Diamond News Archives
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At the 2020 World Economic Forum in Davos, Bob Prince, co-chief investment officer at Bridgewater Associates, attracted attention when he suggested in a news interview that the boom and bust cycle as we have come to know it in the last decades may have ended. This viewpoint may well have been encouraged by the fact that the latest economic upswing ("boom") has been going for around a decade and that an end is not in sight as suggested by incoming macro- and microeconomic data.
But would that not reject the key insight of the Austrian business cycle theory (ABCT), which says that a boom, brought about by artificially lowered market interest rates and injections of new credit and money produced "out of thin air," must eventually end in a bust? In what follows, I will remind us of the key message of the ABCT and outline the "special conditions" which must be taken into account if the ABCT is applied to real-world developments. Against this backdrop, we can then form a view about how the next crisis might look.
What the ABCT Says
The ABCT is actually a "theory of crisis," and it explains the broader consequences if and when central banks, in close cooperation with commercial banks, increase the amount of money in the economy through credit expansion—that is, an increase in bank lending that is not backed by real savings. The increase in the circulation of credit supply initially lowers the market interest rate below its "natural level," or, "the originary interest rate level," to use the Austrian school's term.
The artificially lowered market interest rate discourages savings and encourages consumption and investment expansion. The economy enters a boom. However, after the initial injection of new credit and money has had its...
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Stocks fell broadly on Friday, wiping out the Dow Jones Industrial Average[1]'s gain for January, as investors grew increasingly worried about the potential economic impact of China's fast-spreading coronavirus[2].
The Dow dropped 350 points, or 1.2%, falling to its low of the session after Delta and American suspended all flights between China and the U.S. The S&P 500[3] was down 1% while the Nasdaq Composite[4] dipped 0.9%.
The major averages slid even as Amazon surged 9% to a $1 trillion market value, joining an elite club shared only by Apple, Microsoft and Alphabet.
China's National Health Commission confirmed on Friday that there have been 9,692 confirmed cases of the coronavirus, with 213 deaths.
The World Health Organization (WHO) recognized[5] the deadly pneumonia-like virus as a global health emergency on Thursday, citing concern that the outbreak continues to spread to other countries with weaker health systems. WHO's designation was made to help the United Nations health agency mobilize financial and political support to contain the outbreak.
The virus, which was first discovered in the Chinese city of Wuhan, has now spread to at least 18 other countries[6] and has dampened sentiment over global economic growth.
"The outbreak of the coronavirus has added another headwind to the near-term outlook for stocks," said Peter Berezin, chief global strategist at BCA Research, said in a note. "Viruses often become less lethal as they mutate because a virus that kills its host is also a virus that kills itself. Unfortunately, in a world of mass travel, a virus can spread across the globe before it has time to lose potency."
Police officers in plainclothes raid a medical...
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Medical workers in protective gear transport a patient believed to be a confirmed case of the Wuhan coronavirus, also known as 2019-nCoV, at Queen Mary Hospital in Hong Kong, China, on Wednesday, Jan. 29, 2020.
Justin Chin | Bloomberg | Getty Images
The World Health Organization said the fast-spreading coronavirus that's infected more than 8,200 across the world is a global health emergency — a rare designation that helps the international agency mobilize financial and political support to contain the outbreak.
The announcement comes just hours after the U.S. confirmed its first human-to-human transmission[1] of the virus, which has killed at least 171 people in China and has now spread to at least 18 other countries.
Since emerging less than a month ago in Wuhan, China, the coronavirus has infected more people than the 2003 SARS epidemic, which sickened roughly 8,100 people across the globe over nine months. As of Thursday, there are at least eight cases in four countries, outside of China, of human-to-human transmission of the new coronavirus.
"Over the past few weeks we have witnessed the emergence of a previously unknown pathogen that has [resulted in] an unprecedented outbreak," WHO Director-General Tedros Adhanom Ghebreyesus said during a press conference at the organization's Geneva headquarters on Thursday. "We must act together now to limit the spread."
WHO defines a global health emergency, also known as a "public health emergency of international concern," as an "extraordinary event" that is "serious, unusual or unexpected."
[To see the latest updates on the coronavirus, visit CNBC's live blog here[2].]
The "continued increase in cases and the evidence of human-to-human transmission outside of China are, of course, most deeply disturbing,"...
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WASHINGTON — In a move aimed at loosening some of the reins put on Wall Street following the financial crisis, the Federal Reserve moved Thursday to eliminate a restriction on bank ownership of venture capital funds.
The intent is to get rid of the 3% limit previously set under the Bank Holding Company Act, more widely known as the Volcker Rule. It took its name from former Fed Chairman Paul Volcker, who helped draft part of the sweeping reforms that took place following the crisis that erupted in 2008.
Current Fed Chairman Jerome Powell said the move was part of an ongoing review to keep the parts of the provision that restrict banks from reckless speculation but reform some rules that either were difficult to enforce or unclear to the industry.
"We now have considerable supervisory experience putting that common sense prohibition into practice, and we have learned that a simpler, clearer approach to implementing the rule makes it easier for both banks and regulators to carry out the intent of the rule," Powell said in a statement. "We have already taken several steps in that direction and the proposal before us continues that work."
Other moves under consideration include clarifying how foreign funds are treated and simplifying operation and compliance. The proposal would allow banks to provide limited services to so-called covered funds, such as hedge and private equity funds.
Vice Chairman Randal Quarles emphasized that the changes do not fundamentally alter the main intention of the Volcker Rule — specifically the prohibition against "prop trading," or the use of bank funds in risky investing strategies like arbitrage....
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(IDEX Online) - With financing in the diamond industry increasingly tight, Russian banks could step in to inject some much needed funds into the market.
Eximbank of Russia, which is part of the Russian Export Center Group, has issued its first loan to a diamond company. The loan agreement, which was underwritten by Exiar, provides for a 24-month revolving credit line in euros to Belgian company Dali Diamond.
The loan was for financing rough diamond purchases from Alrosa and was used during Alrosa's January trading session.
In a release, Alrosa said the terms of financing are among the best in the industry today - both with regard to rates and deferred payments to the bank, although no further details were given.
"This transaction marked the beginning of cooperation between Eximbank of Russia and EXIAR with the diamond industry and...Dali Diamonds," said Nikita Gusakov, senior vice president of the REC Group.
"It is a new source of funds in our industry, and we hope that such form[s] of cooperation will work out," said Alrosa deputy CEO Evgeny Agureev. "Now, when we often hear that sources of financing in the industry are cut down and key players have decided to withdraw from the sector or are considering such an option, the actual financing that took place is encouraging and is a milestone for the whole diamond market."...