A Less-Cash Society and a $10 Billion Scandal

This week, our editors have contributed a selection of their favourite articles discussing a range of topics including a cashless society, YouTube censorship, Deutsche Bank’s woes and Lego’s bright future.

We start with Michael Pearl, who shares with us his favourite article of the week…

A Less-Cash Society

The cashless society vision has been for years a popular notion amongst some academics and pundits. But recently this idea has been gaining an increasing popularity.

The use of cash has been decreasing at a steady pace over the last three decades with the growth of payments technology, up to the point that it has become an esoteric practice in some places. 

In Sweden, for instance, less than two percent of transactions in 2015 were conducted in cash.

Beyond this trend, some governments (headed by the Scandinavian countries) and financial institutions have openly announced their will to go all the way.

You cannot use cash in the Swedish public transportation. In Denmark and Sweden, a vendor can legally refuse to sell to you if you don’t use your credit card. The same goes for Norwegian banks.

There are many reasons to go fully digital with respect to currency, from assisting the war on drugs and terror to improving the collection of taxes.

On the other hand, old habits die hard. Most of us are reluctant to buy a hot-dog or a newspaper on the street with our Visa. In other cases, some areas and layers of society lag behind with respect to the payments technology.

In a the American economist Kenneth Rogoff has ilustrated his vision of an almost cashless society. Rogoff, a long-standing advocate of “de-cashing” the global economies, has claimed in the exclusive op-ed source Project Syndicate that this move is both feasible and necessary.

Rogoff believes that beyond eliminating the wrong-doings that cash funds, such a move will also raise some $700 billion for the US national coffers, and many more to the EU.

He basically suggests gradually phasing out large sum banknotes, similar to what the ECB did recently with the 500 EUR note, and eventually leaving only notes under $10 in circulation.

This move, he claims, will allow a small portion of trade using cash, but will make the abuse of the cash transactions much harder.

YouTube Censorship

This week I’ll suggest you read “YouTube’s “ad-friendly” content policy may push one of its biggest stars off the website” 

Years ago the internet was mostly a flat space where anyone could have equal access to consume and disseminate information. Sadly, today just a handful of companies, Facebook and Google chief among these, control the majority of online traffic.

People and companies have come to depend so much on this cartel that not being on their platforms is almost equal to not being online at all.

From time to time we get examples of how capricious decisions by these giants can upend entire business ecosystems, and now is the turn of YouTube to show users the dangers of trusting an unchallenged monopoly with your work.

Starting as a website where everyone can share their cat videos, Google-controlled YouTube is now a platform where many have broadcasting careers and its old slogan “Broadcast Yourself” has long been retired.

Now the company has unilaterally decided it can prevent these content creators from making any money if they deem the contact not ad worthy, over everything from using foul language to reporting on wars and disasters.

What makes this even worse is that it appears to target videos completely at random from the independent creators point of view.

It is also hypocritical as YouTube benefits from super successful rap videos with very explicit images and lyrics but might destroy the livelihood of a blogger if he somehow talked about anything even mildly controversial.   

Troubled Waters for Deutsche

The New Yorker is once more. Mirror trading has been at the core of a $10 billion scandal that has put Deutsche Bank even deeper in trouble than it already is.

The German lender has been serving as a facilitator for fraudulent transactions between corporate entities in Russia and offshore which have been funneling money outside of the country.

The shift into more aggressive business lines for Deutsche Bank in light of its shift of power from the corporate headquarters in Frankfurt to risk-hungry London has changed the company’s risk profile.

One of the main reasons why the bank has accumulated massive derivatives exposures which are affecting the firm’s share price are low interest rates introduced by the European Central Bank (ECB).

How European monetary authorities will manage the €21 trillion derivatives exposure of Germany’s largest lender remains to be seen, but political pressure to punish the bank for wrongdoing on multiple fronts is going to be increasing after the revelations from the latest banking heist.

In the aftermath of the great financial crisis of 2008, Deutsche Bank has been fined over $9 billion by multiple regulators globally.

The charges against the bank included precious metals price manipulation, mortgage fraud, U.S. sanctions violations and LIBOR and FX manipulation.

Will the top German lender be able to rein in its books and rebound after its shares are trading close to thirty year lows – only the new management of the company has the power to show us.

Build It Higher

I’d like to end on a light-hearted note, so my chosen article this week is . In this high-tech age where you might believe that Lego is, well… uncool, I was somewhat surprised to learn that the plastic bricks manufacturer simply can’t keep up with demand.

Although Lego’s sales slowed down during the first half of 2016, it wasn’t because its popularity started to wane. It was in fact, the opposite – the colourful bricks are more popular than ever.

The company experienced strong sales in 2015, in fact, but had trouble meeting demand and decided to pull back on its marketing after the company’s CFO, John Goodwin acknowledged that the rapid growth had begun to put pressure on Lego’s factories around the world.

This year, however, the company is planning to get back on track for the upcoming holiday season and has begun to plan for a future of continued strong demand.

The growth is incredible for a company which a decade ago was on the brink of bankruptcy and is now, set to grow even further.

That ends another week of stories that our editors are reading. Feel free to share your views in the comment section and any recommendations of your own. We look forward to hearing your opinions!

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