Sunday, December 4, 2016

Euro sinks to 20-month low on Italy PM's exit; Too late to worry – globalization is dead; Why plastic credit cards are on their way out

1 Euro sinks to 20-month low on Italy PM’s exit (Straits Times) The euro sank to 20-months lows in Asia on Monday after Italian Prime Minister Matteo Renzi said he would resign in the wake of a stinging defeat on constitutional reform that could destabilise the country's shaky banking system.

The single currency dived as far as $1.0505 in thin trade, after starting around $1.0645 earlier. It was the sharpest fall since June and opened the way to a retest of the March 2015 trough around $1.0457. Dealers said Italian bonds were set to come under pressure as top-rated US Treasuries and German bunds gained.

Investors and Europe's politicians fear victory for the opposition "No" camp could cause political instability and renewed turmoil for Italy's banks, pushing the euro zone towards a fresh crisis. Ultimately, the danger is that Italy holds a vote on whether to leave the euro, possibly triggering a break-up of the entire bloc.

Analysts at RBCCM argued that, based on what happened in 2012 at the height of the Greek crisis, such a risk could see the euro trade as low as $0.8000. "It may sound extreme, but if a second euro zone crisis were to hit, with the US dollar at a much stronger starting point, EUR/USD could arguably trade lower still," they wrote.


2 Too late to worry – globalization is dead (Bob Swarup in The Guardian) Today’s paradigm is globalisation and free trade is its evangelical mantra. But this narrative has become worn and no longer fits the facts. In recent months, there has been a backlash, accompanied by emotive talk about the reversal of globalisation and the battle for society’s future. The Organisation for Economic Co-operation and Development used its latest health check on the global economy to warn of the costs of protectionism.

The hand-wringing is half a decade too late, because globalisation is already dead and we are already some miles into the journey back. Donald Trump and Theresa May are not flagbearers in the distance, they are catapults battering at the walls. Trump’s stated intent to pull the US out of the TPP on his first day in office underlines the new reality we inhabit, as does the European Union’s recent troubles closing a trade agreement with Canada thanks to Wallonia’s obstinance.

Today, we have a new meme – deglobalisation – as people turn their backs on an interconnected world economy and societies turn iconoclastic. It is not for the first time. Globalisation may be defined as when trade across nations is growing faster than GDP.

Proto-globalisation (1820-1870): Rapid global trade growth, thanks to the Industrial Revolution and the spread of European colonial rule. Globalisation 1.0 (1870-1913): Empire building became the norm. Rapid advancements in transport and communications grew trade. But rapid change also meant volatile bouts of economic obsolescence and crisis.

Deglobalisation 1.0 (1913-1950): Limited growth, unequal outcomes and a huge debt overhang from previous decades stoked economic nationalism and protectionism. Trade fell and a collective failure to tackle deeper structural issues led to the 1930s. Globalisation 2.0 (1950-2010): Since then, we have been on a tearaway expansion with unparalleled growth of both global trade and GDP.

Deglobalisation 2.0 (2010-?): The last financial crisis focused policymaker attention inwards and crystallised the growing sense of social disenfranchisement. A toxic mix of suppressed wages, rocketing debt and political myopia have largely destroyed the allure of globalisation.

This is more than a sense of ennui. Global trade today is not slowing down but has plateaued – hardly a barometer of rude global health. After their peak in January 2015, global exports fell -1.6% by the end of August 2016. The blame lies not with commodity price falls, but shifts in trade policy. Protectionism is en vogue.


3 Why plastic credit cards are on the way out (Kevin Peachey on BBC) Imagine strolling into your local supermarket, popping your essentials into a basket, heading to the bagging area - where no items are unexpected - and walking out with your weekly shop. There is no need to make a payment, no fiddling with coins, and no placement of a debit or credit card in a terminal. In fact, there is no till at all.

This is not casual shoplifting but a realistic prospect of the future way to pay - when technology recognises your presence, scans your shopping, and invisibly takes payment from your account. Amer Sajed, the chief executive of Barclaycard, says it will spell the steady demise of the physical plastic credit card, which his company introduced to the UK 50 years ago.

At a display for Barclaycard staff, he shows off a plastic ring, a bracelet and a keychain which all contain a chip allowing the shopper to make payments on credit. This, he says, is just a bridge to technology that will see customers identified by their eye or fingerprint, located via their smartphone, and able to shop without queuing up at a checkout.

A link in the background between the individual and the payment system is required for any of this to work. This already happens with shopping portals like Amazon and services such as Uber allowing a single-click transaction because bank or credit card details are loaded when the customer first signs up.

The UK Cards Association predicts there will be almost 21 billion "card" transactions in the UK in 2025, up from 12.6 billion last year. Of these, 3.6 billion will be credit card purchases compared with 2.5 billion last year. The association says the long-term effect of this is difficult to judge, but - with a revolution in the way we pay for things - the future will hold many more unknowns for the credit card industry.


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