Category: Money

Inflation Explained: Why Prices Keep Going Up And Who’s To Blame?

Allison Morrow, CNN BusinessBusiness, Economy, Money 0

Confused about inflation? You’re not alone. Inflation is, paradoxically, both incredibly simple to understand and absurdly complicated.  Let’s start with the simplest version: Inflation happens when prices broadly go up.

That “broadly” is important: At any given time, the price of goods will fluctuate based on shifting tastes. Someone makes a viral TikTok about brussels sprouts and suddenly everyone’s gotta have them; sprouts prices go up. Meanwhile sellers of cauliflower, last season’s trendy veg, are practically giving their goods away. Those fluctuations are constant.

Inflation is when the average price of virtually everything consumers buy goes up. Food, houses, cars, clothes, toys, etc. To afford those necessities, wages have to rise too.

It’s not a bad thing. In the United States, for the past 40 years or so (and particularly this century), we’ve been living in an ideal low-and-slow level of inflation that comes with a well-oiled consumer-driven economy, with prices going up around 2% a year, if that. Sure, prices on some things, like housing and health care, are much higher than they used to be, but other things, like computers and TVs, have become much cheaper — the average of all the things combined has been relatively stable.

Still with me?

All right, let’s cut to today, and why inflation is all over the news.

When ‘inflation’ is a bad word

Inflation becomes problematic when that low-and-slow simmer gets fired up to a boil. That’s when you hear economists talk about the economy “overheating.” For a variety of reasons, largely stemming from the pandemic, the global economy finds itself at a rigorous boil right now.

In the United States, prices have climbed 6.2% — the biggest increase since November 1990, and well above the Federal Reserve’s long-term inflation goal of around 2%.

And here’s where Econ 101 merges a bit with Psych 101. There’s a behavioral economics aspect to inflation where it can become a self-fulfilling prophecy. When prices go up for a long enough period of time, consumers start to anticipate the price increases. You’ll buy more goods today if you think they’ll cost appreciably more tomorrow. That has the effect of increasing demand, which causes prices to rise even more. And so on. And so on.

That’s where it can get especially tricky for the Federal Reserve, whose main job is to control money supply and keep inflation in check.

How’d we get here? Blame the pandemic.

In the spring of 2020, as Covid-19 spread, it was like pulling the plug on the global economy. Factories around the world shut down; people stopped going out to restaurants; airlines grounded flights. Millions of people were laid off as business disappeared practically overnight. The unemployment rate in America shot up to nearly 15% from about 3.5% in February 2020.

It was the sharpest economic contraction on record.

By early summer, however, demand for consumer goods started to pick back up. Rapidly. Congress and President Joe Biden passed a historic $1.9 trillion stimulus bill in March that made Americans suddenly flush with cash and unemployment assistance. People started shopping again. Demand went from zero to 100, but supply couldn’t bounce back so easily.

When you pull the plug on the global economy, you can’t just plug it back in and expect it start humming at the same pace as before.

Take cars, for example. Automakers saw the Covid crisis beginning and did what any smart business would do — shut down temporarily and try to mitigate losses. But not long after the pandemic shut factories down, it also drove up demand for cars as people worried about exposure on public transit and avoided flying. Automakers had whiplash.

Cars require an immense number of parts, from an immense number of different factories around the world, to be built by highly skilled laborers in other parts of the world. Getting all of those discreet operations back online takes time, and doing so while keeping workers from getting sick takes even more time.

Economists often describe inflation as too much money chasing too few goods. That’s exactly what happened with cars. And houses. And Peloton bikes. And any number of other items that became hot ticket items.

How’s the supply chain involved in all this?

“Supply chain bottlenecks” — that’s another one you see all over, right?

Let’s go back to the car example.

We know that high demand + limited supply = prices go up.

But high demand + limited supply + production delays = prices go up even more.

All modern cars rely on a variety of computer chips to function. But those chips are also used in cellphones, appliances, TVs, laptops and dozens of other items that, as bad luck would have it, were all in high demand at the same time.

That’s just one example of the disconnect in the global supply chain. Because new cars have been slow to roll in, used car demand shot through the roof, which drove overall inflation higher. In some cases, car owners were able to sell their used cars for more than what they paid for them a year or two prior.

What happens next?

Prices and wages are likely to keep going up well into 2022, officials and economists say. But for how long and how much depends on countless variables across the globe.

Policymakers’ top priority is to unclog the supply chain bottlenecks to get goods moving at their pre-pandemic pace. That’s a lot easier said than done. And there’s no telling what kind of shocks — a resurgent Covid variant, a massive shipping container getting stuck in a key waterway, a natural disaster — could set back progress.

Economists and investors in the United States expect that the Fed will tighten monetary policy by raising interest rates and dialing back emergency stimulus, thereby slow the pace of inflation. When money becomes more expensive to borrow, that can take the heat off price increases and bring the economy back down to that nice, gentle simmer.

US Announces Big Hike In Medicare Premiums

Maggie Fox And Tami Luhby, CNNCommunity, Health, Money 0

The federal government announced a large hike in Medicare premiums Friday night, blaming the pandemic but also what it called uncertainty over how much it may have to be forced to pay for a pricey and controversial new Alzheimer’s drug.

The 14.5% increase in Part B premiums will take monthly payments for those in the lowest income bracket from $148.50 a month this year to $170.10 in 2022. Medicare Part B covers physician services, outpatient hospital services, certain home health services, medical equipment, and certain other medical and health services not covered by Medicare Part A, including medications given in doctors’ offices.

The Centers for Medicare and Medicaid Services played down the spike, pointing out that most beneficiaries also collect Social Security benefits and will see a cost-of-living adjustment of 5.9% in their 2022 monthly payments, the agency said in a statement. That’s the largest bump in 30 years.

“This significant COLA increase will more than cover the increase in the Medicare Part B monthly premium,” CMS said. “Most people with Medicare will see a significant net increase in Social Security benefits. For example, a retired worker who currently receives $1,565 per month from Social Security can expect to receive a net increase of $70.40 more per month after the Medicare Part B premium is deducted.”

The increase, however, is far more than the Medicare trustees estimated in their annual report, which was released in late August. They predicted the monthly premium for 2022 would be $158.50. The actual spike — the largest since 2016 — could hurt some seniors financially.

It “will consume the entire annual cost of living adjustment (COLA) of Social Security recipients with the very lowest benefits, of about $365 per month,” said Mary Johnson, a Social Security and Medicare policy analyst for The Senior Citizens League, an advocacy group. “Social Security recipients with higher benefits should be able to cover the $21.60 per month increase, but they may not wind up with as much left over as they were counting on.”

Medicare premiums have typically increased at a far faster rate than Social Security’s annual adjustments, the league said. And much of the 2022 increase in Social Security benefits will be eaten up by inflation, which is also rising at a rapid clip.

CMS said part of the increase for 2022 was because of uncertainty over how much the agency will end up paying to treat beneficiaries to be treated with Aduhelm, an Alzheimer’s drug approved by the US Food and Drug Administration in June over the objections of its advisers. Some experts estimate it will cost $56,000 a year. Medicare is deciding whether to pay for it now on a case-by-case basis.

Because Aduhelm is administered in physicians’ offices, it should be covered under Medicare Part B, not Part D plans, which pay for medications bought at pharmacies. Traditional Medicare enrollees have to pick up 20% of the cost of most Part B medications, which would translate into about $11,500 in out-of-pocket costs for those prescribed Aduhelm.

“The increase in the Part B premium for 2022 is continued evidence that rising drug costs threaten the affordability and sustainability of the Medicare program,” CMS Administrator Chiquita Brooks-LaSure said in a statement. “The Biden-Harris Administration is working to make drug prices more affordable and equitable for all Americans, and to advance drug pricing reform through competition, innovation, and transparency.”

Also, Congress last year limited the 2021 premium increase even as emergency Medicare spending surged during the coronavirus pandemic. The monthly charge rose less than $4.

Along with the premium spike, the annual deductible for Medicare Part B beneficiaries is rising to $233 in 2022, up from $203 in 2021.

Medicare is the federal health insurance plan covering more than 62 million people, mostly 65 and older.  Part B premiums are based on income. Individuals earning $500,000 or more a year and joint filers making $750,000 or more annually will pay $578.30 a month for coverage in 2022.

China Overtakes U.S. To Grab Top Spot On Global Wealth

Staff ReporterBusiness, Economy, Money 0

Global wealth tripled over the last two decades, with China leading the way and overtaking the U.S. for the top spot worldwide.

That’s one of the takeaways from a new report by the research arm of consultants McKinsey & Co. that examines the national balance sheets of ten countries representing more than 60% of world income.

“We are now wealthier than we have ever been,” Jan Mischke, a partner at the McKinsey Global Institute in Zurich, said in an interview.

Net worth worldwide rose to $514 trillion in 2020, from $156 trillion in 2000, according to the study. China accounted for almost one-third of the increase. Its wealth skyrocketed to $120 trillion from a mere $7 trillion in 2000, the year before it joined the World Trade Organization, speeding its economic ascent.

Richest 10%

The U.S., held back by more muted increases in property prices, saw its net worth more than double over the period, to $90 trillion.

In both countries — the world’s biggest economies — more than two-thirds of the wealth is held by the richest 10% of households, and their share has been increasing, the report said.

As computed by McKinsey, 68% of global net worth is stored in real estate. The balance is held in such things as infrastructure, machinery and equipment and, to a much lesser extent, so-called intangibles like intellectual property and patents.

Financial assets are not counted in the global wealth calculations because they are effectively offset by liabilities: A corporate bond held by an individual investor, for instance, represents an I.O.U. by that company.

The steep rise in net worth over the past two decades has outstripped the increase in global gross domestic product and has been fueled by ballooning property prices pumped up by declining interest rates, according to McKinsey. It found that asset prices are almost 50% above their long-run average relative to income. That raises questions about the sustainability of the wealth boom.

“Net worth via price increases above and beyond inflation is questionable in so many ways,” Mischke said. “It comes with all kinds of side effects.”

Surging real-estate values can make home ownership unaffordable for many people and increase the risk of a financial crisis — like the one that hit the U.S. in 2008 after a housing bubble burst. China could potentially run into similar trouble over the debt of property developers like China Evergrande Group.

The ideal resolution would be for the world’s wealth to find its way into more productive investments that expand global GDP, according to the report. The nightmare scenario would be a collapse in asset prices that could erase as much as one-third of global wealth, bringing it more in line with world income.

Inflation Expectations Among Consumers Hit New Highs, Fed Survey

Staff ReporterBusiness, Economy, Money 0

Americans’ inflation fears continued to accelerate in October, climbing for the 12th consecutive month in a row to another record high, according to a key Federal Reserve Bank of New York survey published Monday, November 8, 2021.

“Median inflation uncertainty – or the uncertainty expressed regarding future inflation outcomes – increased at both the short- and medium-term horizons. Both measures reached series highs in October,” the survey said.

Heads of households surveyed by the New York Fed expected consumer prices to rise by a median of 5.7 percent over the next year, according to the bank’s October Survey of Consumer Expectations.  The one-year inflation rate projected by consumers rose 0.4 percentage points since September and reached the highest level since the survey began in 2013.

The Fed and economists pay close attention to inflation expectations among consumers, particularly long-term expectations, when assessing the future of price increases. Steady increases in consumer inflation expectations could lead to what economists call a wage-price spiral: higher prices prompting workers to hold out for higher wages, which exacerbates the need to raise prices.

With consumers braced for the highest inflation levels in nearly a decade, they are also expecting the price of things like food, gasoline, rent and college tuition to rise over the next year. The only things that Americans expect to get cheaper over the next year are home prices and medical care.

The report is based on a rotating panel of 1,300 households.

Federal Reserve Chairman Jerome Powell has largely attributed the spike in consumer prices to pandemic-induced disruptions in the supply chain, a shortage of workers that has pushed wages higher and a wave of pent-up consumers flush with stimulus cash.

Although Powell has repeatedly said the rise in inflation is likely “transitory,” he acknowledged last week during the Fed’s two-day policy-setting meeting that the surge may not fade until the latter half of 2022. He maintained that wild swings in consumer prices will stop once current pressures on the supply chain dissipate.

“Our baseline expectation is that supply bottlenecks and shortages will persist well into next year and elevated inflation as well,” Powell told reporters. “And that, as the pandemic subsides, supply chain bottlenecks will abate and job growth will move back up. And as that happens, inflation will decline from today’s elevated levels.”

His comments came after the Federal Open Market Committee voted to begin pulling back on the extraordinary stimulus it has given the economy since March 2020. The U.S. central bank announced that it would reduce its aggressive bond-buying program by $15 billion a month in mid-November, lowering its purchases of long-term Treasury bonds by $10 billion a month and purchases of mortgage-backed securities by $5 billion a month.

C.S. Venkatakrishnan To Be CEO of Barclays

Staff ReporterEconomy, Money, Profile 0

Barclays new CEO is CS Venkatakrishnan, an Indian-American and the first person of color to hold that position. Mysore-born CS Venkatakrishnan has replaced Jes Staley as Barclays CEO after the latter stepped down on Monday, November 1st. Barclays said succession planning has been in place for some time, and he had been identified as the preferred candidate more than a year ago.

Jes Staley stepped down from Barclays, which is Britain’s third-biggest bank by market value, after a probe into his relationship with financier and sex offender Jeffrey Epstein. The bank said Staley will get a 2.5 million pound ($3.5 million) payout and receive other benefits for a year.

Better known as ‘Venkat’, he studied at Massachusetts Institute of Technology, where he got a PhD in operations research, after which he joined JPMorgan Chase in 1994. At JP Morgan Chase, venkat had held senior roles in Asset Management, where he was Chief Investment Officer for approximately $200 billion in Global Fixed Income, as well as in Investment Banking, and in Risk.

He joined Barclays in 2016. Prior to his appointment as Group CEO, Venkat was Head of Global Markets, Co-President of Barclays Bank PLC (BBPLC), and a member of the Group Executive Committee of Barclays, based in New York. He has also served as Chief Risk Officer at Barclays.

Venkat will be on a higher base salary than his predecessor and will receive £2.7 million ($3.69 million) in fixed pay – half in cash and half in shares. This amount is more than Staley’s 2.4 million pounds a year, it’s still a cut from Venkat’s – undisclosed – fixed pay as head of global markets, Barclays’ board said. Venkat will be eligible for a bonus up to a maximum of 93 per cent of his fixed pay and long-term incentives up to 140 per cent of fixed pay per year and a cash payment instead of a pension of £135,000 a year.

Venkatakrishnan joined Barclays as chief risk officer and initiated a comprehensive review of the bank’s exposure to bad credit card debt. The review led to Barclays taking a £320 million impairment charge after Venkatakrishnan urged the bank to adopt a more conservative approach to predicting how much of its credit card book would not be paid. Venkat is the executive sponsor for Embrace, the global multi-cultural network at Barclays, the bank said in its stock exchange announcement on Monday.

The board “identified Venkat as its preferred candidate for this role over a year ago, as a result of which he moved from the position of group chief risk officer to head of global markets,” London-headquartered Barclays noted in an announcement to the stock exchange. “The board has long been confident in Venkat’s capabilities to run the Barclays Group.”

The executive, known for his “genial unflappability” and “fondness for emojis,” appears to care about diversity. He has made progress on promoting women, Bloomberg reported. Venkatakrishnan is also the executive sponsor for Embrace, the global multi-cultural network at Barclays. He leads the company’s “Race at Work Action Plan,” which has strived to improve diversity at the company where underrepresented minorities comprise just 5% and 21% of the staff in the UK and the US respectively.

The 56-year-old who is now based in New York was born in Mysore, the southernmost city in the southern Indian state of Karnataka. Even now, Venkatakrishnan enjoys a meal at an Indian restaurant that would “serve lunch on orange plastic trays,” Ken Abbott, Barclays’ chief risk officer for the Americas until 2018, told Bloomberg. “He thought that was very authentic.”

2 Indians Led Firms In Forbes List of Future Billion Dollar Companies

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Two Indian American-led companies made Forbes magazine’s annual list of 25 venture-backed startups that are most likely to become unicorns, with valuations of more than $1 billion.

Legion Technologies, founded by Sanish Mondkar; and Alchemy, co-founded by Nikil Viswanathan and Joseph Lau are featured in the new List released by Forbes earlier this month.

“A $1 billion valuation isn’t what it used to be, as companies reach that milestone at breakneck speed, noted Forbes, adding that even startups with barely any revenue are earning sky-high valuations as investors bet on future growth.

The average estimated 2020 revenue for companies on this year’s list is just $12 million; last year’s list featured startups with an average of $30 million in revenue.

“Still there are plenty of up-and-comers worth keeping an eye on, including one that tests your dog’s DNA and another that will help you notarize documents from the comfort of your home. This list represents the 25, in alphabetical order, that we think have the best shot of becoming future stars,” said the magazine, in its introduction to the list.

Mondkar, a former chief product officer at SAP, left his job in 2015. He then traveled around the country with his two dogs, talking with people outside of Silicon Valley, according to his profile in Forbes. A year later, he founded Legion Technologies, a workforce management software that helps employers manage their hourly wage workers.

“There is no innovation targeted at these hourly workers,” says Mondkar, 48. The Redwood City, California-based company uses artificial intelligence and machine learning to help its customers forecast demand and optimize their labor costs, while taking into account employees’ preferences for when and how they work. “Most employees quit these jobs because of schedule conflicts,” he said. “The goal for the algorithms is to prioritize both sides.”

“Good jobs create happier, more productive employees who are less likely to quit,” wrote Mondkar in a blog post. “At an average cost of $4,969 per employee who quits, imagine how much money could be saved if they stayed on board.”

Philz Coffee was Legion’s first customer. Dollar General and SoulCycle also use Mondkar’s technology. With increased attention on workforce issues during the pandemic, Legion revenues are expected to more than double this year, to $11 million, predicted Forbes, noting that Legion’s 2020 revenue was $5 million. Mondkar has raised $85 million in equity from First Round Capital, Norwest Venture Partners, Stripes, XYZ.

Viswanathan and Lau co-founded Alchemy in 2017, a year after building Down to Lunch, which The New York Times touted as “the hottest new social app in America.” Alchemy makes it easier to read and write information onto blockchains, such as Ethereum and Flow. “Alchemy provides the leading blockchain development platform powering over $30 billion in transactions for tens of millions of users in every country globally. Our mission is to enable developers to bring the magic of blockchain to the world,” wrote Viswanathan in his LinkedIn profile.

“The computer and internet fundamentally improved human life on planet earth. We’re excited to help enable the global opportunity of blockchain – the next tectonic shift,” he said.

The service starts free for smaller developers, but larger customers pay a monthly fee. The San Francisco-based firm is on pace to increase revenue tenfold this year, to an estimated $20 million, as it helps clients like PwC, Unicef and OpenSeat conduct more than $30 billion in volume annually, noted Forbes in its profile of the company. Alchemy’s 2020 revenue was $2 million. The company has raised $96 million in equity from Addition, Coatue, and Pantera.

Sitharaman Meets With U.S. Businesses In New York

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India’s Finance Minister Nirmala Sitharaman’s meetings with U.S. businesses and institutions continued at a feverish pitch, including talks with two key investors asking them to broaden their world view and look at India for investment. As part of this, Sitharaman on Oct. 16 met Scott Sleyster, executive Vice president and chief operating officer of Prudential Financial, and Philip Vassiliou, chief investment officer of Legatum, in New York.

Her discussions with Sleyster revolved around the reforms towards capital bond market, investor charter and other initiatives. The robust structural growth and continued interest of the company to invest in India formed part of the discussion with Vassiliou. Earlier during the day, Sitharaman addressed global business leaders and investors at a Roundtable organized by USISPForum and Ficci India in New York.

“With the current reset in the global supply chain and clear headed and committed leadership in India, I see opportunities galore in India for all investors and industry stakeholders,” she said at the Roundtable.

The finance minister also met Jane Fraser, CEO of Citi.

Fraser talked about the strength of India’s economic recovery and how India will increasingly become an important destination of investment for multinational corporations looking to grow their operations.

Sitharaman also held one-to-one meetings with Raj Subramanyam, Indian American CEO of FedEx; Ajay Banga, executive chairman, and Meibach Michael, CEO at Mastercard; and Arvind Krishna, chairman and chief executive officer at IBM.

The discussions revolved around getting more investment into India.

All the business leaders talked about the positive impact India’s reforms, in particular the PLI schemes, will have on labor-intensive sectors in the country. IBM indicated its interest in India in the areas of hybrid cloud, automation, 5G, cybersecurity, data, and AI.

The recently launched initiative of the National Infrastructure Master Plan, GatiShakti and India having the third largest start-up ecosystem and unicorn base formed part of discussion with Subramanyam.

Pandora Papers Expose World Leaders Of Secret Wealth

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A massive leak of financial documents was published by several major news organizations on Sunday that allegedly tie world leaders to secret stores of wealth, including King Abdullah of Jordan, Czech Prime Minister Andrej Babis and associates of Russian President Vladimir Putin.

The dump of more than 11.9 million records, amounting to about 2.94 terabytes of data, came five years after the leak known as the “Panama Papers” exposed how money was hidden by the wealthy in ways that law enforcement agencies could not detect.

The International Consortium of Investigative Journalists, a Washington, D.C.-based network of reporters and media organizations, said the files are linked to about 35 current and former national leaders, and more than 330 politicians and public officials in 91 countries and territories. It did not say how the files were obtained, and Reuters could not independently verify the allegations or documents detailed by the consortium.

Jordan’s King Abdullah, a close ally of the United States, was alleged to have used offshore accounts to spend more than $100 million on luxury homes in the United Kingdom and the United States.

DLA Piper, a London law office representing Abdullah, told the consortium of media outlets that he had “not at any point misused public monies or made any use whatsoever of the proceeds of aid or assistance intended for public use.”

The Washington Post, which is part of the consortium, also reported on the case of Svetlana Krivonogikh, a Russian woman who it said became the owner of a Monaco apartment through an offshore company incorporated on the Caribbean island of Tortola in April 2003 just weeks after she gave birth to a girl. At the time, she was in a secret, years-long relationship with Putin, the newspaper said, citing Russian investigative outlet Proekt.  The Post said Krivonogikh, her daughter, who is now 18, and the Kremlin did not respond to requests for comment.

Days ahead of the Czech Republic’s Oct. 8-9 parliamentary election, the documents allegedly tied the country’s prime minister, Babis, to a secret $22 million estate in a hilltop village near Cannes, France.  Speaking during a television debate on Sunday, Babis denied any wrongdoing. “The money left a Czech bank, was taxed, it was my money, and returned to a Czech bank,” Babis said. (Courtesy: Reuters)

Over 1,000 Indians Have Net Worth of Rs 1,000 Crore

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India has achieved the milestone of having over 1,000 individuals with net worth of Rs 1,000 crore, said Hurun India. Accordingly, the IIFL Wealth Hurun India Rich List 2021 revealed that 1,007 individuals across 119 cities have a net worth of Rs 1,000 crore. The report cited that cumulative wealth was up 51 percent, while average wealth increased by 25 percent. Besides, it showed that 894 individuals saw their wealth increase or stay the same, of which 229 are new faces, while 113 saw their wealth drop and there were 51 dropouts.

Currently, India has 237 billionaires, up 58 compared to last year. “While ‘Chemicals’ and ‘Software’ sectors added the greatest number of new entrants to the list, Pharma is still at number one and has contributed 130 entrants to the list. The youngest in the list is aged 23, three years younger than the youngest last year.” Furthermore, the list report pointed out that Reliance Industries’ Chairman and Managing Director Mukesh Ambani continued to be the richest man in India for the 10th consecutive year with a wealth of Rs 718,000 crore.

“With INR 505,900 crore, Gautam Adani & family moved up two places to the second spot in the IIFL Wealth Hurun India Rich List 2021.” The Adani group has a combined market capitalization of Rs 9 lakh crore, except Adani Power, all listed companies are valued at more than a lakh crore. “Gautam Adani is the only Indian to build not one, but five Rs 1 lakh crore companies,” said Anas Rahman Junaid, MD and chief researcher, Hurun India. In addition, Shiv Nadar of HCL retained the third rank, as HCL’s limited exposure to Covid affected segments such as travel, retail and hospitality resulted in a 67 percent increase in his wealth to Rs 236,600 crore.

For the 12 months that ended in December 2020, HCL became only the third Indian IT company to break through the $10 billion revenue mark. With 255 individuals Mumbai tops the list of richest Indians followed by New Delhi (167), Bengaluru (85). Hyderabad retained the fourth position. Chennai overtook Ahmedabad at the fifth place.

Is U.S. Losing The Race To Decide The Future Of Money?

Dion Rabouin At TIMEFinance/Economy, Money 0

In cities across China, the country’s central bank has begun rolling out the e-renminbi—an all-digital version of its paper currency that can be accessed and accepted by merchants and consumers without an internet connection, credit or even a bank account. Already having conducted more than $5 billion in e-renminbi transactions, China has opened its digital currency up to foreigners. Next year, when Beijing hosts the Winter Olympic Games, authorities are expecting to let the world test drive its technological achievement.

The U.S., by contrast, is having trouble even concluding its multi-year exploration into the possibility of an e-dollar. In fact, an upcoming Federal Reserve paper on a potential U.S. digital currency won’t take a position on whether the central bank of the United States will, or even should, create one. Instead, Federal Reserve Chair Jerome Powell said in recent testimony to Congress, this paper will “begin a major public consultation on central bank digital currencies…” (Once planned for July, the paper’s release has since been moved to September.)

Once the world leader in digital payments and technological innovation, the U.S. is being outpaced by its top global adversary as well as much of the industrialized and the developing world. The Bahamas recently announced the integration of its digital Sand Dollar into a stock exchange, while Australia, Malaysia, Singapore and South Africa are moving forward with the world’s first cross-border central bank digital currency exchange program led by the Bank for International Settlements (BIS), which is known as the central bank of central banks.

Such developments have been somewhat outshined by El Salvador’s recent decision to make bitcoin a legally accepted currency, which few expect to make significant impact in the payment space. But outside of the cryptocurrency space, nations around the globe are making significant strides in the development of the digital future of money — supported by governments and backed by powerful central banks. Leadership in this space will have implications for more than just payments: geopolitical ambitions, economic growth, financial inclusion and the very nature of money could all be dictated by who leads the charge and how.

“I don’t think the U.S. is aware there is a race”

Digital currencies are the next wave in the “evolution of the nature of money in the digital economy,” Hyun Song Shin, economic adviser and co-leader of the Monetary and Economic Department at the Bank for International Settlements, tells TIME. As more of our world migrates from physical brick-and-mortar to wireless and cloud-based, the way we pay for things is changing as well. A central bank digital currency would operate just like cash, but instead of having to carry it in a physical wallet or put it into a bank account, it would be stored and accessed digitally. Not only could U.S.-backed digital currency facilitate easier, modern banking, it could prove vital in protecting American international influence.

Late to the party, the U.S. is “stepping up its research and public engagement” on digital currencies, the Federal Reserve says, including forming working groups on cryptocurrency and other kinds of digital money, and experimenting with technology that would be central to producing a digital dollar. The Fed’s regional Boston branch is overseeing these efforts with the Massachusetts Institute of Technology on what’s known as Project Hamilton. But the path towards a digital U.S. dollar has met many challenges, skeptics and outright opponents. All while China, and other countries, push forward.

Lagging behind the world

Just how far behind is the U.S. in the development of a central bank-issued digital currency (CBDC)? According to global accounting firm PwC’s inaugural CBDC global index, which tracks various CBDCs’ project status from research to development and production, the U.S. ranks 18th in the world. America’s potential efforts trail countries like Sweden, South Korea and China but also countries like the Bahamas, Ecuador, Eastern Caribbean and Turkey. China, with its government’s hyperfocus on maintaining control and overseeing data, has been working to develop a CBDC for almost a decade.

And the U.S. is probably not close to catching up. Analysts like Harvard economics professor Kenneth Rogoff, who study monetary policy and digital currencies, estimate that the U.S. could be at least a decade away from issuing a digital dollar backed by the Fed. In that time, Rogoff argued in an op-ed earlier this year, the modernization of China’s financial markets and reduction or removal of its currency controls “could deal the dollar’s status a painful blow.”

China has already largely moved away from coin and paper currency; Chinese consumers have racked up more than $41 trillion in mobile transactions, according to a recent research paper from the Brookings Institution, with the lion’s share (92%) going through digital payment processors WeChat Pay and Alipay.

“The reason you could say the U.S. is behind in the digital currency race is I don’t think the U.S. is aware there is a race,” Yaya Fanusie, an Adjunct Senior Fellow at the Center for a New American Security, and a former CIA analyst, tells TIME in an interview. “A lot of policymakers are looking at it and concerned…but even with that I just don’t think there’s this sense of urgency because the risk from China is not an immediate threat.” Not only is the U.S. running significantly behind in the development of a CBDC, we are trailing the rest of the world in digital payments broadly.

Kenya, for example, has almost fully digitized its economy through its digital currency and payment system MPESA, making transactions free and almost instantaneous. India’s Unified Payments Interface (UPI) allows users to transfer money instantly between bank accounts with no cost. Brazil’s PIX facilitates the transfer of money between people and companies in up to 10 seconds. All of these programs work through and are overseen by the countries’ central banks rather than commercial banks or other private companies.

What’s holding the U.S. back?

Critics argue CBDCs are simply a solution in search of a problem and potentially harmful. Many see support from the banking sector as vital to the success of a digital U.S. dollar, however commercial banks in the U.S. have taken a largely adversarial stance. “The proposed benefits of CBDCs to international competitiveness and financial inclusion are theoretical, difficult to measure and may be elusive,” the American Bankers Association said in a statement at a recent congressional hearing on digital currencies. “While the negative consequences for monetary policy, financial stability, financial intermediation, the payments system, and the customers and communities that banks serve could be severe.”

The Bank Policy Institute, which lobbies on behalf of the country’s largest banks, went so far as to argue that neither the Fed nor the U.S. Treasury even has the constitutional authority to issue a digital currency. Commercial banks dominate the U.S. financial system to such a degree that unraveling them would be ostensibly impossible, experts say, they also would be a powerful adversary. Former Goldman Sachs managing director Nomi Prins notes banks have clearly seen the writing on the wall.

“Banks are centralized middlemen with respect to financial transactions,” Prins, author of Collusion: How Central Bankers Rigged The World, tells TIME. “The more popular cryptocurrency or digital currency becomes, the fewer profits the banking system can reap from traditional services and verification methods that allow them to hold, take or use their customers’ money, and the more financial power they stand to lose as a result.” Even disruptive financial technologies like PayPal, Venmo and Zelle work through the banking system, rather than around it, thanks in large part to the banks’ power.

Central bankers also generally have concluded that commercial banks are a necessary piece of a potential CBDC ecosystem, thanks to their pre-existing regulatory guardrails and ability to move money. Top policymakers at the Fed, including influential Vice Chair for Supervision Randal Quarles, have joined the banking industry in arguing that a digital dollar “could pose significant and concrete risks” and that the potential benefits “are unclear.” Fed Governor Christopher Waller said in August he was “skeptical that a Federal Reserve CBDC would solve any major problem confronting the U.S. payment system,” in a recent speech he titled “CBDC: A Solution in Search of a Problem?”  Further, there’s no central U.S. authority with direct oversight or responsibility for any of this.

In addition to the Fed, the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, Office of Thrift Supervision, Financial Stability Oversight Council, Federal Financial Institutions Examination Council and the Office of Financial Research would all have some stake in the development of a digital currency backed by the central bank, to say nothing of state and regional authorities.

“The U.S. has an active congressional debate, which is beneficial and very important,” Federal Reserve Governor Lael Brainard tells TIME in an interview. “But the U.S. also has a diffusion of regulatory responsibility with no single payments regulator at the federal level, which is not as helpful. That diffusion of responsibility is part of what creates the lags that our system is working through.” None of this exists in China where the Chinese Communist Party oversees the central bank, commercial banks and their regulators and is unconcerned with privacy.

How a downgraded dollar could hamstring U.S. influence

An American CBDC could have lasting geopolitical impact and curb a longstanding international effort to reduce reliance on the mighty U.S. dollar. “Why we should care about this is that the U.S. financial system is not intrinsically dominant,” Fanusie says. “Other countries, both allies and adversaries, are sincerely interested in finding ways to decrease their dependence on the dollar.” With the U.S. dollar as the world’s reserve and primary funding currency, the U.S. can restrict access to funding from financial markets, limit countries’ ability to sell their natural resources and hinder or block individuals’ access to the banking sector.

“Other countries, both allies and adversaries, are sincerely interested in finding ways to decrease their dependence on the dollar”

While dollar dominance has rankled much of the world for decades, there has been no suitable replacement for the U.S., with its massive economy, sophisticated banking system and sprawling international presence. China is in the midst of a long-term push to simultaneously grow its financial markets and internationalize its currency. Both have the end goal of allowing China and its allies to limit the ability of the U.S. to enforce its will through economic actions like sanctions. Fanusie wrote in a January report that being the first major economy to roll out a digital currency is “part of China’s geopolitical ambitions.”

However, the renminbi will not become the world’s reserve currency — at least, not any time soon. But what China has done by being in the forefront of CBDC development is put itself in position to take the lead on development and implementation of rules and regulations for digital currencies on a global scale. “While America led the global revolution in payments half a century ago with magnetic striped credit and debit cards, China is leading the new revolution in digital payments,” writes Brookings’ economic studies fellow Aaron Klein.

Why should central banks offer digital currencies?

Over the past decade, digital currencies, including cryptocurrency and “stablecoins,” have sprung up like weeds. Some purport to be just as safe as dollars, but are backed by questionable assets. In a crisis regulators worry they could fluctuate wildly in value or lose their value altogether. Having central banks, which are responsible for the printing and circulation of coins and paper money, issue digital currencies is in part a reaction to this private sector activity, Shin says, “accelerated by the potential encroachment of private digital currencies, and the need to preserve the role of money as a public good.”

“The status quo is not an option”

Notably, a U.S. digital currency could provide benefits to everyday people. It could increase financial inclusion and fix flaws in current payments systems, Shin adds, citing findings of a recent BIS study.

For example, transferring money between U.S.-based bank accounts, even those held by the same person, can take days. The process can be even longer when crossing international borders. Credit and debit card transactions similarly don’t settle for days and come with significant fees for merchants, who sometimes pass them on to customers. CBDCs could grant universal access to the banking sector and quickly facilitate the distribution of paychecks and government funds, reducing the need for costly bank workarounds like check cashing and payday loans.

Championing CBDCs

Brainard has been pushing the Fed to move on a digital currency for years, but there was little urgency from others at the Fed or in Congress. Companies developing their own currencies, consumers investing in cryptocurrency and the COVID-19 pandemic making paper notes anathema to many Americans changed that. Before COVID-19, Facebook’s Libra project (now known as Diem) showed lawmakers and central bankers the potential for a private company to step in and fill the void by effectively minting its own currency that could be spent by users around the world.

“The status quo is not an option,” Diem co-creator David Marcus said at the International Monetary Fund’s 2019 fall meeting. “Whether it’s Libra or something else, the world is going to change in a profound way.” Brainard, for one, has taken notice. “My own thinking is that stablecoins and related private sector initiatives are moving very rapidly, which makes it incumbent on us to move more rapidly,” she tells TIME. “That is why I have been pushing to advance outreach, cross-border engagement, and policy and technology research for several years now.” So-called stablecoins — unregulated digital currencies created by private companies that purport to represent dollars but are completely unregulated — have become a significant worry for lawmakers and shown the importance of considering tying currency to a central bank.

“It’s getting harder and harder for community banks to compete for new customers when big tech companies can afford to spend billions on marketing and technology,” Sen. Sherrod Brown, who chairs the Senate Banking Committee, tells TIME. “But many of these new ‘fintech’ products don’t come with the consumer protections, federal backing or customer service and relationships with the community that small banks and credit unions provide.”

During a hearing on digital currencies in June, Sen. Elizabeth Warren, the ranking member of the Subcommittee on Financial Institutions and Consumer Protection, compared stablecoins to worthless “wildcat notes” that were issued by speculators in the 19th century. Her expert at that hearing, Lev Menand, an Academic Fellow and Lecturer in Law at Columbia Law School, went further in his testimony, calling stablecoins “dangerous to both their users and … to the broader financial system.”

With private companies pushing deeper into the digital currency space, rival countries seeking to seize leadership and a public that is moving further away from physical currency, the U.S. is facing a world in which it may not control or even lead the world’s payment systems. That would make the future of money look very different from the past.

Cash Will Soon Be Obsolete. Will America Be Ready?

Eswar Prasad At Brookings InstituteEconomy, Money 0

When was the last time you made a payment with dollar bills?

Some people still prefer to use cash, perhaps because they like the tactile nature of physical currency or because it provides confidentiality in transactions. But digital payments, made with the swipe of a card or a few taps on a cellphone, are fast becoming the norm. To keep their money relevant, many central banks are experimenting with digital versions of their currencies. These currencies are virtual, like Bitcoin; but unlike Bitcoin, which is a private enterprise, they are issued by the state and function much like traditional currencies. The idea is for central banks to introduce these digital currencies in limited circulation—to exist alongside cash as just another monetary option—and then to broaden their circulation over time, as they gain in popularity and cash fades away. China, Japan, and Sweden have begun trials of central bank digital currency. The Bank of England and the European Central Bank are preparing their own trials. The Bahamas has already rolled out the world’s first official digital currency. The end of cash is on the horizon, and it will have far-reaching effects on the economy, finance and society more broadly.

The U.S. Federal Reserve, by contrast, has largely stayed on the sidelines. This could be a lost opportunity. The United States should develop a digital dollar, not because of what other countries are doing, but because the benefits of a digital currency far outweigh the costs. One benefit is security. Cash is vulnerable to loss and theft, a problem for both individuals and businesses, whereas digital currencies are relatively secure. Electronic hacking does pose a risk, but one that can be managed with new technologies. (As it happens, offshoots of Bitcoin’s technology could prove helpful in increasing security.)

Digital currencies also benefit the poor and the “unbanked.” It is hard to get a credit card if you don’t have much money, and banks charge fees for low-balance accounts that can make them prohibitively expensive. But a digital dollar would give everyone, including the poor, access to a digital payment system and a portal for basic banking services. Each individual or household could have a fee-free, noninterest-bearing account with the Federal Reserve, linked to a cellphone app for making payments. (About 97 percent of American adults have a cellphone or a smartphone.) To see how this might help, consider the payments that the U.S. government made to households as part of the coronavirus stimulus packages. Millions of low-income households without bank accounts or direct deposit information on file with the Internal Revenue Service experienced complications or delays in getting those payments. Checks and debit cards mailed to many of them were delayed or lost, and scammers found ways to intercept payments. Central-bank accounts could have reduced fraud and made administering stimulus payments easier, faster and more secure.

A central-bank digital currency can also be a useful policy tool. Typically, if the Federal Reserve wants to stimulate consumption and investment, it can cut interest rates and make cheap credit available. But if the economy is cratering and the Fed has already cut the short-term interest rate it controls to near zero, its options are limited. If cash were replaced with a digital dollar, however, the Fed could impose a negative interest rate by gradually shrinking the electronic balances in everyone’s digital currency accounts, creating an incentive for consumers to spend and for companies to invest. A digital dollar would also hinder illegal activities that rely on anonymous cash transactions, such as drug dealing, money laundering and terrorism financing. It would bring “off the books” economic activity out of the shadows and into the formal economy, increasing tax revenues. Small businesses would benefit from lower transaction costs, since people would use credit cards less often, and they would avoid the hassles of handling cash.

To be sure, there are potential risks to central-bank digital currencies, and any responsible plan should prepare for them. For example, a digital dollar would pose a danger to the banking system. What if households were to move their money out of regular bank accounts and into central-bank accounts, perceiving them as safer, even if they pay no interest? The central bank could find itself in the undesirable position of having to allocate credit, deciding which sectors and businesses deserve loans. But this risk can be managed. Commercial banks could vet customers and maintain the central-bank digital currency accounts along with their own interest-bearing deposit accounts. The digital currency accounts might not directly help banks earn profits, but they would attract customers who could then be offered savings or loan products. (To help protect commercial banks, limits can also be placed on the amount of money stored in central-bank accounts, as the Bahamas has done.) A central-bank digital currency could be designed for use across different payment platforms, promoting private sector competition and encouraging innovations that make electronic payments cheaper, quicker and more secure.

Another concern is the loss of privacy that central-bank digital currencies entail. Even with protections in place to ensure confidentiality, no central bank would forgo the ability to audit and trace transactions. A digital dollar could threaten what remains of anonymity and privacy in commercial transactions—a reminder that adopting a digital dollar is not just an economic but also a social decision. The end of cash is on the horizon, and it will have far-reaching effects on the economy, finance and society more broadly. With proper preparation and open discussion, we should embrace the advent of a digital dollar.

U.S. Crypto Regulation Talks Are Heating Up, With Three Major Themes Emerging Here’s What They Mean For Investors

Ryan Haa At TIMEBusiness, Economy, Money 0

One of the founding principles of cryptocurrency is that it’s decentralized and unregulated. But the U.S. government isn’t too worried about crypto’s founding principles. SEC chair Gary Gensler spoke at the Aspen Security Forum Tuesday, highlighting his view of the SEC’s role in cryptocurrency regulation. Gensler called the current crypto landscape the ‘Wild West’. A few key themes have emerged on the subject of new U.S. cryptocurrency regulation: stopping cryptocurrency crime and tax evasion, stablecoin regulation, and the potential for investment vehicles like crypto ETFs and other funds.

For many crypto enthusiasts, the decentralized nature of digital currencies — which, unlike traditional currencies, aren’t backed by any institution or government authority — is a big draw. But regulatory guidance can help protect investors. “As much as I like the decentralization and the lack of government [involvement], I am glad that they are paying attention because unfortunately with cryptocurrency, there are a lot of scams,” says Kiana Danial, author of “Cryptocurrency Investing for Dummies.” Here’s a rundown of the proposals we’ve seen so far, and how they may affect cryptocurrency investors in the future: Cryptocurrency Crime and Tax Evasion Cryptocurrency regulation is tucked into a provision of the $1 trillion bipartisan infrastructure bill moving through Congress.

The provision would expand the definition of a brokerage to include companies that facilitate digital asset trades — like cryptocurrency exchanges. The change would mean increased tax reporting responsibility to help the IRS track crypto tax evasion. Some lawmakers and industry groups argue that the language of the draft is too broad, according to reporting by the Washington Post. Additionally, SEC Chairman Gensler spoke recently about a need to increase regulation and help prevent more ransomware attacks, like the one that shut down the Colonial Pipeline back in May. The pipeline attack was one of a number of high profile instances of hackers seeking Bitcoin ransoms.

While Gensler didn’t comment on exactly how the SEC planned to help stop these crimes, he did say that the agency would continue to exercise the full extent of its power. “[The SEC] will continue to take our authorities as far as they go,” Gensler said during an appearance at the Aspen Security Forum in Colorado. A recent U.S. treasury report voiced the same concerns as Gensler, saying cryptocurrency “poses a significant detection problem by facilitating illegal activity broadly including tax evasion.”

[READ MORE]: Cryptocurrency Crime Is Booming. Here’s How to Invest Safely

What Investors Should Know Under the proposed law included in the infrastructure bill, companies that facilitate crypto trades would be required to report tax information about those trades to the IRS (just as brokers of traditional investments like stocks do) starting in the 2024 tax season. “The bill is generally investor-friendly because it makes crypto tax compliance easier for investors,” says Shehan Chandrasekera, CPA, head of tax strategy at CoinTracker.io, a crypto tax software company. “This is because if the bill passes, exchanges will have to issue 1099-B tax forms with cost basis information to investors.”

That means the exchange would provide a record of taxable events on the platform, like how much your Bitcoin was worth when you bought it and when you sell it back into U.S. dollars. Today, only some exchanges report this info. “This will significantly reduce the crypto tax filing burden,” Chandrasekera says. It’s already important to keep your own records of any capital gains or losses on your crypto trades, which you should report on your federal tax returns. But this regulation would make it even more essential, since the IRS would more easily be able to find any cases of tax evasion related to crypto. Stablecoin Regulation Gensler also hinted Tuesday that increased stablecoin regulation could help with the cryptocurrency crime problem, as “the majority of what happens [on cryptocurrency exchanges and platforms] is cryptocurrency to cryptocurrency.” Gensler says that by bypassing the involvement of U.S. dollars in direct crypto-to-crypto trades, bad actors may be more able to evade public policy measures and other sanctions aimed at preventing money laundering or ensuring tax compliance.

PRO TIP

Apart from federal regulation, there have been many state-specific cryptocurrency legislations passed. Know what regulations apply in your state. Stablecoins are a type of cryptocurrency pegged to an existing currency, like USDT (Tether). USDT is tied to the price of the U.S. dollar, so its value is constantly $1. And the SEC isn’t the only agency that’s taken interest. Federal Reserve Chairman Jerome Powell has spoken about stablecoin regulation recently, too, while testifying before the U.S. House Committee on Financial Services earlier this month. Powell said that if stablecoins are going to be a “significant” part of the payments universe, “we need an appropriate regulatory framework, which we frankly don’t have.”

Treasury Secretary Janet Yellen echoed that sentiment recently, coordinating a meeting with the President’s Working Group on Financial Markets to discuss “the rapid growth of stablecoins, potential uses of stablecoins as a means of payment, and potential risks to end-users, the financial system, and national security,” according to a meeting readout. What Investors Should Know Nearly three-quarters of trading on all crypto trading platforms occurred between a stablecoin and some other token in July, Gensler said. While it’s unclear yet what any regulatory action on stablecoins would look like, any regulation could impact investors who hold or use stablecoins as part of their strategy.

Crypto-to-crypto trades often incur lower fees on many exchanges than buying crypto outright in U.S. dollar-to-cryptocurrency transactions, and stablecoins’ low price volatility makes them a potentially better option for purchases than transferring cash each time. But for investors, they’re not as great a store of value as more volatile cryptos like Bitcoin. If you’re investing in crypto looking for long-term growth, experts recommend sticking with more established coins like Bitcoin or Ethereum. In anticipation of any coming guidance, you should also make sure to choose a cryptocurrency exchange that maintains compliance with evolving federal and state regulators in the United States. This includes many established, high-volume U.S.-based exchanges, like Coinbase and Gemini. “I only purchase my cryptocurrency assets from regulated brokers at this point, because we have the luxury of doing so. Of course in other countries they don’t have it, but we do,” says Danial.

Cryptocurrency ETFs While the government considers how to make it harder to use cryptocurrency for illicit activities and tax evasion, there is still no way for Americans to buy into crypto using more traditional investment accounts like those at a Fidelity or a Vanguard. The SEC has yet to approve a cryptocurrency ETF (exchange-traded fund) — despite several proposed funds from different institutions and exchanges —  but Gensler revealed on Tuesday that it may be coming. “We do it in the equity market, we do it in the bond markets, people might want it here,” Gensler said. While acknowledging there have already been SEC filings for ETFs, “I anticipate we’ll have some new ones under what’s called the Investment Companies Act — and when combined with other federal laws, the law provides significant investor protections,” he says. The Investing Companies Act requires companies, including mutual funds, to disclose information about their finances and investments on a “regular basis,” according to the SEC.

Until an ETF gets approved, “there’s not really a way to buy a security that closely tracks the price of a specific cryptocurrency,” says Jeremy Schneider, the personal finance expert behind Personal Finance Club. That means the only way for investors to really do that is to buy coins directly from an exchange. While there has been some confusion about whether cryptocurrencies are securities (and under SEC regulation), Gensler made clear that every initial coin offering (ICO) he has seen is a security: “Generally, folks buying these tokens are anticipating profits, and there’s a small group of entrepreneurs and technologists standing up and nurturing the projects … I believe we have a crypto market now where many tokens may be unregistered securities, without required disclosures or market oversight.” But Gensler reiterated that the SEC has jurisdiction, and “our federal securities laws apply.”

Cryptocurrency ETFs are not yet available in the U.S., but may offer a way for investors to get into cryptocurrency without having to buy directly from an exchange in the future. If you’re interested in crypto, these funds could help you diversify your holdings across different coins, like a conventional ETF or index fund. But they’re still just as speculative as any crypto investment; if you’re waiting for a Bitcoin ETF because you’re unwilling to take on the risk, you may want to reconsider whether crypto belongs in your portfolio at all. In the meantime, Gensler’s stance that every ICO is a security could mean investors should look to the SEC for protections as regulation becomes more concrete.

Biden Administration Grants Automatic Student Loan Forgiveness To 325,000 Permanently Disabled Borrowers

Danielle Douglas-Gabriel, The Washington PostEducation, Money, Youth 0

The Biden administration moved Thursday (Aug. 19, 2021)  to grant 325,000 people who are severely disabled automatic federal student loan forgiveness to the tune of $5.8 billion, setting the stage for reforms to a process that is widely criticized as cumbersome and onerous. “The Department of Education is evolving practices to make sure that we’re keeping the borrowers first and that we’re providing relief without having them jump through hoops,” Education Secretary Miguel Cardona said on a call with reporters Thursday.  “I’ve heard from borrowers over the last six months that the processes are too difficult so we’re simplifying it.”

By law, anyone who is declared by a physician, the Social Security Administration or Department of Veterans Affairs to be totally and permanently disabled is eligible to have their federal student loans discharged. The benefit has never been widely publicized, so few have taken advantage. And when they do, many are met with tedious paperwork and requirements. There is a three-year monitoring period in which borrowers must submit annual documentation verifying their income does not exceed the poverty line. The requirement routinely trips up people who wind up having their loans reinstated. To ease the burden, the Biden administration in March waived the paperwork requirement during the coronavirus pandemic, retroactive to March 13, 2020, when President Donald Trump declared a national emergency.

On Thursday, Cardona said the Education Department will indefinitely extend the income waiver. The department will also pursue the elimination of the requirement altogether through the negotiated rulemaking process in October. The federal agency is proposing new rules to provide automatic disability discharges for anyone identified as eligible through data matching initiatives with Veterans Affairs and the Social Security Administration.

In 2016, the Education Department partnered with the two other agencies to identify eligible borrowers. While the department removed the application requirement in 2019 for veterans, it did not do the same for people identified through the SSA match. Only half of the people identified through the SSA match have received the discharge, according to the Education Department. A bipartisan coalition of congressional lawmakers, including Sens. Chris Coons, D-Del., and Rob Portman, R-Ohio, had urged Trump to automatically discharge the debt, much like his administration had done in 2019 for permanently disabled veterans. But the Trump administration failed to act, while hundreds of thousands of disabled borrowers defaulted on their loans.

A Freedom of Information Act request made by the D.C.-based nonprofit National Student Legal Defense Network found over 517,000 individuals as of May had not received relief. Asked about the discrepancy between the May figure and the 325,000 announced Thursday, Ben Miller, a senior adviser at the Education Department, said the older figure likely includes duplicates that may be showing up in multiple matches. He assured the latest figure accounts for all of the borrowers currently on the books.

“Obviously, we anticipate there will be new matches each quarter,” Miller said. “This is not just a one-time action.” Eligible borrowers will receive notice of their approved discharge in September and the department expects cancellation will occur by the end of the year. People who wish to opt-out of forgiveness will be given the opportunity. While borrowers will not be subject to federal income taxes on the canceled debt, they may encounter state taxes. Consumer groups had urged the Biden administration to automatically discharge the federal student loans of eligible borrowers, rather than require them to submit an application for debt forgiveness. Many were disappointed when the Education Department announced the income waiver in March without automating the process. Advocates praised the administration Thursday for stepping up.

“This is a life-altering announcement for hundreds of thousands of student loan borrowers with disabilities,” Dan Zibel, chief counsel at the National Student Legal Defense Network. “Today’s step is another indication that the Department is listening to the voices of student loan borrowers.”

Rihanna, A Billionaire, Is the Richest Female Musician

Caitlin Flynn At Yahoo NewsEntertainment, Money, Women 0

It’s official! Forbes has named Rihanna a billionaire, making her the richest female musician and the second wealthiest woman entertainer in the world. The singer, whose real name is Robyn Fenty, is now second only to Oprah in wealth with an estimated net worth of $1.7 billion. Not too shabby!

It was her music that first made her a household name, but according to Forbes, the majority of Rihanna’s net worth comes from her cosmetics brand Fenty Beauty. Rihanna owns 50 percent of the beauty company, which she launched in 2017. Fenty immediately set itself apart by prioritizing inclusivity; it launched with 40 shades of foundation for different skin tones and that number has since grown to 50.

Fenty Beauty was launched in partnership with luxury goods conglomerate LVMH, which is run by the world’s richest person, Bernard Arnault. Upon its launch, Rihanna described Fenty Beauty as her “passion project.” Now, Forbes estimates that a whopping $1.4 billion out of her $1.7 billion fortune comes from the brand. The rest of Rihanna’s net worth is from her lingerie line, Savage x Fenty, and the money she’s earned as a singer and actress.

Fans, including Rihanna’s peers, are celebrating this milestone moment. “[A] BILLI-ON here, a BILLI-ON there- Little Bajan bih w/ green [eyes] – dat bag is a different size,” Nicki Minaj wrote in an Instagram Story.

Fans are eagerly awaiting Rihanna’s next album, which is rumored to be in the reggae genre. Something they can look forward to that’ll arrive far more quickly is the star’s Met Gala look. It’s been confirmed that she’s on the guest list for the star-studded benefit, which is scheduled for next month. Looks like she’ll be one of the richest people at the party.

Was US Money Used To Fund Risky Research Lab In China That Supposedly Is The Origin Of Coronavirus?

Staff ReporterHealth, Money, Science 0

As the debate continues over the origins of the coronavirus, a heated political battle is taking place over virus research carried out in China using US funds. It’s linked to the unproven theory that the virus could have leaked from a lab in Wuhan, the Chinese city where it was first detected.

A report released by Republican lawmakers cites “ample evidence” that the lab was working to modify coronaviruses to infect humans and calls for a bipartisan investigation into its origins.

Republican Senator Rand Paul also alleges that US money was used to fund research there that made some viruses more infectious and more deadly, a process known as “gain-of-function”.

But this has been firmly rejected by Dr Anthony Fauci, the US infectious diseases chief. What is ‘gain-of-function’ research? “Gain-of-function” is when an organism develops new abilities (or “functions”).

This can happen in nature, or it can be achieved in a lab, when scientists modify the genetic code or place organisms in different environments, to change them in some way.

For example, this might involve scientists trying to create drought-resistant plants or modify disease vectors in mosquitoes to make them less likely to pass on infections.

With viruses that could pose a risk to human health, it means developing viruses that are potentially more transmissible and dangerous.

Scientists justify the potential risks by saying the research can help prepare for future outbreaks and pandemics by understanding how viruses evolve, and therefore develop better treatments and vaccines.

Did the US fund virus research in China?

Yes, it did contribute some funds. Dr. Fauci, as well as being an adviser to President Biden, is the director of the US National Institute of Allergy and Infectious Diseases (NIAID), part of the US government’s National Institutes of Health (NIH).

This body did give money to an organization that collaborated with the Wuhan Institute of Virology. That organization – the US-based Eco Health Alliance – was awarded a grant in 2014 to look into possible coronaviruses from bats.

Eco Health received $3.7m from the NIH, $600,000 of which was given to the Wuhan Institute of Virology. In 2019, its project was renewed for another five years, but then pulled by the Trump administration in April 2020 following the outbreak of the coronavirus pandemic.

In May, Dr Fauci stated that the National Institutes of Health (NIH) “has not ever and does not now fund gain-of-function research in the Wuhan Institute of Virology”.

Senator Rand Paul asked Dr Fauci if he wanted to retract that statement, saying: “As you are aware it is a crime to lie to Congress.” Senator Paul believes the research did qualify as “gain-of-function” research, and referred to two academic papers by the Chinese institute, one from 2015 (written together with the University of North Carolina), and another from 2017. One prominent scientist supporting this view – and quoted by Senator Paul – is Prof Richard Ebright of Rutgers University.

He told the BBC that the research in both papers showed that new viruses (that did not already exist naturally) were created, and these “risked creating new potential pathogens” that were more infectious. “The research in both papers was gain-of-function research”, he said.

He added that it met the official definition of such research outlined in 2014 when the US government halted funding for such activities due to biosafety concerns. The funding was paused to allow a new framework to be drawn up for such research.

Why does Dr Fauci reject this charge?

Dr Fauci told the Senate hearing the research in question “has been evaluated multiple times by qualified people to not fall under the gain-of-function definition”. He also said it was “molecularly impossible” for these viruses to have resulted in the coronavirus, although he did not elaborate.

The NIH and Eco Health Alliance have also rejected suggestions they supported or funded “gain-of-function” research in China. They say they funded a project to examine “at the molecular level” newly-discovered bat viruses and their spike proteins (which help the virus bind to living cells) “without affecting the environment or development or physiological state of the organism”.

One of the US scientists who collaborated on the 2015 research on bat viruses with the Wuhan institute, Dr Ralph Baric from the University of North Carolina, gave a detailed statement to the Washington Post.

He said the work they did was reviewed by both the NIH and the university’s own biosafety committee “for potential of gain-of-function research and were deemed not to be gain-of-function”. He also says that none of the viruses which were the subject of the 2015 study are related to Sars-Cov-2, which caused the pandemic in 2020.

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