Transparency Paradox in the Financial System. Proposed Bills Would Infringe on Freedoms.

Russia Moving to the Chinese Renminbi.

Here is what we will be getting into today:

1. The Transparency Paradox in the Financial System.

2. The TikTok Ban: A Trojan Horse for Greater Government Control.

3. Russia Ditches the Dollar: Embraces China's Renminbi Amid Western Sanctions.

4. Macro Notes From The Last Week.

Let's Dive In!

Newsletter: The Last Bear Standing

Title: See No Evil.
Link: https://thelastbearstanding.substack.com/p/see-no-evil

Here are the key highlights:

• The recent failure of Silicon Valley Bank (SVB) has highlighted the double-edged nature of transparency in the financial system. While regulations demand extensive disclosure and transparency, it can also lead to panic and contagion in a reflexive system with limited liquidity.

• The failure of SVB had a significant impact on the stablecoin USDC, which had $3 billion of deposits at the bank. Despite no losses being incurred, USDC's circulation has since decreased by 23%, with investors flocking to Tether instead. Tether, which has a history of being undercollateralized and opaque, has ironically regained its position as a safe haven due to the transparency of its competitor.

• In China, struggling banks have used a variety of methods to stay afloat, including police intervention and freezing funds, while there has never been a true acknowledgement of non-performing loans and the insolvent position of many rural banks. There has however been a large, unpublicized, centrally coordinated cash infusion in the form of Certificates of Deposits (CDs) to at-risk banks at some point in 2022.

• These responses demonstrate the near-term benefit of opacity in certain circumstances, but over the longer term, it is hard to see how an opaque system will lead to efficient and productive growth. Risk exists whether hidden or disclosed, and whether you choose to see it is up to you.

YouTube Channel: Mark Moss

Title: Warning! The TikTok Ban Is a Trojan Horse, Watch Out
Link: https://www.yyyoutube.com/watch?v=IENe0P7DwsY

Here are the key highlights:

• The TikTok ban in the United States is a Trojan horse. The proposed Data Act and Restrict Act in the United States have raised concerns about potential infringement on individual freedoms. These bills aim to grant the US government authority over all forms of communication, both domestic and international, and enforce mitigation measures to address national security risks.

• These laws could be part of a larger plan to control information flow, communication, and even personal finances. The Restrict Act, in particular, would allow the government to access data on video devices used by services with over one million users, such as iPhones and Ring Doorbells. Penalties for using privacy devices like VPNs could include a million-dollar fine, 20 years in prison, and forfeiture of personal assets. Additionally, the Act would grant unlimited hiring power and funds to enforcement positions, along with immunity from Freedom of Information Act requests. Opponents of the legislation are urging citizens to voice their disapproval to their elected officials, as they believe it represents a significant threat to individual liberties in the United States.

Website: Financial Times

Title: Russia embraces Chinas renminbi in face of western sanctions
Link: https://www.ft.com/content/65681143-c6af-4b64-827d-a7ca6171937a

Here are the key highlights:

• Russia has increasingly adopted the Chinese renminbi as a primary currency for international reserves, overseas trade, and some personal banking services, making it the fourth-largest economy for renminbi trading volumes. This shift is driven by international sanctions and exclusion of Russian banks from global markets.

• Bilateral trade between Russia and China reached a record $185 billion in 2022, and renminbi accounted for 16% of export payments as of January 2022. Over 50 Russian banks now offer renminbi-denominated deposits, and President Vladimir Putin supports its broader international use. The Russian Central Bank has become more reliant on renminbi-denominated assets due to restricted access to other reserve currencies. Although less than 3% of global central bank reserves are held in renminbi, Russia had to turn to it after their euro and dollar holdings were frozen.

• The National Wealth Fund now includes renminbi as a permitted currency, accounting for about 30% of the $147 billion fund. Despite its limited use in retail banking, the renminbi's popularity has grown among ordinary Russians on the Moscow Exchange (MOEX), where its share has risen to nearly 40%. However, Russia's growing dependence on the renminbi raises concerns over risks posed by unpredictable currency shifts by China. Moscow struggles to anticipate and hedge against Beijing's currency decisions, highlighting the need for more robust hedging mechanisms to mitigate currency risks and safeguard economic stability in emerging market economies.

Newsletter: Conscious Capital Advisors Research

Title: Research Notes for 2023-03-27.
Link: https://research.consciouscapital.pro/p/research-notes-for-2023-03-27

Here are the key highlights:

• Last week's economic news was dominated by concerns over rising tensions between Russia and NATO, as Russian President Vladimir Putin announced the deployment of nuclear weapons in Belarus. This move is likely to be seen as provocative by the West and has raised concerns about the safety and security of nuclear weapons in the region.

• Former New York Fed President William Dudley warned of an increased risk of a hard landing due to uncertainty surrounding the banking system stress and its impact on the economy. While the Fed's decision to keep rates high throughout the year suggests that they do not think the banking system stress will have a significant downward impact on the economy, if the banking system stress continues, the risk of a hard landing will remain high.

• The commercial property market is causing additional concern for banks, as the pandemic led to a decline in demand for office and retail space, resulting in a rise in delinquencies and defaults on loans. Banks are now facing the possibility of having to write off billions of dollars in bad loans, which could lead to a ripple effect throughout the financial system.

• Deutsche Bank's stock fell 14% amid unclear reasons, with some analysts attributing it to a general recession trade where quality factors are in demand and low-quality factors are being sold off. Deutsche Bank is particularly vulnerable to this due to its exposure to corporate lending and Germany's exposure to the global economy.
  
  

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