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Today is Friday, August 22nd, and this is your FT News Briefing.
Pump and dump stock scams are on the rise. and US President Donald Trump is going after the Fed yet again.
Plus, the European Union is working on a digital euro and, not to be dramatic, the stakes are pretty high.
If there's no dominant euro stablecoin, it might mean that the dollar becomes even more dominant across the world.
I'm Mark Filippino, and here's the news you need to start your day.
European Union officials are changing their plan for a digital euro.
That's according to people familiar with the matter.
The block is speeding up the timeline and considering using a public blockchain.
And that's because the EU is worried about competing with the U.S. now that the American stablecoin market is advancing.
It's mostly dominated by digital dollars. the benefits and the potential risks is the FT's Niku Asghari.
She covers digital markets. Hey, Niku. Hi.
So first off, just tell me, what would a digital euro look like?
Digital euro is at the moment theoretical, and it's something that the European Central Bank and officials in the EU have been considering since 2023 whether to create one and how to create it It would be a digital representation of the euro, like how we have cash, but as cash usage is declining across the EU, across the world, the idea is that this would be a digital version of it And how is it being threatened by the advancement of U.S. stablecoins?
The US stablecoins, mainly the ones created by crypto companies Circle and Tether... dominate the market.
They're worth hundreds of billions of dollars.
Last month, the US passed a landmark stablecoin law And that has prompted a lot of these big US banks like Citi, like JP Morgan, to say, hey, we're also going to look at and possibly launch our own state. stablecoins, our own dollar stablecoins, and the worry in that EU is that the global stable coin market, if it's dominated by dollars, means that people in Europe are using dollar tokens instead of potentially using euro tokens.
And that's threatens the sovereignty, the autonomy of the EU.
If people are increasingly using stable coins and increasingly using dollar backed ones, that there becomes this excessive reliance on US dollars. on essentially foreign payments instead of domestic payments.
Okay, so if I understand this correctly, Uh, the private us stable coin market, a lot of which is pegged to the dollar. is on the rise.
And the EU wants to make sure that the digital euro is used around the world and isn't being overshadowed by...
US dollar peg stablecoins. Is that right?
Yes, absolutely. They're just worried about... the future and the use of the euro compared to the booming future and use of these dollar-pegged stablecoins.
So, Niku, tell me a little bit more about what the EU is planning to do to make sure that a digital euro is competitive.
Well, they've been looking at creating a digital euro for a few years, but now officials in the EU have been thinking, hey, we need to speed up our plans.
But also now, I've spoken to people who say that the ECB and European officials are considering creating this token on a public blockchain for example something like ethereum or solana rather than what is widely expected for it to be run on a private system that's managed and overseen by the ECB.
And that has its pros and it has its cons.
I mean, if it's run on a public blockchain, Anyone can use it across the world and all the transactions are visible and that raises privacy concerns.
But on the other hand, it might mean that there'll be more uptake and the circulation, the size of the market will grow much quicker.
I should mention that the ECB said they're still considering different technologies and that they haven't made a final decision yet.
Nico, we've done a few segments on the briefing before on whether widespread adoption of digital currency is issued by a central bank was even going to happen.
Been a lot of chatter about this. Have we now tipped to a point where This is all inevitable?
I'm not sure. I mean, different countries are operating at different speeds.
China already has a digital yuan. It runs privately, but it is being used.
Whereas you've got, as we've discussed, the EU and then also the UK that are still... working out if they want to do this, how they want to do this.
So it's not clear yet how this is all going to shake out.
That's the FT's Nico Asghari. Thanks, Nico.
Thanks. The standoff between President Donald Trump and the Federal Reserve has taken a new twist.
On Wednesday, he called for Fed Governor Lisa Cook to resign And yesterday, the U.S.
Department of Justice wrote to Fed Chair Jay Powell urging him to remove Cook.
The pressure on Cook kicked off after a Trump ally accused her of falsifying documents for a housing loan.
The president then called on the DOJ to investigate.
This all comes as Trump continues to wage war on the central bank, He's called Powell a numbskull and a moron for refusing to cut interest rates.
The president recently nominated a loyalist, Stephen Myron, to fill a vacancy on the bank's board.
For her part, Cook has said she refuses to be bullied out of her job.
Pump and dump stock scams could be on the rise again in the US.
Investors lost billions of dollars last month betting on a handful of small U.S.-listed Chinese stocks.
The share of values plummeted shortly after being heavily promoted on social media.
Here to explain what happened is the FT's George Steer.
Hey, George. Hey. So, George, just tell me in a little bit more detail what exactly happened with these stocks.
So these seven stocks are just the tip of the iceberg, really.
All of them are listed on NASDAQ. All of them have their main operations in China. and all of them surged by hundreds, sometimes thousands of percent in the weeks leading up to COVID. very sudden sell-offs in July, wiping more than $3.7 billion off their combined market value. which kind of backs up what the FBI said in a notice last month.
They said that they'd seen a 300% increase year on year in victim complaints referencing pump and dump stock fraud.
Okay, that seems like a lot, but let's back up a little bit and explain to me how this works.
What exactly is a pump and dump scam? Thank you.
Yeah, so a pump and dump is a kind of securities scam, stock scam, in which people with sizable stake in a company, not anyone connected to that company necessarily. they will entice other investors, mostly retail investors, amateurs, into buying shares in this company, promising good news, promising that it's gonna go up and up and up.
But the insiders who control probably a larger proportion of the company's outstanding shares than they're letting on once they're happy with how high they've pumped the price of that. stock.
They can sell their stake basically in one fell swoop and In doing so, they caused a crash for the company's share price.
You talked to some of the alleged victims.
What did they tell you? Is there one story that sticks out in particular?
Everyone I spoke with had a variation of the same experience.
They all were on Facebook, had seen an advert promoted by someone famous either a a TV anchor a well-known investor someone like that saying, hey, look, click on this ad.
We promise to give you double digit returns over the next however many months.
After clicking on that ad, they're added to WhatsApp groups.
And they spent often weeks of their time on these groups, not investing any money at first, but kind of having... a dialogue with the people running these group chats.
And then like weeks later, once they trusted that they were in something that looked legitimate.
They started spending their savings on buying stocks that were supposedly about to go up.
And why are we seeing these kind of scams now?
Is there anything that we can point to? So it's important to note that pump and dumps aren't a new phenomenon.
They've... been around for as long as stock markets have been around.
They were last a big problem in the US at least, in 2020 and 2021, when we were in the middle of a kind of an unusual pandemic era bull run.
A lot of people stuck at home. Yeah, exactly.
A lot of people with extra money sloshing around.
So times have changed since then, but the common denominator is that markets are very close to all time highs.
The S&P 500 has hit dozens of record highs this year.
So I think the people running these scams exploit the positivity. prevailing in the wider investment community so i think yeah that's the correlation these kinds of scams seem to multiply when markets are doing very well.
Is there anything being done to crack down on these alleged pump and dump scams?
Who would that be? Who's supposed to be watching over this sort of stuff?
Well, we spoke with Meta, who said that they are... doing everything they can to remove the adverts that people click on.
But I guess the body... that is ultimately responsible for ensuring investor safety in the US is the Securities and Exchange Commission.
We went to them for comment. They provided no comment.
NASDAQ. the kind of tech-heavy stock exchange where all of these stocks are listed, provided no comment.
Perhaps one of the reasons why a lot of the regulatory bodies were reluctant to say anything is because these pump and dumps often involve very small stocks and retail investors.
The losses on their own are very small. Cumulatively, they're large.
But it's an easy problem to ignore. I mean, most... big investors are not looking at microcaps, at the Chinese penny stocks that we mentioned in the story.
They're looking at the NVIDIAs of this world, Meta. alphabet, and so on.
George Steer covers U.S. capital markets for the FT.
Thank you so much, George. Thank you. Before we go, I want to give you a heads up that in a few weeks, I'm going to be hosting a session at FT Weekend Festival in London.
Join me and a few other folks from the FT Podcast team on Saturday, September 6th, We're gonna be talking about politics, podcasts, and so much more, so make sure you swing by and say hello.
We're actually offering 10% off your ticket using a promo code that you can find in our show notes.
This has been your daily FT news briefing.
Check back next week for the latest business news.
The FT News Briefing was produced this week by Katya Kumkova, Sonia Hudson.
Fiona Simon, Ethan Plotkin, Josh Gabbert-Doyon, and meet Mark Filippino.
Our show is mixed by Blake Maples and Kelly Gary.
We had help this week from Derek Brower, David DaSilva, and Gavin Kalman.
The FT's acting co-head of audio is Topher Forges, and our theme song is by Metaphor Music.
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