Finance
Central Bank Digital Currencies Are Off To A Rough Start


CBDC – central bank digital currency technology. New generation of money concept
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Nigeria may not be on a lot of people’s radars, but it should be. Africa’s largest economy is in the early stages of a monetary experiment that could be coming to the U.S. sooner than you think.
In October 2021, Nigeria’s central bank introduced the eNaira, a digital version of its currency, the naira, and so far, things aren’t going well. Nigerians aren’t using the currency, for one.
And two, the central bank has recently replaced old high-denomination banknotes with new, less counterfeitable ones. As you might expect, this has triggered a chaotic run on the banks. Cash withdrawals are reportedly limited to around $45 USD per day.
Some people believe the crisis has been engineered to push people into using the eNaira. True or not, the country isn’t giving up on the currency. Nigeria, which held a highly contested presidential election this past weekend, entered into talks last week with a New York-based technology firm to help it “keep full control” of the eNaira, according to reporting by Bloomberg.
I’ve written about the pros and cons of central bank digital currencies (CBDCs) before, and I think by now most people have developed their own opinion about them.
The thing is, CBDCs are not just for emerging and developing countries like Nigeria. Close to 90% of the world’s central banks are at some point in the process of creating their own digital currency. Sweden, already one of the most cashless societies on earth (despite it being the first country in history to issue paper banknotes), may be close to rolling out the e-krona.
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Not everyone favors the idea of a centralized digital currency, and a few nations are working on legislation limiting their scope. Switzerland, whose citizens hold the most physical cash per capita, wants to enshrine the availability of paper banknotes in its constitution. Last week, a U.S. legislator introduced a bill, titled the “CBDC Anti-Surveillance State Act,” that would prohibit the Federal Reserve from issuing its own digital dollar.
It’s All About The Benjamins
Even among those who may not support the creation of a CBDC, the calls to ban certain banknotes have been growing louder over the years. The U.S. has rightfully done away with bills ranging in denomination from $500 and $100,000, and the next on the chopping block could be the $100 bill.
Supporters of this idea say that discontinuing bills bearing Ben Franklin’s face would go a long way in combating corruption, terrorism and other illicit activities, particularly overseas. Believe it or not, a vast majority of $100 bills are held abroad — an estimated 80% of them, according to the Chicago Fed. Demand rises in times of political and financial crisis.
With Benjamins now being the most printed U.S. currency, having overtaken both the $20 bill and $1 bill in recent years, the amount of money that exists outside the American financial system is substantial.
$100 bills are now the most widely circulated U.S. banknote
U.S. Global Investors
I don’t know what the solution to this is, but eliminating the $100 bill seems extreme to me. What would that do to the value of the U.S. dollar? How would that affect people’s faith in our monetary system? We see what’s happening in Nigeria.
Similarly, I don’t believe CBDCs are the solution. Unlike Bitcoin, CBDCs are by definition centralized. They’re also traceable and programmable, with potentially chilling consequences.
In Gold We Trust
This only improves the investment thesis for gold, silver, collectibles, real estate and other hard assets. Although not as liquid or portable as cash, hard assets are attractive stores of value because they’re private property, not issued by a central authority.
The same goes for Bitcoin, gold’s digital cousin. The only way to produce a new Bitcoin or new ounce of gold is through intensive work, a literal conversion of time and energy. No central banker or finance minister can unilaterally affect supply with a snap of their fingers.
It’s for this reason that central banks like gold. They collectively bought a near-record amount of the yellow metal last year, and some analysts forecast they’ll buy even more this year.
Could Bitcoin end up on banks’ balance sheets? It’s not as crazy as it sounds. In December 2022, the Bank of International Settlements (BIS), often called the “central bank of central banks,” released guidance on banks’ exposure to crypto assets. The standard, which goes into effect in 2025, limits that exposure to 2%.
American Exceptionalism
I want to leave you with something that was shared with me recently. Last month I attended Harvard Business School Case Studies, where I finally received my MBA after several years of attending. (I like to joke that I’m a slow learner.)
Larry Summers — former Treasury Secretary and current President Emeritus of Harvard — reminded us how remarkable it is that the total market cap of U.S. stocks represents over 40% of total world equities. This is true despite the U.S. economy representing around 16% of global GDP and its population representing less than 5% of the world’s population.
Value of U.S. stock market as a percentage of total global equity market cap
U.S. Global Investors
Summers’ words reinforce my belief that it’s unwise to bet against the U.S., no matter who’s in charge or what else is going on in the world. American exceptionalism is much more than a pie-in-the-sky concept — it’s apparent in the strength of our institutions and capital markets.
I will be speaking more on decentralized assets like gold and Bitcoin at the Swiss Mining Institute’s annual conference, to be held March 21 and 22. Get your tickets by clicking here!
Finance
Bonds See 2023 Recession, Stocks Aren’t So Sure


Fixed income markets are increasingly pricing in a recession, but the stock market remains … [+]
AFP via Getty Images
The yield curve is one of the most robust recession predictors and has signaled a recession may be coming since mid 2022. In contrast, U.S. stocks as measured by the S&P 500 are up materially from the lows of last October and only just below year-to-date highs, seemingly rejecting recession fears. Yet, fixed income markets see the Fed potentially cutting rates by the summer, perhaps reacting to a U.S. recession.
The Evidence From The Bond Markets
The recessionary evidence, at least from fixed income markets, is mounting. The 10 yield Treasury yield has been below the 2 year yield consistently since last July. That is is called an inverted yield curve and has signaled a recession fairly reliably when compared to other leading indicators.
Building on that, fixed income markets see almost a nine in ten chance that the Federal Reserve cuts rates by September of this year. That’s something the Fed has repeatedly said they won’t do on their current forecasts. Yet, a recession could cause it to happen.
The Stock Market
In contrast, the stock market shows some optimism. The S&P 500 is up 7% year-to-date as the market has shrugged off fears of contagion from recent banking issues. In particular, tech stocks have rallied.
In contrast, more defensive sectors such as healthcare, utilities and consumer goods have lagged in 2023. This suggests that the stock market is taking more of a ‘risk on’ position and is perhaps less worried about the economy.
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That said the stock market is a leading indicator of the business cycle, it may be that stocks see a recession, but are now looking past it to growth ahead and are factoring in the lower discount rates that a recession might bring as interest rates decline. Also, the U.S. stock market is relatively global, so the fate of the U.S. economy is a key factor in driving profits, but not the only one.
What’s Next?
Monitoring unemployment data will be key. Though the yield curve is a good long-term forecaster of recessions it is less precise in signaling when a recession starts. Unemployment rates can offer more accurate recession timing. Unemployment edged up in February, suggesting a recession may be near, but we’ve also seen monthly noise unemployment. Two similar monthly unemployment spikes during 2022 both proved false alarms.
However, if we see a sustained move up in unemployment from the low levels of 2022 that may be a relatively clear sign that a recession is here. Economist Claudia Sahm estimates that a sustained 0.5% increase in unemployment rate from 12-month lows is sufficient to trigger a recession. Unemployment rose 0.2% from January to February 2023, so maybe we’re on the way there. Of course, the jobs market performed better than expected in 2022 and it could do so again. Still, fixed income markets do suggest a 2023 recession is coming. Stock markets don’t necessarily share that view.
Finance
Which States Have The Highest And Lowest Life Expectancies?


Where you live can influence how long you live
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There’s a wide variance of life expectancies among the 50 states in the U.S., according to a recent report prepared by Assurance, an insurance technology platform that helps consumers with decisions related to insurance and financial well-being.
Figure 1 below shows the 10 states with the highest life expectancy, starting with Hawaii, the state with the highest life expectancy.
Steve Vernon using data from Assurance
Figure 2 below shows the 10 states with the lowest life expectancy, starting with Mississippi, the state with the lowest life expectancy.
Steve Vernon using data from Assurance
Assurance scoured life expectancy data prepared in January 2023 by the U.S. Centers for Disease Control and Prevention (CDC). With this data, Assurance created several easy-to-understand graphics that offer information about life expectancies.
Life expectancies are a basic measure of well-being
As measured by the CDC, life expectancies are a basic measurement of well-being in a broad population and not a prediction of how long an individual might live. The CDC measures the expected lifespan for a person born in the year of measurement. This measurement is calculated based on the assumption that the individual will live and die according to the rates of death that are prevalent in the measurement year for each age. There’s no assumed improvement or backsliding in the assumed mortality rates in future years for each age in the life expectancy calculation.
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By contrast, an estimated lifespan for an individual would consider their current age, their gender, and some basic lifestyle information. It might also attempt to project future improvements or backsliding in mortality rates based on key factors.
Significant influences on life expectancy calculations
Leading causes of death in the U.S. are heart disease, cancer, and accidents in that order. These immediate causes are significantly influenced by factors in the population such as poverty rates, educational attainment, rates of obesity and smoking, access to healthcare, prevalence of violent crime, and the support people receive from federal, state, and local governments. All these factors can vary widely among different states, which can be a key reason why life expectancies vary by state.
When you think about it, all these factors also have the potential to influence a person’s quality of life. The measured life expectancy rate rolls up all these factors into one objective measurement of well-being that’s based on population data.
In addition to the factors listed above, mortality rates increased and life expectancies decreased in the past few years due to the Covid-19 pandemic. A recent article titled “Live Free And Die” summarized recent research results that show that life expectancies in most countries around the world rebounded after the Covid-19 pandemic but that they continued to decline in the United States. Many of the reasons cited in the article for the continued decline in U.S. life expectancies are the same or similar to the factors listed above.
Why should retirees care about the life expectancies reported here if these measures don’t predict your own lifespan? Life expectancy calculations indicate the general well-being of the entire population in your area. While the living conditions in your area can influence your own lifespan and quality of life, retirees should focus on their remaining life expectancy given their age. They should also consider how the factors listed above that influence life expectancies in the population might apply to them.
You can obtain customized estimates of your remaining life expectancy at the Actuaries Longevity Illustrator. Part of your planning for retirement is understanding how long you an an individual might live, instead of relying on generalized information about larger populations you see in the media.
Finance
IRS Dirty Dozen Campaign Warns Taxpayers To Avoid Offer In Compromise ‘Mills’


Business people stress the cost
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Owing taxes can be stressful. Unfortunately, the actions of some companies can make it worse. As part of its “Dirty Dozen” campaign, the IRS has renewed a warning about so-called Offer in Compromise “mills” that often mislead taxpayers into believing they can settle a tax debt for pennies on the dollar—while the companies collective excessive fees.
Dirty Dozen
The “Dirty Dozen” is an annual list of common scams taxpayers may encounter. Many of these schemes peak during tax filing season as people prepare their returns or hire someone to help with their taxes. The schemes put taxpayers and tax professionals at risk of losing money, personal information, data, and more.
(You can read about other schemes on the list this year—including aggressive ERC grabs here, phishing/smishing scams here and charitable ploys here.)
Tax Debt Resolution Schemes
“Too often, we see some unscrupulous promoters mislead taxpayers into thinking they can magically get rid of a tax debt,” said IRS Commissioner Danny Werfel.
“This is a legitimate IRS program, but there are specific requirements for people to qualify. People desperate for help can make a costly mistake if they clearly don’t qualify for the program. Before using an aggressive promoter, we encourage people to review readily available IRS resources to help resolve a tax debt on their own without facing hefty fees.”
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Offers In Compromise
Legitimate is a key word. Offers in Compromise are an important program to help people who can’t pay to settle their federal tax debts. But, as the IRS notes, these “mills” can aggressively promote Offers in Compromise—OIC—in misleading ways to people who don’t meet the qualifications, frequently costing taxpayers thousands of dollars.
An OIC allows you to resolve your tax obligations for less than the total amount you owe. You generally submit an OIC because you don’t believe you owe the tax, you can’t pay the tax, or exceptional circumstances exist.
Because of the nature of the OIC—and the dollars involved—the process can be time-consuming. It can also be confusing for taxpayers who may not have a complete grasp on their finances.
First, you must complete a detailed application, Form 656, Offer in Compromise. You must also submit Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-B, Collection Information Statement for Businesses, with supporting documentation (generally, bank and brokerage statements and proof of expenses).
You’ll also need to submit a non-refundable fee of $205 and payment made in good faith. The payment is typically 20% of the offer amount for a lump sum cash offer or the first month’s payment for those made over time. Generally, initial payments will not be returned but will be applied to your tax debt if your offer is not accepted. Payments and fees may be waived if the OIC is submitted based solely on the premise that you do not owe the tax or if your total monthly income falls at or below income levels based on the Department of Health and Human Services (DHSS) poverty guidelines.
The IRS will examine your application and decide whether to accept it based on many things, including the total amount due and the time remaining to collect under the statute of limitations. The IRS will also review your income—including future earnings and accounts receivables—and your reasonable expenses, as determined by their formula. The IRS will also consider the amount of equity you have in assets that you own—this would include real property, personal property (like automobiles), and bank accounts.
Criteria
Before your offer can be considered, you must be compliant. That means you must have filed all your tax returns and paid off any liabilities not subject to the OIC. After you submit your offer, you must continue to timely file your tax returns, and pay all required tax, including estimated tax payments. If you don’t, the IRS will return your offer.
Additionally, you cannot currently be in an open bankruptcy proceeding, and you must resolve any open audit or outstanding innocent spouse claim issues before you submit an offer.
Representation
You can probably tell—it’s a lot to consider. You may want representation. A tax professional can help marshal you through the process and offer practical guidance, while communicating what fees could look like.
By contrast, according to the IRS, an OIC “mill” will usually make outlandish claims, frequently in radio and TV ads, about how they can settle a person’s tax debt for cheap. Also telling: the fees tend to be significant in exchange for very little work.
Those mills also knowingly advise indebted taxpayers to file an OIC application even though the promoters know the person will not qualify, costing taxpayers money and time. You can check your eligibility for free using the IRS’s Offer in Compromise Pre-Qualifier tool.
“Pennies On A Dollar”
What about those promises that taxpayers can routinely settle for pennies on a dollar? Not true. Generally, the IRS will not accept an offer if they believe you can pay your tax debt in full through an installment agreement or equity in assets, including your home. That’s why the IRS tends to reject a majority of OICs that are submitted. The acceptance rate is less than 1 in 3, according to the 2021 Data Book.
The IRS will generally approve an OIC when the amount offered represents the best opportunity for the IRS to collect the debt. It’s true that there’s a formula that the IRS uses to figure out how much they think they can collect from you. But there is some wiggle room to account for special circumstances, including a loss of income or a medical condition. It’s worth noting those are the exceptions, not the rule.
Collections
While submitting an OIC may keep the IRS from calling you, it doesn’t stop all collections activities—don’t believe companies that suggest that submitting an OIC will make your tax debt disappear. Penalties and interest will continue to accrue on your outstanding tax liability. Additionally, the IRS may keep your tax refund, including interest, through the date the IRS accepts your OIC.
You may also be liened. In most cases, the IRS will file a Notice of Federal Tax Lien to protect their interests, and the lien will generally stay in place until your tax obligation is satisfied.
Be Skeptical
An OIC is a serious effort to resolve tax debt and shouldn’t be taken lightly. Be skeptical—if it sounds too good to be true, it likely is. If you’re considering an OIC, hire a competent tax professional who understands the rules and is willing to level with you about your chances of being successful—including other options. Don’t fall into a trap that can make your situation worse.
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