Interbank market news scan: Facebook’s Diem can help the dollar remain the global reserve currency …

Links to follow today ….

Central banks, ECB. Global stocks held steady on Thursday ahead of the European Central Bank’s monetary policy update and despite COVID-19 lockdown restrictions in Europe being extended and cases rising globally. Global stocks stabilize ahead of European Central Bank meeting despite steep rise in COVID-19 cases in Asia | Markets Insider (businessinsider.com)

Central banks, Norway. Norway’s central bank will test various technical solutions for a central bank digital currency (CBDC) over the next two years, it said on Thursday. Norway to test solutions for digital central bank currency | Nasdaq

Central banks, Canada. The Federal Reserve and the Bank of Canada will use drastically different playbooks for the remainder of their nations’ respective economic recoveries. The US central bank has indicated it will leave rates near zero for the foreseeable future, and that it isn’t even considering reining in its emergency asset purchases. Canada’s central bank is taking surprising steps to cool the nation’s red-hot virus recovery – and the approach directly conflicts with the Fed’s ultra-easy stance, even with the US further along (msn.com)

Central banks, remittances, Kenya. Remittance inflows into Kenya in March were up 27% year on year to $290.8 million, the central bank said on Wednesday. Kenya’s remittance inflows in March up 27% yr/yr -central bank | Reuters

Central banks, United Kingdom, ECB. Sterling slipped on Thursday, holding below $1.40 before a European Central Bank meeting, as investors weighed up the outlook for an economic recovery from COVID-19 in the UK. Sterling slips versus euro; currency markets quiet ahead of ECB meeting | Nasdaq

Central banks, Facebook, cryptocurrency. Now known as diem, the Facebook-backed digital coin is expected to launch later this year, albeit in a much more limited form. When it finally arrives, diem won’t come with the same fanfare and controversy of the original idea envisioned by the social media giant nearly two years ago. Facebook-backed Diem aims to launch digital currency pilot in 2021 (cnbc.com)

Central banks, ECB, digital currency. Only a few years ago, central bank digital currency (CBDC) was seen as something exotic. Sweden’s Riksbank was alone among high-income countries in exploring it, a fact attributed to its population’s uniquely low use of cash. Now official e-currencies have gone mainstream. www.ft.com

The market opening. The rates to start your day ….

As of 8:10 am EST, Bloomberg reports that the yield on the three-month Treasury note is at 0.01%, down from yesterday’s 0.03% while the two-year note remained at yesterday’s 0.15% rate. The ten-year and thirty-year Treasurys are trading at 1.57% and 2.27%, respectively and relatively unchanged from yesterday.

The Federal Funds rate, the rate at which banks lend to each other overnight in support of their reserve requirements, is at .07%, while the Fed Funds target rate is still at .25%. The prime lending rate is 3.25%. All three rates unchanged from yesterday.

Exchange rates of interest as of 8:45 am EST….

Currency PairsRates as of 8:45 am EST 22 April 2021Rates as of 9:55 am EST 21 April 2021Percentage change in rates
EUR/USD1.17931.2024-1.9%
GBP/USD1.37851.3891-.0076%
USD/CAD1.25721.2629-.0045%
CAD/XCD2.14622.1462unchanged
USD/XCD2.70002.7000unchanged
USD/TTD6.66916.6721-.0004%
USD/BBD2.00002.0000unchanged
CAD/TTD5.30125.3050unchanged
CAD/BBD1.58991.5874unchanged
Source: OANDA

The Opening Takeaway: Could Facebook’s cryptocurrency be the longer term digital play?

Facebook appears to be leveraging the experience it has garnered on America’s Capitol Hill. When the Facebook-backed digital coin Libra found itself targeted by backlash from members of Congress, the company and its stable coin project partners had to go back to the drawing board which included a rebrand of the coin (from Libra to Diem); a little reorganizing of the stable coin project’s membership; and pursuing a payment services license from Switzerland’s financial regulators. See Facebook-backed Diem aims to launch digital currency pilot in 2021 (cnbc.com).

By going the stable coin route, where a cryptocurrency pegs its value to the value of a country’s currency, in this case, the United States, Facebook and its Diem partners, knowingly or not, have made baby steps to pacifying government critics in the US who are concerned about Diem’s threat to the stability of the US political-economic system. This is simply code for “We have to stop Facebook from disrupting our tax and customs regime.” The claims of concern over privacy also seem a bit bogus given that Congress has passed up a number of times over the last decade and a half to promulgate any comprehensive laws that would not only have codified network neutrality but also privacy over America’s digital networks. Besides, as the US slowly gets to testing its own central bank issued digital coin, it too will have to address why taxpayers should be less concerned about government intrusion into privacy as opposed to Facebook.

Facebook is in a position to leverage its network effect generated by over 2 billion daily users and its e-commerce and advertising platform. Its subscribers can enjoy some sort of “dual nation” status where they exchange goods and services on Facebook’s platform using Diem, thus creating a sense of exclusivity. Sort of like an Amazon Prime membership on steroids where only members i.e. Diem-using subscribers, can come and play. And knowing that Diem can be exchanged for US dollars will put Facebook subscribers’ minds at ease. If the Facebook subscriber is not concerned about convertibility, then the US government should have less of a consumer protection argument to throw around.

Another potential benefit may carry over to the Federal Reserve. As it hems and haws over the development of a central bank issued digital currency, it could study the Facebook template, observing in real time how a digital nation-state operates. Also, there is the potential for a test case for conducting digital foreign currency exchange made easier due to Diem being a stable coin.

Lastly, from a foreign policy perspective, the US should look favorably on more of the world’s economies having indirect access to the dollar via Facebook’s stable coin. Using, buying, and selling Diem amounts to using, buying, and selling US dollars. This indirect use of the greenback would keep the dollar out front as the world’s reserve currency.

Alton Drew

In a 5G world, can an individual be their own bank?

A thought ….

That Covid-19 has sped up the exposure of workers to the possibility of automation replacing them is a saying that is becoming almost cliché. Television commercials remind us that we are “all in this together” and that we should wear masks and safely social distance. Meanwhile, telecommunications companies are promoting 5G technology that when fully deployed will help alleviate the downsides of working from home with a technology that moves data faster and can help connect all your devices and appliances so that you can better manage the data flowing through your home. But what if, in addition to connecting your mobile phone to your refrigerator which may allow you to determine whether to buy more milk, that 5G also helps to turn you into a micro bank by taking a real-time audit of the assets in your possession and using them as a basis for issuing your own coin?

The thought came to me today while conversing with two friends about the probability of Facebook becoming its own “nation.” Facebook, the world’s largest social media platform, is backing a group that plans to issue a cryptocurrency next month called Diem. Diem will hopefully help people send money around the world almost instantaneously. Unlike other cryptocurrencies, Diem will be a “stable coin” meaning it will be backed by reliable fiat currencies like the U.S. dollar or the euro.

But what if we could take the Facebook macro-model and make it micro to you? For example, with 5G-driven internet of things and block chain technology, why couldn’t a real time audit of a person’s possessions be taken and instead of the individual issuing digital fiat currency or even stable coin, the individual could issue their own personal currency. Tom Steyer, for example, could digitally tally up his cash, land, securities, and other holdings and issue a digital certificate that could be used in the digital marketplace. A man of his wealth could take a position in a number of different currencies but should he choose to engage exclusively in the digital world on his own dime, he could do so without any rules or regulations that come along with currency issued by a nation-state, a social media platform, or a corporation.

The advantages to such a scheme compound when more people with the material means decide to go digital and trade either the social media platform’s coin or, if affluent enough, their own coin. This would be true personal banking.

Broadband consumption increase 38-fold over a decade

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by IIA

DECEMBER 9, 2020

Internet data and analytics company DecisionData used historical data from FCC annual reports to map out the rapid increase in broadband consumption over the past decade. Their analysis found that the average household is using 38x the amount of internet data they were 10 years ago and 3.5x that of five years ago. If this trend continues, DecisionData estimates that within the next three years average household usage is likely to exceed 1 TB of data per month – an almost 200% increase from 2020’s estimated monthly average.

Much of this rapid growth is attributed to the growing popularity of streaming video services and proliferation of connected devices.

Couldn’t gather with the family during Thanksgiving? Internet innovation made alternatives possible….

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by IIA

DECEMBER 2, 2020

The ongoing pandemic forced many families throughout the U.S. to forgo their traditional Thanksgiving family gatherings and opt instead for virtual celebrations through platforms such as Zoom. Cable broadband usage saw a year-over-year 45% jump on Thanksgiving Day, according to broadband management and analytics company OpenVault.

The company’s monitoring tools show that average broadband consumption per subscriber on Thanksgiving Day was 15.59 GB, up from an average of 10.77 GB in 2019. Traffic peaked between 9AM and 2PM CT and coincided with the holiday suspension of Zoom conferencing limitations, which normally limit their free conferencing service to 40 minutes.

Source: OpenVault

Election night saw increase in internet usage

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by IIA

NOVEMBER 11, 2020

On election night, intense interest throughout the country in the results of the 2020 election drove a significant increase in broadband usage. During prime time on November 3 (5pm to 8pm CT), broadband management and analytics company OpenVault estimated a 7% increase in broadband usage compared to previous Tuesdays. Usage was up even more for cord cutters, where OpenVault reported an increase of 16.4% from previous weeks.

Section 230: America is about trade. Information should be subject to markets …

Opinion

Alton Drew

I see a lot of waste in America. For an example, just take a look at e-mails exchanged within and between corporate departments. It is hard to believe that American MBA holders are racking up e-mail threads with one or two liners that effectively amount to suggesting changes in a word or adding a period to a sentence. About 25% percent of this e-mail exchange usually entails Worker One telling Worker Two that Worker One is going on vacation and will be out of touch. Ironically, Worker One makes it a point somewhere during his two-week vacation to a place he will likely never visit again to send a picture from the beach where he is sitting with a laptop across his thighs.

Americans stay busy for the sake of being busy or worse, spend a lot of time looking busy. This busy-body, chatty-catty approach to production is adding to the noise in the work place that may be drowning out the true information, the true surprise. True information should have us bolting out of our folding recliners on the beach and doing backflips on the sand. I am not seeing this and at times wonder if Americans have the capacity to provide any more surprise moments.

Some may argue that the internet is one of those surprise moments and I would remind them that the surprise is now an echo reverberating from over fifty years ago. The internet has now become a commodity, the advanced communications platform supporting more than just voice communications. Today I can review documents to determine their level of confidentiality and privilege from my home office. I can use my computer screen to watch news programming, movies, or television shows accessed from content delivery networks operating on the internet. I can meet with colleagues and receive updates on case progress or to simply have a virtual happy hour via video services on the internet.

But I still see more waste than value. I don’t see an increase in value, just tasks that were done one way in analog being done another way in digital. Social media, the internet’s most recognized application, has torn the scab off of American narcissism. The “democratization of information content” promised by internet proponents is devolving into 25-year old women and men taking Instagram booty shots, hoping against all odds to be the next sexy sensation, in a digital world crawling with other sexy sensations.

Democratization of the internet has made data that was always available but harder to find easier to find but of less value. Inaccessibility made the hunt fun. A search premium that captured the inaccessibility variable created a lucrative business for the information broker or trader. Information should be subject to market forces. The internet in general and social media in particular are destroying the market mechanism for trading information.

Social media in particular has introduced severe imbalances in the information markets where a social media subscriber’s information is acquired under the rule of discovery, swimming around unbound like Moby Dick waiting for Captain Ahab to put a spear in him. This problem could be resolved by making social media and other interactive computer access services or internet portals bear the burden of liability where the capture and use of information results in harm to the subscriber and third parties that are exposed to it.

Removing the liability shield provided by Section 230 of the Communications Act of 1934 as amended by the Communications Decency Act of 1998 would force interactive computer access services to provide the public with a business model that better replicates the interchange one should see in a market.

On a base market tier, for example, an interactive computer access service would offer a subscriber access to its posting services in exchange for use of the subscriber’s data and permission to edit subscriber content where publication of the content violated community mores of decency or would otherwise expose the interactive computer access service to claims of defamation or liability.

On a prime market tier, the subscriber would pay the interactive computer access provider for the privilege to post content, grant the interactive computer access service the right to collect and use certain subscriber proprietary information, and accept damages stemming from claims of liability or defamation brought by a third-party.

One upside to this approach would be the reduction in noise occurring on the internet as a result of the democratization of content. Fewer subscribers over all would post content that raises the specter of liability. Depending on the tier of services offered, interactive computer services would be free to edit content that did not meet their platform guidelines while protecting themselves from third-party liability or receive a premium from subscribers that can be used to insure the interactive computer access service from claims of liability or defamation.

Information should flow freely, like the bulls of Pamplona, but the markets should discipline their exchange. Government, as a facilitator of markets, can encourage more market behavior for information by repealing Section 230 and allowing contract to regulate the market between interactive computer access services and subscribers.

5G technology is a hog in the US. Investment in more infrastructure is needed …

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by IIA

OCTOBER 28, 2020

A new report from Opensignal found that in September 2020, 5G users in the U.S. consumed almost twice as much data as 4G users – 16.5GB compared to 8.7GB respectively. This difference in data consumption between 5G and 4G users is even more prominent on a global scale, where 5G users average 2.7 times the data consumption as 4G users.

“Opensignal data shows that 5G users on average consumed much higher amounts of mobile data compared to 4G users, suggesting that, by having a better experience, users consumed more content on their smartphones, or similar amounts of content at higher quality and resolution.” – Francesco Rizzato, Principal Technical Analyst, Opensignal

Source: Opensignal

Broadband: Innovation in T-shirts may be good for your heart.

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by IIA

OCTOBER 23, 2020

Smart materials company KYMIRA recently developed a t-shirt that can accurately measure heart rates by printing an ECG (electrocardiogram) into the shirt fabric. The shirt is also equipped with Bluetooth, which enables the uploading of heartbeat data to a cloud where algorithms can be used to process the data and detect lifesaving heart irregularities.

Learn more about this heart monitoring t-shirt here.

Broadband networks remain resilient …

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USTelecom recently released updated data on broadband network traffic growth during the COVID-19 crisis. Elevated levels of traffic persist compared to the pre-crisis baseline, though overall network traffic decreased since its peak in mid-April. Since reaching a high of 27% over the pre-crisis baseline the week of April 16, the average traffic increase was between 10% and 13% from May 7 – June 11.

Even with the traffic increases, USTelecom members’ core network capacity remains fully capable. Interconnections between networks have remained uncongested, even during peak traffic periods, with an average of 61% to 74% of the total capacity of peering links available as a buffer.

Source: USTelecom

Elected officials should better promote information technology when addressing rural economies …

Information driven firms don’t require the standard top-down hierarchical structure. It has no need for administrative staff. It barely has need for a managerial staff. Each wage earner must become more of a self-sufficient information node, with each node given more or less equal weight by a reduced by still centralized management.

The new information infrastructure will look more like a distributed energy platform versus the standard step down energy platform. This means greater reduction in labor, a forecast that has been bouncing around for half a decade.

For elected officials promising more job opportunities in the rural space, they will have to reconcile this coming reality and either weave it into their economic opportunity narrative or look for a fall guy or gal for the coming doom in the labor markets.  The adjustment will not be easy for their constituents.  The voter/citizen has been under considerable stress due to work from home requirements, stay-in-place requirements, and reductions in workforce as government induced fall off in demand for services took hold of and wrecked certain business models.  As part of his promise to create jobs in rural America, apparent Democratic nominee Joe Biden has proposed a $20 billion rural broadband plan for deploying more advanced communications technology into rural America.  Mr Biden states that this funding will equal three times the amount of funding under the U.S. Department of Agriculture’s Community Connect Grant Program.  Under 7 CFR section 1739.1, the purpose of the program is:

“to provide financial assistance in the form of grants to eligible applicants that will provide, on a “community-oriented connectivity” basis, broadband service that fosters economic growth and delivers enhanced educational, health care, and public safety benefits. ”

Donald Trump’s broadband program doesn’t seem that definitive.  On his campaign website, the President notes as an accomplishment a 2018 program dedicating $50 billion to empower rural economies, 80% of those moneys going directly to state governors and the remaining amount going to selected states that apply for a rural performance grant.  Whether funds went to the governors or to select states applying for performance grants, the amounts promised by the President appear less than those promised by Mr Biden.  Currently, according to the Department of Agriculture’s website, the Community Connect Grant Program is closed.  Funding this program or another one like it would support the President’s rhetoric about increasing economic opportunities in rural areas.

The economic uncertainty surrounding the COVID-19 pandemic has fueled talk about people leaving the cities for urban areas.  Axios, citing polling results, reported that one-third of Americans are considering moving to less densely populated areas including rural areas.  Urban residents are more likely to consider a move versus suburban or rural residents.  If this finding were to materialize then there might be an uptick in demand for broadband services in these areas.

Supporting more broadband is a political win for either of these candidates.  Consumers should bear in mind that broadband roll-outs call for coordination between federal, state, and local government agencies and the policy desires of a president are not enough. Elected officials will need to put their money where their mouths are and ensure the funding of programs such as the Community Connect Grant Program and other similar programs.