On Wednesday, the "House" passed the "American Rescue Plan". The $1.9 trillion stimulus to the US economy is valued at almost 10% of GDP.
The legislation will send $1,400 dollar checks to most Americans, with additional household spending on unemployment insurance and child support.
In the plan, individuals earning up to $75,000 dollars and couples earning up to $150,000 dollars, will each receive the $1,400 dollar bonus. The scheme will cost $400 billion dollars. More money, $500 billion, is allocated to FEMA, in addition to the $350 billion offered to state and local government.
Forecasts of growth in the US are expected to rise as a result of the stimulus. Fears for inflation are also rising as Uncle Sam performs the helicopter drop. The thought of more cash into communities, pushed ten year bond yields higher to 1.62%. Nasdaq and S&P closed higher in the week. The DOW joined the fun, moving to an all time high, clearing the 32,500 level.
China reported an increase in foreign purchases of sovereign debt in February. Overseas funds picked up a further $15 billion of assets following record purchases in the prior month. US treasuries are losing their "safe haven role. The extent of central government borrowing and central bank buying is compounding the problem. The yield of 3.2% on offer in China, assists the process.
Foreign Direct Investment, into China, increased by 34% in January and February. Investment in service sector projects accounted for 80% of capital flows. Investment from the EU showed the largest overall gain, followed by the ASEAN nations and members of the Belt and road initiative.
This week Bitcoin moved to $60,000 dollars. Just over ten years ago, 10,000 bitcoin were needed to pick up two Papa John pizzas. In today's market, that would value a pizza at $300 million dollars or $50,000 dollars per slice.
In other news this week, the financial world discovered non-fungible tokens. A record $60 million dollars was the closing bid at auction. The winning bidder owns a work of art in the form of a unique string of code, called a non fungible token. The piece has no physical presence and will be "delivered directly to the buyer, accompanied by a unique NFT encrypted with the artist’s unforgeable signature and uniquely identified on the blockchain," Christie's said.
Next week the news a SPAC or SPIV is pivoting to invest in Non Fungible Tokens, picking up Jack Dorsey's first tweet as the primary asset. I have been on Twitter since August 2007. It must be time to get the back catalogue valued ... for the bespoke TSE Special Investment Vehicle ... valued in bitcoin of course ...
The Saturday Economist
John Ashcroft publishes the Saturday Economist. Join the mailing list for updates on the UK and World Economy.
|The Saturday Economist|
The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The presentation should not be construed as the giving of investment advice.