Economy

(Reuters) – Cryptocurrency assets are highly speculative and investors in them need more protections or they could lose trust in the markets, Gary Gensler, chair of the U.S. Securities and Exchange Commission, said on Monday. Generally, people who buy cryptocurrencies do not get the disclosures they get when they make other asset purchases around things like whether the trading platform they are using is actually trading against them, or whether they actually own the assets they store in digital wallets, Gensler said.”We have this basic bargain: You the investing public can make your choices about the risk you take, but there is supposed to be full and fair disclosure, and people are not supposed to lie to you,” he said at the Financial Industry Regulatory Authority’s annual conference in Washington.His comments came after last week’s spectacular collapse of TerraUSD, a so-called stablecoin that lost its 1-to-1 dollar peg.The token’s crash sent cryptocurrencies tumbling, a slide that resumed on Monday, as bitcoin erased the gains it had eked out over the weekend to trade under $30,000, far below its Nov. 10 record of $69,000.While crypto markets are thought of as decentralized, the reality is that most activity occurs on a handful of trading platforms, which, along with token issuers, need to work with the SEC to improve industry rules and disclosures, Gensler said.He pointed to basic market principles like, “anti-fraud, anti-manipulation, making sure there’s not front-running, making sure an order book is actually real and not made up.”The SEC will continue to be “a cop on the beat,” while working with the Commodity Futures Trading Commission to ensure all cryptocurrencies are covered, Gensler said.”There’s a lot to be done here, and in the meantime the investing public is not that well protected,” he said. More

KABUL (Reuters) – Taliban authorities in Afghanistan dissolved five key departments of the former U.S.-backed government, including the country’s Human Rights Commission, deeming them unnecessary in the face of a financial crunch, an official said on Monday.Afghanistan faces a budget deficit of 44 billion Afghanis ($501 million) this financial year, Taliban authorities said on Saturday as they announced their first annual national budget since taking over the war-torn country last August.”Because these departments were not deemed necessary and were not included in the budget, they have been dissolved,” Innamullah Samangani, the Taliban government’s deputy spokesman, told Reuters. Also dissolved was the High Council for National Reconciliation (HCNR), the once high-powered National Security Council, and the commission for overseeing the implementation of the Afghan constitution. The HCNR was last headed by former Afghan President Abdullah Abdullah, and was working to negotiate a peace between the U.S.-backed government of former President Ashraf Ghani and the then-insurgent Taliban.In August 2021, 20 years after invading Afghanistan, foreign forces withdrew from the country leading to the collapse of the government and a Taliban takeover.Samangani said the national budget was “based on objective facts” and intended only for departments that had been active and productive.He added that the bodies could be reactivated in the future “if needed”.The Taliban ruled Afghanistan from 1996 to 2001 with an iron fist and implemented a harsh version of Islamic rule, including banning women from education and work. After taking over last year, the Taliban assured the world they would be more moderate. However, they are yet to allow older girls to restart education, and have also introduced rules that mandate that women and girls wear veils and requiring them to have male relatives accompany them in public places. More

Boris Johnson was locked in a stand-off with Northern Ireland’s biggest pro-UK unionist party on Monday, as a row over post-Brexit trading rules left the region in political paralysis.The Democratic Unionist party warned Johnson that only the enacting of legislation to scrap a post-Brexit customs border in the Irish Sea — not just the threat of a new law — would be enough to end the political deadlock.Liz Truss, the UK foreign secretary, will on Tuesday set out plans for British legislation to override parts of the Northern Ireland protocol, a key element of Johnson’s 2019 Brexit deal, if talks with the EU on reforming the pact fail.But while that plan has enraged politicians in the EU — who argue that Johnson’s government is threatening to unilaterally rip up an international treaty — it is still not deemed hardline enough by the DUP.Speaking after talks with Johnson in Northern Ireland on Monday, DUP leader Sir Jeffrey Donaldson said he wanted the legislation enacted if he is to lead his party back into the power-sharing executive in the region.“Tabling legislation is words,” Donaldson told reporters outside Hillsborough Castle, the official UK government residence outside Belfast. “What I need is decisive action and that means I want to see the government enacting legislation that will bring the solution that we need.”Johnson, who was booed by anti-Brexit protesters on his arrival, has been desperate in recent days to dial down tensions with Brussels, amid fears the EU could retaliate with a trade war. His allies said he had “zero appetite” for a political fight with the EU.

Speaking after talks with the five main parties in the region, he said that all had agreed that the Northern Ireland protocol — which creates checks on trade travelling across the Irish Sea from Great Britain to the region — could be improved.“We don’t want to scrap it, but we think it can be fixed,” Johnson said. He added that he wanted a deal with the EU to soften border checks: “We would like this done in a consensual way with our friends and partners.”The British legislation, to be outlined by Truss on Tuesday after being signed off by the cabinet, would be part of a “parallel process”, according to Johnson aides, and would only be passed into law if EU talks collapsed.Another piece of Northern Ireland-related business due to be introduced in the London parliament on Tuesday is a bill to offer an amnesty from prosecution to some perpetrators of attacks during the Troubles after the government rowed back from controversial plans to introduce blanket immunity.But the DUP’s hardline stance on the protocol suggests, according to one senior Tory MP, that Johnson is risking a fight with Brussels but is getting nothing in return. “It’s a strategic disaster — why are they going to compromise?” the MP said.

Truss and Brandon Lewis, the Northern Ireland secretary, had been convinced that the DUP would re-enter the executive if legislation was brought forward, according to government officials. Under the 1998 Good Friday peace agreement, Northern Ireland’s main unionist and nationalist parties have been forced into fractious power-sharing. The protocol row has stymied its resumption in the wake of the May 5 election, won by the nationalist party Sinn Féin.The DUP on Friday scuppered the election of a speaker to the Stormont assembly and has vetoed the formation of a power-sharing government until Brexit demands it says would restore Northern Ireland’s place as part of the UK are met. Johnson’s allies said the EU needed to be more flexible because it would be a “kick in the teeth” to deny nationalist party Sinn Féin its election victory. Northern Ireland now faces the prospect of months of limbo and potentially even new elections this winter, while the region confronts a cost of living crisis and serious problems in its health service.Sinn Féin emerged furious from what party president Mary Lou McDonald called “tough” talks with Johnson, whom she accused of acting “shamefully”.She demanded a return to local institutions with “no ifs, no buts, no conditionality, no unionist veto” and slammed the prospect of unilateral UK legislation to undo parts of the protocol. Additional reporting by Sam Fleming in Brussels

Video: Northern Ireland tries to heal a legacy of separation | FT Film More

Jeff Bezos lashed out at Joe Biden’s White House on Monday over policies he claimed risked stoking inflation, escalating a war of words over the cause of sharply rising prices that are dominating US politics in an election year.The Amazon founder and world’s third-richest person took aim at the Biden administration’s failed Build Back Better bill, which would have increased taxes on the wealthy and large companies to pay for spending on childcare, education and programmes to curb climate change.“Administration tried their best to add another $3.5tn to federal spending,” Bezos wrote on Twitter. “They failed, but if they had succeeded, inflation would be even higher than it is today, and inflation today is at a 40-year high.”Bezos’s attack was an uncharacteristic outburst for one of the world’s best-known businesspeople, who has not previously used Twitter to wade into contentious political disputes.It followed a back-and-forth with the White House that began on Friday, when Bezos criticised a tweet from Biden that suggested one reason inflation had taken off was that wealthy companies did not pay enough in tax. Bezos retorted that while high inflation and the level of taxes paid by companies were issues that deserved to be discussed, linking the two was a “non sequitur” that should be put before “the newly created Disinformation Board”.The White House reacted scathingly to the Bezos tweets. “It doesn’t require a huge leap to figure out why one of the wealthiest individuals on Earth opposes an economic agenda for the middle class that cuts some of the biggest costs families face, fights inflation for the long haul and adds to the historic deficit reduction the President is achieving by asking the richest taxpayers and corporations to pay their fair share,” a spokesperson said.Bezos also came under fire on Monday from Lawrence Summers, the former US Treasury secretary, who broke with most economists early last year to start warning about the rising risk of inflation. Summers called the tech entrepreneur “mostly wrong”, adding that it was “perfectly reasonable to believe . . . that we should raise taxes to reduce demand to contain inflation and that the increases should be as progressive as possible”.Tensions between Bezos and the White House have been exacerbated by the president’s support for organised labour, including unionisation efforts at Amazon that have been building since Biden took office 18 months ago. “It’s also unsurprising that this tweet comes after the President met with labour organisers, including Amazon employees,” the White House spokesperson said. Since stepping down as chief executive of Amazon last year, Bezos has become increasingly active on Twitter and used it to make occasional barbed asides related to his personal views, though not with the frequency or vehemence of rival tech billionaire Elon Musk. Last month, Bezos suggested that Tesla’s heavy dependence on sales to China could give the Chinese government leverage to force Musk to bow to censorship after his planned purchase of Twitter.As with Musk, Bezos has shown libertarian political instincts and once waged a bitter fight with Amazon’s home city of Seattle over a proposed tax increase. Amazon has also long resisted unionisation by its employees, putting it at odds with the Biden administration.

However, Bezos has also at times backed liberal causes, including donating heavily to defend same-sex marriage in Washington state and hiring Jay Carney, a former press secretary in the Obama White House, to head public policy and communications at Amazon.The public spat between Bezos and the White House was symptomatic of broader frictions between business and the Biden administration and Democratic lawmakers over inflation, with some officials blaming corporate America for price-gouging and taking advantage of rising prices at the expense of ordinary consumers. However, most economists said inflationary pressures were due to a combination of factors including high demand driven by government stimulus and the rebound from the coronavirus pandemic downturn, as well as the oil price shock exacerbated by the war in Ukraine and supply chain bottlenecks that have been more persistent than expected. More

LONDON (Reuters) -Bank of England Governor Andrew Bailey said on Monday that the current surge in inflation was the central bank’s biggest challenge since it gained independence in 1997, but denied that policymakers had been “asleep at the wheel”.Bailey has been criticised for failing to act sooner on inflation by some lawmakers from the ruling Conservative Party, which is under public and political pressure over a cost-of-living crisis.While in December the BoE became the first major central bank to raise interest rates since the start of the pandemic, this did not stop a surge in inflation which hit 7.0% in March and is forecast to have reached a 40-year high of 9.1% in April.”I should emphasise that I do not feel at all – obviously – happy about this,” Bailey told the Treasury Committee in the lower house of parliament. “This is a bad situation to be in.”Conservative lawmaker Mel Stride, who chairs the committee, said there was a frequent assertion that the BoE had been “asleep at the wheel” while another lawmaker suggested to Bailey that the BoE appeared “helpless” in the face of surging prices.Asked if the BoE should have acted differently, Bailey said: “I don’t think we could. I don’t think we could foresee a war in Ukraine. Another factor that we’re dealing with at the moment is a further leg of COVID, which is affecting China.” Other central banks are also scrambling to cope with a surge in inflation, which they initially described as “transitory” when it began with the post-pandemic reopening of the global economy, before Russia’s invasion of Ukraine pushed energy prices even higher. Inflation in the United States is running at an annual 8.3%, according to data for April published last week, down a touch from March’s 8.5% which was the biggest rise since 1981. In the euro zone, inflation hit a record high of 7.5% in April, up from 7.4% in March.The BoE earlier this month warned that Britain risks a double-whammy of inflation above 10% later this year and possibly a recession. It raised interest rates to their highest since 2009, hiking by quarter of a percentage point to 1%. “It is a very, very difficult place for us to be in,” Bailey said on Monday. I have to say that this is the biggest test of the monetary policy framework that we’ve had in 25 years, no question about that.” He said rising food prices, which have been pushed up by the conflict in Ukraine, were a major worry, not just for Britain but for developing economies too.”Sorry for being apocalyptic for a moment, but that is a major concern,” he said.Monetary Policy Committee member Michael Saunders said British inflation expectations might have been a bit lower if interest rates had gone up sooner than they did but there would have been little impact on the current inflation rate. Saunders, whose term ends in August, was one of three members of the nine-strong MPC who voted for a bigger half-point rise this month. At the end of the hearing, Stride said he thought there should be a general acceptance that the BoE had had to deal with an unusual number of economic shocks, as well as a high degree of uncertainty over the impact of COVID and the war in Ukraine.The BoE said in its May announcement that most policymakers believed “some degree of further tightening in monetary policy may still be appropriate in the coming months”. But two members said the guidance was too strong given the risks to growth. More

Ministers are being urged to review “grossly unfair” compensation arrangements affecting 83,000 elderly members of the UK’s pension lifeboat fund as the cost of living soars.The Pension Protection Fund said it had received complaints from members over the lack of inflation protection on their retirement benefits as energy and food bills skyrocket.The PPF, a government body part-funded by a levy on 5,500 corporate “defined benefit” schemes, was set up in 2005 to provide a safety net for members of failed company pension plans.The PPF pays annual increases of up to 2.5 per cent on its compensation, however, these increases do not apply to pension benefits accrued before April 1997. With the Bank of England forecasting that inflation could exceed 10 per cent later this year, PPF members who do not qualify for any annual increases in their compensation are worried that the purchasing power of their benefits is being significantly eroded. Prospect, the union, said: “The secretary of state needs to urgently review whether the lack of inflation protection in this environment is reducing overall benefits below minimum legal requirements and take action to address it.”Oliver Morley, chief executive of the £38bn fund, told the Financial Times that the government set the rules on PPF compensation but member complaints to the lifeboat were rising as inflation continued to shoot up.The PPF lifeboat has around 288,000 members, of which around 83,000 pensioners have no indexation on their compensation because their benefits were wholly accrued before April 1997, meaning they do not qualify for any annual uplifts.“My PPF pension has barely increased in the 10 years since I have been in the PPF because only 10 per cent is inflation-proofed,” said one 86-year-old member. “Last year my increase was just under £50. With prices going up, I am very worried.” Tony Reading, a 70-year-old PPF member, said the situation was “grossly unfair” with most of his PPF pension not inflation-proofed.“During my working life, I paid a 30 per cent higher pension contribution specifically to ensure that I would receive RPI inflation updates on my retirement income,” said Reading. “Two-thirds of my retirement income has no inflation protection. We have been shafted.”In the last financial year, the lifeboat paid out £1bn in compensation to 180,000 PPF pensioners while collecting £630mn in levy funds. The PPF also administers financial assistance to members of “defined-benefit” company schemes that failed before the fund’s launch in 2005, but this is taxpayer funded. In this group are 60,000 members who are also not receiving any indexation due to the pre-1997 rule.“It is very clear to us what is going on today, in terms of members’ experience and challenges,” said Morley. “But equally we have to be conscious that there are limits as to what we can do. We have to effect the legislation as it stands.” The PPF has built up £9bn in reserves that it is using to achieve self-sufficiency by its 2030 target date. Morley said any decision to use the £9bn to boost compensation would have a knock on effect for its wider remit to offer a safety net for 5,500 schemes with 9mn members. “Our primary goal is to make sure we are able to pay those claims on us as opposed to expanding our remit,” said Morley. “These are not easy calls.”The Department for Work and Pensions said: “We recognise the pressures on the cost of living and are doing what we can to help, including spending £22bn across the next financial year to support people across the country.” It added that the PPF continued to play a “crucial role” in protecting people with a defined benefit pension when an employer becomes insolvent. More

Boris Johnson’s government is on a collision course with Brussels over implementation of the post-Brexit deal for trading arrangements in Northern Ireland.Last July London set out its demands for a series of reforms to the so-called Northern Ireland Protocol, but six months of negotiations after the European Commission tabled fresh proposals last October have failed to break the deadlock.The UK government has now threatened to bring legislation to suspend parts of the protocol unilaterally if the EU does not get much closer to meeting its demands. Here we look at the central disagreements between the two sides.The movement of goods To avoid a return to a hard border on the island of Ireland, it was agreed under the protocol that all goods going from Great Britain to Northern Ireland should follow the rules of Europe’s single market, including disruptive bureaucracy to ensure food products comply with EU rules.The UK says these controls divide the UK’s internal market by creating an unacceptable bureaucratic border in the Irish Sea. To simplify this, it has proposed that all goods destined for Northern Ireland should be allowed through a “green lane” with much-reduced checks and without the need to submit EU customs codes. At the same time, the UK accepts that goods ultimately heading for the Republic of Ireland should enter a “red lane” and face full checks.In response, Brussels has offered some easements that it claims will reduce paperwork by 50 per cent and food-related checks by 80 per cent, but it stopped short of accepting UK proposals to submit only industry-based data on goods heading for Northern Ireland alone.

The EU has also refused to relax controls over parcels going from Britain to Northern Ireland, arguing that these must be submitted to checks because they are a known route for smugglers. The UK says this leaves consumers in the region unable to order some products from mainland Britain.The UK also wants the EU to waive biosecurity rules that prevent Scottish seed potatoes, for example, from being exported to Northern Ireland, as well as some plants. Brussels has offered to reduce paperwork for lower-risk categories of plant, but this was rejected as insufficient by London.The EU says it could discuss more far-reaching easements if the UK provided better-quality, real-time trade data on goods travelling from Britain to Northern Ireland. It also wants the UK to complete the building of border control posts at Northern Ireland’s ports.However, almost all solutions to managing the border rely on the two sides trusting one other to implement the agreement in good faith. Both acknowledge such trust is in very short supply.State aid and subsidiesThe protocol required the UK government to get prior approval from Brussels for any subsidy decision that had an impact on Northern Ireland’s goods market — even if it principally affected the market in mainland Britain. That clause in the deal, the UK government says, was conceived before the EU and the UK had reached an agreement on shared principles for subsidy control policy in their Trade and Cooperation Agreement. But now that the TCA is in place and the UK has passed a subsidy control act, London argues that this part of the protocol can be substantially relaxed and rewritten. However, the EU disagrees and has not yet tabled proposals in this area.MedicinesThe UK complained in mid 2021 that rules in the protocol meant medicines approved for use by authorities in the UK would potentially not be equally available to patients in Northern Ireland.The EU responded in April by unilaterally passing legislation that recognised the validity of UK-tested medicines, which Brussels said addressed the issue. Privately, UK officials told the Financial Times they were satisfied with the solution.

However Boris Johnson again raised medicines in a newspaper article ahead of a visit to Belfast on Monday. UK government officials say there are outstanding issues on some cancer drugs, and insist the EU solution is time-limited and not sufficiently comprehensive. EU rulemaking and the European Court of JusticeThe UK says it is unacceptable that the protocol is policed by the European Court of Justice, and insists that it cannot accept the EU’s top court deciding disputes between Brussels and London. Instead the UK wants the EU to adopt a similar system to that used in the TCA, in which disputes ultimately go to international arbitration if the two sides cannot resolve them.The commission, whose Brexit negotiating team is led by vice-president Maroš Šefčovič, argues that since the protocol leaves Northern Ireland subject to EU laws for goods trade, the bloc’s top court must be the final arbiter. Brussels has until now not been willing to formally address the question of the role for the ECJ in enforcing the deal. A compromise solution is likely to involve the UK accepting the ECJ must give binding rulings on matters of EU law, as part of a broader dispute-resolution mechanism where both sides have equal standing.VATUnder the protocol, Northern Ireland follows the EU’s value added tax regime. This means that if the UK government cuts VAT — say on fuel bills to address the cost of living crisis, or on green technology as in the chancellor’s Spring Statement — citizens in Northern Ireland cannot enjoy the same benefits.London wants to be able to set VAT rates for the whole of the UK, while trying to avoid creating distortions with the Republic of Ireland. The EU has not ruled out some new flexibilities in this area, but they fall short of UK demands. More

Vladimir Putin’s war on Ukraine has proved a catastrophic mistake. After Russian forces withdrew from around Kyiv last month, Ukrainian troops were on Monday filmed restoring border posts on the Russian frontier, having mostly pushed Moscow’s army back from the second city of Kharkiv. Finland and Sweden are meanwhile due this week to apply to join Nato — an expansion of the alliance that is the exact opposite of what the Kremlin’s war was meant to achieve. Yet Ukraine’s military successes should not obscure the need for the west to accelerate both weapons supplies, and financial support to counter Russia’s crippling economic war against its neighbour.Large-scale help is starting to flow. The US Senate should this week approve a support package including military, humanitarian and economic aid that lawmakers have increased to $40bn from the $33bn President Joe Biden asked for last month. For now, though, this remains a budget line. The sooner it can be converted into further arms supplies, the greater Ukraine’s chance of containing and repelling Russian forces in eastern and southern Ukraine before they have time to regroup.The prospect of a lengthy and vicious war of attrition in the east, while Russia continues to bombard military, infrastructure and economic targets elsewhere and to blockade Ukraine’s Black Sea ports, makes economic and non-military aid vital too — on a grand scale. Without a ceasefire, economic output is forecast to plunge more than 40 per cent this year. The Kyiv School of Economics puts direct damage to Ukraine’s infrastructure at more than $94bn by May 10, roughly one-third each accounted for by residential buildings and roads, with $10bn of damage to industry and factories and $15bn to railways, hospitals, bridges, schools and colleges.One priority is budgetary support. War widened the deficit to $3.8bn in April, with $1.1bn of domestic debt redemptions — in line with the IMF’s assessment that Ukraine faces a financing gap of about $5bn a month for several months. Economic aid of $9bn in the coming US package takes western budgetary support commitments over $20bn, but these, too, will take time to arrive. The IMF is looking at transferring 10 per cent of unused special drawing rights to Ukraine, but the initiative must surmount EU legal hurdles.Other problems require material and logistical support. Grain exports — crucial to Ukraine’s economy and to global food supplies — are impossible via the Black Sea thanks to Russia’s blockade of Odesa and other ports and seizure of Mariupol. That will require what Brussels calls a “gigantesque” effort to move grain via road and rail to Baltic and other European ports. But efforts are complicated by Ukraine’s different rail gauge and shortages of trucks. The EU has pledged to establish “solidarity lanes” to ensure Ukraine can export grain and import necessary goods, from humanitarian aid to fertilisers and animal feed. Shortages of motor fuel — thanks to damage to a refinery at Kremenchuk in central Ukraine — threaten to hamper both the civilian and military economy. And border delays are hindering exports of those manufactured goods Ukraine is still managing to produce.Including indirect costs such as forgone GDP, corporate profit and investments, labour outflows, and higher defence and social spending, Kyiv economists already estimate Ukraine’s total losses from the war at $560bn-$600bn. With Nato allies unwilling to go to war with a nuclear-armed Russia, Ukraine is having to fight alone. It will need all the international support it can muster to deal with the long-term economic devastation. More