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South African Cryptocurrency Debts

Although many think that cryptocurrency may be the way to solve African debt and investment problems, there seems to be scant evidence that this is happening.  Like most areas of the world, the crypto craze looks to have little real world benefits. Sure some people are making huge profits betting on the enormous swings of Bitcoin and it’s rivals, but this is of little help to real world issues.

Certain African countries seem to be really keen on the new cryptocurrencies predictably Nigeria and South Africa where there’s intensive trading and speculation on both formal and informal trading networks.  Indeed in South Africa, there are many reports of people getting into financial trouble betting on the wild swings of various cryptocurrencies.

Much like the day trading crazes of the 1990’s, buying and selling these currencies in the short term is extremely risk but of course can be incredibly lucrative.  Many are investing money from second mortgages and credit card debt hoping to profit from the boom in prices.  Of course, the volatility goes both ways with Bitcoin trading in a range of around $8000 – $20000 in just a few weeks. Any of these currencies can easily rise or fall by over 30% in a single day and possibly much more than that.  One individual in cape Town was reported as selling his car just to invest in the cryptocurrency Ethereum after getting a tip on it’s imminent rise.

For ever investor who is losing money on investments in crypto speculation  there are a couple who have simply been scammed.  There are numerous Ponzi and MLM schemes operating in the African continent which supposedly invest in cryptocurrencies.  The schemes offer guaranteed returns and also referral schemes designed to draw in more victims. It should be noted that if there’s one thing for certain with regards investing in bitcoin or similar that’s uncertainty is guaranteed.  There is no way anyone can predict the long term prices of bitcoin as it doesn’t have any underlying value. Bitcoin is always going to be extremely volatile and as such no scheme could ever guarantee anything at all.

South Africans are not the only Africans embracing Bitcoin however, as a recent report from Citibank has indicated. Apparently Kenya, are the fifth highest bitcoin holders in the world just behind Nigeria.  There’s certainly a real appetite for investing in the digital currency on the African continent.

How important is this? Well the countries like Kenya who are investing large proportions of their private wealth in cryptocurrency are obviously very vulnerable to a collapse in prices.  What’s worse is that every cent invested in this digital world is not invested in traditional projects in the country.  More developed countries would cope with this investment drain better than most African nations.

Most financial institutions are very positive about blockchain the technology behind the currencies so this could have a beneficial effect in the long term on African economies.  The hype on cryptocurrencies however rises daily, you can see lots of reports and coverage on mainstream media – try watching UK TV abroad for some insight in their financial sections.

Much will depend on how cryptocurrencies fair in the long term, it may be that they turn out to be a valuable wealth generation tools.  African’s perhaps see these currencies as a way of investing in Western economies in a simple way.What is certain is that Africa’s economic success will be much more certain if the world of the cryptocurrency develops further in the coming years.

Steven (BBC News) Baker

The Rise of the Eastern Euro Nations

The beginning of 2017 has seen some impressive growth in the eastern economies of the European Union. These countries have benefited from development money and an increase in demand in the Eurozone economies has helped too.

The leading economy is definitely Romania, their growth has risen to nearly 6% more than forecasted.The Polish economy, the largest economy in the Eastern sector of the EU grew by 4%.Even the slowest performing Eastern economy – the Czech Republic posted growth figures of 2.9% still outpacing the Euro area.

Much of the increased activity can be predicted from a growth in construction which has increased across Europe.Although this has been created by a improvement in the economic conditions across the Eurozone.

These former socialist nations are in some senses rising the growth of their western neighbours. The relative weaknesses in their economies are more easily stimulated by demand across the Eurozone.Even unemployment which has often been the problem for these nations has fallen to record lows. Hungary’s currency in particular and the other Eastern European currencies are all performing strongly.  There is a sense of optimism in these countries not seen before, you can see by investing in a VPN or Smart DNS service and watching their local TV and radio broadcasts online.

The growth figures are impressive almost across the board, places like Hungary and Bulgaria have exceed all forecasts in their growth. Some of the growth is not entirely unexpected, the previous years had seen cutbacks in public investment in many of these countries. There had been much pressure to get rid of these reductions and for Governments to start investing more – it seems that resulted in increased growth.The predictions for the developing European nations look good too, the IMF forecast that Eastern European countries will grow double the rate of the developed Euro countries.

Although the Western countries are lagging behind their Eastern neighbours these figures represent great news for all the EU nations. The investment and development funds which have been spent in these countries was intended to advance their economies quickly. It was a long term strategy for the EU designed to build strength across the member nations, investing in the developing nations has not always been popular. In places like France, Italy and the UK there was some resentment at European money being diverted to these nations in times of struggling.

 

South Africa’s Debt Downgrade

There seems to be little that can stop the momentum which is propelling South Africa towards the lowest credit rating possible on the international markets.  The latest setback involves S&P (Standard and Poor) reported by the BBC (use a VPN for access) who have downgraded the country’s credit rating to junk status after the finance minister was dismissed suddenly.

The global ratings department of S&P brought South Africa’s sovereign debt rating down because it considered the sacking of the respected finance minister, Pravin Gordhan a risk to the implementation of the country’s fiscal policy.

Needless to say this had a negative effect on the markets as the Rand plummeted by nearly 2% against the dollar while the value of Government bonds dropped sharply too.   The depreciation fall was the worse in nearly two years and came in response to the sacking of the finance minister and also other cabinet members.

The credit rating is important to all countries as it has a serious effect on the interest rates the country pays when borrowing on the international markets.   It has surprised many that the President risked this turmoil when he knew that the agency was going to be announcing an assessment on his country’s prospects.

The country has not reached the ‘junk’ status that most countries fear but currently are only two points above that rating.  However there is a real possibility that the other major agencies will similarly cut their ratings too for the country.  If South Africa does end up with ‘junk’ ratings there will be profound effects for the economy as a whole.  Many pension and investment funds for example will automatically sell their bonds if they reach this status which will cause further pressure on their value.  This will mean that the government’s borrowing costs will rise sharply which as they are running a large deficit will be substantial.

This is not the first of the emerging economies to suffer such a downgrade, Russia and Brazil both were downgraded to junk status in 2015 due to their struggling economies.   It will certainly add to the pressure on President Zuma and you can see on the local TV broadcasts that this is rising substantially.  You may need to use a good vpn service like this to access some of the African only broadcasts on local Television channels.

Debt Crisis in Mozambique

The government of Mozambique has issued a stark warning to it’s creditors warning that a debt restructure was essential in order for the country to recover.  It revealed last week that the country would simply be unable to repay or even fully service it’s loans until the gas revenues it was expecting was available sometime after 2021.

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It’s a grim picture for the South Eastern African nation – which expects public debt to reach an unsustainable level of 130% of GDP by the end of this year.  The International Monetary Fund has offered it’s assistance in negotiating new terms with it’s creditors however direct aid was suspended after they discovered hidden loans of over $2 billion which were not declared.

As hidden debts go this was pretty spectacular, most of it had been built up by various state firms primarily to purchase various security and military equipment.  These were ironically supposedly needed to protect the purchase from a previous secret loan which was used to buy a Tuna fishing fleet.  All of these purchases and loans were kept secret from both investors and creditors alike.

The total of Mozambique’s debt doesn’t sound that much in the context of some Western countries but the total of almost $10 billion is way outside Mozambique’s ability to service.  It is estimated that the country is able to manage a maximum repayment schedule of about $25 million a year, unfortunately it’s current liabilities require repayments of around $38 million dollars every single month.

Many analysts have previously promoted Mozambique as one of the safest investment opportunities in Africa for a variety or reasons.  It’s politically very stable and has some good mineral reserves particularly a large amount of natural gas.   The country had been experiencing some good growth levels however violent clashes in the North and the worldwide drop in commodity prices have stalled both inward investment levels and the overall economic growth which does still stand at about 3.7% however.

The debt crisis though threatens to halt the economic progress being made in Mozambique.  Much of the country has benefited greatly from both the growth and the political stability.  You’ll see a new professional middle class emerge in the cities, who purchase luxury good and utilize the improving internet infrastructure.  Large media firms like Hulu and Netflix are available there although you’ll need a working Netflix VPN to access properly.

It’s a worrying time for the citizens of this beautiful African country, once more the promise of a better life and economy has been threatened by reckless mismanagement by the State. Hopefully the debt can be restructured in some way in order to allow the country to continue it’s growth story.

Does Britain Risk a Debt Filled Future?

Among the corridors of economists and financial analysts, there has been largely quiet praise for the UK’s approach to the global recession, the banking crisis and the high levels of debt which have resulted.  The cut backs in Government spending are of course not everyone’s prescription for the troubles and equally many suspect it has hindered and slowed the recovery.

The reality is that much of the UK Government’s spending levels were simply unsustainable and austerity although unpopular would have been inevitable at some point in time.   Increased growth obviously impacts these figures too and a healthy growing economy can also be used to reduce debt levels in tandem with any spending cuts.

BBC News Streaming

For several years this reduction in Government debt levels has been the main focus for the economy, however the Brexit decision seems to have thrown these goals up to the winds of political expediency.   If you watch the UK news and political reports, austerity now rarely get’s a mention – apart from the brief distraction of the Olympics, the talk is all about leaving the European Union.   The reality is that this decision is likely to have a much bigger effect than any trimming of welfare payments or cutting back government departments.

The most urgent problem though is the uncertainty, the simple fact that no-one seems to know what is happening. The protagonists who promoted the leave campaign now seem to have stepped into the background, leaving a variety of pledges and promises in the dust.  The truth was none of these were ever guaranteed and indeed many simply contradicted themselves, and in truth will probably be set aside mostly by the new government entrusted to deliver some sort of Brexit result.

It looks like nothing much is happening soon, and the uncertainty looks likely to continue for months and possibly years to come.  There is a suspicion that something is happening behind closed doors, in the corridors of power some sort of workable compromise is happening but we may just have to wait and see. Until then it’s almost certain that economy will start to shrink, maybe slowly but the current situation is not conducive to growth.

Business investment has already hit a 10 year low, as companies wait for direction.  There are lots of rumours of impending trade deals and agreements, but none of these can actually be implemented until the country leaves the European Union so all the talk is very premature.

Many seem to see the ‘free trade deals’ as a passage to huge prosperity and a sales fueled bonanza for a UK freed from the shackles of the EU.  The problem is that ‘free trade’ can also be extremely detrimental to an economy as well as being beneficial.  It’s why these agreement sometimes take a decade to negotiate, a bad deal can be much worse than no deal at all.  International trade, even is you simply use the base economic model of comparative advantage can be a complex and difficult area. Establishing a ‘free trade’ agreement sounds like a simple, beneficial thing to establish however it’s implication is that you offer trade advantages over other countries, which can have huge knock on effects in an economy.

The worry for the UK economy is on many fronts – the indecision, the confusion and what is actually going to happen.  Sometimes no decisions are actually worse that ‘bad decisions’ – government debt is only going to increase while the confusion remains.

Jim Harvey

Author of Online IP Changer

Brazil’s Economic Downturn Deepens

It doesn’t seem so very long ago that we were discussing the economic successes of emerging nations like Brazil.  From Europe we looked across at huge growth rates, rising living standards and a vibrant economy with a sense of extreme jealously.

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However Brazil is now facing much bleaker economic prospects and it is a prime example of how quickly market sentiment can turn against an economy. The risks were always there, in this blog we highlighted here the fact that much of the success in Latin American countries was due to US economic policies – which meant that there was always a lack of genuine fundamentals underlying the growth. Much of the investment in these emerging countries was simply driven out of the US and Europe by very low interest and bond rates, when stability returned then the investment dried up in places like Brazil too.

The economic prospects for Brazil continued on a downward slope with this weeks decision for the credit rating agency Moody downgrading Brazil’s sovereign debt status to junk. The decision in itself will have little consequence, partly because it was anticipated and had largely been already priced into the markets. That’s not likely to be much relief though, more simply a confirmation of the bleak prospects of the Brazilian economy as a whole.

The reality is that Brazil has simply been spending too much with huge levels of debt and an ongoing fiscal deficit making it even bigger. As always in these situations, the talk is of a debt default which could be the catalyst for even more pressure on the country’s currency and a deepening recession.

Only a few years ago Brazil’s economy was growing at over 4% a year, whilst many other economies in the world were basically stagnant. Now that growth has been reversed and this year it is expected that it will contract by around 3-4% this year. This would represent Brazil’s worse recession in more than a hundred years, and with little indication of a turnaround the deficit is likely to increase.

The political situation is also unlikely to offer any relief for Brazilians, which desperately needs strong policies to deal with the economic crisis. However if you invest a few short minutes in looking at the Brazilian media online, possible with an online IP changer then you’ll see that there’s little sign of this happening. As one correspondent highlighted, the report by Moody’s is like a medical report which states the patient is sick yet is maintaining the same lifestyle which caused the problem.

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Will Greece Start a Euro Collapse?

Well today is Sunday the 5th July, the day after the anniversary of US independance but certainly today was an event of much more importance to the future of a European Union.  The Greeks have voted no to the current offer from the EU of more money based on specific austerity measures.

It’s a difficult one to call, at the moment I’m watching the news on the BBC and there are pictures of Greeks dancing in the street at the result. I’m watching from a cafe in Western Paris known for it’s fast internet access even with a VPN to help watch BBC News live – available here.

Greek Exit From Euro

Greek Exit From Euro?

So what’s next? Does the Greek Government now have a mandate to negotiate real change in the debt restructure? Well the reality is probably not, Greece is unable to function for more than a few days without a serious cash injection. It is certainly not a position of strength, although many would argue that a democratic mandate from a few million Euro citizens should count for something.

There are many Euro officials, probably not easy to find now, that stated that a ‘No’ vote was basically a vote to leave the Euro and rejecting the terms of the creditors. The problem is that when the amounts are this large creditors are not really acting from a position of strength.

You can’t send in a firm of bailiffs to a country to recover a few billion euros, after all where will sell a few hundred thousand flat screen TVs with all the settings set to Greek. The reality is that a default and exit for Greece will be devastating for both sides, so I feel that a compromise will definitely happen. You can get really upset about someone not paying you back 50 billion euros, but losing another 200 billion euros as your currency and economy crashes is not going to cheer you up.

Time will tell on what happens, at the moment I’m treated myself to buy IP address, so that I could watch all the different News sites and listen to experts across the world. There seems to be little common consensus, but the reality is that the amount that will be wiped off Euro stocks, the economies of the Eurozone and many other areas, will be many times more that the Greek debts will mean that someone will give ground. My money says that Greece have played a very shrewd game and will benefit from this no vote, however I could be completely wrong.

Trade Figures Point to UK Recovery

At any given time, for most of the European economies you can find a positive economic story and a negative one.  It’s particularly valid for the United Kingdom where speculation and predictions veer widely from one extreme to another.

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This week we’ve seen a lot of positive news around increasing trade and negative ones warning of credit problems caused by  the spectre of the European Referendum whenever that might occur.  However it’s best not to dwell on the fears of the market as they are largely overblown so far into the future.

So what about the trade news?  Well the positive signs are coming from the size of the UK’s trade deficit which finally seems to be heading downwards.  In fact it’s falling a significant amount with the March figures falling from 3.1 billion pounds to a little over 1 billion.  A huge fall in one of the UK’s problem areas – the trade deficit is estimated to knock nearly a percentage point from the quarterly economic growth forecast.  So it is expected that this good news should filter through to the economic growth indicators for the second quarter of 2015.

It is the April figures that outshone the rest, and some optimists have predicted that instead of net trade being a drag on economic growth, they might in fact contribute to them in the future.    This would be a huge surprise for most economists and perhaps point to a great increase in confidence particularly in manufacturing and their export markets.

UK growth will likely still be reliant on domestic demand, the improvement in most Eurozone economies over the last quarter will hopefully bring some positive benefits to the UK too.  There are many signs that export volumes are increasing at a pace, this will partly be fueled by the increase in confidence in British companies over the last couple of years and some would suggest the shock Conservative majority.

The overall figures suggest that imports are falling rapidly and the exports are climbing. The fall in imports was largely due to other factors though particularly the falling commodity prices particularly oil – this also helped cut manufacturers costs and make British exports more affordable.

For further information on the UK economy, see the UK press and media.

Resources:

UK Proxy Service – http://www.youtube.com/watch?v=7VYyV0vrTfM

USA VPN – http://www.proxyusa.com/usvpn