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Markets

Gold: Venezuela to Sell Gold Ingots to Pensioners as Inflation Soars

President Nicolas Maduro said Venezuela will begin to sell certificates backed by gold ingots as a savings mechanism starting next month. The certificates, backed by 1.5 grams and 2.5 grams of gold, are meant as tools for pensioners and others to save money and use as credit lines to acquire cars and other items, Maduro said in a televised address. The gold is meant as a more stable way for Venezuelans to hold their diminishing funds as inflation in the socialist nation runs at over 100,000 percent.

Earlier this month Maduro announced a 95 percent currency devaluation and a minimum wage hike of more than 3,000 percent, decisions that were a tacit acceptance of the ubiquitous black-market exchange rate. They accompanied the roll-out of new banknotes that dropped five zeroes — the second time such a measure was implemented in the past decade — to simplify transactions.

Starting Sept. 11, the gold certificates will be sold at around 3,500 sovereign bolivars and 5,800 sovereign bolivars depending on the weight.

During his address Maduro also appointed William Contreras as head of the newly-formed Interior Commerce Ministry. Contreras used to serve as the director of Venezuela’s pricing authority. B

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Economics & Trade

US Consumer Debt: US student debt balloons past $1.5tn 

The US student loan burden has swelled past $1.5tn despite actual lending volumes falling for more than half a decade, as struggling students fall behind on their payment plans and debt relief programmes fail to offer sufficient succour. The overall size of US student debt has grown by $500bn since the 2010-11 academic year, according to a report by S&P Global, but the credit rating agency notes that loan origination has declined every year since then.

That has been caused by payment adjustment schemes that offer some short-term relief but add to the overall long-term burden by reducing the minimum payment without lowering the interest rate, according to John Anglim of S&P.

The US student loan delinquency rate fell to a 12-year low of 8.8 per cent in the second quarter of 2018, and the size of the pool of bonds backed by student loans has also gradually declined, from $242.6bn a decade ago to $175.6bn at the end of the second quarter.

Nonetheless, student debt remains the worst-performing area of consumer credit. Brookings, the think-tank, warned in a January report that according to the default trends of past age cohorts, as many as 40 per cent of borrowers could default on their student loans by 2023. FT

Turkey: As Turkey Teeters, Germany Considers Offering a Financial Lifeline 

The German government is considering providing emergency financial assistance to Turkey as concerns grow in Berlin that a full-blown economic crisis could destabilize the region. While the talks are at an early stage and may not result in any aid, the possibilities being discussed range from a coordinated European bailout similar to the kind deployed during the eurozone debt crisis to project-specific loans by state-controlled development banks and bilateral aid.

Berlin fears a meltdown of the Turkish economy could spill over into Europe, cause further unrest in the Middle East and trigger a new wave of immigration toward the north. Other European governments have grown equally concerned. Hosting his Turkish counterpart in Paris on Monday, French Finance Minister Bruno Le Maire said it was important to support Turkey’s efforts to repair its economy.

The collapse of the lira—it has lost 40% of its value against the dollar this year—has pushed up inflation and put pressure on companies and individuals who have loans denominated in foreign currency. The threat of mass defaults, in turn, has been weighing on Turkish banks. WSJ

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Services

F&B: How Seltzer Is Upending Coffee and Beer

Sparkling water sales are soaring in the U.S. as consumers  xditch soda for healthier, more natural beverages. And with that explosion has come a wave of variants: caffeinated and alcoholic versions, sparkling coconut water and coffee, even seltzer laced with cannabis. Americans will buy an estimated 821 million gallons of sparkling water this year, including imports like S. Pellegrino and domestic brands like LaCroix, according to industry tracker Beverage Marketing Corp. That is nearly three times as much as 2008.

The small-but-growing caffeinated sparkling water category—including brands such as Phocus and Limitless—offers drinks with an energy kick minus the sweeteners. Anheuser-Busch InBev , the world’s largest brewer, last year bought Hiball Inc., a San Francisco-based company that makes caffeinated sparkling water. And the flavored-water company Hint Inc. plans to release a caffeinated fizzy water this fall.

Meanwhile, sales of hard seltzer are small but surging, stealing market share from beer. Sales of alcoholic fizzy water totaled $295 million in the year ended July 14, up from $106 million the previous year and $11 million two years ago, according to Nielsen. Hard seltzer now represents about 10% of all flavored malt beverage sales in the U.S. WSJ

F&B: Weed beer is near, and it’s gonna get weird 

Giants in the beverage industry such as Molson Coors Brewing Co. and Constellation Brands Inc. are making bold bets on weed beer as beer sales continue to drop across the U.S., and more are expected to jump on the bandwagon, even though the concept of weed beer has not yet proved to be popular. Beverage sales of $1.8 million accounted for just 0.7% of marijuana sold in June in California — the largest single market in North America — while the vast majority of pot sales, $175.7 million, was for products meant to smoke or vape.

Dealing in drinkables is fraught with regulatory issues. Alcohol rules can vary from state to state and have caused headaches for the alcohol industry even before introducing marijuana into the mix. Cannabis consumption is legal in only a few U.S. states, though a large potential market will open when legalization takes hold throughout Canada in October.

And beyond just the complex and changing legal landscape, there are issues with consumer knowledge of the differences between drinking a beer and a drink laced with cannabis extracts. Breweries, like Two Roots, are experimenting with cannabis-derived products in different ways to control the effects of their drinks. MW

Newspapers: U.S. International Trade Commission overturns import duties on Canadian newsprint

The U.S. International Trade Commission has overturned duties imposed on Canadian newsprint by the U.S. Commerce Department earlier this year. The five commissioners voted unanimously Wednesday that imports from Canada of uncoated groundwood paper, used for newspapers, commercial printing and book publishing, do not injure U.S. industry.

The U.S. Commerce Department had imposed anti-dumping and countervailing duties of various levels on Canadian producers including Resolute Forest Products, Catalyst Paper Corp., Kruger Inc., and White Birch Paper.

The U.S. International Trade Commission’s vote overrules the findings of the Commerce Department. The vote was welcome news to Montreal-based Resolute, the largest newsprint producer in the world, and comes after U.S. newspapers had campaigned to lift the duties that had pushed a core expense higher and forced layoffs at some papers. The U.S. imported an estimated US$1.21 billion worth of uncoated groundwood paper last year.

In January, the U.S. International Trade Commission reversed nearly 300 per cent duties imposed on Bombardier’s C Series aircraft after a complaint by rival Boeing. The tariffs had helped prompt Bombardier to sell the aircraft to Airbus, which renamed it the A220. G&M

Prisons: California Eliminates Cash Bail, Accelerating a National Trend

California Gov. Jerry Brown signed legislation eliminating cash bail for people accused of crimes, in a major step forward for a growing national movement. Several U.S. cities and states have in recent years reduced their reliance on bail, arguing the system unfairly confines poor people, creating overcrowded jails and extra costs for taxpayers. California, which has historically set some of the highest bail amounts in the nation, is now the largest state to do so.

When the law goes into effect on Oct. 1, 2019, people accused of crimes in California will no longer be required to put up money in order to “make bail” and be released before trial. Instead, public employees will conduct a risk assessment and then recommend to a judge whether the accused should be kept in jail or be released either on their own recognizance or with conditions such as home detention or GPS trackers. Prosecutors will also be able to request detention.

Kentucky, New Jersey and the District of Columbia have already almost eliminated bail in practice, said Amber Widgery, a senior policy specialist for the National Conference of State Legislatures. California’s new law goes further than those states have by officially ending the practice, rather than just ceasing its use in most cases, Ms. Widgery said. WSJ

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