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Predictions for 2015

I always like to start the New Year by making a bunch of predictions, but have been beaten to it this year by the Financial Times.  Therefore, I will make some specific banking and technology predictions this week but, as I like to look at the economic and social changes in the year, the easier way to begin this is to use the FT’s columnists’ views and share my own opinions of agreement or disagreement.  I won’t go through them all, as there are many, but here are the key ones that I’ve picked on.

Who will win the UK's General Election in May?

The UK has a general election in May and has a very divided political structure between the Conservative and Liberal Democrat Coalition, which is fragile to say the least, the weakness of Labour and the rise of the UK Independence Party (UKIP) and the Scottish National Party (SNP).  The FT’s Jonathan Ford makes no firm prediction here, apart from saying that there will be a viable government in some form.  The most likely outcome imho, is that the Conservatives will gain a whisker of a majority or, if not, a repeat of the existing Coalition Government.

Will the ECB launch a full-scale QE (Quantitative Easing) program?

The FT’s Martin Wolf says yes and so do I.  It is notable that the growth economies post the meltdown are the US and UK, both of which launched QE programs in 2009 and are now reaping the rewards.  Europe has staggered from crisis to crisis, with the Sovereign Debt issue still a major exposure.  The ECB has been loath to launch QE as the German economy is the one that would be most hit by such measures but now, with the German economy also leering towards recession, it is the only answer.  That is why Mario Draghi is saying that the intention is to inject a €1 trillion lifeline into the depressed EU economy.  It needs it, as the Euro is at an all-time low and with even France looking like joining the PIGS (Portugal, Italy, Greece and Spain) it won’t come at a moment too soon.

Will Russia annex more territory in Ukraine or other territories such as Latvia and Moldova?

The FT’s Gideon Rachman says no, and that Putin will become introspective.  I also agree here, having blogged extensively about this issue over the holiday period.  Russia’s interests are to consolidate the Crimea annexation by completing the annexation of the Eastern Ukraine.  Putin will continue to push that agenda but will not inflame Western leaders further by trying to gain expansion into other territories.  It just wouldn’t make sense as their economy is hurting badly with the rouble at an all-time low and the collapse of the first of services of Russian banks just before Christmas.  Overseas, Russian banks are faring badly too and to inflate a crisis further would not give Mr. Putin any additional kudos with his oligarchs and billionaires.  Instead, the aim will be to gain a win over Eastern Ukraine and leave it at that.  Whether that can be achieved without Europe, America and, most importantly, the Ukrainians having something to say about it, will be the most fundamental question over the future of the European-Russian balance and dialogue this year.

Will China’s growth rate fall below 7 percent?

The FT’s James Kynge believes it will but I am not so sure.  China’s economy has been propped up over the last five years by a benign government policy of quantitative easing, otherwise called the shadow economy.  China’s economy would already have collapsed, were it not for government-enabled debt and that policy will not change in 2015.  For China to allow its economy to fall further would be a public embarrassment for the People’s Republic, so I expect it to remain just above 7 percent growth this year.  That growth is not just through government funded debt however, but through resurgent demand in the growth economies across Asia and Latin America, as well as a resurgent American consumer demand.

Which Central Bank will raise interest rates first – the Federal Reserve or Bank of England?

The FT’s Chris Giles says the US Federal Reserve, but that assumes that interest rates will rise this year.  The FT forecast that interest rates would rise in 2014, but they didn’t so, will they this year?  Who knows but, if anyone will raise interest rates first, my bet is the opposite of Mr. Giles and that it will be the Bank of England and not the Federal Reserve.

Will a serious rival emerge to challenge Hillary Clinton in 2015?

The FT’s Edward Luce says no and that the only real alternative candidate would be the woman who created the US Consumer Financial Protection Bureau (CFPB), Senator Elizabeth Warren.  Would she want to stop America having its first female president by dividing the vote?  No.  However, the FT misses out the more important point about who will challenge Hillary from the Republicans and could she carry the Democrats to a third term in office when the vote has them out of the Senate and Congress majority today.  After eight years of Obama, 2016 is far more likely to see Hillary lose to a populist Republican candidate such as Jeb Bush, brother of George W. and so of George.  In other words, it’s a Game of Thrones between two titanic presidential families, rather than a Democrat threat to Hillary that will play out this year.

Will there be a fall in London house prices?

God I hope so.  London’s pricing has become stupid, with a recent survey showing the average house price is over £1 million.  That is ridiculous!!!  OK, so it’s mainly Russian, Ukrainian, Syrian and other million and billionaires investing in a ‘safe haven’ but c’mon.  When the average house price is over 10 to 30 times the average wage, something has got to give.  That’s why the FT’s Jane Owen forecasts a 10 percent fall in London property prices this year.  All I will say is that when you see year-on-year prices growing by 10, 20 or even 25 percent per annum, then you know you have a bubble and there’s only one thing that happens with a bubble.

Bubble burst

Picture courtesy of Red Orbit

Will this be the year that bitcoin takes off as a mainstream currency?

The FT’s Izabella Kaminska says no, and that the fall in the currency’s pricing and collapse of MtGox are to blame.  She doesn’t say it will collapse, but that its chances as a currency are zero.  This is a fine line view of semantics if you ask me.  The semantics being whether consumers will be using bitcoins to buy and sell online or whether bitcoins as  currency store will become mainstream for other uses online.  As mentioned several times, I think Bitcoin will become an integral part of contractual exchanges using net-based recording, or smart contracts as we like to call them using the blockchain.  As discussed many times, to use the blockchain needs a native currency and the most established of those is bitcoin.  So I would say that bitcoin will not collapse and that it’s usage as the currency behind the blockchain will, in effect, make it a mainstream currency of value exchange on the net – in the context of smart contracts – but not a mainstream currency for general buying and selling online of other goods and services.

Will 2015 be the year of wearable technologies in consumer tech?

Richard Waters says no, and that wearable tech is a solution looking for a problem.  I’m not so sure, especially as this week's CES has a plethora of wearable announcements.  Personally, I don’t like carrying around devices but, equally, Apple’s Watch and Google’s Glass hold little attraction for me right now.  However, the idea of embedded technologies in fashion, such as Heritage Bank’s Payments Suit …

… do make me think there’s a place for fashion tech.  Fashion tech will allow my clothes, shoes and jewellery to communicate and exchange information such as telephone numbers, email addresses, twitter handles and facebook page names.  Later, it will move to more commercial usage, such as payments and exchange of bank details.  In other words, fashion that removes the friction of having to open an app, press a button and confirm a transaction will become interesting.  It may not happen in 2015, but it’s coming very soon.

So there’s my take on the FT’s predictions.  What do you think?


About Chris M Skinner

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here…

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