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Monday, October 18, 2021

Wall Street Titans’ Take on Deflation, and More

The global economy is facing different challenges that are myriad and growing with every passing day. Bloomberg News spoke to three of the eminent visionaries of the financial industry and found out what they are most worried about for the forthcoming years. 

Cathie Wood, Ark Investment Management

Bloomberg News reveals that for Cathie Wood, it is “a wave of deflation”. She said that there is an underlying assumption that people are now in the inflationary period, which is “turbocharged” by disruptions that are manifested in the supply chain. She also believes that if anyone is planning for such an inflationary phase is perhaps making mistakes. Instead, according to her, three deflationary forces are budding. 

  • She stated that presently, there are 5 platforms, namely, robotics, energy storage, blockchain technology, DNA sequencing, and artificial intelligence. And all of them are deflationary. In AI, for instance, the cost of training is slashed by 68% annually. This reveals that there is going to be a lot of AI-driven products soon because it is faster, cheaper, and creative. 
  • There is a cost of DNA sequencing. It took 13 years of computing and $2.7 billion to sequence the whole human genome. After so many years, if cumulative doubling is considered for whole human genome sequencing, the cost drops by 40%, indicative of a transformation in the healthcare sector. 
  • There are electric vehicles (EV) and technology for battery pack systems. If the sale in cumulative doubling for every EV sold is considered, the cost drops by 28% for battery, and 15% roughly for the EV. 
  • By employing industrial robots, the cost when cumulative doubling is considered drops by 20%. 

According to Bloomberg News, Cathie Wood stated that this is good deflation. 

Mohamed El-Erian, CEA, Allianz SE, President of Queen’s College, Cambridge

Bloomberg News reports that what worries him is a “world of inequality”. This holds for within the nations and across them as well. According to him, Covid has played an instrumental role in further widening the divide. 

  • Mohamed El-Erian believes that if a society is unequal, it is not a healthy one. Inequality of opportunity is even more disturbing. 
  • According to him, Covid has caused many schools to lose touch with their innumerable students since not all had the means to stay in touch. As a result, a whole generation of “unemployable” young people are growing and not unemployed. 
  • More and more people in developing countries require prospective employees to come to the employer and not vice versa. This is where it matters especially when education and technology are lagging, Bloomberg News revealed as such. 
  • If you see at what has happened, it will be found that the higher part of wealth distribution has improved. But the reverse is true for the ones at the bottom-end. 

Scott Minerd, Chairman Guggenheim Investments

What worries Scott Minerd is the sustainability related to the payment system on a global scale. 

  • Scott Minerd, as per Bloomberg News prefers to use the word sustainability over vulnerability since the key is to keep the global payment system moving. And there have been hacks galore, aside from the Colonial Pipeline incident, and more. 
  • He said that if there was a “synchronized attack”, the global market would have been on its knees. The first response would be the crashing of the securities prices followed by the closing of the exchanges across the globe only to “figure out” how the payment system could be restored. 
  • He stated that it is essential to have a macro look, someone or a group that would be taking care of how everything is interconnected and identify the potential vulnerabilities. He also expressed the need to have international cooperation to ascertain the risks and find out how the system can be made tough for the short run and the long run too.



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Kiara Dawson
Kiara Dawson comes from an Engineering background, with a specialization in Information Technology. She has a keen interest and expertise in Web Development, Data Analytics, and Research. She trusts in the process of growth through knowledge and hard work.

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