It is hard to depict an accurate financial world in 2030, especially when there are so many variables that are still unknown. However, and using the data we hold right now, Deutsche Bank have carried out a research to try to unravel what the future of the financial world would look like ten years from now. In ‘Imagine 2030’ by Simon Pearson , the institution presents 24 contrarian ideas for how the 2020s may evolve because they believe it is best to be prepared for the unexpected themes that may arise over the coming decade. “After all, if the 2010s have taught us anything it is that the trends of the prior decade are no guide for the decade to come.”
The report highlights many external developments that might reshape the financial world. Decades of low labour costs, which in turn hold together the FIAT money system, might unravel in the ten next years, and demand for alternative currencies, from gold to crypto, putting at risk the current monetary system.
Likewise, this change in labour costs might ultimately cause the end of high profit margins. “While corporate profit margins are at multidecade highs, the returning power of labour, along with higher competition and taxation, will cut margins. As leverage could be more
constrained, equity returns may depend on managers reversing some oft-ignored
multi-decade trends,” it was stated in the report.
More social-related issues will materialize in the next decade. Ageing population will hit European economies, damaging an already endangered market. In fact, the report highlights three major policies that European policymakers must undertake if they want Europe to stop falling behind the US and China. To do so, Europe should focus on what the research calls “The three Arrows” approach:
· The first fiscal arrow would see the establishment of a large EU fund for investment and convergence. “This would be used to finance high-quality technology infrastructure, either as part of the European Investment Bank or as a sister entity.”
· The second arrow is structural reform. “This must include a re-examination of EU competition policy to allow for greater economies of scale, as well as the completion of the Banking and Capital Markets Unions. Consolidation is particularly necessary in the European banking industry.”
· The third arrow in the package is a fundamental reconsideration of monetary policy. “The ECB has pursued a variety of unconventional policies in recent years to revive the Euro Area economy. However, the effects of these have often been counterproductive. Progress here can be made with a symmetric inflation target which will help mitigate the deflationary effects of many structural reforms.”
In the same context, China is also facing their own challenges. The Chinese economy is experiencing a structural slowdown since 2010, something the authorities have noticed and have started to palliate. For the next decade, the main focus of growth will turn to consumption as the baby-boomers will start to retire and with rural areas improving their per capita income rapidly.
India, on the other hand, is set to become the third economy of the world by 2030. However, it will also experienced a slowdown within the next decade. “Yet, structural reforms have significantly boosted India’s potential. By 2030, the Indian economy is likely to see strong expansion led by these reforms and a growing working-age population,” the report pointed out.
Furthermore, the report also highlights technological challenges and how these new technologies will impact our daily lives as well as the financial system. But there is another major takeaway from the report in the form of how cryptocurrencies might actually take off within the next decade.
“Until now, cryptocurrencies have been additions, rather than substitutes, to the global inventory of money. Over the next decade, this may change. Overcoming regulatory hurdles will broaden their appeal and raise the potential to eventually replace cash,” said the report.
If all of those predictions are to become true are yet to be seen. Nevertheless, many ‘decade ahead’ predictions prove unreliable. “And we admit this special edition of Konzept/Imagine 2030 cannot be a perfect crystal ball. After all, if the 2010s have taught us anything it is that the trends of the prior decade are no guide for the decade to come,” pointed out the report.
Simon Pearson is an independent financial innovation, fintech, asset management, investment trading researcher and writer in the website blog simonpearson.net.
Simon Pearson is finishing his new book Financial Innovation 360. In this upcoming book, he describes the 360 impact of financial innovation and Fintech in the financial world. The book researches how the 4IR digital transformation revolution is changing the financial industry with mobile APP new payment solutions, AI chatbots and data learning, open APIs, blockchain digital assets new possibilities and 5G technologies among others. These technologies are changing the face of finance, trading and investment industries in building a new financial digital ID driven world of value.
Simon Pearson believes that as a result of the emerging innovation we will have increasing disruption and different velocities in financial services. Financial clubs and communities will lead the new emergent financial markets. The upcoming emergence of a financial ecosystem interlinked and divided at the same time by geopolitics will create increasing digital-driven value, new emerging community fintech club banks, stock exchanges creating elite ecosystems, trading houses having to become schools of investment and trading. Simon Pearson believes particular in continuous learning, education and close digital and offline clubs driving the world financial ecosystem and economy divided in increasing digital velocities and geopolitics/populism as at the same time the world population gets older and countries, central banks face the biggest challenge with the present and future of money and finance.
Simon Pearson has studied financial markets for over 20 years and is particularly interested in how to use research, education and digital innovation tools to increase value creation and preservation of wealth and at the same time create value. He trades and invests and loves to learn and look at trends and best ways to innovate in financial markets 360.
Simon Pearson is a prolific writer of articles and research for a variety of organisations including the hedgethink.com. He has a Medium profile, is on twitter https://twitter.com/simonpearson
Simon Pearson writing generally takes two forms – opinion pieces and research papers. His first book Financial Innovation 360 will come in 2020.