There are just a few days left until we can finally say goodbye to the turbulent year of 2020 once and for all.
And while economists and leaders are forecasting a smoother ride for 2021, not everyone agrees.
Saxo Bank has revealed its far-flung predictions for the next 12 months in its annual Outrageous Predictions report.
The predictions focus on a series of “unlikely but under-appreciated” events which, if they were to occur, could send shockwaves across financial markets, the investment bank says in the report.
“The Covid-19 pandemic and the painful US Election cycle have brought what might have seemed a distant future a quantum leap closer, accelerating nearly every underlying social and technological super-trend,” said Saxo Bank chief economist Steen Jakobsen.
“Simply put, the traumas of 2020 mean that in 2021, the future is now.”
Saxo Bank’s 10 outrageous predictions for 2021
1. Amazon ‘buys’ Cyprus
2021 sees Amazon and other online monopoly and infotech giants becoming wary about governments looking to take them down a notch for having become too powerful, and for paying very low tax rates.
In response, Amazon relocates its EU headquarters to Cyprus. The country then welcomes the giant corporation and the tax revenue that will help it reduce its debt-to-GDP ratio of nearly 100 per cent.
“Amazon consultants help’ Cyprus to rewrite its tax code to mimic Ireland’s, but with even lower levels of corporate and other taxes, with the country’s leaders and its population happily in its thrall from the financial windfall and lower tax rates,” the report reads.
“But EU regulators quickly get wise to what is going on and move against Amazon, forcing the company to change its practices, and forcing Cyprus and other EU countries to harmonise tax rules.”
2. Germany bails out France
France is one of the European countries facing the highest wall of debt in the coming years, which has only been exacerbated by the pandemic response.
“France is unable to avoid a wave of bankruptcies as many companies in the services sector are unable to cope with the series of “stop and go” lockdowns. Investors are getting increasingly gloomy about the future return on equity, which triggers massive selling of French megabanks.
“Given the poor state of public finances and the already extraordinarily high level of debt, France has no other choice but to come begging cap in hand to Germany, in order to allow the ECB to print enough euros to enable a massive bailout of its banking system, to prevent a systemic collapse.”
3. Blockchain tech kills fake news
In 2021, the mounting threat of disinformation and low levels of trust in news providers reaches a critical level, demanding an industry response.
Major media companies and social platforms are forced to impose new countermeasures against fabricated and misleading news.
The result is a massive shared blockchain network for news content, which allows distribution of news only once it has been validated, verified and double checked, therefore eradicating fake news.
4. New digital Chinese currency causes a shift in capital flow
The Digital Currency Electronic Payment (DCEP) will be a blockchain-based digital version of the Yuan (CNY).
Allowing full access for foreigners into Chinese capital markets will improve liquidity and aid direct access to investments inside China.
Meanwhile, the stability of the Chinese currency and the built-in traceability and oversight that blockchain tech enables would virtually eliminate the risk of capital flight or illegal transfers out of China.
“Opening up China’s capital account and creating a currency that rivals the US dollar for reserve status will help boost Chinese consumption, fund an entirely new Chinese pension system and deepen the country’s capital markets.”
5. Fusion energy will solve global energy shortage problems
Surging energy demand (which can’t be met by alternative or green energy technologies) will see the introduction of commercial fusion energy.
“The mastery of fusion energy opens up the prospect of a world no longer held back by water or food scarcity, thanks to desalination and vertical farming. It’s a world with cheap transportation, fully unleashed robotics and automation tech, making the current young generation the last required to “work” by necessity,” the report explains.
“Best of all, fusion energy allows nearly every country to become food- and energy-independent and sees the most rapid and largest upgrade in living standards ever witnessed.”
6. Universal basic income decimates big cities
In the new era of universal basic income, tech-driven job redundancies, and remote working made more normal by Covid-19, city office real estate is suddenly faced with 100 per cent or worse overcapacity.
Not only are commercial property values crushed, the universal basic income also drives a change in attitude towards the work-life balance.
“Meanwhile, the professionals and the marginal workers in big cities also begin to leave, as job opportunities dry up and the quality of life in small, over-priced apartments in higher crime neighbourhoods loses its appeal.”
7. Citizens Technology Fund reduces inequality
In 2021, policy sees a major overhaul, with a new approach to reducing inequality that has little to do with tax adjustments.
A Citizens Technology Fund is created that transfers a portion of asset ownership of capital assets to everyone, with an extra portion going to displaced workers, allowing them and everyone else to participate in the productivity gains of the digital era.
“The policy is spun as a ‘Disruption Dividend’ and goes a long way to relieving the economic and social anxieties for those who have been losing out on the share of economic output in recent years.
“The Disruption Dividend frees up enormous entrepreneurial energy at the individual and community scale as millions have more time and energy on their hands away from repetitive and stressful jobs.”
8. A successful Covid-19 vaccine kills companies
Easing financial conditions, infinite liquidity and low investment-grade corporate yields force investors into riskier assets, which is justified by the prospect of an effective covid-19 vaccine bringing a new boom in economic growth.
But the ripping post-vaccine recovery overheats the economy, inflation rises and unemployment falls so rapidly that the Fed allows long treasury yields to spike higher, taking the yield on riskier debt with it.
“The Fed ends up making a policy mistake by allowing financial conditions to tighten too rapidly via higher longer rates, having never implemented yield curve control as they were too distracted by the sudden spectre of 4-5 per cent annualised inflation and 6-8 per cent annualised wage gains by Q3.
“Corporate defaults rise to their highest in years, with the first to go the most over-levered companies in the physical retail space that were already struggling in the solid, pre-Covid economy.”
9. Silver demand and prices skyrocket
Turbocharging the rise in the silver price in 2021, even relative to gold, is the rapidly rising demand for silver in industrial applications.
In fact, a real silver supply crunch is on the cards in 2021, and it frustrates the full throttle political support for solar energy investments under a Biden presidency, the European Green Deal, and China’s 2060 carbon neutral goal, among other initiatives.
Another challenge on the supply side for silver is that more than half of mined silver supply is a by-product of zinc, lead and copper mining, making it tough for miners to meet the surging excess proportional demand for silver.
10. Next-generation tech supercharges frontier and emerging markets
First, satellite-based internet delivery systems are set to crush the price of internet while also creating a significant increase in internet speed.
SpaceX’s Starlink will be the first on the scene there, with as many as 1,500 operational by the end of 2021 which will benefit education and business productivity.
Second is the evolution of fintech payment and banking systems which have already given billions of people access to the digital economy via their mobile devices.
Finally, drone technology is set to revolutionise delivery systems and reduce the disadvantages and costs of living away from the largest cities and towns.