Business
US Faces Economic Uncertainty Over the Decline of the US Dollar
The US is facing an economic catastrophe as the use of the US dollar as a global currency may fall to 40-45% within 2-3 years because of international trading with a new BRICS currency.
The United States experienced an economic catastrophe in March 2023. One of the most famous American banks, Silicon Valley Bank, ranked one of the top 20 banks in the United States with over $215 billion in assets, went bankrupt. The bank incurred a $1.8 billion loss due to the interest rate increase on US Treasury securities.
Days later, New York-based Signature Bank, with over $110 billion in assets, failed because its deposits exceeded the maximum permissible limits of the US Federal Deposit Insurance Corporation, while First Republic Bank, with over $215 billion in assets, saw its share price fall by 67% and Western Alliance Bancorporation fell by 90%.
Also, almost every major private bank in the United States has had its credit ranking downgraded. Before all of this, Silvergate Bank, another cryptocurrency-related institution, failed due to liquidity problems in the first week of March 2023.
Global demand for the US dollar falling
The manner American financial institutions are collapsing one after the other portends the Western superpower’s economic doom. These banks have a singular explanation for their failure, and it is related to the interest rate on US Treasury bonds.
As global demand for the US dollar falls, so do these bonds, and to keep them afloat, banks are forced to give higher interest rates, which eats into their liquidity.
When renowned economist Dr. Nouriel Roubini, also known as ‘Dr. Doom,’ who accurately predicted the 2008 global recession, not only predicts another global economic collapse but also warns that problems will last for a long period, possibly a decade or more.
De-dollarization would be one of the primary causes of the impending recession. Once thought to be the sole currency for global commerce, the US dollar is losing its luster and being replaced by other currencies.
Naturally, it will significantly affect the American economy and may lead to an economic disaster for the world’s leading superpower.
Let us attempt to grasp the concept of de-dollarization.
Historically, the value of any currency has been determined by the assets held by the nation issuing that currency. Until about a century ago, the British Pound was the most valuable worldwide currency, not the US Dollar.
Following World War I, America, which escaped relatively unscathed because the war was not fought on its soil and got the lion’s share of wartime gold reserves, began to replace the pound as a global trade currency.
The Bretton Woods Agreement
In 1944, the United States implemented the Bretton Woods Agreement, which promoted bilateral commerce in US dollars. Surprisingly, by the late 1960s, it was thought that keeping US dollars was more profitable than holding stocks or gold. As a result, its hoarding was widespread not only among people but also among countries.
After the London Gold Pool was disbanded in 1970, the Bretton Woods Agreement was nearly null and void, and Asian economies began to recover. On the other hand, the United States was confronting a negative balance of payment crisis due to massive Cold War and Vietnam War expenditures.
President Nixon canceled the US dollar’s convertibility into gold in 1971, detaching it from the worth of his country’s assets. As a result, the value of the US dollar was now determined by worldwide demand rather than assets held by the US government.
The advent of ‘Petro Dollars increased demand for the greenback, and to meet the demand, the US began printing more and more dollars.
Because the United States was the largest contributor to worldwide institutions such as the IMF and the World Bank, all payments were made in US dollars. Consequently, developing or underdeveloped countries were compelled to trade in US dollars with other countries. By the late 1990s, nearly 90% of worldwide trade was conducted in US dollars.
Bilateral currency swap agreements
Hoarding grew, and more money was printed to meet the demand. Today, instead of nearly $500 billion in US gold reserves, they have released nearly $4 trillion in hard currency and $38 trillion in US treasury bonds, nearly 80 times the total assets of the US Treasury.
The US believed that because its currency was in high demand in the market, it would continue to cruise on its artificial bubble. It has produced war-like situations worldwide in recent years, compelling countries to purchase more weapons, fuel, and other items from the global market, promoting trade in US dollars.
The Information Technology (IT) boom of the 1990s boosted demand even more because most of the top IT firms were American, and nearly 80% of the IT industry was based in the United States. American sanctions were also imposed on bilateral currency swap agreements between nations to discourage trade in other currencies.
Since 2014, when the US imposed economic sanctions on Russia and created roadblocks in its trade in US dollars, countries have considered alternatives to using the US currency.
The introduction of the Euro also assisted nations in breaking the US dollar’s monopoly. Over the last eight years, many nations have signed bilateral agreements to avoid a situation similar to Russia’s. Russia and China created payment gateways, and India and Russia signed a similar arrangement that linked the Reserve Bank of India and Russia’s Sistema Peredachi Finansovykh Soobscheniy. (SPFS).
The US dollar’s share has fallen.
Meanwhile, nations such as Brazil, China, Australia, Argentina, Egypt, the European Union (EU), Iran, Japan, Saudi Arabia, the United Arab Emirates (UAE), and Turkey signed bilateral treaties to break the monopoly of the US dollar.
As a result, the total circulation of the US dollar worldwide decreased considerably, as has greenback stockpiling. According to one estimate, the US dollar’s worldwide trade has dropped by more than 20% in the last four years.
This is evident in the International Monetary Fund’s foreign currency assets, where the US dollar’s share has fallen from 71% in 1999 to 57% in 2021 and is expected to fall further.
The net cascading impact on the worldwide circulation of the US dollar will be significant. The worldwide use of the US dollar as a currency is anticipated to fall to 40-45% within the next 2-3 years.
The Euro, previously traded below the US dollar, now has the upper edge. Russia trades in Ruble against its cheap oil, while other nations trade in Chinese Yuan, Japanese Yen, Saudi Riyal, and UAE Dirham. India also trades in the Indian Rupee with over 44 nations.
Netflix added 9.3 million subscribers to begin the year, and its profit increased as a result of its still-emerging push into advertising, but investors were taken off surprise by a shift that will make tracking the video streaming service’s future development more difficult.
The performance released Thursday showed that Netflix is still building on its momentum from last year, when a crackdown on free-loading viewers using shared passwords and the introduction of a low-cost option with advertisements rekindled its growth after a post-pandemic lull.
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Netflix Now Has Nearly 270 Million Subscribers After Another Strong Showing To Begin 2024
Netflix’s strategy resulted in 30 million new customers last year, the second greatest annual gain in the service’s history.
Netflix’s increases from January to March more than doubled the 1.8 million customers added at the same time last year, and were nearly three times higher than analysts expected. The Los Gatos, California-based corporation finished March with almost 270 million global customers, including approximately 83 million in its largest market, the United States and Canada.
Netflix’s stock price has more than doubled since the end of 2022, as investors increasingly see it as the clear winner in a tough streaming battle with Apple, Amazon, Walt Disney Co., and Warner Bros. Discovery.
But Netflix stunned investors by announcing in a shareholder letter that it will no longer provide quarterly updates on member totals beginning next year, making it more difficult to watch the video streaming service’s growth — or shrinkage. Since going public 22 years ago, the corporation has consistently reported quarterly subscriber totals.
Netflix’s shares fell more than 5% in extended trading despite a great financial performance.
In a video chat with analysts, Netflix co-CEO Greg Peters stated that management believes the company’s financial growth has become more important to monitor than quarterly variations in subscriber numbers.
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Netflix Now Has Nearly 270 Million Subscribers After Another Strong Showing To Begin 2024
“We think this is a better approach that reflects the evolution of the business,” Peters went on to say.
The corporation still plans to provide annual updates on total subscribers. Raj Venkatesan, a business administration professor at the University of Virginia who researches the video streaming market, claims that Netflix is attempting to persuade investors to pay attention to long-term trends rather than three-month increments, which are susceptible to short-term factors like programming changes and household budgetary pressures that result in sporadic cancellations.
Now that Netflix has been tightening down on password sharing for more than a year, management is likely to understand it has gained the majority of the subscriber gains from those measures and that maintaining that pace would be more challenging, according to eMarketer analyst Ross Benes.
“They are quitting while they are ahead by no longer reporting quarterly subscriber numbers,” Benes told me.
Netflix’s increased subscriber growth has coincided with a tighter focus on increasing profit and revenue, which has pushed management to be more frugal in its spending on original programming and to regularly raise subscription fees.
It’s a strategy that helped Netflix earn $2.33 billion, or $5.28 per share, in the most recent quarter, up 79% from the same period previous year. Revenue increased 15% from a year ago to $9.37 billion. FactSet polled analysts, who predicted earnings of $4.52 per share on $9.27 billion in revenue.
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Netflix Now Has Nearly 270 Million Subscribers After Another Strong Showing To Begin 2024
Advertising revenues continue to play a minor role in Netflix’s profitability, with BMO Capital Markets analyst Brian Pitz predicting the firm will earn approximately $1.5 billion from advertising streaming on its service this year, with years of steady growth ahead. According to Pitz, the low-cost advertising option is having a significant influence on attracting and retaining users, with 41 million people expected to pay for the commercial format.
SOURCE – (AP)
Business
Tesla wants shareholders to reinstate $56 billion pay package for Musk rejected by Delaware judge
AUSTIN, Texas – Tesla will ask shareholders to approve the reinstatement of a $56 billion compensation package for CEO Elon Musk, which a Delaware judge rejected earlier this year, and move the electric car manufacturer’s headquarters from Delaware to Texas.
In a statement with federal regulators early Wednesday, the business stated that shareholders will vote on both measures at its annual meeting on June 13.
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Tesla wants shareholders to reinstate $56 billion pay package for Musk rejected by Delaware judge
The Tesla board of directors offered Musk an unprecedented compensation plan that could be worth $55.8 billion over ten years starting in 2018, but Chancellor Kathaleen St. Jude McCormick ruled in January that Musk is not eligible for it.
Five years ago, a Tesla shareholder lawsuit argued that the pay package should be void because Musk dictated it and forged agreements with directors who weren’t impartial to him.
Musk announced a month after the judge’s decision that he would try to relocate Tesla’s corporate listing to Texas, where he has already relocated the company’s headquarters.
Almost immediately after the judge’s order, Musk moved Neuralink, his privately held brain implant company, from Delaware to Nevada.
Tesla met all of the operational and stock value benchmarks outlined in a 2018 CEO pay package, according to Chairperson Robyn Denholm in a letter to shareholders this week. She also stated that Musk has met the automaker’s growth expectations.
“Because the Delaware Court second-guessed your decision, Elon has not been paid for any of his work for Tesla for the past six years, which has helped to generate significant growth and stockholder value,” Denholm said. “That strikes us — and the many stockholders from whom we already have heard — as fundamentally unfair, and inconsistent with the will of the stockholders who voted for it.”
According to a regulatory filing, Tesla delivered 1.8 million electric vehicles worldwide in 2023. However, the value of its shares has dropped sharply this year as sales of electric vehicles fall.
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Tesla wants shareholders to reinstate $56 billion pay package for Musk rejected by Delaware judge
Future growth is still being determined, and it may be difficult to persuade shareholders to support a large pay package in a market where competition has increased globally, and demand for electric vehicle sales is declining. Shareholders will also be asked to submit a nonbinding advisory vote on future CEO pay.
Tesla’s stock has lost over one-third of its worth this year as dramatic price cuts have yet to attract new purchasers. The business said it shipped 386,810 automobiles from January to March, about 9% fewer than last year.
Musk’s package was valued at more than $55.8 billion at the time of the Delaware court verdict, but the court may have cost the erratic CEO more than $10 billion due to the company’s stock decline this year. According to the report, Musk’s 2018 remuneration totaled $44.9 billion at the close of trading on April 12.
Since last year, Tesla has reduced prices by up to $20,000 on some models. The price decreases caused the prices of used electric vehicles to fall, reducing Tesla’s profit margins.
Tesla announced this week that it would lay off nearly 10% of its workforce, or approximately 14,000 individuals.
Following receipt of a report from a special committee under the direction of one board member, Kathleen Wilson-Thompson, Tesla’s board stated in the filing that it sought shareholder approval of Musk’s 2018 compensation package.
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Tesla wants shareholders to reinstate $56 billion pay package for Musk rejected by Delaware judge
The board stated that if a significant vote is cast against future executive pay packages, “we will consider our stockholders’ concerns, and the compensation committee will evaluate whether any actions are necessary to address those concerns.”
Tesla Inc. shares, which fell another 8% this week, were marginally down in trade shortly after Wednesday’s opening bell.
SOURCE – (AP)
Business
Boeing In The Spotlight As Congress Calls A Whistleblower To Testify About Defects In Planes
Boeing is the focus of back-to-back Senate hearings on Wednesday as Congress investigates allegations of severe safety failings at the troubled aircraft manufacturer.
The Senate Commerce Committee was hearing testimony from members of an expert team that discovered major weaknesses in Boeing’s safety culture. Sen. Ted Cruz, R-Texas, said the public expects the Federal Aviation Administration and Congress to ensure that boarding one of the company’s planes is safe.
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Boeing In The Spotlight As Congress Calls A Whistleblower To Testify About Defects In Planes
“Commercial air travel is the safest mode of transportation, although recent events have justifiably concerned the flying public. Cruz stated, “The perception is that things are getting worse.”
In a February study, the expert panel stated that, despite reforms made following the Max crashes, Boeing’s safety culture remains faulty, and employees who express concerns may face pressure and punishment.
One of the witnesses, MIT aeronautics instructor Javier de Luis, lost his sister when a Boeing 737 MAX 8 crashed in Ethiopia in 2019.
A second Senate hearing will feature a Boeing engineer who believes that pieces of the 787 Dreamliner’s skin are improperly connected and may eventually fall apart. The whistleblower’s lawyer claims Boeing ignored the engineer’s warnings and prohibited him from speaking with specialists about the problems.
Sam Salehpour, a whistleblower, provided information to the Federal Aviation Administration, which is investigating the quality and safety of Boeing’s manufacturing. Ed Pierson, a former manager on the Boeing 737 program, is also slated to appear before a Senate investigative subcommittee on Wednesday. Two other aircraft technical specialists are also on the witness list.
The Democratic chair of the Senate Homeland Security and Governmental Affairs Committee’s subcommittee, as well as its top Republican, have requested papers dating back six years from Boeing.
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Boeing In The Spotlight As Congress Calls A Whistleblower To Testify About Defects In Planes
The senators want all information about the production of Boeing 787 and 777 planes, including any safety issues or complaints submitted by Boeing employees, contractors, or airlines. Some issues concern Salehpour’s claims about poorly installed carbon-composite panels on the Dreamliner.
A Boeing spokeswoman stated that the business is working with the MPs’ probe and has offered to share papers and briefings.
The business denies accusations regarding the 787’s structural integrity. This week, two Boeing engineering officials stated that no fatigue or cracking in the composite panels was discovered during design testing or inspections of planes, some of which were 12 years old. They claimed that the material, composed of carbon fibers and resin, is practically immune to fatigue, a continual concern with conventional aluminum fuselages.
Boeing executives also denied Salehpour’s claim that he had witnessed production workers jumping on fuselage parts on 777s to position them.
Salehpour is the latest whistleblower to come forward with allegations of production difficulties at Boeing. The business was plunged into crisis mode when a door-plug panel blew off a 737 Max jet during an Alaska Airlines flight in January. Investigators focused on four bolts removed but not reinstalled during a repair procedure at Boeing’s manufacturing.
The Justice Department has launched a criminal inquiry into the company, while the FAA and the National Transportation Safety Board are conducting separate probes.
CEO David Calhoun, who will step down at the end of the year, has repeatedly stated that Boeing is working to enhance its manufacturing quality and safety culture. He described the blowout on the Alaska jet as a “watershed moment” that will result in a better Boeing.
Such comments are met with widespread suspicion.
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Boeing In The Spotlight As Congress Calls A Whistleblower To Testify About Defects In Planes
“We need to look at what Boeing does, not just what it says it’s doing,” said Sen. Tammy Duckworth, D-Ill., a member of the Senate Commerce Committee, before the hearing on Wednesday.
The FAA is also sure to face some criticism. Duckworth stated that until recently, the agency had “looked past far too many of Boeing’s repeated bad behaviors,” including when it certified the 737 Max more than a decade ago. Two Max jets crashed in 2018 and 2019, killing 346 people, due to incorrect activation of a flight-control system that the FAA did not fully comprehend.
The heads of the Senate investigations panel have also demanded information from the FAA about its monitoring of Boeing.
SOURCE – (AP)
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