The destruction of cities driven by universal basic income or the rescue of France by Germany are also among the unlikely, but not impossible, events planned for next year.
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Danish investment bank Saxo Bank has published its list annual ‘Outrageous Predictions’ (shocking predictions) for the year 2021. The report seeks to evaluate some unlikely events, but not impossible, that could shake the world financial markets after the traumatic 2020. In fact, last year the entity was correct in some his forecasts, like the failure of Donald Trump in the US presidential elections.
A vaccine against covid-19, the “definitive killer” of the economy?
Global central banks have been printing more and more money to mitigate the economic consequences of the coronavirus pandemic. This has brought interest rates to near zero, forcing investors to go for riskier assets.
While hopes of an early COVID-19 vaccine launch sent stock markets booming, the arrival of the antidote may add pressure on an already overheated economy, rather than the anticipated recovery, predicts Saxo Bank. This would increase inflation, forcing the Federal Reserve to raise yields on long-term Treasuries, but the yield on riskier debt would also skyrocket. In this point, many weaker companies could defaultanalysts assert.
Amazon ‘buys’ Cyprus to create its own tax haven
Another prediction made by experts is the possibility that the tech giant Amazon, which has benefited from coronavirus restrictions, could ‘buy’ Cyprus to turn it into its own corporate tax haven. On the Saxo stage, Amazon first moves its European headquarters to the island, and then “literally buy” political power at all levels and helps the country rewrite its tax code, which would come to mimic Ireland’s, but with even lower levels of corporate and other taxes. This would provide a financial windfall for Cyprus, but would push the EU to harmonize tax rules among its members.
Universal basic income destroys cities
According to the bank, the pandemic has only accelerated the K-shaped recovery, meaning that some sectors of the economy have rebounded while others are desperately lagging, further widening the inequality gap.
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Faced with the risk that “societies will be completely destroyed”, the emergency measures of covid-19 may evolve towards a new permanent reality of universal basic income (UBI), predicts Saxo, warning that this concept can “decimate” the big cities. Along with technology-driven job layoffs and remote work, the RBU era could crush the real estate and commercial office market. Furthermore, young professionals may choose to stay in the communities where they grew up, while others may start to move out of the big cities, which are no longer as attractive in terms of job opportunities and living conditions.
Germany has to rescue France
According to Saxo, Germany may have to “bail out” France to avoid the systemic collapse of the EU’s second-largest economy. France could face a wave of corporate bankruptcies that will eventually affect its banks, and would have “no other option but to go begging Germany for cap in hand” to allow the ECB to “print enough euros to allow a massive bailout,” say the authors of the report.
Other predictions
Among other somewhat less alarming predictions, analysts at Saxo Bank indicate that China could further develop its digital yuan, which would not only rival the US dollar, but also open up the Chinese capital market for foreigners and boost the country’s economy. .
Next year may also become a turning point for emerging economies “woefully underestimated”, whose growth would be driven by better access to technology and education.
As the coronavirus exacerbates wealth inequality, the bank suggests creating what it calls a ‘Citizens’ Technology Fund’, the idea of which would be to transfer a portion of ownership of capital assets to everyone, with an additional portion earmarked to workers displaced by automation, allowing “them and everyone else to participate in the productivity gains of the digital age.”
Experts also suggest that in 2021 artificial intelligence (AI) algorithms may pave the way for commercial fusion energy, while blockchain technology could somehow become our shield against fake news. Also, Saxo Bank expects a higher demand for silver in 2021, which will drive up the price of the metal.
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