THE FURORE-ING TWENTIES: My Thoughts On The New Decade Ahead

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As we leave the 2010s and head into a new decade, I naturally like to meditate on what the next ten years will have in store for the world. Approximately ten years ago to this day I was in Peru in the Andean town of Huaraz. Back then my eyes were not so open and I couldn’t see beyond my own little self-created bubble of rock n roll, existential literature and nomadic travelling. I had little to no understanding about global politics, technology and the financial system.

Predicting the future is hard enough. Very often, the predictions that turn out to come true are ridiculed from the start. If I were to say to a group of fellow travellers at some bar in Huaraz on New Years Eve 2009 that during the following decade Donald Trump would become president of the USA and that there would be a referendum in the UK where the UK would vote to leave the EU, they would have looked at me as if I had lost my mind.

What do I think will happen in the 2020s? I think it will be a very interesting decade where lots of changes will occur.

I will begin with the financial markets. As of now, many stock markets are at all time high levels. The 2010s has been an absolutely stellar decade for US stock markets, especially the NASDAQ. Back in 2009, towards the end of the financial crisis, the NASDAQ was trading below 1500 points. Today, it’s close to hitting 9000 points. That’s a six-fold increase within the space of a decade. The question now of course is, will this rally continue or are markets in danger of crashing? When I try to make my own predictions, I like to also gauge what the general consensus is. On social and traditional media sites, there seems to be no shortage of videos and articles predicting that 2020 will be the year when markets are going to crash. With such an overwhelming consensus, I, naturally, have to re-evaluate my own thoughts and vision.

The important point is that for all of the 2010s since the 2007-9 financial crisis, interest rates have been at very low levels. In some countries they are now at negative levels. The consequence of this has been that since the 2008 Lehman Brothers collapse, total global debt levels have increased by almost 50% from $173 trillion to $255 trillion. This era of cheap money has played a large role in this decade long stock market boom. Instead of trying to predict when the next crash will occur, it may be better to predict when interest rates will finally return to more normal levels. My feeling is that this is not going to happen anytime soon and that interest rates will, at least in the short run, continue to fall even if they breach negative territory (as they already have in some countries). This will be bad news for trying to reduce the already gigantic levels of global debt. Debt will only just continue to increase and stock markets will continue to rise, until the moment when inflation will kick in, which will immediately trigger central banks to raise interest rates.

Throughout the 2010s, gold has never dipped below $1000 per troy ounce. It has always remained above that level. At the start of the millennium, 1 troy ounce of gold was trading between just $250-300. It was almost as if it were considered obsolete, a relic from another age. With hindsight one can shoot down in flames the UK’s former chancellor Gordon Brown for selling off half of the UKs gold reserves back in 2001 at such low prices. Yet at the time, gold just wasn’t on many people’s radars save for a small selection of far-sighted individuals. As the 2000s chugged on, the price of gold went on a phenomenal ascent breaching $1000. By the end of 2011, just 2-3 years after the financial crisis, the price of gold nearly hit $1900 an ounce . As of today, the price of gold is hovering around the $1500 an ounce mark.

Why does all this matter? It matters, because I believe in the 2020s precious metals will do very well due to the extraordinary circumstances we are facing with record levels of global debt, perpetually low/falling interest rates and stock markets showing no signs of slowing down. The ‘kicking the can down the road’ mantra can only go on for so long until eventually the music will have to be faced.

But it’s not just fragile economic circumstances that will contribute towards precious metals doing well. Political circumstances will also play their role. In continental Europe, populist governments will continue to rise as will government spending. The economic situation in several Eurozone countries remains very precarious and this could lead to the Eurozone facing a genuine existential crisis. There are vast financial imbalances between the major Eurozone countries. During the last Eurozone crisis at the start of the 2010s, the European Central Bank (ECB) was able to utilize monetary tools such as Quantitative Easing to stimulate flagging Eurozone economies thus saving the Eurozone. The question now is if the Eurozone were to face another such crisis, would the ECB this time be able to successfully avoid a disastrous situation? It is trickier now for two reasons. Firstly, the Eurozone is carrying much more debt than before. Many Eurozone banks also continue to remain in dire shape. Secondly, the discontent of citizens in Eurozone member counties and the rise of populist parties in these countries could only exacerbate and make worse any already fragile/vulnerable situations.

Another thing that will be interesting to see is how the whole Brexit saga is going to play out in the coming months. What kind of a trade deal will be negotiated between the UK and the European Union? Will there even be a deal? If the UK were to leave the EU completely with no deal, it’s likely that the burden of keeping the EU together (and contributing more money towards it to keep it going) would fall increasingly more on Germany and to a lesser degree on France. This would put the entire future of the EU project in a very difficult position, especially if the German economy were to fall into a recession due to factors such as additional tariffs on the bulk of its exports as well as the very real prospect of a substantial government bailout to save two of the country’s largest banks; Deutsche Bank and Commerzbank.

It pains me to say that the 2020s could very well see the first stages of the Eurozone being dismantled followed by the EU itself. I am praying that such a situation doesn’t happen, but I feel this may unfortunately become a reality. A breakup of the EU could lead to Russia gaining much more dominance in the region with some former EU countries forging stronger ties with Russia. At the same time, I can also foresee some of the southern European Eurozone countries, especially Italy and Spain (which, like Germany, also have large manufacturing industries), experiencing multi-year long economic booms once they have their own currency (which they will be able to devalue and thus re-gain their economic competitive advantage). Whilst the German economy benefited greatly from adopting the Euro currency, the Euro hurt the economic competitiveness of other major Eurozone countries such as Italy, Spain and to a lesser degree even France.

One of my boldest and most off-the-wall predictions would be to say that the USA will experience a taste of some kind of socialism at some point in the 2020s. I feel there’s a high probability that, as unlikely as it may currently seem with the impeachment inquiry hanging over him, Trump will manage to secure a second term in power in 2020. However, his second term will be more challenging than his first. It is also highly likely that the long-awaited stock market crash that everyone is predicting will happen at some point during his second term. And when it does occur it will be very painful and cause another economic recession. In the wake of this, it is possible that many of Trump’s most loyal supporters begin to turn against him. By the time of the 2024 elections in the USA, I think the Democrat party will have moved more to the left just as has happened with the Labour Party in the UK over the last few years. By the time of the 2024 US elections, I envisage the Democrats winning the election with a barely tested transformational socialist agenda. By 2024, many of Trump’s traditional Midwest supporter base, who will have felt let down and failed by him, will opt for any kind of new change regardless of the consequences.

Any kind of future socialism though will likely not be like the socialism of the past, but more a kind of technological socialism. Before the fall of the Berlin Wall, the internet didn’t even exist, and it was possible to easily control information. The world was a much larger place. A future kind of socialism could be one where technology is so advanced that everyone’s most basic needs are all provided for and there is no need to perform any repetitive jobs or tasks. Technological socialism within the paradigm of a post-work or post-scarcity society. However, this kind of a vision is still some way off.

The truth is, in the coming years ahead, one is likely to witness an increasing number of savvy and hyper aware Millennial and younger Gen Z politicians come to the fore, who will want to change the rules. In the United States, the politician Alexandria Ocasio Cortez is a prelude and prime example of those next generation politicians who will eventually rise to prominent positions of power.

The 2020s will be a decade of exponential technological progress. The implementation of 5G networks will be crucial and integral towards the development of the so-called Internet Of Things, where every electronic device – be it your electronic household devices, street lights, transportation vehicles etc – is connected to the internet. Once this has been further developed, the transition from Smartphones to Smartglasses with enhanced Augmented Reality capabilities will become more of a reality and I predict this transition will begin to bear fruit from around the mid to end part of the 2020s.

In one of my very first blog posts back in 2016, I made a moonshot prediction that by the beginning of the 2020s, every household would have a 3D printer. It seems that I got that prediction horribly wrong. Back in 2013/14 there was quite a bit of hype around 3D printing and how it would revolutionise manufacturing. I am still a big believer in 3D/4D printing or however one wishes to call it. Such a technology makes it possible for anyone to print any physical thing no matter where in the world they may be.

The 2020s will also be a decade to watch regarding the development of Space Exploration and Sustainable/Renewable Energy. Elon Musk is at the fore of those developments with his companies Tesla and SpaceX. Most people who are aware of Tesla view it as a company that sells high priced electric vehicles. Yet the mission of Tesla is to transition the world away from fossil fuels. The building of its giga-factories in various locations around the world will enable Tesla to develop a level of scale to successfully achieve its mission. In many financial circles, lots of investors and analysts have been predicting that Tesla will go to zero. Lots of people have been betting against Elon Musk. However, I feel that such a move is unwise. I believe that Tesla will ultimately succeed in its mission and will become a very valuable and important company.

The 2020s will also see quite a lot of activity from Musk’s other company SpaceX. I think that SpaceX will lead the way in the nascent space industry and be responsible for dramatically reducing the costs of space exploration. The last part is very important as its currently prohibitively expensive to launch even just a satellite into space. Hence that’s why there are not many players operating in this industry due to high costs and high barriers to entry. In the 2020s, we are likely to see via SpaceX, the greatest accomplishments in the space industry since 1969 when the first person landed on the moon. The mission of SpaceX’s Starship rocket is to transport people to Mars and create a permanent human colony there. Using ground-breaking bioengineering innovations, the goal is to turn Mars into a planet similar to Earth (via the process of ‘terraforming’), with a climate and atmosphere containing vegetation and oceans and the right temperature and levels of oxygen for living organisms to flourish. Although all this is highly unlikely to occur as early as the 2020s, the next decade may well see the beginnings of the initial stages of such a mission coming into fruition.

However, one SpaceX project to keep an eye on in the near future is Starlink. This project involves sending lots of satellites into low orbit to beam down high-speed internet on all corners of the world, event the most remote corners. The last point is very important. Even though billions of people are already connected to the internet, there are billions of people living in remote and undeveloped parts of the world with no access to it. Currently, almost all of our wi-fi and telecommunications networks come from land-based cell towers. A mass adoption of super strong satellite beaming internet would be a real game-changer in the next level of network/internet connectivity, as it has the potential to enable everyone in all corners of the world to have access to a high-speed internet connection.

It will be interesting to also see how cryptocurrencies/blockchain technology will evolve in the 2020s. Lots of people invest in cryptocurrencies such as Bitcoin hoping that the price will go higher, yet what does the future hold for cryptocurrencies? My greatest fear is that increasing government regulation will affect the development and performance of the main cryptocurrencies. In an article from earlier this year, I wrote about certain cryptocurrencies such as Bitcoin, Litecoin and Zcash acting as a store of value. Many people also tout Bitcoin as a form of digital gold and some even say that it will disrupt physical gold as a store of value. I fear that such a situation is unlikely to occur and that Bitcoin will likely never again see the highs it witnessed at the end of 2017.

Privacy coins, especially Monero, have long been a thorn in the side of governments around the world. Of all the privacy coins, the one I am keen to watch is Zcash (where privacy is just an option – transactions can be shielded or unshielded), especially since I think it is currently fundamentally undervalued compared to other privacy coins. Furthermore, the other advantage it has is that, unlike many other cryptocurrencies, it was created by professional academic cryptographers.

The underlying blockchain technology itself will continue to evolve, and I can see further development of so called ‘stablecoins’ (which are not prone to fluctuate madly in value) becoming more widely adopted. One project I am interested to see manifest is Facebook’s own digital Libra currency. Facebook has the unique advantage of unbelievable network effects with over 2.4 billion users from around the world. So, Facebook simply introducing its own digital currency, means at least a third of the world’s total population potentially using it. This could be a huge benefit for Facebook users in countries with unstable currencies. However, I fear that the implementation of Facebook’s Libra currency will be met with lots of opposition from governments around the world who may fear that it will pose a threat to the stability and performance of their very own national currencies.

In fact, there is a big chance that at some point during the next decade both Facebook and Google/Alphabet will face even higher amounts of regulation by governments around the world with the very real possibility of both these companies eventually being broken up. This kind of regulation as well as the more extreme break-up threats will likely begin to kick off in a big way in Europe and could further manifest in the USA itself if a left-wing Democrat party politician (with an anti-billionaire, anti-Big Tech agenda) where to come to power in the 2024 elections in the USA. However, taking an axe to both Facebook and Google could also have the effect of further empowering their Chinese rivals, Tencent and Baidu. It could well be that Facebook and Google’s loss become Tencent’s and Baidu’s gain.

So, these are my thoughts for the coming new decade. Reading them over again, they can seem to oscillate wildly from overly pessimistic to naively optimistic with scant middle ground. When writing these predictions, I tried very hard to overcome any well ingrained cognitive biases by envisaging potential events that could likely occur even if I don’t want them to happen and/or they are against my beliefs and values. In a sense, this is also a kind of experiment and I expect to get several of my predictions completely wrong. Yet I feel that the unexpected black swan events we all witnessed throughout the 2010s will continue into the 2020s taking many by surprise.

 

By Nicholas Peart

27th December 2019

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SOURCES/FURTHER READING

https://mises.org/wire/150-years-bank-credit-expansion-nearing-its-end

https://www.ccn.com/edward-snowden-zcash-interesting-bitcoin-alternative/

 

Image: aitorvz

 

 

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