WSJ What’s News - The Cryptocurrency Fueling the Financial Underworld

Episode Date: September 11, 2024

P.M. Edition for Sept. 11. The Wall Street Journal’s Angus Berwick explains how Tether became an important cog in the world economy. And U.S. inflation eased in August to new three-year lows, but core inflation held steady. Journal markets reporter David Uberti on how this could influence the Fed’s interest-rate cut decision. Plus, what Republicans and Democrats are saying after last night’s face-off between Donald Trump and Kamala Harris. Tracie Hunte hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

OCI is the single platform for your infrastructure, database, application development, and AI needs. Do more and spend less like Uber, 8x8, and Databricks Mosaic. Take a free test drive of OCI at oracle.com slash wall street. U.S. inflation eased in August to new three-year lows. And how an unregulated cryptocurrency fuels a parallel economy around the world. We're seeing financial actors from obviously criminals, sanction busters, and even regular citizens turning to Tether as a workaround within the global financial system. Plus Democrats and Republicans weigh in after last night's presidential debate.

It's Wednesday, September 11th. I'm Tracy Hunt for The Wall Street Journal. This is a PM edition of What's News, the top headlines and business stories that move the world today. U.S. inflation eased in August to new three-year lows, teeing up the Federal Reserve to begin gradually reducing interest rates at a meeting next week. The U.S. Labor Department says the consumer price index climbed 2.5 percent from a year earlier, extending its cooling streak to five months. But core inflation, a measure that excludes volatile food and energy costs, held roughly steady

at 3.2%. Here with us now to explain what this could all mean for the economy is the journal's David Uberti. David, what is the market making out of this latest data? Well, the market is more or less thinking that this is a positive report on balance. Like you said, five straight months of overall declines in the inflation rate. But they are sort of zooming in on that core price increase number.

Yeah, core inflation remains consistent. What's driving core inflation? Core inflation stems largely from housing price increases. Those have been very sticky in large part because if you rent your apartment, those leases tend to run 12 months, 24 months, even longer than that. So it takes time for those rollovers to happen over the course of time for renters. So analysts tend to expect that increases in housing prices will gradually moderate over time.

The Fed is meeting next week. What picture is all of this painting for them? So there's a live debate that's been happening in the market and within the central bank over the extent to which or the speed with which to begin cutting interest rates and recurrent levels. Our reporting indicates that that was sort of a decision between 50 basis points, a half percentage point interest rates versus 25 basis points. So a quarter percentage point in interest rates because that housing number was a little bit firmer than anticipated. housing number was a little bit firmer than anticipated. Many of the analysts that we spoke to, as well as some of the traders who place bets on interest rates in the market, are really ramping up those bets on that more moderate pace of monetary easing.

David Oberti is market reporter for the Wall Street Journal. We're exclusively reporting that Price Waterhouse Cooper's U.S. unit is laying off some 1,800 workers, its first formal layoff since 2009. The Big Four accounting firm is also restructuring its technology group to simplify operations and address declining demand for certain advisory services. According to people familiar with the matter, PWC plans to notify those affected in October. U.S. Stocks Reversed Early Declines U.S. stocks reversed early declines and ended the day near session highs, rebounding from a slide that followed the slightly hotter-than-expected reading on inflation.

The Dow added 0.3 percent or about 125 points. The S&P 500 rose 1 percent, while the Nasdaq composite gained 2 percent. In the aftermath of his debate against Kamala Harris yesterday, Republicans are expressing concern about former President Donald Trump's performance. They are also complaining about ABC News' debate moderators. ABC News didn't immediately respond to a request for comment, while Democrats dismissed the complaints as nothing more than whining about the outcome. White House reporter Ken Thomas. Republicans are definitely expressing some frustration in the aftermath of the debate.

There have been complaints that former President Trump faced more scrutiny in that encounter with Vice President Harris. Democrats feel like Harris won the debate. There was overall just this question on whether she could take it to Trump and confront him on a number of issues. And the Democrats we spoke with felt like she passed that with flying colors. It certainly is unclear if a debate like this may change hearts and minds in a big way. We have a very divided polarized electorate, but at the same time, this is an election that's going to be won or lost on the margins. We have seven battleground states and each one of them could hinge on 10 to 15,000 votes. So collectively you're talking about

the number of people who could fit into a large NFL stadium who may decide the outcome of this election. No vote today. That's what Republican House Speaker Mike Johnson had to tell reporters after opposition from rank-and-file GOP members forced him to scrap a planned vote to avoid a government shutdown. The proposal would extend government funding for six months beyond the September 30th end of the current fiscal year. That would give lawmakers more time to settle on new spending levels. The bill also includes a provision that would require voters to provide proof of citizenship to register.

Some Republicans said kicking the next deadline to March would prevent them from implementing spending cuts sooner. Others say the proposal would hurt military priorities. House Democrats favor a three-month extension instead, and they oppose the voting provision. Lawmakers need to pass a deal to continue funding federal agencies beyond September 30th to prevent a partial government shutdown. Coming up, the shadow dollar that's fueling the financial underworld. That's after the

break. AI may be the most important new computer technology ever, but AI needs a lot of processing speed, and that gets expensive fast. Upgrade to the next generation of the cloud, Oracle Cloud Infrastructure, or OCI. OCI is the single platform for your infrastructure, database, application development, and AI needs. Do more and spend less like Uber, 8x8, and Databricks Mosaic. Take a free test drive of OCI at oracle.com slash wall street, oracle.com slash wall street. A giant unregulated currency is undermining America's fight against arms dealers, sanctions

busters and scammers. Almost as much money flowed through its network last year as through Visa cards. And it has grown into an important cog in the global financial system, with as much as $19 190 billion dollars changing hands daily. Its name? Tether. And it's basically a digital US dollar. It's a cryptocurrency privately controlled by secretive owners in the British Virgin Islands and its activities are largely hidden from governments. Angus Berwick has been following Tether's rise for the Wall Street Journal and he joins us now.

So Angus, why Tether? Theether's rise for the Wall Street Journal and he joins us now. So, Angus, why Tether? The importance that it exerts over the entire crypto industry has only continued to grow. But I think what's really kind of triggered our interest is how Tether's importance has since seeped into the kind of regular financial world. And we're seeing financial actors from obviously criminals, sanction busters and even regular citizens turning to Tether as a work around within the global financial system.

So, for instance, Venezuela, I mean, Venezuela has been under US sanctions for a number of years, which has cut off regular citizens and government actors from global banking channels. What our reporting found is that from about 2020, when the government passed a law enabling the state to use crypto, the state oil firm, Bedevesa, started to use Tether to receive payment for its oil cargoes.

And through these sort of channels, the oil firm was able to ride out the impact of US sanctions. And why has it gained so much popularity? What we see is that the places where it is most popular are in countries where citizens and companies have difficulty accessing the global banking system. And often that's because those countries have been targeted by sanctions from the US or other countries.

Or it's local factors like hyperinflation, kind of economic mismanagement, which means that local banking functions just aren't working very well. But the main kind of attractions of Tether are its stability, its pegged one-to-one to the US dollar, its acceptance. There are people willing to trade and accept Tether pretty much across the entire planet at this point, and it's liquidity. The way that Tether maintains this peg is important.

They say that any holder of Tether can go to the company and swap their token for a US dollar. Did we get any comment from Tether about our story? For our article, Tether didn't respond to our request for comments. In the past, the company has said that they're building a kind of a global, fairer financial ecosystem, in particular, connecting kind of developing economies into global financial flows. They've also said that they're committed to combating illegal activity in this ecosystem and that they voluntarily abide by US sanctions lists in order to stop kind of sanctioned actors moving funds

through their networks. Angus Berwick is a reporter for The Wall Street Journal. Harvard says it's enrolled fewer students who identified as Black in its class of 2028, the first group to enter the university after the Supreme Court ruled last summer that schools can't consider race in admissions. 14% identified themselves as Black or African American. That's down from 18% for the class of 2027. The share of students who didn't disclose their race or ethnicity rose to 8% from 4%. Meanwhile, the share of students who said they were Hispanic or Latino rose to 16% from 14%. And enrollment of students who identify as Asian-American remained unchanged at 37%.

Other schools have reported a decline in new students from racially diverse backgrounds, particularly Black students. A recent examination by the Wall Street Journal revealed that Amherst College, the University of North Carolina at Chapel Hill, and Brown University all enrolled fewer black students. And finally, tech companies have embraced the efficiency that artificial

intelligence has brought to their hiring process. But now they're having a hard time dealing with candidates who are using AI themselves to misrepresent their experience and identities. Our tech news briefing podcast spoke with reporter Katie Bindley about how job seekers are using these tools. Companies I've spoken with have said, you've got a lot of people looking for work at once, and then you've got these new tools at their disposal. So what candidates can do is basically use generative AI tools to build them a custom resume for each job that they're applying to. And then you can just send out so many more

resumes than you otherwise would have been able to. It totally makes sense that people are using what tools are at their disposal to help expedite the process of applying to jobs. What ends up happening though, the result that is an issue is that the volume of applications is so large that the companies are then saying that they are having a hard time sifting through candidates and they believe that they might be missing out on really good candidates because of the volume. And you can hear more about how employers are managing these challenges in tomorrow's tech news briefing podcast. And that's what's news for this Wednesday afternoon.

Today's show was produced by Pierre Bienneme and Anthony Bansi with supervising producer Michael Cosmitas. I'm Tracy Hunt for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening. signals to prevent ransomware and AI attacks that target business. Zscaler Zero Trust plus AI. Learn more at zscaler.com slash zero trust AI.