Easy Part Done, Biden Moves to Contentious Issues; Could the Fed Support a New Currency?

Insights and Market Perspectives

Author: Greg Valliere

June 14, 2021

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THE BIDEN LOVE-IN: Whether it was tea with the Queen, joking around with Boris Johnson, or bonding with Emmanuel Macron, Joe Biden’s European trip has gotten off to a very good start. Happy photo ops could push Biden’s job approval rating past 60% positive.

G-7 LEADERS AGREED to condemn China’s human rights abuses and its “non-market economic practices,” and Biden got agreement on an investigation into Beijing’s handling of the Coronavirus, sending a signal that U.S-China relations
may stay rocky for months to come.

WHILE THERE WAS SEEMING UNITY ON CHINA, some issues were not resolved — including the timing of a phase-out on the use of coal, or an opening of the border between the U.S. and Canada, which may not come until later this summer.

NEVERTHELESS, THE CLEAR TAKE-AWAY WAS THAT BIDEN is the anti-Trump, a gregarious politician, eager to cut deals. “The U.S. is back,” was the mantra, but now Biden faces contentious issues, starting with today’s meetings in Brussels, where Afghanistan will be a major topic.

BIDEN APPARENTLY DID NOT CONSULT WITH ALLIES before announcing a Sept. 11 deadline for the withdrawal of U.S. forces, and many countries with troops in Afghanistan want assurances that there will be an orderly pull-out; 36 countries — including Germany, Italy and the U.K. — have troops stationed there. At the least Biden will have to offer support for counterterrorism operations as troops depart.

THE HIGHLIGHT OF BIDEN’S TRIP obviously will be Wednesday’s meeting with Vladimir Putin, who Biden has insulted over the years. Biden once told Putin to his face that he “has no soul,” and recently called him “a killer.”

YET PUTIN SAID LAST WEEK that he can deal with Biden, so there may be some modest agreements on issues like helping Syrian refugees. But a meaningful deal on malware attacks or Russia’s designs on Ukraine seem highly unlikely this week. Actually, some smiles or light banter before and after the summit may be as much as can be expected.
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IN A POTENTIALLY ASTONISHING DEVELOPMENT, THE FEDERAL RESERVE reportedly is considering the possibility of launching its own virtual currency, “a move that could shake up banks, give millions of low-income Americans access to the financial system and fortify the dollar’s status as the world’s reserve currency,” according to an article in Politico this weekend.

THE FEDERAL RESERVE BANK OF BOSTON and MIT’s Digital Currency Initiative are aiming next month to publish the first stage of their work to determine whether a Fed virtual currency could succeed on a practical level, according to Politico.

MIT’S LEAD EXPERT ON PROJECT called it “a once-in-a-century opportunity to redesign the dollar” in a way that supports innovation much like the internet did.

NEEDLESS TO SAY, even a hint of something like this has upset U.S. banks; they have begun lobbying against the idea, which would need Congressional approval. So this is a long way from enactment, but it’s an issue that won’t go away, and many members of Congress are intrigued by it.