Ed Yardeni on Tariffs and Blockchain

by Marilou Moursund on March 15, 2018

in currencies,Foreign Markets,free trade,Technology

We have all heard about the wild ascent and subsequent fall in the price of Bitcoin, and shortening cryp

tocurrency to crypto in your conversation is a sure fire way to sound cool.  However, the underlying technology driving Bitcoin, called blockchain, has many theoretical uses.  From Yardeni Research’s Morning Briefing today:

1) Blockchain basics. We’ve long been fans of blockchain, the technology behind bitcoin and other cryptocurrencies. It’s a distributed ledger, or database, where data of all sorts is housed in multiple locations, so that, in theory, it cannot be hacked. To change the data, it must be changed in all of the locations, and all of the holders of the data must agree to the change.

(2) Spreading fast. The implementation of blockchain is gaining momentum. A 3/11 WSJ article gave some examples: “Already, 1.1 million items sold or on sale at Walmart are on a blockchain—including chicken and almond milk—helping the company trace their journey from manufacturer to store shelf. Global shipping giant Maersk uses the same technology from IBM to track shipping containers, making it faster and easier to transfer them and get them through customs. … Everledger, a company started in April 2014 with the intention of creating a blockchain-based registry of every certified diamond in the world, already has 2.2 million diamonds in its registry. It’s adding about 100,000 diamonds a month, says Leanne Kemp, chief executive and founder.”

Other potential uses for blockchain include tracking property titles, loans, deposits, derivative contracts, stocks, and bonds. It could be used by retailers to ensure their goods are indeed organic or being produced using fair-trade or sustainable practices.

Ed then goes on to postulate that blockchain could be used instead of tariffs to keep steel from being dumped here at unfair prices:

(4) The blockchain solution. If the US required the registration of imported steel on a blockchain system, it could easily determine where the steel was being produced and what price was being asked for it. The government could more precisely track whether Chinese steel was being dumped in Canada and then sold into the US at below-market prices. And it could set limits on how much steel could be sold at below-market prices—thereby targeting the below-priced steel shipment instead of any specific country.

“The use of the ‘smart contracts’ created by blockchain technology allows for the irrefutable, certainty of the origin of any product produced or [traded] around the world. By tagging the origin of products, it’s no longer ‘trust and verify’, it becomes proof or no trade! The supply chain will never be the same,” noted a 3/13 CNBC commentary by Jack Bouroudjian, chief economist and co-founder of UCX, a secondary marketplace for cloud computing resources. He continued: “One thing we should all agree on is that you can’t fight a digital economic war with analog ideology. As the creators and proliferators of American free market style capitalism around the world, it becomes the job of the U.S. to lead. Smart contracts and blockchain technology will be much more effective than any tariff ever established.”

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