The Covid-19 Virus Has Just Reset The Global Economy!

On By mehranmuslimiblogIn Covid - 19, EconomyLeave a comment

President Trump claimed that the Covid-19 pandemic was “unforeseen”, or as Harvard’s Professor Jeffrey Frankel suggests, political leaders are seeing it as a ‘black swan’ event. That’s an event that nobody saw coming. The last one of these was the financial crash of 2008.

Perhaps countries’ responses might have been more organised had governments listened more carefully to leading epidemiologists who have been warning about the dangers of a global pandemic for decades. However, as with any event like this, hindsight is a wonderful thing. We are where we are, and we must deal with it.

There isn’t one person who cannot be aware of the effects that the coronavirus epidemic will have on the economy, because so many are already afraid of the future already due to the immediate loss of employment that came in the wake of each country’s lockdown restrictions. At the very beginning of Spain’s lockdown, unions said more than 100,000 people risked losing their jobs, and economists have warned that these temporary layoffs could become permanent. These figures refer to the big companies such as Seat, Iberia and Burger King, not the small businesses, such as bars and cafes, which have also been forced to close. And then there are the self-employed. This scenario is being replicated across Europe and in the USA.

Three scenes of impact

I believe there are three possible scenarios in relation to the economic impact:

Containment

This hasn’t happened. Economies would have had a better chance of staying stronger if we had managed to contain the infection rate to less than 500 per million. However, if you look at the average rate in the most affected countries, you are looking already at 1600 cases per million. So, it’s too late for that.

Government funding

Massive injections of emergency funding is another route. The USA is pouring an historic two trillion into the economy to shore up retail supply chains, and other countries are taking similar measures, mostly to ensure that its citizens have some income. However, there is a clear problem with this approach. Government loans will only work in the short term for businesses, for two or three months at most, and then businesses will have to let staff go. This will be fine if the economy can return to business as usual by the end of April perhaps, but if it goes on longer, there will be problems.

Herd immunity

Then there is the ‘herd immunity’ approach. The UK government suggested taking this approach when the first cases appeared, and allowing 60% of the country to become infected. They said it was what the science said, but the British people weren’t quite so keen on the idea, and it was only a matter of days before the British government stopped talking about herd immunity, and followed other countries’ actions. If a country followed the ‘herd immunity’ concept, it is likely that the crisis would continue into September/October, by which time a blanket of economic depression would have fallen over the entire world. Two-thirds of the population would be infected and the death toll would be enormous.

The economy would grind to a halt, and even a powerful economy like that of the USA wouldn’t be able to bail out businesses. The result would be a real life horror film, with social unrest, looting and crime at record heights due to unemployment. Hospitals would close their doors to all coronavirus patients, and uninfected people would fear those who were infected and violent hate acts would follow. The most vulnerable citizens, that is our elderly, would have to be moved to safe areas, while criminals would happily take advantage of the situation. Indeed, it would be like sunshine for them, as law enforcement resources would be focused on dealing with the social unrest arising from unemployment. If it sounds like one of those zombie apocalypse films that is because it is pretty close to one.

Currently we are all trying to stop the spread, but as you can see from the above scenarios, none of them guarantees us a return to the economic certainties we knew just a month ago. There will be many more predictions as the days and weeks pass: let’s hope they paint a brighter picture.

However, be warned: We are entering a new era that we might as well call ‘Global Elite Centralization’ and Covid-19 was the reset button that triggered it.

Coronavirus threatens fintech lenders

On By mehranmuslimiblogIn Covid - 19, FintechLeave a comment

We are only just coming out of the last recession, and now we are hurtling into another one at breakneck speed. Countries are going into lockdown one after another, with those that can continue to function with employees working from home, having a distinct advantage over those sectors, such as tourism and hospitality that have been brought to their knees in some places already.

We all know that finance is going to be hugely affected yet again, and with so many people losing employment and therefore their salary, loans are going to be in the spotlight once again. Jeff Kauflin suggests that fintech lenders in the USA may be facing the biggest risks right now, starting with the basic reason — people won’t be able to repay their loans.

Upstart is a fintech-based lender that lends consumers up to $50,000 for purposes ranging from credit card debt consolidation to putting in a new kitchen. However, as the bond-rating agency Kroll reports, “It makes most of its loans to people with below-average credit scores.” Upstart argues that by using alternative data and machine learning to assess risk, it can identify creditworthy borrowers with lower traditional credit scores. It is true that the company has not reported significant defaults over the last year and is in profit, but what will happen to it during a sharp and sudden economic decline?

William Ryan, a managing director at investment bank Compass Point points to the fact that in a crisis, people place repaying personal loans very low on their list of priorities. He says, “People pay their cell phone bills, mortgages, auto loans and credit card bills before personal loans.”

And if the fintechs are not facing defaults, they face is a rapid rise in the cost to fund their loans. Most of them don’t hold banking charters and this means they can’t do what banks do — use customers’ checking accounts to fund loans cheaply. Typically, fintechs borrow from banks to fund their loans and this approach prevents them from holding loans on their own balance sheet, thus reducing their risk.

Another issue the fintechs face is the fact that interest rates for low-grade corporate debt have surged in recent weeks. Together, these factors are already making fintechs lower their growth expectations. Dan Rosen, a founder of fintech-focused venture capital firm Commerce Ventures said: “I was with a bunch of entrepreneurs last week. Most of them had already been having board calls and dramatically changing their plans for originating [new loans].”

The outcome for fintechs depends on the length of a lockdown. Chris Brendler, a senior director of research at CB Insights says that most will be able to survive a one to two-month lockdown, but that if it goes on for three to four months there will be a significant rise in unemployment, as well as

A List Of Fintech Firms Providing Free Technology During The Coronavirus Crisis

On By mehranmuslimiblogIn Covid - 19, FintechLeave a comment

Coronavirus, or Covid-19, is preoccupying everyone at the moment, and in different ways. Businesses in almost every sector face a rough ride ahead, as they close offices in response to protecting employees health and responding to government instructions to stay at home and avoid contact with others.

Meanwhile, most of us still need money. We have to pay for food and online products, and for that we depend on bank services. And at this critical time, the more traditional banks have been receiving support from the fintechs, so that they can continue to support their customers.

According to Ron Shevlin writing for Forbes, the fintechs are “extending free, discounted, or accelerated deployment offers to financial institutions.”

So let’s see what some of them are doing.

Active.AI has a pre-built virtual assistant that can be quickly customized with answers specific to the institution. It is offering a 30-day free trial.

Agolo is providing customers with AI-generated summary feeds focusing on the impact of coronavirus on various sectors such asFinance, Energy, Media & Entertainment, Health Care, Info Technology, etc. It is offering these feeds for free on the web and via social media.

Agora Teen is an interesting fintech that specialises in offering white-label solutions for teenager bank accounts pre-opened by parents. It is offering free access to its products.

BillGO helps track, manage, and pay bills in one place and it is offering its Prism app free to help everyone stay on top of their money.

Brace is a borrower platform and it is helping borrowers to seamlessly apply for mortgage assistance in the event that the hardship is caused by COVID-19.

Digital Onboarding is a fintech offering its clients unlimited usage at no extra cost to help educate their customers/members on how to access money and utilise digital services without visiting a branch.

Similarly, Horizn works with financial institutions globally making sure both customers and employees understand and know how to bank digitally. It is providing a discounted short-term licence package of our cloud-based Customer Digital Platform and Digital Demos, and like other fintechs, it is accelerating deployment to get banks up and running within two weeks.

There are many other fintechs who are rallying around the financial sector and helping those institutions that need to react quickly to support customers. It’s a welcome move from fintechs and it can only help to boost confidence in digital banking once we come out the other side of this crisis.

Is ‘The Simpsons’ ahead of the Bitcoin curve?

On By mehranmuslimiblogIn Bitcoin, cryptoLeave a comment

One of my colleagues recently shared an anecdote with me about ‘The Simpsons’. She told me that during a chat about politics, her son told her, “Well, it was on ‘The Simpsons’ and then it came true.” And then he asked her, “How do they do that?”

Indeed, how is it that the long-running animated series appears to be a more reliable source of future predictions than Nostradamus, or even the MSM? So, I was very interested when one of the writers I follow, Billy Bambrough, published an article at Forbes about the The Simpsons’ predictions for Bitcoin

It’s true that cryptocurrencies, and in particular Bitcoin, have been mentioned in a number of shows, perhaps most relevantly in ‘Silicon Valley’, as well as in The Big Bang Theory, but who might have expected that Luno, a major bitcoin and cryptocurrency exchange, would turner to the Simpson family’s past prediction to figure out when Bitcoin might go mainstream.

Bambrough refers us to an episode that aired on 23rd February, which I must admit I didn’t see. It featured Jim Parsons, who plays Sheldon Cooper in ‘The Big Bang Theory’, and in it, Bitcoin is described as ‘the cash of the future” and that this future is coming closer “each day.”

As Bambrough points out: “Over the show’s 30-year run The Simpsons have correctly predicted Donald Trump becoming U.S. president, the NSA spying scandal, Apple’s FaceTime, smartwatches, and the Disney takeover of Fox.”

Now, here is the interesting bit. The analysts at Luno have calculated that it takes an average of 15.6 years for a ‘Simpsons’ prediction to become reality. That means we’ll see mass adoption by 2036. Marcus Swanepoel, Luno’s chief executive, said, “It seems the creators behind The Simpsons have a knack for picking up on things that seem out-of-this-world, and a way of portraying the impossible as part of day-to-day life,” adding, “I wouldn’t be surprised if they’ve overshot their prediction slightly in this case.”

Indeed, the very fact that ‘The Simpsons’ are talking about crypto and Bitcoin on-screen may give adoption a very helpful nudge, because there is no doubt that public perception and awareness is one of the most important factors in digital assets going mainstream.

Perhaps we should all be keeping a closer eye on ‘The Simpsons’ — it’s obviously about so much more than eating doughnuts!