December 31st, 2020
Anticipating 2021 - Featuring the new abnormal
Good riddance 2020. But not so fast. Even if Covid relents - and I for one am not counting on it very soon, the state of the economy has to be concerning with two stormy factors shaping up to characterize 2021. The pre-Covid economy was robust allowing government to address populist social issues - some of which today seem extreme. But that was then and this is now.
It's always darkest before it gets pitch black
It's the economy stupid is not my invention, but it will be the story for 2021. Here we discuss what we believe to be the two biggest stories that will emerge in 2021: post-Covid inflation and the US investigation and breakup of data-amassing monopolies.
1st - A devastated economy and pending inflation
The post-Covid economies virtually everywhere will feature extraordinary public debt, record consumer savings, and the early signs of the impact of the intergenerational transfer of wealth with the passing on of the babyboomers. Combine that with an unavoidable increase in inflation and a rise in interest rates. Cryptocurrencies and gold, continue to gain in popularity as a hedge against inflation.
2nd - Data surveillance checked
Europe kicked it off but the US is following suit. So watch out, this will be a gong show. The public is fed up with disinformation and the data industry agrees, some form of regulation is warranted. But the genie is out of the bottle and the breakup of data-amassing corporate monopolies is sure to follow. A public hanging may be just what the public wants during the lockdown, that is, a TV showdown featuring a good old prosecution. The promise is that lower costs, more competition and higher standards are sure to follow along with more entrepreneurship and innovation in the personalization of former public services of health and education.
BREAKING UP MONOPOLIES - when enough is too much!
Let's look first at what to expect with the pending breakup of 20th century monopolies.
The emergence of monopolies and the accumulation of unfathomable family wealth have always been a feature of new transformative technologies. In the United States there was Andrew Carnegie in steel and in transportation there were the railway magnates of the 19th century. In oil-for-energy the Rockefellers of the early 20th century were beneficiaries. Other monopolies in public utilities by AT&T and still others in meat packing, sugar and tobacco are well known. Each were ultimately broken up and legislation gave government the authority to protect the public's interest.
Ideally, competition forces technologies to dissipate; preventing the initial, first to market advantage and formation of a monopoly. But occasionally, the technology takes roots to the advantage of it's distributor - rarely by the way, is it the founder who benefits but rather those with the capital and moxie to establish the distribution network.
Now new technologies and associated algorithms are amassing and employing personal behavioural data - the "new oil" for improving shopping and porn, health and education "services". The corporate beneficiaries are few, global with extraordinary influence, wealth, and market dominance.
Does gravity apply? Does all that goes up must come down? Does power corrupt, and absolute power corrupt absolutely? Is it tempting to stretch one's advantage? Should we always harvest as much as we can while the sun is shining.
Here is my forecast - not gloomy, not rosy, just sober. As in the past, the monopolies that serve to distribute technology to the masses and drive an industrial transition do come to an end. The state as protector of public interests ultimately steps in.
So here is a list of what to expect in 2021. The data monopolies in the United States and in China will be investigated - lotsa televised anti-trust hearings, supporting new regulations and forms of taxation introduced and forcing the break ups. Here is the evidence to support my crystal ball gazing:
Google and Facebook face anti-trust action HERE https://www.nytimes.com/2020/12/20/technology/antitrust-case-google-facebook.html
The evils of surveillance HERE
CRYPTOCURRENCIES - hedging pending inflation
We've heard of Bitcoin and Etherium, but did you know there are already over 4,000 forms of cryptocurrency. The digital form of currency will start to be of serious concern to bankers and governments in 2021 as their value and usage increase significantly - as will gold, should inflation reemerge.
The signs are all there - continued stimulus grants, extraordinary savings, and government action to contain Covid's spread decimating the economy particularly small business. Interest rates cannot stay at zero should inflation re-emerge as all indications are that it will. Stimulus payments continue and savings are accumulating while public debt grows exponentially.
The worst case scenario has two dimensions. First, that the economy fails to rebound given the devastation of Covid on small business. Slow recovery would undermine any hope that increased tax revenues will contribute to paying down debt. Second, is the prospect of increased inflation due to post-Covid shortage of supplies and services, the surplus of savings and a post-Covid euphoric buying spree. A slow to no recovery and rising inflation is a toxic combination leaving government with few to no options.
What's your opinion? Let me know as this discussion is bound to get more and more attention warranting a webinar in the near future!
- Perry Kinkaide perry@PerryKinkaide.com
IN THE NEWS
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No shortage of data but suspect information and abuse of "science"
FUSION for energy
Sustained burn hypes imminence of breakthrough
Effective surveillance and achieving "military" success
Digitization of healthcare 2020
Full of promise(s)
Could appear here
Visit PerryKinkaide.com to review the 5 episodes of our 2020 TEST of Alberta's economic resilience including recommendations and measures for developing the province's innovation ecosystem.