Innovation in The Monday Briefing
- Select a blog category
Spending money just keeps getting easier. Internet shopping, electronic bank transfers, contactless and mobile payments are increasingly popular ways of spending. Last year the number of contactless payments tripled in the UK and on-line shopping rose nearly 20%. Digital versions of traditional central bank currencies are in the ascendant in the West.
These digital central bank currencies face growing competition from the private, all-digital, so-called cryptocurrencies. Bitcoin, established in 2009, is the dominant player, but the rash of new currency launches or ‘initial coin offerings’ means it has plenty of imitators.
At the heart of bitcoin is the blockchain, an anonymous, electronic record of all bitcoin transactions. Transactions are processed by a distributed network, not through the banking system as with central bank currencies.
Some bitcoin users distrust banks and want to operate outside the traditional banking network and financial system. Bitcoin’s anonymity appeals to libertarians, those who particularly value privacy and, of course, criminals. Some fear that central banks, with their ability to create money at will, cannot be trusted to maintain its value against inflation. These users see bitcoin, with a fixed ceiling of 21 million of issuance, as a better store of value than pounds or dollars. Finally, the vertiginous rise of bitcoin this year suggests that many see bitcoin as a quick way of making money.
Bitcoin excites different reactions. China, Russia and a number of other countries have put obstacles in its way. Murky governance and its potential as an anonymous means of payment for criminals worry many. The CEO of JP Morgan, Jamie Dimon, has branded bitcoin a “fraud” which will blow up.
The Monday Briefing reached its tenth birthday over the summer. This week’s Briefing offers some thoughts on the lessons we’ve learned and the errors and successes we’ve made along the way.
Perhaps the most obvious lesson is that the economy depends on a stable financial system. In getting this right before the crisis, and emphasising it in the Briefing, I can’t claim great prescience. The devastating effect of the bursting of Japan’s banking and asset bubble in the early 1990s provided me, and others of my generation, with a graphic illustration of the effects of a financial collapse.
A personal view from Ian Stewart, Deloitte's Chief Economist in the UK. Subscribe to & view previous editions at: http://blogs.deloitte.co.uk/mondaybriefing/
The latest Deloitte survey of UK Chief Financial Officers, released this morning, shows a rebound in optimism after the sharp decline in the wake of June's General Election. Perceptions of uncertainty have declined and are running at almost half the levels prevailing after last year’s EU referendum.
Economists disagree on lots of things, but on one thing at least there is a consensus. Productivity, or the efficiency of production, is the main driver of human welfare. The data bear this out. Consider that growth in living standards in the UK since the late nineteenth century has been driven entirely by rising productivity. It is not surprising that improving productivity is the Holy Grail of economic policy.
With the return to work underway here’s our summary of the key developments in the global economy and in politics over the summer.
On the economic front the mood has been fairly positive, with activity nudging higher led by the euro area, Japan and emerging markets. Unemployment has fallen in Europe, North America and Japan since June. The VIX index, a gauge of financial market uncertainty, is close to a 25 year low. In the last three months global equity prices have risen by 5% and the euro by 4%. The dollar and the pound have continued to soften. Copper and oil prices rose over the summer, the later buoyed by Hurricane Harvey.
With the summer break upon us here are ten facts to sprinkle into your holiday conversations.
- There is a common misconception that for a Brit making a card transaction overseas in sterling is cheaper than using the local currency. Martin Lewis of moneysavingexpert.com reports that, in fact, it is almost always better to make card transactions in the local currency. Even if the currency conversion provider waives its commission it usually uses an exchange rate with a significant mark-up over that offered by Visa/MasterCard for sterling transactions.
The world seems like a much more uncertain place today than it was before the financial crisis. The International Monetary Fund reckons that macroeconomic risk is running at twice the level it was before the failure of Lehman in 2008. The backwash from the crisis, debt-laden governments, low productivity and risk averse businesses and banks, has spelt weaker growth.
With the holiday season almost upon us we are launching our summer reading list. The Economics Team read dozens of articles to come up with our top six picks for summer reading. All are available free and on-line. You can save these articles on your iPhone or iPad's reading list by opening the links on Safari and tapping on the share arrow next to the address bar. To print these articles please use the print icons, where available, on the webpages to ensure the whole article comes out. The Monday Briefing will continue to run throughout the summer.
Last week I spoke at a debate on the effects of technology in the workplace. The event got me thinking about this vast, complex subject. Here’s a two-minute summary of my musings.
It seems to me that innovation will remain the key driver of growth and human welfare. Rising prosperity and insatiable human demand seem likely to create new industries and jobs to replace those destroyed by technology. In short, robots won’t steal all the jobs. This has been the pattern of the last 200 years and I think it will persistent.
Western politics has developed a more nationalist character in recent years. In Europe populist parties claim to champion national interest against globalisation while in the US Bernie Sanders and Donald Trump have broken with the free trade consensus that has lasted since 1945.