Marginalised and dominated economically by the Global North, developing countries must urgently cooperate to better strive for their shared interests in achieving world peace and sustainable development.

Cold War rivalry

During the first Cold War between the US, Nato and other allies, on the one hand, and the Soviet Union and its allies, the former prided itself on sustaining economic growth, especially during the post-war Golden Age.

Since the 2008 global financial crisis (GFC), successive US governments — led by Barack Obama, Donald Trump and Joe Biden — have all strived to sustain full employment in the US. However, real wages and working conditions for most have suffered.

Exceptionally among monetary authorities, the US Federal Reserve’s mandate includes ensuring full employment. However, without the US-Soviet rivalry of the first Cold War, Washington no longer seeks a buoyant, growing world economy.

This has affected US relations with its Nato and other allies, most of which have been hit by worldwide economic stagnation since the GFC. Instead of ensuring worldwide recovery, “unconventional monetary policies” addressing the ensuing Great Recession have enabled further financialisation.

Interest rate hikes slow growth

Since early 2022, the US has raised interest rates unnecessarily. Stanley Fischer, later International Monetary Fund (IMF) deputy managing director and Fed vice-chair, and colleague Rudiger Dornbusch found low double-digit inflation acceptable, even desirable for growth.

Before the fetishisation of the 2% inflation target, other mainstream economists reached similar conclusions in the late 20th century. Since then, the Fed and most other Western central banks have been fixated on inflation targeting, which has no theoretical or empirical justification.

Fiscal austerity policies have complemented such monetary priorities, compounding contractionary macroeconomic policy pressures. Many governments are being “persuaded” that fiscal policy is too important to be left to finance ministers.

Instead, independent fiscal boards are setting acceptable public debt and deficit levels. Hence, macroeconomic policies are inducing stagnation everywhere.

While Europe has primarily embraced such policies, Japan has not subscribed to them. Nevertheless, this new Western policy dogma invokes economic theory and policy experience when, in fact, neither supports it.

The Fed's raising interest rates since early 2022 has triggered capital flight from developing economies, leaving the poorest countries worse off. Earlier financial inflows into low-income countries have since left in great haste.

New Cold War contractionary

The new Cold War has worsened the macroeconomic situation, further depressing the world economy. Meanwhile, geopolitical considerations increasingly trump developmental and other priorities.

The growing imposition of illegal sanctions has reduced investment and technology flows to the Global South. Meanwhile, the weaponisation of economic policy is fast spreading and becoming normalised.

After the Iraq invasion fiasco, the US, Nato and others often do not seek the UN Security Council to endorse sanctions. Hence, their sanctions contravene the UN Charter and international law. Nonetheless, such illegal sanctions have been imposed with impunity.

With most of Europe now in Nato, the Organisation for Economic Co-operation and Development, G7 and other US-led Western institutions have increasingly undermined UN-led multilateralism, which they had set up and still dominate but no longer control.

Inconvenient international law provisions are ignored or only invoked when useful. The first Cold War ended with a unipolar moment, but this did not stop new challenges to US power, typically in response to its assertions of authority.

Such unilateral sanctions have compounded other supply-side disruptions, such as the pandemic, and exacerbated recent contractionary and inflationary pressures.

In response, Western powers raised interest rates in concert, worsening the ongoing economic stagnation by reducing demand without effectively addressing supply-side inflation.

The internationally agreed sustainable development and climate targets have thus become more unattainable. Poverty, inequality and precariousness have worsened, especially for the most needy and vulnerable.

Limited options for South

Due to its diversity, the Global South faces various constraints. The problems faced by the poorest low-income countries are quite different from those in East Asia, where foreign exchange constraints are less of a problem.

IMF first deputy managing director Gita Gopinath has argued that developing countries should not be aligned in the new Cold War.

This suggests that even those walking the corridors of power in Washington, DC, recognise the new Cold War is exacerbating the protracted stagnation since the 2008 global financial crisis.

Josep Borrell — the second most important European Commission official, in charge of international affairs — sees Europe as a garden facing invasion by the surrounding jungle. To protect itself, he wants Europe to attack the jungle first.

Meanwhile, many — including some foreign ministers of leading non-aligned nations — argue that non-alignment is irrelevant after the end of the first Cold War.

Non-alignment of the old type — à la Bandung in 1955 and Belgrade in 1961 — may be less relevant, but a new non-alignment is needed for our times. Today’s non-alignment should include firm commitments to sustainable development and peace.

BRICS’ origins are quite different, excluding less economically significant developing countries. Although not representative of the Global South, it has quickly become important.

Meanwhile, the Non-Aligned Movement remains marginalised. The Global South urgently needs to get its act together despite the limited options available to it.

Source: The edge markets

The devil is in the detail

Another employment growth figure of close to 50,000 (47,500) in August should dispel thoughts of imminent easing from the Reserve Bank of Australia (RBA). Until recently, there was an odd kink in the implied cash rate curve at the September meeting, indicating that some investors still believed the RBA would follow the Fed lower this month. This has now disappeared. 

Still, for the doves, this latest labour report contains some suggestions of weakness that they may want to cling to. 

Despite the strong headline employment growth number, the increase all came from the part-time sector. These jobs, which are almost by definition more poorly paid, and often come with lower job security, perks and other benefits, will have a smaller impact, job-for-job, on household spending than full-time employment growth. Full-time jobs actually fell by 3,100 in August. While part-time jobs grew by 50,600. 

Full-time and part-time employment growth (monthly change, 3mma)

It's way too early to draw any firm conclusions

It would be wrong to get too carried away by this month's data. This is an extremely volatile set of figures, and we prefer to draw our conclusions only from trends, such as the 3-month moving averages shown in the chart above. 

When examined in this way, we can see that the trend of employment growth is still being driven by full-time jobs, although the pace of full-time employment growth does seem to be waning slightly. At this stage, we are not drawing any inferences from the numbers, and we doubt the RBA is either. 

We had also thought that this month may show a slight increase in the unemployment rate to 4.3% from 4.2%. In the end, it remained at 4.2%. Labour force growth slowed slightly to 37,000 in August from 75,400 in July but remains robust. But the number of unemployed declined by 10,500, which shows that the labour market remains reasonably firm. Again, a small monthly decline in the number of unemployed is not remarkable. We had a similar fall in May and in February this year. It does not herald a dramatic shift in the labour market. That said, this month's unemployment rate figures came perilously close to being rounded down to 4.1%, and that may have caused a bigger market reaction if it had happened. It's certainly something to watch out for next month. 

Market response was positive, but muted

The immediate market response to today's data was a positive one - though fairly muted. The AUD had been trading weaker going into the data but jumped slightly following the release. 2Y Australian government bond yields likewise rose from about 3.62% to 3.66%. 10Y Australian government bonds rose about the same from about 3.91% to 3.94%. 

We remain of the view that the RBA will not be following the Fed anytime soon and that easing is going to be a 2025 story with a first RBA cash rate cut tentatively forecast for the first quarter of that year and a total of 100bp of cuts priced in this cycle. If anything, we feel that the risks to even these forecasts are that the RBA may start easing later, and by less in total for 2025. 

After touring crucial battleground states, Coinbase’s Stand With Crypto initiative could have registered as many as 121,000 people to vote in the 2024 United States elections.

In a statement shared with Cointelegraph, a Stand With Crypto spokesperson said roughly 17,500 users have clicked on the platform’s voter registration tool since Sept. 4, when the group launched a national tour to raise awareness of crypto policies.

They added that more than 121,000 crypto advocates had used the tool since the platform launched in 2023.

The organization, claiming to advocate for “clear, common-sense regulations for the crypto industry,” allows users to enter their email addresses to check their polling locations and whether they’re registered to vote. It’s unclear how many of the users Stand With Crypto reported were already registered or went on to register in their respective US states.

Stand With Crypto organized a bus tour, holding rallies for crypto enthusiasts in Arizona, Nevada, Michigan, Wisconsin, Pennsylvania, and Washington, DC. Many recent polls suggested that Democratic nominee Kamala Harris and Republican Donald Trump are neck and neck nationally and in crucial swing states, indicating tens of thousands of people could make the difference in carrying a state’s electoral votes in the 2024 presidential election. 

The bus tour, which concluded in DC on Sept. 18, was one of the latest efforts by industry advocates to encourage crypto-focused voter turnout. Crypto-backed political action committees (PACs) have contributed millions of dollars toward media buys to support pro-crypto congressional candidates and oppose anti-crypto ones in the 2024 election cycle.

Crypto as an election issue

It’s unclear how many of the roughly 240 million US citizens eligible to vote in 2024 will cast their ballots based solely on a candidate’s crypto policies. A 2023 Federal Reserve suggested that as many as 18 million US adults could hold or use cryptocurrencies.

Though neither Vice President Harris nor Trump mentioned digital assets during their one and possibly only debate on Sept. 10, the candidates have taken different approaches to crypto in their respective campaigns. 

The Republican candidate has called for “all the remaining Bitcoin” to be mined in the US and continues to address crypto voters on the campaign trail. Harris has been largely silent on digital assets as she runs in 2024, but in August, a senior campaign adviser said she would “support policies” for the industry’s growth.

Source: COINTELEGRAPH

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Source:XM