November 7th Financial News

As if an already dramatic day for the global economy needed any more excitement, Germany has delivered a significant political upset of its own. German Chancellor Olaf Scholz announced tonight that he has fired his finance minister Christian Lindner. Lindner’s party, the FDP, left the government. 

In a short speech explaining the decision, Olaf Scholf was on fire, at least for someone from Hamburg, accusing Lindner of breach of trust and clientelism. Scholz positioned himself as a well-balanced leader who didn’t want to choose between social welfare and investment or support for Ukraine. Scholz also mentioned that he had proposed triggering the national escape clause of the national debt brake for 2025 but Lindner had refused to agree. Notably, Scholz explicitly stated that Germany's public finances were healthy and government debt was among the lowest in Europe, clearly distancing himself from Lindner who last week described a picture of worrying public finances. Let’s not forget that this announcement marked the beginning of the next election campaign. The official reaction by Christian Lindner shows that a mud fight or blame game between Scholz and Lindner was playing out.

Tonight's decision was not surprising but rather the climax of a long series of growing tensions within the government. The latest episode was a paper issued by Lindner last week.

Vote of confidence on 15 January, snap elections probably end March

Looking ahead, Scholz announced he would bring a vote of confidence to the German parliament on 15 January. If he loses this vote, which is highly likely, the federal president would have to call snap elections within two months. Scholz himself already mentioned the end of March as a possible moment for the snap elections. Based on Scholz’s comments, a minority government doesn’t seem to be an option. Until then, the budget for 2025 still needs to be agreed. Tonight's comments suggested that the SPD and FDP will be trying to get the opposition CDU on board to support another year of pausing the constitutional debt brake. The next few days will show whether this strategy succeeds. Otherwise, Germany could enter the new year with only a rudimentary budget.

Given the neverending tensions within the government and clear disagreement on how to get the German economy out of its current state of stagnation and structural weakness, the collapse of the government could also be a blessing. Elections and a new government could and should end the current paralysis of an entire country and offer new and clear policy guidance and certainty.

Consequently, the election campaign will probably focus mainly on the economy and less on immigration, potentially weakening support for the AfD, and therefore offering a clear strategy to restore growth and competitiveness. This is an election campaign that will push the political parties to show their hands on where they stand on the debt brake or better, on the question of debt-financed investments. Whether this debate will really make it into the living rooms of German voters, is a different question. On the day Donald Trump won a second term in the White House, Germany is preparing for the first snap elections in almost 20 years, with politicians set to offer their own answers on how to make the German Economy Great Again.

Market Picture

The cryptocurrency market surged with excitement as its capitalization jumped 7% in just 24 hours, reaching $2.45 trillion and briefly peaking at $2.48 trillion, matching the highs seen in July. Trading volumes since the start of the day were the highest since early August and have a chance of surpassing those levels.

Bitcoin has been a key driver of the crypto market rally, rising 6.6% over the past 24 hours to an all-time high of $75.4K before retreating to $73.8K at the time of writing. The current move is within a rising channel that has been in place since September. Its upper border is now near $76.6K (above the recent highs), and the RSI is far from overbought, suggesting that there is still upside potential.

Dogecoin rallied nearly 55% from its November 3rd lows to Wednesday afternoon’s high, fuelled by Trump’s improved chances of victory and anticipation around the election results. In addition to the general positivity for cryptocurrencies, speculators are betting on Musk’s potential position in the new administration. The Tesla founder and head of X (formerly Twitter) has maintained the recognition of one of the first meme coins for many years.

News Background

Another recalculation saw the difficulty of mining the first cryptocurrency jump by 6.24%. The index reached a record high of 101.65 T. The average hash rate over the two-week calculation period dropped slightly (680 EH/s) but is currently back above 720 EH/s.

The Michigan State Pension Fund announced the purchase of shares in two Ethereum funds for approximately $11 million. The organisation was one of the top five holders of ETHE. This is the first pension fund initiative since the launch of spot ETH ETFs in July. Bloomberg called the Michigan authorities’ decision a ‘big win for Ethereum’.

According to Arkham, the largest transaction in recent months was sent by the bankrupt cryptocurrency exchange Mt. Gox to two unknown wallets: 34,371 BTC ($2.3 billion).

Opportunities:

Risks:

Inflation

Racial polarization

Democratic turnout was poor

Source:ABC New

Source:CNN