Currency
New York (CNN Business)The prices of bitcoin, dogecoin and other digital currencies have plunged more than 40% in recent weeks. While Elon Musk isn’t the only reason for the crypto carnage, he certainly isn’t helping.
China’s corporate bond tab currently stands at a mind-numbing $1.3 trillion of domestic debt payable in the next 12 months. That’s 30% more than what U.S. companies owe, 63% more than in all of Europe and enough money to buy Tesla—twice. What’s more, it’s all coming due at a time when Chinese borrowers are defaulting on onshore debt at a record-breaking pace. This could get messy.
(Bloomberg) — Even by the standards of a record-breaking global credit binge, China’s corporate bond tab stands out: $1.3 trillion of domestic debt payable in the next 12 months.
That’s 30% more than what U.S. companies owe, 63% more than in all of Europe and enough money to buy Tesla Inc. twice over. What’s more, it’s all coming due at a time when Chinese borrowers are defaulting on onshore debt at an unprecedented pace.
The combination has investors bracing for another turbulent stretch for the world’s second-largest credit market. It’s also underscoring the challenge for Chinese authorities as they work toward two conflicting goals: reducing moral hazard by allowing more defaults, and turning the domestic bond market into a more reliable source of long-term funding.
While average corporate bond maturities have increased in the U.S., Europe and Japan in recent years, they’re getting shorter in China as defaults prompt investors to reduce risk. Domestic Chinese bonds issued in the first quarter had an average tenor of 3.02 years, down from 3.22 years for all of last year and on course for the shortest annual average since Fitch Ratings began compiling the data in 2016.
“As credit risk increases, everyone wants to limit their exposure by investing in shorter maturities only,” said Iris Pang, chief economist for Greater China at ING Bank NV. “Issuers also want to sell shorter-dated bonds because as defaults rise, longer-dated bonds have even higher borrowing costs.”
A year ago, as the pandemic ravaged country after country and economies shuddered, consumers were the ones panic-buying. Today, on the rebound, it’s companies furiously trying to stock up.
Mattress producers to car manufacturers to aluminum foil makers are buying more material than they need to survive the breakneck speed at which demand for goods is recovering and assuage that primal fear of running out. The frenzy is pushing supply chains to the brink of seizing up. Shortages, transportation bottlenecks and price spikes are nearing the highest levels in recent memory, raising concern that a supercharged global economy will stoke inflation.
Copper, iron ore and steel. Corn, coffee, wheat and soybeans. Lumber, semiconductors, plastic and cardboard for packaging. The world is seemingly low on all of it. “You name it, and we have a shortage on it,” Tom Linebarger, chairman and chief executive of engine and generator manufacturer Cummins Inc., said on a call this month. Clients are “trying to get everything they can because they see high demand,” Jennifer Rumsey, the Columbus, Indiana-based company’s president, said. “They think it’s going to extend into next year.”
By now, you’re probably familiar with Gartner’s Hype Cycle, a visual representation of how momentum for new technology builds over time.
It’s something to keep in mind as we hear more and more about cryptocurrencies and where they will play in financial services and capital markets in the years ahead. After what some have called the crypto nuclear winter of 2018-2019, crypto is coming through the “trough of disillusionment” and it is now something you shouldn’t ignore — not simply because of the market price of the currencies themselves, but how cryptocurrency is becoming and will become a platform economy going forward.
We already live in a platform economy. Amazon, Google and Apple are the most visible examples of platform economies where these companies have created technology-driven platform models where they engage with users and consumers instead of making physical things. Platforms are about connections, data, sharing and utility for the user. We have many transaction platforms and investment platforms that are part of the digital economy. And as the platform economy evolves it will be more efficient if it has its own platform currency.
Which brings us back to cryptocurrencies. Remember, although we take fiat currencies as the norm (fiat currencies are government back currencies not linked to a commodity such as gold), fiat currencies are only 50 years old. In August 1971, American President Richard Nixon decoupled US dollars from gold, establishing the beginning of fiat currencies on a global scale.
So don’t fall into the trap that the current fiat currency system will last forever. As platform-based digital economies continue to grow rapidly and without borders, it will be inevitable that they will look for an evolved currency environment to fuel and support their growth.
And that’s where cryptocurrencies come in. More on that in my next piece.
DH Kim is the CEO of Finhaven Capital and the Finhaven Private Markets
Microsoft is finally retiring Internet Explorer next year, after more than 25 years. The aging web browser has largely been unused by most consumers for years, but Microsoft is putting the final nail in the Internet Explorer coffin on June 15th, 2022, by retiring it in favor of Microsoft Edge.
“We are announcing that the future of Internet Explorer on Windows 10 is in Microsoft Edge,” says Sean Lyndersay, a Microsoft Edge program manager. “The Internet Explorer 11 desktop application will be retired and go out of support on June 15, 2022, for certain versions of Windows 10.”
While the Long-Term Servicing Channel (LTSC) of Windows 10 will still include Internet Explorer next year, all consumer versions will end support of the browser. Microsoft doesn’t make it clear (and we’re checking), but it’s likely that we’ll finally see the end of Internet Explorer being bundled in Windows either in June 2022 or soon after.
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