Deutsche Bank Research – The Financial World in 2030 by Simon Pearson

Imagine 2030: The Global Financial Landscape Of The Future

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.

China’s rising share in world consumer spending. Source: Imagine 2030 research

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.