US president-elect Joe Biden wants to massively increase investment in everything from clean energy to healthcare and housing. But his efforts will be hampered because the US lacks vital tools that its major competitors and allies rely on.
To address the challenges America is facing — Covid-19, recession, inequality and climate change — Mr Biden should create a public investment bank. Without one, the US is trying to respond with one arm tied behind its back.
Well-capitalised, vigorous public financial institutions can work with the private sector to soften the blows during downturns and extend prosperity in upturns. They support infrastructure investment and small and medium enterprises, especially in innovative sectors or serving vulnerable communities.
It is a paradox that while the US government, in an act of idealism after the second world war, provided funds via the Marshall Plan to create and capitalise the very successful German public bank KfW, it has not created a similar institution at home.
Today, KfW has turned the initial investment into more than $500bn in assets, the second-largest German bank, and is a critical source of domestic capital for small business, clean energy, exports, innovation and start-ups. It was a driving force for reconstruction after the war, for integrating East Germany after reunification and for recovery from the 2008 financial crisis. During Covid-19, KfW and local public banks are providing finance to individuals and businesses, helping save companies and jobs more quickly than the inefficient US system.
The US government should create such an institution now.
Such an American Investment Bank would be a lead investor in critical projects serving the public good, which many private institutions may not at first find attractive. Electricity grids suited to renewable energy, rural broadband and coastal high-speed railways are all candidates. Such investment creates key preconditions for private investment.
We propose that an AIB should be independent, non-partisan and subject to rigorous regulation and government audit. It should be capitalised initially with up to $100bn to assure sufficient resources for its activities and aim at a high investment grade credit rating to access private capital markets at low cost.
It would be financially self-sustaining and profitmaking, but not profit- driven, aiming to maximise its contribution to create a more dynamic, sustainable and fairer economy. Because specific opportunities and challenges differ across the country, it should have regional branches and work with municipal bond issuers and local financial institutions, such as state green banks and commercial banks.
During a crisis, the bank would increase provision of low-cost, long-term credit to support essential services — like hospitals, the manufacturing of critical equipment and transport companies. It would also channel general working capital and payroll support to eligible companies and local governments, acting counter-cyclically to support recovery.
At all times, it would allow grant resources and technical assistance to reach vulnerable communities. Those with significant populations of black, brown, indigenous people and others, are often marginalised and face a lack of access to credit, and disinvestment because of loss of industry or transition to clean energy, for example.
The AIB would also accelerate the pace at which new low carbon technologies become bankable by investing in very innovative technologies. Working alongside commercial banks and institutional investors, it would share knowledge as a public not a proprietary good, so critical risk and performance data make it to market quickly. It would make loans, take equity stakes and mitigate risk via guarantees.
There is no time to lose and no reason to wait. Both for helping the recovery from Covid-19-induced recession and building back better, by providing finance for investment in the most dynamic, innovative, competitive and inclusive sectors and companies, an American Investment Bank is essential for the US economy to prosper in the 21st century.
Doug Sims, a senior adviser at theNatural Resources Defense Council, contributed to this article
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
