From Banking Crisis to Fintech Startups
Thank you for taking the time to read my opinion on global trends. Although I’m grateful for your time in reading this, I want to make clear that these are mainly personal opinions not completely based on what I have seen on the BBC or any other media network. It’s been a tough last 12 months in global politics, so talking about future trends could be a small diversion for you from the daily trudge of Trump / Brexit / Syria / North Korea and other distractions.
My obsession with the Global Economic Crisis started a few years ago, when I tried to find out the answer to the question: “Where did all the money go?” This may seem a little unusual, and with a certain Scottish friend of mine we tried our best to follow the trail back. The trail pointed to one man… Hank Paulson. If there was ever anybody who really knows what was going on back then, it’s enough to have a quick look at Mr Paulson’s fine resume to see that the man must know more than anyone in the World about certain economic occurrences that may have precluded the global economic crisis and subsequent loss of trillions of dollars of investments globally.
The crisis did several things to the world, and with the backdrop of government austerity, and the fear of a looming repeat of the 2008 crisis, many of the top companies globally started to “hoard” their capital reserves. Some time ago, the New York Times stated that: “Collectively, American businesses currently have $1.9 trillion in cash, just sitting around.”
It says later in the article that Google has $80 billion sitting in one of its’ bank accounts which is making maybe 2% interest a year, but could be used to buy an Uber or even a Goldman Sachs, and make more than 2%… from that investment. In fact, General Motors holds nearly half its value in cash, Apple only holds a third, all in the name of the fear of a rainy day. Quite a bewildering trend in a place where poverty still affects a massive percentage of the global population.
So, the crisis kind of made “hoarding” ok. Which was fine, until the EU started to pick on Apple, Starbucks and Amazon for their tax affairs, with Luxembourg and Ireland coming up time and again. Then the Panama and Pacific papers and Swiss Leaks happened to make matters worse and show the number of corporate affairs that happen under the radar.
This type of “aggressive” corporate tax efficiency whilst corporations continued to “hoard”, in times of austerity, was always going to have an effect on the people. People started to see evidence of what they had sometimes suspected, but never really paid much attention to before. People started to be more sceptical of the way big business and governments work together.
It’s always useful at a moment like this to take a side-step and analyse what the Global leaders suggest at times like this. A few years ago, I started to take notice of an event that kept coming up in the Global economic calendar — the World Economic Forum in Davos. I’ve never really understood why all the Global leaders insist on travelling to a remote town which is a 2-hour drive from the nearest international airport (Zurich) in the middle of winter, but they do seem to get through a lot of topics while they are there. Operating as the World Economic Forum since 1987 and recognised as an international organization since 2015, the Forum engages the foremost political, business and other leaders of society to shape global, regional and industry agendas. Sounds promising. And without further ado, may I present the future according to the World Economic Forum: Fintech and Blockchain. According to the World Economic Forum report from August 2016, there has been US$ 1.4 billion investment in Financial Technology companies in the Blockchain area alone in the past 3 years. This is almost 1% of all the cash of all American businesses, and you would want to assume the Banks are probably sitting on a few dollars here and there, which could mean that the future is slightly brighter than we all thought! And there are springs of hope to look out for in this area that could have a big effect on all of us.
Blockchain has been on the agenda of the World Economic Forum for a few years now. In January 2015, however, it really hit the scene with aggressive predictions made by the Forum of virtual currency exchanges gaining up to 10% of global FX transfers. Blockchain is the platform, but many people will have heard of Bitcoins, Litecoins, Altcoins and others as they are more spoken of in the media, however these are just products on a complex platform that can do far more than transferring currency. Blockchain can make immediate digitally signed transfers of anything virtual or web-based with no substantial running costs once applications are created — contracts, money, agreements, virtual services and anything like this. And Blockchain is the buzzword in Fintech StartUps as well as many other StartUps.
To give the story a little more background, I think we can all agree that Capital Markets are a good indicator as to what returns on investment have been available the last 5 years. And as indicators, let’s have a look at some of the returns on some of the best stocks over the last few years:
How do you translate this massive jump in the value of virtual currency? Could it show that this new type of Financial Technology is going to continue to boom or are we seeing it peak? Is it all just about volatility?
However, as a return, and against the US$ and even some of the most profitable investments on earth, it does appear that Virtual currencies may have their place in the future. They will almost certainly affect the Disruptive Financial Technology revolution that is now becoming a dominant movement in both corporations and the StartUp industry.