In The Headlines

Cryptocurrencies Could Challenge the Global Financial Order

Retail ApocalypseWith Bitcoin and so-called “crypto mania” sweeping the world, a handful of countries have stirred at the possibility of issuing their own virtual currencies based on blockchain, the technology behind Bitcoin. For now, the idea seems most popular among autocrats looking to evade or undercut international sanctions that are enforced, in part, through the global banking system. But advocates of government-backed cryptocurrencies (so-named because they rely on cryptography for security) say that if the movement takes hold—which is by no means assured—it could irrevocably change the international monetary system as we know it.

Venezuela’s president, Nicolas Maduro, is pitching a proposed virtual currency he calls the Petro, each unit of which would be backed by one barrel of oil. Maduro says the Petro will have a “great impact” on how Venezuela accesses foreign currencies and obtains goods and services from around the world—a reference to the country’s dollar shortage as a result of sanctions imposed by the U.S. An initial round of sales for about 40% of the Petro tokens is focusing on institutional investors. Success is by no means assured. There is no mechanism to exchange the cryptocurrency for crude or other hard assets, as Maduro’s plan envisions. And Venezuela’s opposition-controlled parliament has declared the proposed Petro an illegal currency. Russia’s central bank plans to talk to countries including Brazil, China, India and the five former Soviet republics about creating a supra-cryptocurrency that could cover countries with 40% of the world’s population. People’s Bank of China Deputy Governor Fan Yifei wrote an article broaching the possibility of a digital currency it would issue with Chinese commercial institutions. In Sweden, where use of cash is vanishing, the central bank is investigating issuing its own digital currency, the E-krona, out of concern that widespread use of other virtual currencies controlled by private actors could harm competitiveness.

Bitcoin and its many competitors and imitators have developed independently from central authority—and intentionally so. But the blockchain technology that undergirds all cryptocurrencies does not preclude centralization. In theory, a government could have greater control of a virtual currency than a paper one because it would be able to keep tabs on all transactions recorded on the blockchain ledger.

Regulating the money supply through changes in interest rates—i.e. monetary policy—would be much more direct, which could mean it is more effective and cost-efficient. Governments could crack down on tax evasion, since transactions will be traceable. Plus, for the same reason Bitcoin is so popular among people looking to circumvent government control of currency, starting a digital currency might seem attractive to any government that does not like how it is being treated by the global financial system. That includes governments facing international sanctions.

The U.S. attempts to enforce sanctions by blocking banks and companies that do business with the target country from the American financial system. Violators are traced via their transactions in the international banking system. But if a government had its own digital currency, its transactions might not be detectable to U.S. authorities. Bitcoin can provide an avenue around sanctions as well, but a government would struggle to get hold of enough of them to be meaningful. Plus, as has been seen recently, Bitcoin’s value is volatile.

The Western-dominated global financial system relies on a large number of internationally agreed-upon rules, norms and institutions that let countries trade and invest in each other. The U.S. exercises a degree of control over the system because the dollar and the U.S. banking system dominate. Should enough countries set up their own digital currencies, they would operate outside the existing framework, undermining the influence of traditional global central banks like the Federal Reserve and the European Central Bank.

In the case of national cryptocurrencies, the blockchain technology would supplant the clearing process now handled by commercial banks, undermining an important revenue stream. Banks would likely retain their role issuing mortgages and other forms of credit.

Citations                     

  1. http://for.tn/2BtAkGg – Fortune
  2. http://bit.ly/2ftbcHb – MIT Technology Review

Will Illegal Fishing Eliminate the World’s Commercial Fisheries?

Casinos and MillenialsPeople have been taking fish out of the sea for about as long as people have existed at all. But criminal fishing has never posed the threat that it does today. The growing problem of illegal, unreported and unregulated fishing has put whole swaths of the world’s fisheries in danger. Roughly a quarter of the 120 million tons of seafood that humans catch every year is stolen from countries’ waters or caught with outlawed methods, according to marine biologists and industry analysts.

Vessels are bigger than ever, and fishing techniques more effective. Consumer incomes are higher than ever—around the world. And the mechanisms and infrastructure of global trade make it possible to ship catches further, more easily. The problem is criminals who flout the regulations that legal fleets must obey. Sometimes, illegal perpetrators use small boats, slipping from their own waters to poach other countries’ fisheries. Other times, the fish thieves use huge, industrial vessels that scoop up vast stretches of water, killing everything in their nets. The biggest outfits work in fleets, dropping their catches onto tremendous, refrigerated mother ships. That practice, called “transshipping,” lets fishing boats stay at sea, sweeping up marine life, for years at a stretch. Scientists warn that left unchecked, overfishing will eradicate whole species, and could within a few decades contribute to a total collapse of the world’s fisheries. But fishing grounds from Asia to Africa and beyond are already cleaned out.

Fish are swept away for sale in wealthier, far-away markets, such as China. Beijing helps its fishing fleet—the world’s biggest—range far across the globe by giving government subsidies based on boat horsepower, according to risk analysis firm Stratfor and others. Shadowy boat owners come from nations all over the world, however, even from countries like Thailand that are trying to combat fish pirates. In the meantime, traditional oceangoing villages can’t compete. Fishermen lose their livelihoods. Struggling nations are stripped of economic resources. Governments are robbed of tax revenue. People lose their main source of protein.

There are many reasons why catching the bad guys is so hard. First, the oceans are vast almost beyond imagining. Even if authorities know where illegal fishing is happening — and they’re inclined to intervene — it could take them several days to get to the scene.

Second, it is often unclear just who the “authorities” are. The United States polices its own marine waters, and so do other wealthy nations. But there is no police jurisdiction on the world’s gargantuan, open seas. Many countries cannot afford to operate ships or pay crews to watch over even their own waters.

Finally, it is hard to determine who the real perpetrators are—even when violating boats are identified. Illegal fishing vessels change names and intentionally obscure their ownership.  A vessel at sea may be owned by a person in one country, fly the flag of another country, be captained by someone from a different country, and put its cargo ashore in yet another—for processing somewhere else, and sale somewhere beyond that. And there is nothing illegal or inherently unethical about a globalized fishing industry, or practices such as transshipping that support it.

But the practices that underpin global shipping can become problems in their own right, such as when criminal boats dump their cargoes onto mother ships, where illegally caught fish may get mixed in with catches from other boats—including the legal ones. Those illegal catches, blended in with the rest, then become untraceable.

Citations

  1. http://cnb.cx/2Ev1CPr – CNBC
  2. http://econ.st/2tjO1mM The Economist

The Good News Is . . .

Good NewsSmall business owners regained their high optimism in January with the National Federation of Independent Business (NFIB) Small Business Optimism Index rising 2.0 points to 106.9. Leading the monthly index higher was a 5-point gain in the view that now is a good time to expand, the highest level for this component in the history of the NFIB survey. Six of the ten components of the index posted increases, with earnings trends registering the greatest improvement by jumping 11 points. Expectations that the economy will improve rose 4 points to 41 and plans to increase inventories also rose 4 points to 3. Current job openings rose 3 points to 34, as more than a third of small business owners reported job openings they could not fill. Rounding out the gainers were capital outlays, which rose 2 points to 29.

Loews Corp., a diversified company with subsidiaries in finance and insurance, oil and gas exploration, and hotel management, reported earnings of $1.43 per share, an increase of 66.3% over year-earlier earnings of $0.86 per share. The firm’s earnings topped the consensus estimate of analysts by $0.10. The company reported revenues of $1.8 billion, an increase of 4.3%. Management attributed the results to improved non-catastrophe current accident year underwriting results from its property and casualty operations, as well as higher net investment income driven by improved limited partnership results.

Trinity Mirror, which publishes The Daily Mirror, said it had agreed to acquire the print assets of the Northern & Shell Media Group, which publishes The Daily Express, in a deal that would bring together news outlets on opposite ends of the political spectrum and shake up Britain’s fiercely competitive newspaper market. The deal is valued at $176 million. Assuming it goes through, Trinity Mirror’s holdings will run the political gamut, from The Daily Mirror, the best-selling newspaper in Britain on the left, to The Daily Express on the right. Trinity Mirror publishes more than 150 newspapers in Britain and Ireland, including the Manchester Evening News. The purchase would add a diverse group of other publications to that roster. Publishers are looking to control costs as newspapers and magazines have struggled with falling circulation and declining print advertising. Newspapers in Britain have also had to contend with a phone-hacking scandal that was especially damaging to the tabloids.

Citations

  1. https://bloom.bg/2eVhfSb – Bloomberg
  2. http://cnb.cx/2lwnm3s – CNBC
  3. http://bit.ly/2F57Cvi – Loews Corp.
  4. http://nyti.ms/2BZXF3t – NY Times Dealbook

Planning Tips

What to Do When Your Doctor Doesn’t Take Medicare

Estate PlanningThanks to plummeting reimbursement rates, ever-tightening rules and cumbersome paperwork, many doctors are dropping Medicare. If you recently enrolled in Medicare, only to find that your long-standing doctor does not accept it, you have a number of options. Below is a short guide to some of them. Be sure to consult with your healthcare insurance advisor to determine the best course of action for your situation.

Stick with Your Doctor and Pay the Difference – If your doctor is a “non-participating provider,” this means he or she has not signed an agreement to accept assignment for all Medicare-covered services, but can still choose to accept assignment for individual patients. In other words, your doctor may take Medicare patients, but does not agree to Medicare’s reimbursement rates. These non-participating providers can charge you up to 15% over the official Medicare reimbursement amount.  If you choose to stick with your non-participating doctor, you will have to pay the difference between the fees and the Medicare reimbursement. Plus, you may have to cough up the entire amount of the bill during your office visit. Then, if you want to get paid back, either your doctor will submit a claim to Medicare or you may have to submit it yourself using Form CMS-1490S. So, say your doctor’s bill comes to $300, and Medicare will pay $250. This means you will have to pay the $50 difference, plus your 20% copay out of pocket. Obviously, this can add up quickly over time. However, you may be able to cover these extra expenses through a Medigap insurance policy.

Request a Discount – If your doctor is what an “opt-out provider,” he or she may still be willing to see Medicare patients, but expects to be paid his or her full fee, not the much smaller Medicare reimbursement amount. These docs accept absolutely no Medicare reimbursement, and Medicare will not pay for any portion of the bills you receive from them. That means you will be responsible for paying the full bill out of pocket. Opt-out physicians are required to reveal the cost of all their services to you up front. These doctors will also have you sign a private contract saying you agree to the opt-out method. Of course, you can always try to negotiate a discount. It is not uncommon for physicians to lower their rates for established patients. They might also offer, as a courtesy, extended payment plans if you are in need of a series of expensive treatments or procedures.

Go to a “Doc in the Box” – Most urgent care centers and walk-in clinics accept Medicare. According to the Urgent Care Association of America, there are more than 7,500 urgent care centers in the United States, and many of these clinics serve as primary care practices for some patients. So, if you just need a flu shot or come down with a relatively minor illness, you may consider going to one of these centers. Save the doctor visits for the major medical problems.

Ask for a Referral – If you simply cannot afford to stick with your doctor, ask him or her to recommend the next best doctor in town who does accept Medicare. Who else is better equipped to make sure you fall into reputable, experienced hands? Your current doctor may have already prepared for this eventuality and arranged to transfer Medicare patients to another physician’s care.

Start Searching – There are still plenty of doctors who take Medicare. You can find them in Medicare’s Physician Compare directory, a comprehensive list of physicians and healthcare providers across the nation. Once you pinpoint a provider, call to make sure they are still taking on new Medicare patients. After all, this can change quickly. Another approach is to check the best local hospitals and see if any physicians on their staff are taking Medicare patients. When you get names, research them online to learn about their backgrounds.

Citations

  1. http://bit.ly/1JBglzB – Medicare.com
  2. http://bit.ly/2BwvIiH – Forbes
  3. http://bit.ly/2EHwTxQ – Investopedia
  4. http://bit.ly/2EM65N1 – Medicare.com
  5. http://bit.ly/2Et0IyO  – MedicareInteractive.com