By Peter Benson

The writing’s on the wall.

Warning signs of another global recession are seemingly ubiquitous, but it’s easy to dismiss them as just more meaningless bad news. Unfortunately, we may be feeling the combined effects of this bad news sooner than we think, perhaps even by the end of 2020.

What signs am I talking about? Let me explain:

The Inverted Yield Curve

You may not have heard, but in December 2018, part of the U.S. Treasury’s yield curve (5 year – 2 year yield spread) inverted for the first time in nearly a decade. The yield curve is a graph that plots the interest rates of similar bonds with varying times to maturity. Put simply, the yield curve mirrors the outlook of investors on future economic prospects. If it’s curving upward, it means they expect long-term economic growth. If it inverts (curves downward), which it did, it means that the summer holiday you just booked may be in jeopardy. Find out more on that here.

A yield curve inversion is regarded widely as being positively correlated with a recession. The yield curve on 10 year – 2 year yield spreads inverted on 14th August 2019, and the last time it inverted in this fashion was in 2007. According to Reuters, an inversion has predated every recession in the past 50 years, offering a false signal just once in that time. It has previously taken up to 24 months for a recession to follow a yield curve inversion, so perhaps we still have time to wait. Time is ticking on that deadline, however, and all should be revealed by December 2020.

It is worth mentioning that a yield curve inversion should not be taken as gospel in and of itself. Some suggest that the data is skewed because of the U.S. Federal Reserve’s wholesale purchase of bonds to retain their balance sheet, and that the economy rarely moves in ‘lock-step’ with the stock market.

Who knows? Maybe our bank accounts will soon take a hit. Maybe they won’t. But the yield curve’s latest inversion, the strongest metric by which a recession can be predicted, simply cannot be ignored. At the very least, it serves as a wake-up call that it may be time we took a second look at our finances.

Brexit

You get the idea.

The European economic fall-out from a no-deal Brexit is as yet unknown but seemingly unquantifiable.

KPMG forecast that a no-deal outcome could shrink the British economy by 1.5%. A mere 1.5% drop isn’t too bad, right? Wrong. With a GDP that is valued to be in excess of $2.6tn, a 1.5% shrinkage of the UK’s economy would equate roughly to a loss of $39bn. To put that figure into perspective, the GDP of Latvia is estimated to be in the ballpark of $39bn.

That’s not to mention the repercussions of such an outcome on the Irish economy, and the knock-on effects globally. Ireland has traditionally relied heavily on the UK for exports, and although this reliance has eased somewhat in recent years, 9% of our total exports are still to our nearest neighbours. This is notwithstanding the World Trade Organisation’s latest ruling that has paved the way for a fresh round of U.S. tariffs on EU goods to the tune of $7.5bn.

Granted, this is a worst-case scenario. Recent legislation in the form of the ‘Benn-Act’ provides us with some solace. This Act forces the British Prime Minister, Boris Johnson, to advocate for an extension on the October 31st deadline if Brussels is dissatisfied with whatever deal is proposed. However, loopholes in this legislation have already been identified, and Johnson’s comments at the latest Tory conference that Britain will leave the EU ‘come what may’ paint a foreboding picture.

Perhaps it’s fitting that our fate may be sealed on Halloween. I, for one, will be dressing up as the world’s most recent judicial champion, Lady Hale.

Everything Else

• The escalating trade war between the U.S. and China is not expected to end anytime soon;
• Did you know Japan and South Korea are also embroiled in a trade war with global economic implications?
• The over-valuation of housing isn’t just a problem in Ireland; there’s a global property bubble, the bursting of which could prove disastrous;
• This week, sharp falls were recorded in the Asian, U.S., and European markets, signalling that a recession may well be due;
• The result of the 2020 U.S. Presidential election could inject even more volatility into an already fracturing global market.

So there you have it.

Financial and economic warning lights are flashing, and if I were a government economist I’d be shaking in my boots.

What would another global financial crisis look like as we approach the end of the decade? In light of recent calls for a lower intake of domestic students, and without increased government funding, what would be the impact on Trinity? Would more cuts be implemented, or would our focus shift to further commercialisation? How would a country only recently getting back on its feet after years of economic turmoil, but still wildly indebted, fare in future?

My message is this: there is a strong possibility of another global economic downturn occurring within the next 15 months. Rather than rest on our laurels, here are some things we can do to prepare ourselves financially. They won’t provide us with total financial security, but they may soften the inevitable blow.

There are still a lot of variables at play, particularly in relation to Brexit, that may bring with them a slightly more positive outlook.

What’s certain, however, is that the hum of our global economy is slowing, and our ears must be pricked toward it. The writing on the wall is thickening, and thus we must read it.

By Luz Cuentas

Origin

It is strange to think that this notion was first proposed in 2006. At the time, the exponential growth of social media as an integral part of many people’s lives across the world was at its infant stage. Yet this is what British mathematician Clive Humby remarked when he said that “Data is the new oil.” It is worth noting that this idea only really became more widespread and a popular source for debate when The Economist released an article in May 2017 called “The world’s most valuable resource is no longer oil, but data.” The question resurged again this year following the premiere of Karim Amer and Jehane Noujaim’s documentary film “The Great Hack” at Sundance Film Festival. “The Great Hack” is centred around the 2018 Facebook-Cambridge Analytica scandal. Its subsequent rave reviews by critics resulted in the release of their documentary on streaming giant Netflix in July which gained this notion even more exposure to a global audience. Ring the alarm bells, your personal information has now replaced oil as the world’s most valuable resource. Or has it really?

Oil as the World’s Most Valuable Resource

Just over a century ago, oil was undoubtedly the world’s most valuable commodity – and with good reason too. Global crude production of oil was at its highest at the start of the 20th century since its emergence in the mid 19th century. However, it was only after the 1950s that oil emerged as the global powerhouse of energy supply, replacing its predecessor, coal. Taking the example of the American oil market in the 1880s, the implementation and subsequent rise of managerial capitalism as a way of structuring the business by John D. Rockefeller and 39 other allied companies owned by his associates led to the establishment of the Standard Oil Trust. This resulted in the Standard Oil Trust controlling almost 90% of the kerosene produced in the United States – one of the earliest examples of modern monopolies. The economies of scale generated by Rockefeller and his partners led to oil overhauling coal as the primary source of energy powering the United States. This example soon occurred in many other countries worldwide. Coal was replaced by oil as the world’s most valuable commodity because oil became much cheaper and more accessible than coal despite both of them being finite.

The Rise of Data

So, where does data come into all of this? Well, oil seems to be running into the same problems that its predecessor, coal ran into at the turn of the 20th century. The argument for data becoming more valuable than oil as a resource is not as ludicrous now as it was in 2006. Why? Oil is of course finite too. Many would argue that data is also much cheaper and more accessible now than ever before. Most of us hand in our personal details and information to “The Big Five” technology giants Alphabet (parent company of Google), Amazon, Apple, Facebook and Microsoft on a daily basis. We can also access all of these websites, software services and social media platforms for “free”. Likewise, these technology giants can also access our personal data and possibly more for “free”. Hence, this argument is definitely more valid and logical now more than ever. “The difference between oil and data is that the product of oil does not generate more oil (unfortunately), whereas the product of data (self-driving cars, drones, wearables, etc) will generate more data (where do you normally drive, how fast/well you drive, who is with you, etc).” This remark was made by Piero Scaruffi, author of “A History of Silicon Valley” in 2016. Hence this leads us to the conclusion that unlike coal and oil, data are not finite.

Data reserves will not run out the same way an oil reserve will because the human population will undoubtedly keep growing. This of course leads to an infinite source of data from future generations. Our data is also much cheaper and easier to access now as seen in “The Great Hack” with the 2018 Facebook-Cambridge Analytica scandal. So our vulnerability to have our political views influenced and potentially changed using these “The Big Five” technology giants is potentially at its maximum threat level. Can a monetary value be placed on such a concept? Maybe not but all of these arguments pave the way for the proposal of data being the world’s most valuable resource as a very convincing notion.