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Category: The Pamphleteers

On 2011 we published a long term look at the future of financial services under the title of “In Safe Hands?” http://www.longfinance.net/publications.html?id=784  – with hindsight – what did we get right and what did we get wrong? And about what is the jury still out?  Gill Ringland investigates, at a workshop on Monday, 13 June 2016.  Book your place here.

What we got right

We were prescient about the nature of the recovery after the 2008 crash – we foresaw that the UK and the US would show a slow return to health, as represented by consumer and employment figures.  Japan and the Eurozone would see a prolonged depression, a growing statist environment.

(Though in a recent eSAMI newsletter I reflected on comments on the prognostication for Japan “The first is a comment by Stratfor  that Japan may be coming out of its lost decades. The reason given is that “For two decades, the island nation has been relatively removed from both regional and global affairs. Now it is in the earliest stages of a push to re-establish itself as a leading power in the Pacific Rim, a role that will require it to make some significant internal adjustments”.However I have also been reading Foreign Affairs – in the April 2016 issue there is an article by Rushir Sharma of Morgan Stanley exploring the correlation between economic growth and expanding the working population. Japan’s aging demographic clearly works against it being able to do this – though he references Prime Minister Shinzo Abe's “Womenomics” which aims to revive the economy by getting firms to hire more women. The question must be how wrenching the internal adjustments will be”

We thought that the growth of China and India would continue, with rates predicated in factors other than the 2008 crash; and that the middle income industrialising countries would use monetary inflation to reduce debt.

We also foresaw the use of machine intelligence to remake the professions in the form of the accounting profession – and this still looks right even though much of the discussion has originated from thinking around the legal profession (for instance “the Future of the Professions, Richard Susskind and Daniel Susskind, OUP, 2015). The march of machine intelligence is also discussed in a blog in the SAMI 25 series, https://samiconsulting.wordpress.com/2015/10/07/machine-learning-and-professional-work-a-lookahead-to-2040/

What did we get wrong?

We did not anticipate the pace of change in financial services, with peer to peer lending becoming an accepted part of the landscape, and Blockchain offering revolutionary transaction speeds and costs. The impact of both has still to be felt – a good discussion of the second is by Chris Skinner in “ValueWeb, How fintech firms are using mobile and blockchain technologies to create the Internet of Value (ISBN: 9789814677172)”

The jury is out on three of our conclusions

Firstly, we anticipated that insurance would decline in importance. In motor and travel insurance, use of automated parking and collision avoidance technology is reducing risk even before driverless cars change the model. Weather forecasting data collection and technology will reduce the uncertainty of weather events such as flooding and storm damage. And genome testing will reduce the uncertainty in health outcomes, hence reducing the scope for polling of risk.

Secondly, we thought that widespread trading of environmental credits would emerge. Environmental credits, or mitigation banking, are terms used primarily by the United States government and the related environmental industry to describe projects or programs intended to offset known impacts to an existing historic or natural resource such as a stream, wetland, endangered species, archeological site or historic structure. Crediting systems can allow credit to be generated in different ways. For example, in the United States, projects are valued based on what the intentions of the project are which may be to preserve, enhance, restore or create (PERC) a natural resource.

There are active trading programs in several air pollutants For greenhouse gases, which may cause dangerous climate change, permit units are often called carbon credits. The largest greenhouse gases trading program is the European Union Emission Trading Scheme which trades primarily in European Union Allowances (EUAs); the Californian scheme trades in California Carbon Allowances, the New Zealand scheme in New Zealand Units and the Australian scheme in Australian Units The United States has a national market to reduce acid rain and several regional markets in nitrogen oxides.

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