Where do we go from here?

Innovation; where are we going and how fast can we get there?

In 1968, Bob Beamon long jumped 8.90 metres in the Olympics in Mexico City. He broke the world record by 55cm. That was simply unbelievable at the time and it was said that it was the limit of human ability in that discipline. Yet in 1991 Mike Powell jumped 5cm further. That was twenty-six years ago so have we now reached the limit of human achievement in that discipline?

In 2007 Asafa Powell ran one hundred metres in 9.735 seconds. The world record had been being lowered in tiny increments. Then in 2009, along came Usain Bolt who ran one hundred metres in 9.572 seconds.

That 0.163 seconds is at latest equivalent to what Beamon did, but the question remains, is that the limit of human achievement?

I can already see you scratching your head, asking what is he on about now? Well the fact is that the pace of human achievement getting faster and faster and the sporting metaphor shows that it is true in all walks of life.

Take Cryptocurrencies. Ten years ago,…..ok we all know the pizza story, so I won’t repeat it. But have we now reached a Beamon or Bolt moment? What’s next? Can we afford to expect that in a dark cave somewhere late in the second decade of the twenty first century a latter-day Satoshi Nakamoto is about to take us even further into the digital and crypto age?  

When does the Banking Challenge begin?

For the man in the street, Bitcoin is little more than a generic name for all the cryptocurrencies that have sprung up over the past few years?

Will it fade away as its use falls and retailers decide that acceptance of Bitcoin is not going to be a panacea for their business?

The same man in the street will also probably have heard tales of pizzas and big houses and not be able to grasp what has gone on in between so he hasn’t yet been galvanized to get into the “crypto revolution”.

He or She prefers to keep his or her funds in a bank.  Such actions are not particularly safer, if at all, than a blockchain secured currency or simply under his mattress where he can at least feel its presence.

One of the surprises of Bitcoin Ethereum, Ripple et-al is the lack of conversation around interest rates. Cryptocurrencies have no time value as they have no monetary base other than as an exchange of value. How many Bitcoins or now fractions thereof are you prepared to pay for a cup of coffee?

Obviously, investors realize that when they invest in Bitcoin etc., they are considering capital gain and not income and this has been smoothed by the fact that cash deposits earn nothing now in any case.

Banks only appear to consider the time value of money on one side of their balance sheet and see only risk premium even though the depositor is also taking a risk in a “too big to fail” bank.

When you or I go to a bank and ask for a loan, we are asked to tell them what the funds will be used for.

Are we not entitled to the same courtesy?

Imagine going to your bank and paying in, say, ten thousand Euros, pounds, Zloty or whatever and asking what they intend to do with these funds. Quite apart from the fact they won’t pay you interest, would you lend it to them if they intended to invest in CDO’s or some other similar high-risk venture?

Probably not, which is why an alternative exchange of value makes sense.

In the Fiat world it’s about monetary policy again

Those of us still trying to earn an honest living trading Yen, Swiss Francs and Euros have been spared the deliberations of Central Banks for some considerable time as they lit the blue touch paper on QE and sat back to see if it really would bring hyperinflation as the Keynesian theorists feared.

Well, as Gloria Gaynor said, “so now you’re back, from outer space, I just walked in to find you here with that sad look upon your face”. Well, Messrs Draghi, Powell and Carney are maybe not fans of disco, but they are certainly making a comeback as their economies start to need a little tweaking.

Don’t tell the Bundesbank but inflation is starting to creep up, although in the UK, which is a special case, it is starting to creep down.

Next week The FOMC will hike rates again and Jay Powell will say the next hike will depend of the source and direction of inflation despite having hiked twice at the prospect of higher inflation.

Mario Draghi will cause uproar whether he mentions tapering or not. If he does the euro goes above 1.2000 if he doesn’t, the ECB are accused, like the MPC of crying wolf.

It’s rarely dull is it?