The key economic graphs that define 2023
How to sum up a year like 2023?
Perhaps the best thing to say is that it was considerably less exciting – as far as the economics went – than 2022.
And that’s probably no bad thing, because in 2022 much of what passed for excitement was extremely painful: the onset of a cost of living crisis which caused the biggest fall in British standards of living in modern record, a financial meltdown in the wake of Liz Truss‘s mini-budget.
The plan, when Rishi Sunak and Jeremy Hunt came into office, was always to make the economy boring again, and to some extent they succeeded.
Most obviously, while the government’s cost of borrowing did later rise to above the Truss era levels, it was largely down to higher inflation expectations and not to fears over the credibility of UK government policy.
This time last year, most people assumed – present company included – that 2023 would be a year of recession for the UK.
And for much of the year that’s precisely what it looked like.
France and Germany both tipped into technical recession (the definition of which is that you suffer two successive quarters of economic contraction). The UK was expected to do likewise.
Economic growth
But somehow, it never happened.
At least, not quite.
Instead, the economy more or less flatlined for most of the year – though figures published by the Office for National Statistics just before Christmas showed the economy contracted slightly, by 0.1% in the third quarter.
Either way, this can hardly be held up as a positive result. Normally you’d expect the UK’s gross domestic product to grow by around 2-2.5% each year.
However, a negligible amount of economic growth is more than most expected this year – even if (see below) it was helped by a colossal increase in migration.
Technically, this meant the prime minister met one of his much-publicised pledges he made to the country at the start of the year – to grow the economy.
As you can see from the chart, this isn’t much to boast about, especially set against the pre-pandemic path, but it is certainly better than what many other European countries experienced.
The Cost of Living
Another of the prime minister’s pledges was to halve inflation this year.
At the time he made it, this pledge looked pretty unspectacular, given a) controlling inflation is the Bank of England‘s task, not the government’s and, anyway, b) pretty much every economist was expecting inflation to halve this year anyway.
But over the course of the year inflation defied many of those economists’ forecasts, with the upshot that by the summer that pledge looked quite risky.
But then, no sooner had inflation surprised on the upside, it surprised on the downside, falling faster than most economists expected.
By the end of the year the consumer price index rate of inflation was down to 3.9% which is nearly in “normal” territory, albeit considerably higher than the Bank of England’s 2% target.
But while that meant the rate was indeed halved (actually more than halved) over the year, this hardly ends the cost of living crisis.
After all, inflation is simply the rate at which prices are changing each year. And right now prices are still 15% higher than they were a couple of years ago.
It’s that jump in levels which is causing severe economic hardship right now.
Life is not getting any less expensive. It’s just getting expensive a little slower than it was a year or so ago.
Interest rates
It’s tempting to lump interest rates along with the other things that didn’t turn out as bad as expected, but here the story is more complicated.
True: rates never rose to the 6% highs that were once expected around the time of the Truss mini-budget and also during the inflation spike during the Hunt chancellorship.
But they nonetheless rose far higher than most had expected at the start of the year, up to a peak of 5.25%. As the year ended, the Bank was still insisting that they would stay up there for some time (and some members were still voting for higher rates) but most investors believe they will be cut numerous times in the new year – down as far as 4% by the end of the year.
That has a bearing on the mortgage rates most of us pay, since fixed-rate mortgages are mostly priced off what’s going on in financial markets rather than the Bank’s official rate. The upshot was that the going rate for two and five-year fixed-rate mortgages were falling sharply by the end of the year.
Tax burden
Another hot topic this year was taxation.
The government insisted repeatedly that it wants to bring it down, and in the Autumn Statement, the chancellor announced a series of cuts to both workers’ taxes and taxes on business investment.
The upshot was that the tax burden wasn’t due to rise as high as it might otherwise have done.
However, the overall burden is still due to hit the highest level since the 1940s, in large part because of the fact that the levels at which people are pulled into higher tax bands has been frozen.
Higher wage inflation (due to the cost of living crisis) means more people are seeing their earnings taxed at those higher levels.
This so-called “fiscal drag” means the nation is shifting from being a medium-tax country to a high-tax country.
But so too are most developed nations, as the cost of running expensive healthcare systems rises, along with the average age of their populations.
Migration
While the government spent much of its energy talking about illegal immigration and the boats coming across the channel, the real quantitative story here was actually legal migration, which rose, according to the data released this year, to an unprecedented level of 745,000 in 2022.
That rise was extraordinary by any standards.
When looked at as a share of the population, it amounts to comfortably the biggest rise in net migration since records began. And, strikingly, experts said that this was primarily a consequence of the new rules brought in after Brexit, which made it easier for workers and students from outside Europe to come to Britain.
Migration might have been a big issue during the EU referendum, but the numbers today are considerably higher than they were back then – but Britain has swapped EU migrants with those from outside the continent – primarily from India and China.
European Union regulators are reportedly mulling a $1 billion fine against Elon Musk’s X, taking into account revenue from his other ventures, including Tesla and SpaceX, according to The New York Times.
EU regulators allege that X has violated the Digital Services Act and will use a section of the act to calculate a fine based on revenue that includes other companies Musk controls, according to an April 3 report by the newspaper, which cited four people with knowledge of the plan.
Under the Digital Services Act, which came into law in October 2022 to police social media companies and “prevent illegal and harmful activities online,” companies can be fined up to 6% of global revenue for violations.
A spokesman for the European Commission, the bloc’s executive branch, declined to comment on this case to The New York Times but did say it would “continue to enforce our laws fairly and without discrimination toward all companies operating in the EU.”
In a statement, X’s Global Government Affairs team said that if the reports about the EU’s plans are accurate, it “represents an unprecedented act of political censorship and an attack on free speech.”
“X has gone above and beyond to comply with the EU’s Digital Services Act, and we will use every option at our disposal to defend our business, keep our users safe, and protect freedom of speech in Europe,” X’s global government affairs team said.
Source: Global Government Affairs
Along with the fine, the EU regulators could reportedly demand product changes at X, with the full scope of any penalties to be announced in the coming months.
Still, a settlement could be reached if the social media platform agrees to changes that satisfy regulators, according to the Times.
One of the officials who spoke to the Times also said that X is facing a second investigation alleging the platform’s approach to policing user-generated content has made it a hub of illegal hate speech and disinformation, which could result in more penalties.
X EU investigation ongoing since 2023
The EU investigation began in 2023. A preliminary ruling in July 2024 found X had violated the Digital Services Act by refusing to provide data to outside researchers, provide adequate transparency about advertisers, or verify the authenticity of users who have a verified account.
Related: Musk says he found ‘magic money computers’ printing money ‘out of thin air’
X responded to the ruling with hundreds of points of dispute, and Musk said at the time he was offered a deal, alleging that EU regulators told him if he secretly suppressed certain content, X would escape fines.
Thierry Breton, the former EU commissioner for internal market, said in a July 12 X post in 2024 that there was no secret deal and that X’s team had asked for the “Commission to explain the process for settlement and to clarify our concerns,” and its response was in line with “established regulatory procedures.”
Musk replied he was looking “forward to a very public battle in court so that the people of Europe can know the truth.”
Source: Thierry Breton
Magazine: XRP win leaves Ripple a ‘bad actor’ with no crypto legal precedent set
US crypto exchange Coinbase has filed with the US Commodity Futures Trading Commission (CFTC) to launch futures contracts for Ripple’s XRP token.
“We’re excited to announce that Coinbase Derivatives has filed with the CFTC to self-certify XRP futures — bringing a regulated, capital-efficient way to gain exposure to one of the most liquid digital assets,” stated Coinbase Institutional on April 3.
The firm added that it anticipates the contract going live on April 21.
According to the certification filing, the XRP (XRP) futures contract will be a monthly cash-settled and margined contract trading under the symbol XRL.
The contract tracks XRP’s price and is settled in US dollars. Each contract represents 10,000 XRP, currently worth about $20,000 at $2 per token.
Contracts can be traded for the current month and two months ahead, and trading will be paused as a safety measure if spot XRP prices move more than 10% in an hour.
“The exchange has spoken with FCMs (Futures Commission Merchants) and market participants who support the decision to launch a XRP contract,” the firm stated.
Coinbase is not the first to launch XRP futures in the United States. In March, Chicago-based crypto exchange Bitnomial announced the launch of the “first-ever CFTC-regulated XRP futures in the US.”
XRP futures trading is available on many of the world’s leading centralized crypto exchanges, such as Binance, OKX, Bybit and BitMEX.
Funding rates remain negative
In late March, Cointelegraph reported that XRP derivatives’ funding rates had flipped negative as investor sentiment turned bearish.
Related: XRP funding rate flips negative — Will smart traders flip long or short?
Funding rates are periodic payments between traders in perpetual futures markets that help keep the futures price aligned with the spot price. Positive funding rates mean that long traders (buyers) pay short traders, while negative funding rates mean short traders (sellers) pay long traders.
When funding rates go negative, it means short traders are willing to pay a premium to maintain their positions, indicating strong conviction from bearish derivatives traders.
XRP funding rates remained negative on major derivatives exchanges as of April 4, according to CoinGlass.
XRP OI-weighted funding rates. Source: CoinGlass
Magazine: XRP win leaves Ripple a ‘bad actor’ with no crypto legal precedent set
Former Binance CEO Changpeng “CZ” Zhao will begin advising the Kyrgyz Republic on blockchain and crypto-related regulation and tech after signing a memorandum of understanding with the country’s foreign investment agency.
“I officially and unofficially advise a few governments on their crypto regulatory frameworks and blockchain solutions for gov efficiency, expanding blockchain to more than trading,” the crypto entrepreneur said in an April 3 X post, adding that he finds this work “extremely meaningful.”
His comments came in response to an earlier X post from Kyrgyzstan President Sadyr Zhaparov announcing that Kyrgyzstan’s National Investment Agency (NIA) had signed a memorandum with CZ to provide technical expertise and consulting services for the Central Asian country.
The NIA is responsible for promoting foreign investments and assisting international companies in identifying business opportunities within the country.
Source: Changpeng Zhao
“This cooperation marks an important step towards strengthening technological infrastructure, implementing innovative solutions, and preparing highly qualified specialists in blockchain technologies, virtual asset management, and cybersecurity,” Zhaparov said.
The Kyrgyzstan president added: “such initiatives are crucial for the sustainable growth of the economy and the security of virtual assets, ultimately generating new opportunities for businesses and society as a whole.”
Kyrgyzstan, which officially changed its name from the Republic of Kyrgyzstan to the Kyrgyz Republic in 1993, is a mountainous, land-locked country.
It is considered well-suited for crypto mining operations due to its abundant renewable energy resources, much of which is underutilized.
Over 30% of Kyrgyzstan’s total energy supply comes from hydroelectric power plants, but only 10% of the country’s potential hydropower has been developed, according to a report by the International Energy Agency.
CZ has met with several other state officials in Asia
Malaysia also recently tapped CZ for guidance on crypto-related matters, with Prime Minister Anwar Ibrahim meeting him personally in January.
CZ has also met with officials in the UAE and Bitcoin-stacking country Bhutan — however, it isn’t clear what those meetings entailed.
Related: Is Bitcoin’s future in circular economies or national reserves?
CZ’s latest pursuits come a little over six months after he was released from a four-month prison sentence in the US for violating several anti-money laundering laws.
Since being released, CZ has made investments in blockchain tech, artificial intelligence and biotechnology companies.
CZ also recently donated 1,000 BNB (BNB) — worth almost $600,000 — to support earthquake relief efforts in Thailand and Myanmar after the natural disaster in late April.
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