that we have influenced.

What should we expect in the future when it comes to extreme weather? And what might we need to do to adapt?

First of all, it’s not like drought is a new phenomenon. There are parts of the world that are dealing with these conditions every day of the year. What we’re seeing, however, is that the overall set of expected conditions is moving into uncharted territory.

I want to emphasize it’s not just the record levels that we care about. We also care about the frequency by which these extremes occur, how long they last, the seasonal timing of when things like the last frost occurs, and also the spatial extent of extreme events — so where are conditions going to happen in the future that are outside of the observed experience of the last several generations.

It is a set of challenges that we have to face in terms of how do we adapt or manage the risk of these changes. Also, how do we prepare knowing that they may come in combination or in overlapping ways, with more than one extreme event happening at the same time, or in the same season in a sequence, or potentially hitting different parts of the same market or commodities trade exchange or something like that.

We are facing a situation where we have more information about these regional risks, but also know that every increment of climate change that occurs makes these changes more prominent. That sounds scary, but it also gives us agency.

It gives us the ability to reduce these changes if we reduce emissions, and if we can eventually limit them to something like net zero — no total carbon emissions into the climate system. And in that sense, I still remain optimistic despite all this information that you’re seeing in the report about the changes that could come. The bottom line is we have the potential to reduce those changes, if we can get emissions under control.

Source: A NASA scientist explains why the weather is becoming more extreme – The Verge

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4 Tech Tools Your Business Needs During Natural Disasters

Every day brings new headlines about hurricanes, floods, or wildfires disrupting daily life. As a business owner, you have the added responsibility of deciding when to shut down operations, as well as ensuring your workers are safe and informed of developments. You may have to respond to employees who have been displaced from their homes, or are unable to get to work due to unsafe conditions. That can be a huge challenge when electrical grids are knocked out or wildfires disrupt cell towers.

Here are a few tools and tips that can help your business prepare for and even continue functioning in a natural disaster.

1. Set up a Whatsapp group for emergencies

An internet or power outage can cut off employees’ access to email. Consider setting up a group chat on Whatsapp, Telegram, Signal, or another end-to-end encrypted messaging app instead. Such platforms allow users to send and receive messages using either Wi-Fi or mobile data; while most natural disasters pose serious risks to cell and internet infrastructure, one outage may get fixed before the other.

For example, despite an internet outage following the January 2020 earthquakes in Puerto Rico, many people were able to stay connected through mobile networks. Some ISPs will make their public Wi-Fi hotspots available for free during natural disasters.

Whatsapp also allows users to share their live location, which has helped first responders find missing people. Many companies already use Whatsapp or other messaging apps for internal communications, but there are privacy risks associated with regularly using any app. Instead, consider making such apps an emergency-only tool so employees will only have to use them sparingly.

2. Consider a device with LEO connectivity

Satellite internet is still far from common, and far from a necessity. But LEO (low earth orbit) tech will become cheaper and more available in the near future. Apple’s upcoming iPhone 13 reportedly will feature LEO hardware, which means that users can send or receive messages through satellite internet in case 4G or 5G networks are down.

When available, that might be the most cost-effective satellite internet solution; many satellite internet phones range from a few hundred to several thousand dollars. Another option is to set up your employees with satellite internet at home. Satellite internet providers like Viasat and HughesNet have special plans for small businesses.

3. Keep track of fuel shortages with GasBuddy

If you or your employees are struggling to find fuel during a hurricane or snowstorm, a free mobile app can help. GasBuddy, which locates the nearest gas station with available fuel, became one of the most-downloaded apps during the Colonial Pipeline hacks earlier this year. The app also has a crowdsourced dashboard that keeps track of fuel outages by city.

4. Inform customers through social media

If you already have an active social media presence on Twitter, Facebook, and Instagram, those channels can come in handy to announce store closures or any changes in hours. It’s likely many of your customers are scouring social media anyway for the latest updates on the weather. Be sure your post doesn’t get lost in the shuffle by using the name of the disaster as a hashtag or within the text of the post. Clearly mention the day and date, so prospective customers don’t get fooled by an old post. Also, be sure to update your social feeds once your business is operating again.

By Amrita Khalid, Staff writer@askhalid

Source: 4 Tech Tools Your Business Needs During Natural Disasters | Inc.com

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From Miners To Big Oil, The Great Commodity Cash Machine is Back, Energy & Commodities

JUST over five years ago, Anglo American was in deep trouble. The natural resources giant, beset by a collapse in commodity prices, scrapped its dividend and announced plans to close mines and cut thousands of workers. Amid talk of an emergency capital raise, its market value fell to less than US$3 billion.

Last week, the trials of 2016 probably seemed like a parallel universe to its chief executive officer Mark Cutifani.

Fuelled by a rally in iron ore and other commodity prices, he announced record first-half earnings and billions in dividends. Anyone who took a punt on Anglo’s shares when they reached their nadir, would have seen a 14-fold increase as the market capitalization soared to US$55 billion.

“High commodity prices have been very important to us,” Mr Cutifani told investors last week. “We don’t think this is as good as it gets.”

Anglo American is one of many. With raw materials prices surging, the whole natural resources sector is showering shareholders with special dividends and buybacks as miners, oil drillers, trading houses, steelmakers and farmers reap billions in windfall profits.

The sector, marked down by investors because of its contribution to climate change and a reputation of squandering money on mega projects, is again a great cash machine.

The economic rebound from last year’s Covid slump has powered an explosive rally in commodity prices as consumers forgo vacations and dining out and spend their money loading up on physical goods instead: everything from patio heaters to start-of-the-art TVs. Politicians are helping, too, lavishing hundreds of billions on resource-heavy infrastructure projects.

The Bloomberg Commodity Spot Index, a basket of nearly two dozen raw materials, surged to a 10-year high last week and is rapidly closing in on the record set in 2011.

Brent crude, the global oil benchmark, has again surged above US$75 a barrel, copper is headed back towards US$10,000 a tonne, European natural gas is at its highest ever for the summer season, and steel is changing hands at unprecedented levels. Agricultural commodities such as corn, soya beans and wheat are also expensive.

“Demand continues to improve with increasing global vaccinations,” Joe Gorder, the chief executive of Valero Energy, one of the world’s largest oil refiners, said last week.

Even commodities long left for dead, like thermal coal, are enjoying a new life in 2021. Coal, burned in power stations to produce electricity, together with huge volumes of carbon emissions, is trading at a 10-year high.

While commodities prices are the main reason behind the turnaround, there are structural factors at play as well.

Miners and oil companies have cut spending in new projects savagely, creating a supply shortfall. The miners were first, as they curbed investment from 2015 to 2016 as investors demanded more discipline; oil companies followed up last year and some major energy companies last week announced further cuts in spending for 2021.

The result is that while demand is surging, supply is not – at least for now. The oil majors are benefiting too from the work of the Organization of the Petroleum Exporting Countries alliance of oil producers, which is still holding back a large share of output.

Anglo American, which announced US$4 billion in dividends, is probably the most remarkable turnaround story in the natural resources sector, but its profits were still dwarfed by its bigger rivals. Rio Tinto and Vale, the world’s two leading iron ore miners, together vowed to hand back more than US$17 billion in dividends recently. There is still more to come for investors, with both BHP, the world’s biggest miner, and Glencore, another big miner and commodity trader, yet to report.

And for once, the world’s biggest steelmakers were not only able to absorb the costs, but pass them on. An industry that has spent much of the last decade in crisis is now also able to reward long-suffering shareholders.

The world’s largest steelmaker outside China, ArcelorMittal, that was forced to sell shares and scrap its dividend just five years ago, posted its best results since 2008 last week and announced a US$2.2 billion share buyback programme.

The miners have stolen the spotlight from the energy industry, traditionally the biggest dividend payer in the natural resources industry.

Still, Big Oil recovered from the historic price collapse of 2020, when a vicious Saudi-Russian price war and the Covid-19 pandemic briefly sent the value of West Texas Intermediate, the US oil benchmark, below zero. Supported by rising oil, natural gas, and, above all, the chemicals that go into plastics, Exxon Mobil, Chevron, Royal Dutch Shell, and TotalEnergies delivered profits that went to pre-covid levels.

With cash flow surging, Shell, which last year cut its dividend for the first time since World War II, was able to hike it nearly 40 per cent, and announced an additional US$2 billion in buybacks. “We wanted to signal to the market the confidence that we have in cash flows,” Shell CEO Ben van Beurden said.

Chevron and Total also announced they will buy shares. Exxon, though, is still licking its wounds and focused on paying down debt.

The more opaque world of commodity trading has also cashed in. Glencore said last week that it was expecting bigger trading profits than forecast, with rivals Vitol and Trafigura, two of the world’s largest oil traders, also benefiting from lucrative opportunities created by rocketing prices.

The agricultural traders have cashed on higher prices and unusually strong demand from China.

Bunge, a trader that is the world’s largest crusher of soya beans, told investors it expected to deliver its best earnings-per-share since its initial public offer two decades ago. Archer-Daniels-Midland Co, another big American grain trader and processor, also flagged strong earnings. And Cargill, the world’s largest agricultural trader, is heading towards record earnings in its 2021 fiscal year.

Whether the natural resources boom can last is hotly contested. Many investors worry climate change makes the long-term future of the industry hard to read and they also fret about the tendency of executives to approve expensive projects at the peak of the cycle.

Mining executives fear Chinese demand will slow down at some point, hitting iron ore in particular. But the current lack of investments may support other commodities, like copper and oil.

But Shell’s Mr van Beurden summed up the bullish case last week: “Supply is going to be constrained, and demand is actually quite strong”. BLOOMBERG

Source: From miners to Big Oil, the great commodity cash machine is back, Energy & Commodities – THE BUSINESS TIMES

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Bank Of America Listed Among Heavyweights Invested In $300 Million Blockchain Funding Round

On Thursday trading

Originally announced in April, the bank joins other well-known investors such as PayPal PYPL -2.1%, crypto derivatives exchange FTX, and Coinbase. The round was led by Oak HC/FT and gives Paxos a $2.4 billion dollar valuation, with it having raised $540 million across multiple rounds of funding.

This investment comes to light after the May 2021 announcement that Bank of America joined the Paxos Settlement Service, which allows for same-day settlement of stock trades. Other partners on the network include Credit Suisse and Japanese bank Nomura Holdings.

In announcing the new investors Paxos CEO Charles Cascarilla noted, “We’re at the beginning of a technological transformation where new market infrastructure is needed to replatform the global financial system. Paxos uses innovative technology to build the regulated infrastructure that will facilitate an open, accessible and digital economy. We’re defining this space and are excited to grow our enterprise solutions beside these market leaders.”

Additionally, Bank of America appears to be warming up to digital assets and cryptocurrencies. The bank created a research team in July to analyze the emerging asset class and its various applications. On July 16th it was reported that the bank would allow bitcoin futures trading for select clients.

By taking this step, it appears that Bank of America is following the lead of its fellow financial services brethren, who are increasingly engaging with the space, often in response to consumer demand. Bank of America is following the lead of its fellow financial services brethren, who are increasingly engaging with the space, often in response to consumer demand.

State Street STT -0.8% recently created an entire digital assets division, and in an interview with Forbes Jenn Tribush, Senior Senior Vice President & Global Head of Alternatives Product Solutions said, “We’re going to bridge between the innovation that’s happening within the digital world with solving the need for clients to be able to operate in this new paradigm so for me it’s incredibly important to have this level of focus within a dedicated division.”

Source: Bank Of America Listed Among Heavyweights Invested In $300 Million Blockchain Funding Round

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Critics:

Paxos – a provider of blockchain infrastructure – said Bank of America, crypto exchange FTX, Founders Fund and Coinbase Ventures were among a heavyweight list of investors in its $300 million Series D funding round, the firm disclosed on Thursday.

Oak HC/FT led the funding round, which the nine-year-old company announced in late April at a valuation of $2.4 billion. The round also included PayPal Ventures and Mithril Capital, among others. The firm has raised more than $540 million over multiple funding rounds.

The company noted that Bank of America joined the Paxos Settlement Service earlier this year. The platform uses blockchain technology to achieve same-day settlement of stock trades. Paxos started providing infrastructure for PayPal’s crypto service last year, which has extended to PayPal’s Venmo payments app. Credit Suisse, fintech Revolut and Societe Generale are among other customers.

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Bitcoin Cryptocurrency Price Chart May Show $30,000 as Floor

Bitcoin has been grinding lower in a trading range just above $30,000, prompting cryptocurrency insiders to flag the round number as a potential floor for the virtual coin.

Crypto prognostication is fraught with risk, not least because Bitcoin’s price has roughly halved from a record high three months ago. Even so, some in the industry are coalescing around $30,000 as a support point, citing clues from options activity and recent trading habits.

In options, $30,000 is the most-sold downside strike price for July and August, signaling confidence among such traders that the level will hold, according to Delta Exchange, a crypto derivatives exchange. It “should provide a strong support to the market,” Chief Executive Officer Pankaj Balani said.

Traders are also trying to take advantage of price ranges, including buying between $30,000 and $32,000 and selling in the $34,000 to $36,000 zone, Todd Morakis, co-founder of digital-finance product and service provider JST Capital, said in emailed comments, adding that “the market at the moment seems to paying attention more to bad news than good.”

Bitcoin has been hit by many setbacks of late, including China’s regulatory crackdown — partly over concerns about high energy consumption by crypto miners — and progress in central bank digital-currency projects that could squeeze private coins. The creator of meme-token Dogecoin recently lambasted crypto as basically a sham, and the appetite for speculation is generally in retreat.

Bitcoin traded around $31,600 as of 9:26 a.m. in London and is down about 6% so far this week. It’s still up more than 200% over the past 12 months, despite a rout in calendar 2021.

Konstantin Richter, chief executive officer and founder of Blockdaemon, a blockchain infrastructure provider, holds out hope for institutional demand, arguing Bitcoin would have to drop below $20,000 before institutions start questioning “the validity of the space.”

“If it goes down fast, it can go up fast,” he said in an interview. “That’s just what crypto is.”

— With assistance by Akshay Chinchalkar

Source: Bitcoin (BTC USD) Cryptocurrency Price Chart May Show $30,000 as Floor – Bloomberg

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Critics:

The dramatic pullback in bitcoin and other cryptocurrencies comes as a flurry of negative headlines and catalysts, from Tesla CEO Elon Musk to a new round of regulations by the Chinese government, have hit an asset sector that has been characterized by extreme volatility since it was created.

The flagship cryptocurrency fell to more than three-month lows on Wednesday, dropping to about $30,000 at one point for a pullback of more than 30% and continuing a week of selling in the crypto space. Ether, the main coin for the Ethereum blockchain network, was also down sharply and broke below $2,000 at one point, a more than 40% drop in less than 24 hours.

Part of the reason for bitcoin’s weakness seems to be at least a temporary reversal in the theory of broader acceptance for cryptocurrency.

Earlier this year, Musk announced he was buying more than $1 billion of it for his automaker’s balance sheet. Several payments firms announced they were upgrading their capabilities for more crypto actions, and major Wall Street banks began working on crypto trading teams for their clients. Coinbase, a cryptocurrency exchange company, went public through a direct listing in mid-April.

The weakness is not isolated in crypto, suggesting that the moves could be part of a larger rotation by investors away from more speculative trades.

Tech and growth stocks, many of which outperformed the broader market dramatically during the coronavirus pandemic, have also struggled in recent weeks.

SoftBank Invests $200 Million In Brazil’s Largest Crypto Exchange

Brazil’s leading cryptocurrency exchange, Mercado Bitcoin raised $200 million from the SoftBank Latin America Fund, Mercado’s parent company 2TM Group announced today. The investment values 2TM Group at $2.1 billion and is SoftBank’s largest capital injection in a Latin America crypto company.

Following closely on the tails of SoftBank’s investment in the $250 million round raised by Mexican cryptocurrency exchange Bitso in May, the deal shows a growing interest in bringing bitcoin and other cryptocurrencies to Latin America.

“This series B round will afford us to continue investing in our infrastructure, enabling us to scale up and meet the soaring demand for the blockchain-based financial market,“ says Roberto Dagnoni, executive chairman and CEO of 2TM Group. “We want to be the main solution provider for corporate players.”

The São Paulo-based exchange aims to increase the number of listed assets (the exchange currently lists approximately 50 tokens) and grow its 500-member team to 700 by year’s end. Further plans involve regional expansion with focuses on Mexico, Argentina, Chile and Colombia and growth acceleration across 2TM Group’s portfolio, which also include digital wallet provider MeuBank and digital custodian Bitrust (both are subject to regulatory approval).

Founded by brothers Gustavo and Mauricio Chamati in 2013, Mercado Bitcoin has become the largest cryptocurrency exchange in the country. In January, it scored its first financing round co-led by G2D/GP Investments and Parallax Ventures with participation from an array of other investors.

Like many of its counterparts, Mercado Bitcoin has seen significant growth over the past year, with its client base reaching 2.8 million in 2021 – more than 70% of the total number of individual investors on Brazil’s stock exchange B3. Approximately 700,000 clients signed up just between January and May.

Over the same period, trade volume on the exchange had increased to $5 billion, surpassing the total for its first seven years combined. “Every single month [of this year], we are trading the full volume of 2020,” says Dagnoni.

“Mercado Bitcoin is a regional leader in the crypto space and the leading crypto exchange in Brazil. They are tapping into a huge local and regional addressable market measured by potential use cases for crypto,” says Paulo Passoni, managing partner at SoftBank’s SBLA Advisers Corp. (which manages the SoftBank Latin America Fund).

“At SoftBank we look to invest in entrepreneurs who are challenging the status quo through tech-focused or tech-enabled business models that are disrupting an industry – Mercado Bitcoin is doing just that.”

Despite the rapid growth of the local crypto market, Brazilian regulators have been lagging behind. In 2018, Brazilian antitrust watchdog, the Administrative Council for Economic Defense (CADE), opened an investigation into the country’s largest banks for allegedly abusing their power by closing accounts of crypto brokerages. The probe was ongoing as of last year.

In April 2020, Senator Soraya Thronicke proposed an extended set of rules for Brazil’s “virtual asset” businesses, custodians and issuers, consumer protection, crypto taxation and criminal enforcement, however no apparent action has been taken on the bill so far. Nonetheless, Dagnoni says the nation’s regulatory environment is favorable, and the company is closely working with regulators “to build a consistent framework for alternative digital investments in Brazil, in line with its vision of a convergence of the traditional and blockchain-based financial markets.”

Follow me on Twitter or LinkedIn.

I report on cryptocurrencies and emerging use cases of blockchain. Born and raised in Russia, I graduated from NYU Abu Dhabi with a degree in economics and Columbia University Graduate School of Journalism, where I focused on data and business reporting.

Source: SoftBank Invests $200 Million In Brazil’s Largest Crypto Exchange

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Critics:

SoftBank Group Corp. is a Japanese multinational conglomerate holding company headquartered in Minato, Tokyo. The Group primarily invests in companies operating in the technology, energy, and financial sectors. It also runs the Vision Fund, the world’s largest technology-focused venture capital fund, with over $100 billion in capital, backed by sovereign wealth funds from countries in the Middle East.

The company is known for the leadership by its founder and largest shareholder Masayoshi Son. It operates in broadband, fixed-line telecommunications, e-commerce, information technology, finance, media and marketing, and other areas.

SoftBank was ranked in the Forbes Global 2000 list as the 36th largest public company in the world, and the second largest publicly traded company in Japan after Toyota.

The logo of SoftBank is based on the flag of the Kaientai, a naval trading company that was founded in 1865, near the end of the Tokugawa shogunate, by Sakamoto Ryōma.

Although SoftBank does not affiliate itself to any traditional keiretsu, it has close ties with Mizuho Financial Group, its main lender.

See also

 

China’s GDP Surge Is Chance To Reboot Country’s Image On World Stage

China’s economy had a great 12 months, leading the globe out of the Covid-19 era. Yet the last year has damaged something equally important: Beijing’s soft power.

Beijing’s handling of questions about what happened in Wuhan—and why officials were so slow to warn the world about a coming pandemic—boggles the mind. If China’s handling of the initial outbreak was indeed the “decisive victory” that it claims, why overreact to Australia’s call for a probe?

Harvard Kennedy School students might one day take classes recounting how China’s leaders squandered the Donald Trump era. As the U.S. president was undermining alliances, upending supply chains, losing allies, and playing down the pandemic, Beijing had a once-in-a-lifetime opportunity to increase the country’s influence at Washington’s expense.

And now, many in Beijing appear to understand the extent to which they blew it. Earlier this month, Xi Jinping urged the Communist Party to cultivate a “trustworthy, lovable and respectable” image globally. It’s the clearest indication yet that the “wolf warrior” ethos espoused in recent times by Chinese diplomats was too Trump-like for comfort—and backfiring.

The remedy here is obvious: being the reliable economic engine leaders from the East to West desire.

The Trump administration’s policies had a vaguely developing-nation thrust—favoring a weaker currency, banning companies, tariffs of the kind that might’ve worked in 1985, assaulting government institutions. They shook faith in America’s ability to anchor global finance. The last four years saw a bull market in chatter about replacing the dollar as reserve currency and the centrality of U.S. Treasury debt.

China is enjoying a burst of good press for its gross domestic product trends. Not just for the pace of GDP, but the way Xi’s team appears to be seeking a more balanced and sustainable mix of growth sources. Though some pundits were disappointed by news that industrial production rose just 6.6% in May on a two-year average basis, it essentially gets Asia’s biggest back to where it was pre-Covid-19.

China is getting there, slowly but surely. Far from disappointing, though, data suggest Xi’s party learned valuable lessons from the myriad boom/bust cycles that put China in global headlines since 2008. That was the year the “Lehman shock” devastated world markets and threatened to interrupt China’s meteoric rise.

Instead, Beijing bent economic reality to its benefit. Yet the untold trillions of dollars of stimulus that then-President Hu Jintao’s team threw at the economy caused as many long-term headaches as short-term gains. It financed an unproductive infrastructure boom—one prioritizing the quantity of growth over quality—that fueled bubbles. It generated a moral-hazard dynamic that encouraged greater risk and leverage.

Unfortunately, Xi’s government doubled down on the approach in 2015, when Shanghai stocks went into freefall. The impulse then, as in the 2008-2009 period, was to throw even more cash at the problem—treating the symptoms, not the underlying ailments.

The ways in which Team Xi restored calm—bailouts, loosening leverage and reserve requirement protocols, halting initial public offerings and suspending trading in thousands of companies—did little to build a more nimble and transparent system. The message to punters was, no worries, the Communist Party and People’s Bank of China have your backs. Always.

Yet things appear to be changing. In 2020, while the U.S., Europe and Japan went wild with new stimulus schemes, Beijing took a targeted and minimalist approach. Japan alone threw $2.2 trillion, 40% of GDP, at its cratering economy. The Federal Reserve went on an asset-buying tear.

The PBOC, by sharp contrast, resisted the urge to go the quantitative easing route. That is helping Xi in his quest to deleverage the economy. It’s a very difficult balancing act, of course. The will-they-or-won’t-they-default drama unfolding at China Huarong Asset Management demonstrates the risks of hitting the stimulus brakes too hard.

The good news is that so far China seems to be pursuing a stable and lasting 2021 recovery, not the overwhelming force of previous efforts. And that’s just what the world needs. A 6% growth rate year after year will win China more soft-power points than the GDP extremes. So will China accelerating its transition from exports to an innovation-and-services-based power.

It’s grand that President Joe Biden rapidly raised America’s vaccination game. That means the two biggest economies are recovering simultaneously, reinforcing each other.

China’s revival could have an even bigger impact. Look at how China’s growth in recent months is lifting so many boats in Asia. In May alone, Japan enjoyed a 23.6% surge in shipments to China. Mainland demand for everything from motor vehicles to semiconductor machinery to paper products is helping Japan recover from its worst downturn in decades. South Korea, too.

The best thing Xi can do to boost China’s soft power is to lean into this recovery, and provide the stability that the rest of the globe needs. Xi should let China’s GDP power do the talking for him.

I am a Tokyo-based journalist, former columnist for Barron’s and Bloomberg and author of “Japanization: What the World Can Learn from Japan’s Lost Decades.” My journalism awards include the 2010 Society of American Business Editors and Writers prize for commentary.

Source: China’s GDP Surge Is Chance To Reboot Country’s Image On World Stage

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Critics:

The economy of China is a developing market-oriented economy that incorporates economic planning through industrial policies and strategic five-year plans. Dominated by state-owned enterprises (SOEs) and mixed-ownership enterprises, the economy also consists of a large domestic private sector and openness to foreign businesses in a system described as a socialist market economy.

State-owned enterprises accounted for over 60% of China’s market capitalization in 2019 and generated 40% of China’s GDP of US$15.66 trillion in 2020, with domestic and foreign private businesses and investment accounting for the remaining 60%. As of the end of 2019, the total assets of all China’s SOEs, including those operating in the financial sector, reached US$78.08 trillion. Ninety-one (91) of these SOEs belong to the 2020 Fortune Global 500 companies.

China has the world’s second largest economy when measured by nominal GDP, and the world’s largest economy since 2014 when measured by Purchasing Power Parity (PPP), which is claimed by some to be a more accurate measure of an economy’s true size.It has been the second largest by nominal GDP since 2010, which rely on fluctuating market exchange rates.An official forecast states that China will become the world’s largest economy in nominal GDP by 2028.Historically, China was one of the world’s foremost economic powers for most of the two millennia from the 1st until the 19th century.

The Chinese economy has been characterized as being dominated by few, larger entities including Ant Group and Tencent. In recent years there has been attempts by the Xi Jinping Administration to enforce economic competition rules, and probes into Alibaba and Tencent have been launched by Chinese economic regulators.

The crackdown on monopolies by tech giants and internet companies follows with recent calls by the Politburo against monopolistic practices by commercial retail giants like Alibaba. Comparisons have been made with similar probes into Amazon in the United States.

See also

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