What are the Next Trends in the Economy and Financial Markets?

2018 was a year that characterized by general growth in the first few quarters followed by a period of steady economic decline beginning around the end of September. However, depending on your preferences and risk tolerance as an investor, volatility and decline are not always negative—if you can properly time your entries into and out of certain positions, you may be able to earn a significant return on your investment.

In this article, we will briefly review the current state of the economy (both in the United States and globally). We will also discuss some of the events that are likely to occur over the course of the next year and the impact that these events may have on your financial portfolio.

2018: a Disappointing Year for Most Major Indexes

Though there are many indicators that can be used to measure the general health of the economy, there is no doubt that the major indexes are among the most relevant. Despite promising performances towards the beginning of the year, both the S&P 500 and the Dow Jones Industrial Average (DJIA) ended the year with measurably negative growth.

With the Dow ending the year with a 5.6% loss and the S&P 500 ending the year with a 6% loss, 2018 was the first year since 2008 where both these indexes ended the year in a position worse than they started. The possible explanations for these disappointing closing quarters are wide-ranging and include complications due to tariffs, the end of the stock market “sugar rush”, the Federal Reserve’s increasing interest rates, and various others.

The performance of these indexes is crucial due to the fact that they are major components of many American’s (and non-Americans) retirement funds and—because they are composites of some of the largest companies in the world—they are often indicators of the health of the economy as a whole. Though a negative year for the major indexes does not necessarily indicate the beginning of a recession, it is certainly a red flag signaling possible problems for 2019.

Possible Signs of a Pending Recession

It is important to note that while the term “recession” is often used to describe a time when the economy is ambiguously doing poorly, there is a formal definition for the term as well. A recession “officially” occurs when there have been two consecutive quarters of negative growth (as measured by GDP) which, according to even the most pessimistic forecast, has not yet occurred in the United States.

The Federal Reserve of Atlanta estimates that Q4 GDP growth will likely total to be anywhere between 2% and 3%, meaning that a formal recession is at least 6 months away. However, the current market conditions still bear a passing resemblance to those existing before the 2008 financial crisis, which has many investors and economists concerned for the future.

The first sign that a recession may be beginning to formulate is that the Federal Reserve has changed its long-term strategy. Usually, increasing interest rates coincide with strong economic performance, which is what was experienced for the first half of 2018. But—according to CME Group—between the beginning of November and the end of December, those who expected interest rates to either decrease or remain the same in 2019 shifted from less than 20% to more than 80%.

Other signs of a pending recession (beyond the dramatic losses of stock market momentum) include investor’s steadily decreasing levels of confidence and numerous companies adjusting their earnings forecast. In fact, only one day into the new year, Apple CEO Tim Cook adjusted quarterly earnings downward. According to the Wall Street Journal, this is the first time the company has done this in fifteen years and will likely issue an even further blow to the value of a company that has decreased by $300 billion since peaking in October.

Managing Risk and Preparing for the Future

JP Morgan has forecasted that the probability of a recession occurring in the next two years is currently over 60 percent. This will ultimately result in many investors shifting their wealth to safer assets with high liquidity and positive forecasts.

While these general economic woes may create issues for the average American family as a whole, they also create opportunities for those who are risk tolerant. High levels of volatility will create many opportunities for day traders and—assuming investors demonstrate the same survivalist instincts they did a decade ago—most major indexes will likely dip further than necessary, creating the possibility for even further productive positions.

For those who are unsure about risking their savings and gambling on highly volatile stocks, then diversification will likely be the best approach. Investing in multiple different industries, markets, and financial instruments will help reduce overall exposure to asset-specific risk.

Conclusion

When confronted with the overwhelming amount of data available, there is no surprise that many people are having an increasingly pessimistic view about the near economic future. There are still many things that can change between now and the end of 2019, but it certainly seems like that the next few quarters will remain bearish.

Can Italy Be the Next Greece?

Though there is a significant amount of disagreement regarding the politics of controlling an economy, there are still a few things that fundamentally all economists can agree on: high employment is generally desirable, low inflation is generally desirable, and—perhaps above all else—a stable economy is one that can operate in a predictable way. Any time a national economy deviates from these objectives—and possesses high levels of unemployment and general economic instability—there ought to be at least some reason for outside speculators to be concerned.

Less than one decade ago, the Greek economy experienced one of the worst depressions to ever occur in the developed world. In an incredibly short amount of time, unemployment dramatically increased, the interest rate on government bonds skyrocketed, and seemingly all other economic metrics inspired panic to some degree.

Few economists were able to correctly predict just how bad the Greek economic crisis would actually be, but—especially with 20/20 hindsight—the existence of this crisis still remains relatively unsurprising. When compared to other countries tied to the Euro, the Greek economy had been measurably underperforming for quite some time.

Now, roughly six years following the peak of Greece’s economic crisis, Italy finds themselves in a situation that is all too familiar. In this article, we will briefly compare and contrast the economic situations of Greece and Italy, and also discuss ways active investors can potentially exploit the current situation to their advantage.

Similarities between the Situation in Greece and Italy

In order to understand the risks presented by the Italian economy, it is important to recognize why the situation in 2018 is so familiar to what we witnessed in 2011. Both Southern European nations have experienced relatively high rates of unemployment, though Italy’s current unemployment (about 10.2%) is nowhere near as bad as Greece was during its recent peak (27.9%).

Both nations have also experienced tremendously high amounts of national debt (Italy currently has a national debt over 2.3 trillion EUR, 131% of GDP), which have triggered talks of austerity measures and even declaring independence from the Euro. In 2011, Greece began to impose various austerity measures which—at least according to Keynesian economics—seems to have been the incorrect move for a country that was already tremendously low on working capital.

Consequently, austerity measures in Greece witnessed the government become even more desperate for funds and increase 10-year bond yields from roughly 5% to nearly 40% in less than one year. Italy’s reaction to its current economic situation is yet to be seen, but an increased interest in populist politics (5 Star) and Euro-skepticism suggests that it may be moving in the same direction that Greece once was.

Differences between the Situation in Greece and Italy

The details involved in international economics can be quite complex and comparing Greece to Italy will naturally involve a more nuanced and comprehensive approach. There are still some things that make Greece and Italy significantly different and the effects of these differences will vary tremendously.

Though Italy is suffering from many of the same economic woes that Greece experienced a decade earlier, the degree to which they are suffering is not nearly as bad. The Debt-GDP ratio is more sustainable (suggesting that austerity might not be necessary), unemployment is lower, and Italian bonds have experienced comparatively little volatility. All of these figures suggest that if there is a “tipping point” that caused the Greek economy to collapse, then Italy has not passed it (yet).

One difference that should be more concerning, however, is the scale at which the Italian economy operates. While, in terms of nominal GDP, the Greek economy is only 53rd largest in the world, the Italian economy ranks 9th (and is the 4th largest in Europe). This means that the relations between Italy and the rest of the economic world will be significantly more important. Furthermore, while Greece’s crisis took place in a “pre-Brexit” world, the fact that Europe has already witnessed one major power (slowly) begin the process of leaving suggests the Italians may consider a similar route as well.

Opportunities for Investment

Though, as a collective, we should be rooting for the world economy to fare well, there is still no doubt that any sign of systematic volatility means there will be opportunities for some highly rewarding (and risky) investments. In response to what has been happening in Italy, there are several good chances to earn a return on your investment:

  • Exploit the likelihood of increased bond yields by shorting Italian 10-year issues
  • Monitor the situation in Italy and invest heavily in other currencies as soon as the Euro begins to lose value
  • Buy the Italian/German bond spread to take advantage of the likely widening differences between them
  • Short Italian stocks (FTSE Milano Indice di Borsa)
  • Wait until the Italian economy reaches its probable low-point (likely in the next few years) and then invest heavily in Italian stocks

These are just a few of the potential options you have available. The investment that makes the most sense for you will depend on your risk tolerance and overall portfolio strategy.

Conclusion

The obvious weaknesses in the Italian economy are reminding investors of similar conditions in Greece not so long ago. Though the probability of a total economic collapse is small, the high probability of there being at least some economic turmoil gives investors a wide range of opportunities to act.

5 Things You Need to Know About the Cannabis Industry

Though global demand for cannabis has existed for decades (and arguably even millennia), it was not until recently that the international cannabis market began to become completely legitimized. Ongoing legislative efforts and ballot initiatives in the United States and elsewhere around the world have transformed the industry from a black market operation to one that offers investors incredible opportunities to openly increase their wealth.

Normally, when a “new” market is created, industry producers need to wait a significant amount of time before there exists a sufficient level of demand for their product. The cannabis industry, however, has demonstrated itself to be much different. Because high levels of demand already existed all around the world, industry producers quickly recognized that if anything was lagging behind, it was the availability of the global supply.

Clearly, the cannabis industry is uniquely positioned upon a frontier of tremendous opportunity. In this article, we will discuss the most important things for you to know about the industry as a whole and—whether you plan to ever consume cannabis or not—we will also discuss the many unique opportunities for you to earn a significant return on your investment from cannabis trading.

1. The Difference Between Hemp and Marijuana

Before you consider investing in the cannabis industry, it is important to recognize that the term “cannabis” can actually be used to describe a broad range of different products. Though many of the terms in the industry are often wrongfully used interchangeably, both hemp and marijuana are distinctively different manifestations of the more-inclusive cannabis plant.

The primary difference between hemp and marijuana is that, contrary to hemp, marijuana typically contains relatively high levels of tetrahydrocannabinol (THC). THC is the primary component of the cannabis plant that causes users to feel “high” and, consequently, the way in which these products are regulated and managed are significantly different. In the United States, in order for a cannabis product to be labeled as hemp, it must have a THC content of less than 0.3%. Hemp still typically has some active ingredients—usually referred to as cannabinoids—such as CBD, CBN, and others, but these ingredients do not affect users nearly the same way as THC does.

Generally speaking, governments around the world are much less hesitant to allow the growing of hemp than they are to allow the cultivation of marijuana. Hemp can also be used for an incredibly wide variety of industrial purposes including paper, fibers, fuel, animal feed, and many others. This is especially beneficial because, contrary to marijuana, industrial hemp is actually quite easy to grow. Still, because both products are derived from the same cannabis family of plants, there are still some unresolved complications involved in the legalization process.

2. Dramatic Legal Changes around the World

As cannabis use began to enter the mainstream American public in the early 1900s, various groups—including tobacco, paper, and alcohol lobbyists—began to advocate its prohibition. By 1937, the Marihuana Tax Act began to place federal controls on the plant and, by 1970, the Controlled Substances Act outlawed cannabis altogether.

However, despite the fact that the Federal Government of the United States still considers cannabis to be a “schedule I” substance that is more heavily restricted than opiates and certain amphetamines, multiple states across the nation have effectively begun to allow its use. The first “pro” cannabis piece of legislation was California’s Proposition 215, which was successfully passed in 1996.

In 2012, Colorado and Washington were the first states to legalize cannabis for personal use. Furthermore, as of 2018, a majority of states allow the use of cannabis for medical purposes and several more states (AK, OR, CA, NV, MA, ME, VT, DC) have also decided to permit recreational use as well. Currently, only four states (KS, NE, SD, ID) do not allow at least the use of non-psychoactive cannabis.

Though—despite opposition from the federal government—the United States has effectively positioned itself as one of the leading forces with regards to recreational cannabis legalization, there have been significant efforts made elsewhere around the world as well. Uruguay, South Africa, and Georgia are the first three countries to allow full recreational consumption within their borders. Spain, Italy, and the Netherlands are believed to be on the verge of achieving total legalization as well.

Other countries around the world have begun to decriminalize recreational use, allow for medicinal use, or effectively stop enforcing their laws altogether. Furthermore, one of the most notable efforts that have been made is that, as of October 17th, 2018, Canada will allow the recreational use of cannabis across the entire country. Considering the close relationship that exists between the United States and Canada, Canada’s legalization may inadvertently accelerate the pro-cannabis movement in the United States as a result.

3. The Economic Impact of the Cannabis Industry

Though these figures are often difficult to generate, recent research conducted by Grand View Research suggests that the marijuana market is estimated to be worth more than $146.4 billion by the year 2025. When compared to IMF figures from 2017, this means that the marijuana industry alone would be the 59th largest economy in the world.

Clearly, the marijuana industry has the potential to have a major impact on the global economy and to influence a wide variety of different industries.

  • “Cannabis Tourism” is expected to rapidly grow.
  • Medical marijuana—which some claim can help treat chronic pain, cancer, various mental health disorders, and other conditions—will likely begin competing with traditional healthcare and effectively drive down costs.
  • Marijuana cafes, marijuana clubs, and other recreational venues will likely begin to emerge in Canada, the United States, and elsewhere.
  • Once cannabis is fully legal in the United States and Canada, this will likely lead to an increase in international trade (especially in light of the new trade deal).
  • The marijuana industry is also believed to have already created more than 200,000 jobs—many of these employees enjoy more than a 15% pay raise each year
  • Furthermore, in the United States, hemp—the distinctively non-psychoactive derivative of the cannabis plant—has also begun to enjoy bipartisan support from pro-business and pro-agriculture Republicans and generally pro-cannabis Democrats. The Hemp Farming Act of 2018 intends to remove hemp (cannabis with less than 0.3% THC content) from the list of federally controlled substances, support hemp farmers and researchers with various grants, and also allow hemp farmers to have clearer access to the national banking system.

Even though this act has not yet passed, the hemp industry has already begun to flourish in states such as Colorado and elsewhere and has already surpassed $1 billion in domestic value. Once hemp is fully legalized across the United States, it can be expected to perpetually compete with paper mills, animal feed producers, center wellness treatments centers, and various other industries.

4. The Cannabis Industry is “Going Public”

There is no doubt that the general movement toward the legalization of cannabis has already begun to disrupt a wide variety of different industries. What remains unclear is whether these industries—particularly those involved in the medical community—will continue to resist this seemingly inevitable growth or if they will embrace it and find a way to position themselves as industry innovators.

Until such a decision has effectively been made, it remains clear that cannabis producers will continue to occupy a significant portion of the agricultural start-up market. As is the case with many new businesses, the typical large-scale cannabis operations begin with funding from a few angel investors and then seeks additional private funds once they have been able to demonstrate a potential for growth. However, even though there still remains some legal uncertainty regarding the cannabis market, several cannabis producers have already begun the process of issuing IPOs and going public.

Here are some of the top performing cannabis stocks over the course of the past year (2018):

  • Tilray (NASDAQ: TLRY): grew from $25.60 on August 9th to $214.06 on September 19th
  • POTN (OTCMKTS: POTN): grew from $0.19 on January 12th to $0.85 on January 26th
  • Aurora (OTCMKTS: ACBFF): grew from $4.09 on August 14th to $11.36 on October 15th
  • Canopy (NYSE: CGC): grew from $24.62 on August 14th to $54.89 on October 15th
  • Cronos (NASDAQ: CRON): grew from $5.65 on August 14th to $13.75 on September 20th

Clearly, the fact that some of these stocks have demonstrated a potential to more than double their value in a matter of weeks (or even days) will continue to attract initially skeptical investors to cannabis trading. The period between mid-August and early October 2018—occurring near the time many outdoor growers were harvesting their crop—was particularly lucrative for the industry as a whole.

However, despite this potential for growth, it is important to recognize that the cannabis industry is exceptionally volatile. For example, the company India Globalization Capital (IGC) experienced more than 1,000% growth between September 14th and October 2nd, but then lost 70% of that rapid growth over the next three days. Though those who held the stock before this period of volatility are indeed still wealthier because of these movements, anyone who entered the market when IGC stock happened to be at its zenith, may be questioning their initial decision.

Source: Statista
Source: Statista

5. Reasons for Continued Growth

Despite the high levels of volatility that the cannabis industry has clearly begun to demonstrate, one thing continues to remain undeniably clear: even when using conservative projections, the cannabis industry as a whole is still significantly increased in value over time. As capital is gradually shifted from black-market operations to legal, publicly traded firms, the question is no longer whether the industry has what it takes to succeed, but who will ultimately be the most successful.

There are plenty of reasons for outside observers to believe that the cannabis industry will continue its steady rate of growth.

  • As the cost of cancer treatments and other medical treatments continue to rise, patients who find relief in the consumption of cannabis will have a significant impact on global demand.
  • Changing attitudes, legislation, and the opening of markets will help make it possible for major cannabis firms to access a wider audience.
  • Operating on an economy of scale—which is typically made much easier when done through legal avenues—will allow the cost of cannabis to decrease, which will increase accessibility without any damages to profit margins.
  • Increased competition will help spur innovation, drive down production costs, and increase the general quality of cannabis producers around the world.

For better or for worse, the days of full cannabis legalization are undeniably on the horizon. This industry presents the capacity to both complement and disrupts a variety of other industries, meaning that its economic impact is something that no investor can justifiably ignore. Between the bipartisan movement towards legalizing hemp, Canada’s dramatic push to become a world leader in cannabis production, countless initiatives occurring across the states, and various other legalization efforts occurring elsewhere in the world, the industry is clearly prepared to establish itself as a permanent economic fixture.

Conclusion

The cannabis industry—which consists of both hemp and marijuana—is volatile because, as we have seen with other industries (think about the “.com” era), all new industries are positioned upon a frontier of initial uncertainty. However, despite the fact that this level of volatility is likely to continue on into the perpetual future, it remains clear that the value the cannabis industry can offer the world is indeed authentic. The future of cannabis is exciting and will likely witness increased competition, innovation, and consolidation of the world’s top firms. Though investing in the industry is something that can certainly not be done without risk, the almost universally recognizable potential for growth that exists there has uniquely attracted the attention of investors all around the globe.

A Decade After the 2008 Financial Crisis: What has Changed? What has Remained the Same?

The 2007-08 financial crisis was an event that undeniably had a major impact on the global economy. The crisis, which is believed to have been largely triggered by poor debt-keeping and dangerous mortgage practices, unleashed a tremendous series of rippling effects that affected both the world’s largest financial institutes as well as the ordinary individual.

In many ways, the crisis was likely inevitable. The value of various assets (and “bundles” of assets such as mortgage-backed securities) had significantly deviated from actuality and an adjustment back to normalcy would almost certainly have to occur. In the face of the many obvious reasons why the 2007-08 financial crisis occurred, it seems that citizens of any market democracy ought to ask themselves how we can prevent a similar event—which was measurably the worst financial crisis since the Great Depression—from occurring again.

What has changed?

In response to the chaos triggered by what has since been referred to as the “Great Recession”, significant amounts of reorganization and sweeping legislation materialized in the United States and elsewhere around the world. Without a doubt, the most significant piece of reactionary legislation was the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010).

Dodd-Frank, as it is frequently called, was a far-reaching piece of legislation that sought to improve consumer confidence, increase transparency, end “too big to fail” banking practices, and also establish the Consumer Financial Protection Bureau (CFPB). The bill also sought to redesign the “architecture” of the financial industry and transform the ongoing functions of the Federal Reserve.

The extent to which Dodd-Frank was actually able to achieve its lofty goals is still highly debated by economic analysts and, as is the case with most pieces of legislation of this size, it seems there were likely some positive consequences in addition to some negative consequences as well. Notable changes that have occurred—for better or for worse—include the reintroduction of combining commercial and investment banks (negating the Glass-Steagall provisions of the Banking Act of 1933), significant changes to equity ratio requirements, and additional rules regarding corporate governance (as enforced by the SEC).

Other changes we have seen since 2008 have primarily occurred on a much larger global-political scale. As has been the case since the days of Columbus and even the days of the Roman Empire, the world had generally moved towards a state of greater globalization for quite some time, particularly regarding trade. Though the free movement of capital and eventually labor seems inevitable—and has been manifested through NAFTA, the European Union, TTIP, and the TPP—the 2008 financial crisis is frequently referenced as a grieving point by populists on both the American right (Tea Party) as well as the American left (Occupy Wall Street). Despite the fact there are many different reasons that the world’s competing political factions are realigning and readjusting their approach to governance, the 2008 crisis has almost certainly been a major contributing factor.

What hasn’t changed?

Even as we continue moving into a century characterized by new political alignments, new regulations (and the occasional absence of regulations), and new technologies, there are still some things that seemingly remain unchanged. Even in the face of legislative efforts manifested in Dodd-Frank and elsewhere, the perpetual discord between Wall Street and “Main Street” appears to be just as great as it was in 2008. Global inequality, as measured by the Gini Coefficient, has remained largely unchanged and has even increased in many parts of the world. Despite some metrics suggesting the development of an “excellent” economy, the benefits of recent economic growth have largely still been concentrated in the hands of the few.

Though acts such as Dodd-Frank may have reorganized the way that the financial industry is structured, there has been very little real change to prevent crises such as the one occurring in 2007-08 from happening again. Changes in equity ratio requirements have largely caused financial institutions to simply increase the risk held by the uncommitted portions of their portfolios, consequently negating many of the good intentions that Dodd-Frank may have even had to begin with. The possibility of future banking bailouts continues to persist and, knowing this information, many banks continue to pass the consequences of their personal risks onto the ordinary taxpayer.

“Too big to fail” remains a real problem, risky mortgage lending remains a very real problem, and genuine transparency can hardly be claimed to have increased. Though the authentic reforms that the financial industry needs are certainly difficult (if not impossible) to correctly identify, what remains abundantly apparent is that the reactionary Band-Aids of the past decade have not truly solved the problems that contribute to global financial distress.

What have we learned? How close are we to the next financial crisis?

If there are any lessons that can be drawn from the financial crisis of a decade ago, they are as follows: there is no such thing as a risk-free investment and if something seems too good to be true, it probably is. Savvy investors will recognize that as homeownership rates increase without a corresponding increase in real wages or wealth, then a housing bubble is likely to be building again. Just as we saw in 2008, this indicates that the best financial portfolios will probably be the ones that are the most diversified and also liquid enough to react to sudden changes (think, Lehman).

When the next financial crisis will occur is impossible to know with any degree of absolute certainty, though it still clearly seems that there are several new bubbles that are slowly inflating over time. Despite the fact that information is becoming more accessible and distributable than ever before, college tuition rates continue to rise well above real wage growth or even inflation—this suggests the possibility of a student loan debt bubble existing. Commodity bubbles—particularly regarding oil, natural gas, coal, steel, and luxury resources (gold, diamonds, etc.)—are believed by many to be emerging around the world as well. If there is anything to be learned from the 2007-08 financial crisis, it is the simple fact that smoothing the inevitable transition from economic growth to decline will ultimately be in the best interest of both the “elite” and the ordinary individual.

If there is anything else to be learned from last decade’s crisis, it’s that you probably shouldn’t hold your breath.

How Serious is the World’s Water Scarcity Crisis?

According to recent estimates, more than 1.2 billion (roughly 1 in 6) people currently do not have access to clean drinking water. Throughout the course of the year, at least 2.8 billion people will experience water shortages to some degree. If a future global water crisis is something that we hope to avoid, we will need to begin planning and searching for solutions in the status quo. In order to effectively preserve our global well-being, it will be important to identify the causes of this crisis, commit resources to create solutions, and continue developing the saltwater desalination industry.

Climate Change is Here!

Though evidence of climate change has been observable for decades, there is no doubt that this decade is one that has been particularly brutal. Currently, climate change has been actively affecting every continent on our planet. This summer alone has been characterized by intense fires in California, record-setting heat waves across Europe, and the continued desertification of what were once some of the most fruitful lands in Africa.

Whether human beings are responsible for 90%, 95%, or any other portion of this climate change no longer seems to particularly matter. The fact that our actions and consumption habits have significantly caused our planet to change can no longer be denied. As global temperatures continue to increase, the amount of usable water available will inevitably continue to diminish unless we are able to change. With a global population that is expected to continue rising over the coming decades, the consequences of human-caused climate change will only accumulate further.

Our future is one that will likely be characterized by even more droughts and self-inflicted natural disasters. Unsurprisingly, the global poor and those living nearest to the equator will likely be the ones who experience these consequences the most. This will likely be particularly problematic if the UN projections of a global population of 9.8 billion in 2050 turn out to be accurate.

South Africa, Turkey, Brazil, and… Canada?

One of the most notable problems with our developing water crisis is that with each passing year, new countries are added to the list of those who are affected or are at risk of being affected. There may be a very little surprise that the nations with largely desert climates will be the ones that suffer the most, but some unexpected victims—such as Canada—are being added to this list as well.

In Canada, the current problem has had very little to do with the available supply of freshwater but instead has been primarily caused by issues relating to water quality and distribution. As has been the case throughout much of Canada’s unspoken history, the individuals who have been burdened by the water crisis the most have been their indigenous populations (First Nations). This pattern can also be witnessed in South Africa and Brazil where—despite Brazil having access to the world’s largest river—the European-dominated cities in these nations typically experience significantly higher water quality than the indigenously-dominated rural areas.

Because water is fundamental to human life, all issues regarding access to clean drinking water need to be immediately addressed. Though even the United States has witnessed similar issues in Flint, Michigan, the magnitude of these problems are projected to be greater than ever before. Without clean water, entire nations’ infrastructures, agriculture industries, and ways of living will eventually collapse. In the parts of the world that are already plagued by ongoing tensions, the outbreak of water wars is something that will be seemingly inevitable.

Could Water Cost More than Oil?

Though the idea that water could someday cost more than oil may initially seem rather outlandish in the status quo, this may actually be a very real scenario that policymakers across the globe need to consider. There are two primary reasons that this can be expected to happen. First, as alternative sources of energy continue to become more affordable (and thus, more practical on a global scale), oil will likely experience a significant drop in price over time. Secondly, as the global demand for water continues to rise with the human population, the cost of a gallon of water will also continue to increase.

The primary concern with water costing more than oil is that while oil is a luxury (and was largely unused for most of human history), water is absolutely essential for human life. The average human cannot go more than three days without access to clean drinking water, which is something that can certainly not be claimed about oil.

In order to assure that water—which ought to be considered a human right more urgent than seemingly any other—is kept at a reasonable price, governments and NGOs around the world will need to work to make sure it exists in ample supply. Investing heavily in desalination and various infrastructure projects over time may help keep supply greater than demand. Unfortunately, however, the governments of the world that are least equipped to complete these projects are largely the ones that are most threatened by this impending crisis.

How to Invest in Water?

Knowing that, without the proper actions, the pending water crisis will continue to affect individuals across the world well into the foreseeable future, it is important to recognize which actions we can possibly take. “Investing” in water crisis will be the surest way to help us avoid a self-destructive future.

In the public sphere, there are several things that politicians (and voters) can do to improve the situation. Focusing on preservation efforts, the building of reservoirs, and encouraging the localization of commercial activities will all likely be quite helpful. Additionally, providing tax credits and deductions for the corporations that are willing to invest in desalination projects can also create a market incentive to help improve things over time. Finding creative ways to direct capital where it can do human good will almost certainly be necessary in order to preserve our collective well-being.

Though it may not be clear just how bad a future water crisis may be, what can still be observed is the fact that now is the time to begin taking action. The impact of human-induced climate change has already had a wide range of consequences—strongly evidenced by the global climate anomalies that have been witnessed throughout this summer. In order to make sure that humanity still has a strong future, taking care of our planet and our most fundamental needs cannot be willingly ignored. Human action is needed in order to assure our collective well-being.

Is There a Silver Lining for Argentina’s Economy?

At the turn of the 20th Century, Argentina’s rapidly developing economy had effectively established itself as one of the most prosperous economies in the entire world. With access to a diverse array of natural resources, relatively little exposure to the international conflicts of the era, and a well-educated workforce, many economists once believed that Argentina was in a position to eventually outperform the United States.

However, the 20th Century was one that was plagued with multiple waves of revolution, foreign interference, and extreme economic turbulence. Frequent regime changes and stagflation have also been frequent sources of conflict. Though Argentina still maintains a GDP per capita that is well above the global average (nominally 53rd in the world), there is no denying that they have not been able to live up to their once promising potential.

Despite receiving a $50 billion assistance package sponsored by the International Monetary Fund (IMF) earlier this month, there still remains a great deal of uncertainty regarding Argentina’s economic future. This article will briefly review the turbulent history leading up to the status quo and discuss possible future outcomes that Argentina may endure.

A History of Volatility

Argentina’s economic history is one that has been marked by numerous incredible periods of growth followed by severe periods of economic recession. Starting around 1880, Argentina’s agriculture and the beef-centric economy began to experience several decades of foreign investment as well as multiple waves of immigration. Between 1880 and 1905, the economy was able to grow at an astounding rate of roughly 8% per year.

Even considering relatively large levels of income inequality and the global turbulence caused by the Great Depression, mid-century Argentina still enjoyed a GDP per capita level similar to those in Western Europe. However, shortly following World War II, the populist administration of Juan Perón would trigger multiple waves of economic complications. Though nationalizing a wide variety of industries—such as railroads, banks, and numerous others—may have helped accelerate their development, Perón’s aggressive actions would help contribute to the nation’s average inflation rate of 26% between the years 1944 and 1974.

The primary benefit of Perón’s approach to policy making was that Argentina was able to develop a sizable middle class with a firm commitment to the rights of union members. But eventually, as an extension of the Cold War, a military dictatorship seeking to privatize the nation’s industries would gain power starting in 1976. Combined with stagflation, corruption, and the actions of the neoliberals who would eventually replace the dictatorship, Argentina experienced an incredible amount of economic turbulence between the late 1970s and early 2000s.

Argentina Historic GDP
Argentina’s economy has experienced an incredible amount of economic volatility throughout the nation’s unique history. Photo Credit: GiovanniMartin16

Though the nation was able to ultimately move from 10.9% GDP shrinkage in 2002 to 8.8% GDP growth in 2003, recent years have witnessed new waves of economic uncertainty. The goal of the loan from the IMF was to create levels of stability similar to those that were experienced between 2003 and 2008.

Uncertainty in the Status Quo

Currently, the continued economic uncertainty in Argentina is caused by a wide range of contributing factors. The country has once again been experiencing average annual inflation rates greater than 25% and the Central Bank of Argentina recently decided (May 2018) to raise the interest rate on pesos from 27.25% to 40%–notably the highest interest rate of any centralized currency in the world.

In an effort to make the nation’s economy more competitive (striving to outperform Brazil, Mexico, and China), Argentina recently decided to accept a $50 billion loan from the IMF. This loan may help the country to stabilize many of its debts in the short-term, though the nation’s incredible rate of currency deflation still remains a universal concern.

President Mauricio Macri was undeniably voted in during a time of great economic uncertainty and complications. As the first President of Argentina since 1916 who doesn’t identify as a Peronist or a radical, Macri’s approach to economics offered many of his voters the possibility of change. However, in the context of the current global economic climate, it seems that many of Macri’s policies may be creating a new set of issues, rather than effectively solving the problems he inherited.

While Macri’s “gradualist” approach to the economic policy may suggest the possibility of economic stability and predictability, it may also prolong the process of bringing the country’s high levels of inflation back down to acceptable levels. On the other hand, the fact that the administration decided to remove all forms of exchange controls before the economy had a chance to stabilize may deter foreign investors from considering Argentina to be a legitimate investing option.

Looking Towards the Future

As the history of Argentina’s economy and the turbulence in the status quo strongly suggest, the future of what was once the pride of the New World is something that will certainly be quite messy. There is no clear nor easy solution that will be able to effectively resolve the country’s economic woes overnight. Every decision the Macri administration could possibly make—even if they choose to exercise a greater degree of discipline—will involve a significant number of opportunity costs.

However, there may be a few reasons that Argentinians can be generally optimistic. Despite a century of economic mismanagement and volatility, the material conditions for a globally dominant economy have not gone away. Argentina is still one of the largest nations in the world and has more available natural resources per capita than many others of its size. Argentina is still in a very temperate climate zone, has one of the world’s most important cities (Buenos Aires), and has a generally diversified economy. Lastly, Argentina has done relatively well at avoiding international conflicts (save for the Falkland Islands and a few others), which may help encourage an eventual increase in foreign direct investment. With the right and responsible economic leadership, Argentina has all it takes to become a stable economic nation. Otherwise, Argentina is on a mid rollercoaster ride.

The economic difficulties of Argentina are certainly far from being over with. However, Macri’s position as a non-radical, non-Peronist alternative suggests that future change in a positive might still be possible. The primary problems in the status quo are high levels of inflation and high degrees of economic uncertainty. If these problems can be resolved in a clear, well-orchestrated manner, then the economic potential that this beautiful nation still possesses may someday come to full fruition.

Trump’s Trade War: The Good, The Bad, and the Ugly

In a series of moves that have frequently been described by the media as a “trade war”, President Donald Trump’s recent approach to international trade has attracted a significant amount of attention from all sides of the political spectrum. While supporters of these policies believe that these moves may be able to encourage American manufacturing and help make international trading more “fair”, those who are against these moves frequently sight concerns of increased costs and international conflict.

As is the case with most major political changes, this particular series of moves enacted by what can only be described as a relatively unorthodox administration and probably cannot be described as entirely good or entirely bad. A proper analysis of Trump’s trade war will undoubtedly require a nuanced examination of all possible future outcomes. This article will briefly examine the core components of these new trade policies as well as the best and worst case scenarios that may come as a result.

Breakdown of Trump’s Approach to Trade

Since his initial campaign in 2016, President Trump has consistently discussed his intent to return manufacturing jobs to the United States. For individuals working in industries that appear to have lost a significant number of jobs to Mexico, China, and elsewhere overseas, the promise of reversing the job flight trend was undoubtedly appealing. Though the ways in which Trump would “return” these jobs to the United States was often quite ambiguous during his campaign, these promises were likely a significant reason that Trump was able to successfully win the rustbelt swing states of Pennsylvania, Ohio, Michigan, and Wisconsin.

Leading up to the beginning of the “trade war”, one of the most frequently cited reasons for the change was the fact that while the United States only exports $169.8 billion in goods to the People’s Republic of China, $478.8 billion in goods is imported into the United States. The $648.5 billion in exchanges that take place between the United States and China is believed to be the largest between any two nations in the world, as is the $309 billion deficit that currently exists between them.

Other concerns referred to by Trump and his administration include another large trade deficit with Mexico (exports $276.2 billion, imports $340.3 billion), which is not only a nation that offers significantly more affordable labor but is also a partner in the North American Free Trade Agreement (NAFTA). Additionally, concerns regarding intellectual property rights and the steel industry, in particular, have often frequently been cited by Trump and other advocates calling for change.

The use of tariffs in order to combat the current trade imbalances—which the administration seems to firmly be against—is a bit of an old-fashioned approach to international diplomacy, but one that is relatively unsurprising. Trump’s most recent moves include 25% tariffs imposed on roughly $34 billion worth of goods being imported from China (yielding estimated tax revenues of about $8.5 billion). These tariffs primarily target steel, aluminum, manufactured washing machines, solar panels, and numerous other goods.

Trump’s approach to trade marks a significant departure from the movement towards global free trade that characterized the administrations of both his Republican and his Democratic predecessors. In fact, since the Trade Agreement Act of 1934—one that was aggressively forged in reaction to the Great Depression—dutiable import tariffs have decreased from what was once nearly 60% to what is currently less than 6%. The effects of Trump’s approach to trade are yet to be fully seen. If this administration hopes to sincerely claim that the trade war was worth the costs, they will need to produce some justifiable outcomes.

The Good (Best Case Scenario)

For the sake of both the Trump administration and the United States as a whole, the best possible outcome from this trade war will be that the tariffs encourage investment in the United States economy and possibly localize certain manufacturing positions. As the two largest economies in the world, investors are constantly reevaluating whether to make their next marginal investment in the United States, China, or somewhere else. If the competitive advantage of manufacturing steel in China can be temporarily decreased, then investing in American industries may seem to be a relatively more attractive option.

In order for capital to be transferred from Chinese to American markets, the Trump administration will likely need to act quite quickly. Though many investors are certainly not shy about their general preferences for keeping their capital in American and European markets, one of the primary reasons for doing so is that these markets are comparatively far more stable than those outside the OECD. If the administration is unable to produce a reasonably predictable timeline for the trade war and lay out a clear series of actions moving forward—something that Trump has notoriously struggled with—then capital may inadvertently be deterred from being transferred to American markets.

The Bad (Obvious Drawbacks)

Fortunately, for those who are skeptical about Trump’s approach to international trade, the stakes of this “war” are relatively small. Only a fraction (approx. 7.1%) of all imports from China are even subject to these series of taxes, which is something that the media has largely had the tendency to overlook. Even if the trade war continues to persist until the end of the year, trade between China and the United States may still be even larger in 2018 than it was in 2017.

However, despite the fact that the consequences of this trade war are largely exaggerated, they still should not be willingly ignored. By increasing the cost of manufacturing and exporting steel from China, the costs of manufacturing anything steel-related in the United States will effectively be increased as well. China will certainly not remain idly by and endure the increased cost of manufacturing on their own. Industries in the United States that rely on importing cheap steel to make their goods have already begun to notice the trade war’s negative effects.

Despite being in the heart of what many people refer to as “Trump Country”, a nail factory in the city of Poplar Bluff, Missouri has already claimed that the trade war has caused them to decrease production by approximately 50%. Consequently, other companies that rely on nails coming from this factory may have to increase the cost of their goods as well, and the economic backlash stemming from these tariffs will likely continue to ripple outward.

The Ugly (Worst Case Scenario)

There are ample reasons why an increasingly globalized, free-market world will logically shy away from artificial barriers to trade as time goes on. If the cost of trading with the United States ever becomes too much to endure, trading with a relatively more accessible market (such as the EU) will likely become a more common strategy. Free trade not only helps lower the cost of creating, distributing, and exchanging various goods, it is also the pinnacle of free-market capitalism—something that the Republican Party once took pride in their commitment to defending.

The absolute worst case scenario that could result from this trade war is that it stifles the United States economy and results in a sort of economic isolation. China has already matched the United States in terms of GDP (PPP) and will likely be able to match the GDP (Nominal) levels within the next few decades. If the United States hopes to maintain its status as the world’s foremost economic superpower, then it needs to be willing to open itself to cooperation and the free exchange of goods. By increasing barriers to trade, the United States may lose its ability to project power in Europe, Asia, and much of the developing world. Though the impact of the trade war may be relatively small in a financial sense, it may be the straw that breaks the camel’s back and tarnishes economic relationships around the world.


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Moving Forward

Overall, it seems that Trump’s current trade war is likely something that will only last for a short amount of time and will have a relatively minimal effect on the economy. However, based on what has been witnessed thus far—as well as what can be empirically predicted—this particular set of tariffs is unlikely to increase investment in the American economy and is also unlikely to create the jobs that Trump’s campaign was so relentlessly committed. As time goes on, continuing this trade war and preserving barriers to free trade is something that will likely be continually more difficult to defend.

The largest consequence of this trade war, it seems, will likely be materialized in the 2018 and 2020 elections. As both major parties in the United States continue to deal with increased infighting between seemingly irreconcilable factions, there will exist a significant amount of opportunities for them to either lose or gain momentum. While Trump may be able to say to his already devoted fan base that he “successfully” fulfilled another promise, he may begin to alienate the party’s neo-liberal core that cares far more about free trade than it does about blue-collar conservativism. Similarly, while the Democrats may be able to use the trade war as an argument to appeal to their own neo-liberal branch, they may lose the support of unionists, some environmentalists, and those who stand in opposition to globalism. The potential coalitions and realignment that may form between the parties is certainly something that should not be overlooked.

Under His Eye: It’s Time to Expose Our Privacy Terms

As we read through the classic novels 1984, Brave New World, and Fahrenheit 451, the concept of “dystopia” inevitably seems terrifying. But, comforted by the knowledge that what we are reading only exists in the world of books, we can easily remind ourselves that dystopia is a great distance away from the status quo.

The problem that these books – and a wave of new shows such as A Handmaid’s Tale and West World – have inadvertently created that we now assume that if such a world were to ever exist, it would only exist after some major revolution or apocalyptic event. The idea that dystopia could come upon us gradually seems outlandish and easily dismissible.

Though the status quo is certainly different than these creative worlds of science fiction, there are some features of these worlds that are much closer to our everyday lives than we care to admit. As the information era continues to unfold, it becomes increasingly more important to think about our privacy. Even if there is no entity known as “Big Brother” by name, various violations of our basic right to privacy have become almost impossible to ignore.

Technology Ahead of Its Time

The 21st Century is one that has already witnessed a significant amount of changes to the way we live our day-to-day lives. The development of smart technology, the total evolution of information systems, and even the widespread use of social media are all things that would seem completely foreign to anyone living even just twenty years ago.

Many of these changes have been incredibly exciting. Accessing information, other people, and new ideas have rapidly become more possible than ever before. But though we all have a lot we can certainly be excited about, these new frontiers are not without risks.

We are truly confronting the ‘Wild West’ of the information era. Our technologies are evolving quicker than we can keep up with and the risks of having our privacy violated or our information stolen are almost impossible to stay ahead of. The need for vigilance when using all mediums of modern technology has created a new set of responsibilities for consumers and new – seemingly unprecedented – moral obligations for large corporations.

Navigating Terms and Agreements

One of the ways that consumers are most easily taken advantage of is through the use of exploitive terms and agreements. Many terms of use policies will often be over 10,000 words in length making it unrealistic for a consumer to reasonably know exactly where they stand when clicking “I Agree.” Though agreeing to something you have not fully read can help the major data companies avoid legal liabilities, this certainly does not remove the possibility of consumer exploitation.

Some of the most common issues that you’ll find in these agreements include the sale of personal information, the use of cookies, and the long-term storage of data. Companies such as Facebook, Apple, Microsoft, Google, and numerous others have generated a significant amount of concern from the public. Though there have been some positive changes made for consumers, it remains the case that the corporations are often the ones acting first and responding later.

Addressing Problems with Big Data

Many of the problems that can be found in our modern “dystopia” are associated with what is commonly known as big data. As technology has developed, storing larger amounts of information for longer periods of time has become significantly more possible than ever. Though the existence of such a massive body of information can certainly be quite useful, it also presents certain risks to consumers hoping to keep their information private.

Legislators from all ends of the political spectrum have tried to address the problems with big data but are often slow to act and behind the revolutionary changes occurring in these industries. Things such as cryptocurrencies, personal data, and cyber warfare have largely remained in an unregulated sphere of private industry. The reality we face as consumers is that, in this world of seemingly limitless data gathering, we cannot possibly be sure what information about us is currently available, whether it is even true, or how that information may be used to harm us.

Trying to Protect the Rights of Consumers

There are many changes that can possibly be made in order to make the modern world more consumer friendly. Doing things such as increasing transparency of big data corporations, limiting the ways in which data can be stored and distributed, and requiring companies to have clearer terms of use will all likely step in the right direction.

Recent scandals at Facebook and other tech giants have unleashed a new wave or legal situations that will certainly raise some important questions. These cases may have a major impact on consumer rights and the use of technology as a whole. Whether a stronger right to privacy will be created or if the public will continue to remain ‘under his eye’ is something that is still yet to be seen.

How Can Bitcoin be used as a Crime Weapon? And How Can this Be Solved?

While the development of bitcoin – and other comparable cryptocurrencies – seems to have provided users with a unique array of benefits, these benefits have not come without corresponding risks and costs. Due to the distinctively unregulated nature of the cryptocurrency market, it has naturally been frequently used by a wide variety of criminal enterprises.

Legislators around the world continually find themselves in a very unique position. While they do not want to interfere with markets that may be able to eventually regulate themselves, they also do not want to willingly stand by and allow for easier conditions for committing crimes. Furthermore, due to the fact that cryptocurrency exchanges are typically much more difficult to monitor than ordinary electronic transactions and the fact that these exchanges often take place on an international level, there ultimately exists an even more complicated regulatory environment.

Though there may not be one clear path forward to a world where cryptocurrency can be both entirely safe and productive, it certainly seems it is worth the effort to consider the possible means of arriving there. This article will briefly examine the existence of bitcoin (and other cryptocurrencies), how bitcoin has become an integral part of many criminal networks, and possible changes that can be made in the future.

What is bitcoin?

Bitcoin – which was initially released in January 2009 – is the world’s first and most widely recognized form of cryptocurrency. Cryptocurrency is a medium of exchange that exists explicitly in the digital world. Using cryptography – the art of protecting information using a complicated code – financial transactions can be made in a secure way. The ownership of a specific cryptocurrency can be identified using a public ledger.

As of June 2018, one bitcoin is worth approximately $6,500. This is significantly less than the peak value that was witnessed in December 2017 ($19, 343), but also significantly more than values reported just one year ago. The market for bitcoin, overall, is less predictable than most other currency markets. However, because of the digital asset’s unique characteristics – decentralization, easy exchanges between peers, and the innovative use of digital technology – there are still many individuals who believe that bitcoin, or cryptocurrency in general, will likely function as an international currency of the future.

What are the non-criminal uses of bitcoin?

In general, there is relatively little belief that bitcoin will replace the use of traditional currencies (such as USD, EURO, etc.), rather, it will function as an alternative that supplements the global currency markets and also makes them significantly more competitive. Like traditional currency, bitcoin’s value is fundamentally determined by whatever people believe it is worth.

Contrary to the primary focus of this article, there are still many legitimate, legal, and highly accessible ways that an individual can use bitcoin in exchange for specific goods or services.

  • Air travel and hotels (using services such as Expedia)
  • Certain applications, videos, movies, games, and electronic services (accepted in the Microsoft app store or the websites of certain artists)
  • A surprisingly large number of merchants and franchises (including Subway)
  • Some gift cards or other electronic gifts
  • Tuition for certain schools, universities, and even preschools
  • Numerous other circumstances where online payments are standard

Clearly, there are many reasons that a well-intentioned person may want to pay for certain things using bitcoin. Because the correlation between the value of bitcoin and the value of most local currencies is relatively limited, some individuals prefer to use bitcoin when the exchange value is particularly high and use traditional currencies when the exchange value is particularly low. Considering that both currency markets fluctuate over time, diversifying your range of available payment options can decrease the risk of your current holdings.

There are many innocent reasons that a vendor may choose to accept bitcoin as well. Not only will they be able to enjoy the same apparent benefits of diversification, but using bitcoin can help reduce the risk of chargebacks and also make it significantly easier for vendors to operate beyond borders and access a generally broader market. Additionally, even if they are not engaged in any illegal activities, individuals on both sides of a given transaction can enjoy the added layer of privacy that only cryptocurrency can offer.

The future of bitcoin – and the cryptocurrency market as a whole – remains relatively unclear. Generally, it seems that there will be a wider range of cryptocurrencies to choose from and that cryptocurrencies will generally be accepted at an increased number of locations. However, bitcoin’s widespread use in illegal markets and its incredibly unregulated nature are both legitimate reasons for the public to be at least somewhat skeptical.

How is bitcoin used for illegal activities?

Unfortunately, the characteristics of bitcoin that many people innocently enjoy – relative privacy, the removal of an intermediary, ease of international transactions, etc. are also the characteristics of bitcoin that happen to benefit criminal enterprises the most. Like the ski mask, bitcoin was not created with the intention of being compatible with criminality, but its increased use by criminals is something that certainly cannot be easily ignored.

Currently, there are many different ways in which bitcoin is being actively used by criminals.

  • The Darknet is a portion of the internet that operates without any active hosts. Activity on the Darkent is difficult to track, difficult to accurately identify, and difficult to even begin to effectively regulate. Naturally, individuals who seek to exchange currency (cryptocurrency) for illegal services can benefit from these features.
  • The Dark Web is related to the Darknet but is structurally different and typically requires specific software.
  • Bitcoin is frequently used as a means for paying for drugs or other illegal goods and services (such as weapons).
  • Bitcoin is also frequently used to hire individuals for malicious hacking. This includes trying to access other individual’s financial information, other personal information, and trying to “take over” a specific computer.
  • Terrorism and widespread criminal activity – such as the international distribution of weapons and other threats to the public – is often organized using bitcoin due to the fact that it is incredibly difficult to pin these activities on a specific individual.

Essentially, if an individual or organization seeks to engage in an illegal activity that can be entirely organized via the internet, then they will have many reasons to use cryptocurrency rather than traditional payment options. On the rare occasion that a law enforcement organization is able to trace these illegal activities to a specific IP address, the burden of the prosecution is still usually not entirely satisfied. The law enforcement agency (depending on the jurisdiction in which these activities are taking place) will still need to prove this activity took place knowingly and was not a consequence of a deliberate digital misdirection.


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How can the use of bitcoin be made safer?

One of the difficult things about regulating bitcoin and the rest of the cryptocurrency market is that now that this technology has been introduced around the world, it is seemingly impossible to permanently get rid of it (or even get rid of just part of it). Even if someone were to take the most extreme stance on the topic imaginable – and advocate for the total international ban of bitcoin – a replacement alternative would inevitably emerge in a matter of days (or possibly even hours).

Typically, most government agencies around the world are “catching up” with the introduction of new technologies. Staying ahead of the innovation curve in the cryptocurrency industry is something that is seemingly impossible. Instead of banning cryptocurrencies outright, it would be much more rational to try to adapt around the existence of current systems.

Fortunately, it seems there are at least some things that can be done in order to decrease the use of bitcoin as a medium of illegal exchanges without destroying the cryptocurrency market as a whole.

  • Increase communications between various governments in order to make it easier to detect certain patterns
  • Increase annual reporting standards from the companies that use bitcoin as a legitimate purpose (Expedia, Microsoft, Subway, etc.)
  • Develop software that can effectively detect when the public ledger is exhibiting any irregularities (and subsidize or offer tax credits for these efforts if necessary)
  • Shift the focus away from digital methods of payment and towards the original, tangible production of illegal goods (drugs, weapons, etc.)
  • Maintain the decentralized nature of bitcoin while simultaneously creating a centralized medium for self-regulation
  • Offer benefits (such as financial rewards) to cryptocurrency users that are able to effectively identify various threats

Unfortunately, there is no clear path forward that will immediately resolve all of the issues associated with bitcoin and other cryptocurrencies. However, due to the fact that the cryptocurrency market itself is still less than a decade old, it seems that nothing is permanently set in stone and there are certainly some useful changes that can be made.

Conclusion

Though it certainly has a wide range of risks associated with it, the many benefits that are exhibited by the cryptocurrency market suggests that this market is one that is here to stay. The fact that bitcoin is frequently used as the primary medium of exchange for criminal enterprises around the world certainly gives the public a legitimate reason to be concerned. But with a concentrated effort that focuses on deterring criminal activity – rather than the simple use of an alternative currency – it seems that progress can certainly be made in an objectively positive direction.

Netflix Has a Unique Strategy, Style, and a Pretty Good Algorithm

Those who had the hindsight – and the audacity – to bet on Netflix in the long-run can currently enjoy the comfort that their apparently “risky” decision-making has paid off. With hindsight, there are likely many investors that are kicking themselves for not taking a chance earlier. But the question that remains is “how?”

How has Netflix been able to experience such tremendous rates of growth and seemingly reinvent the way that people watch television? Though the company originally focused primarily on mailing DVDs to customers, it seems that perhaps the greatest characteristic of the company has been its ability to adapt in a world of rapidly changing technologies and tastes. Currently, the company has more than 75 million subscribers in over 190 countries and still has an appetite for continued expansion.

The way people watch television has changed—possibly in an irreversible way

Netflix did not invent the home box office, but it seems they may have mastered it. Though HBO has existed since 1972, much of the network’s history has been characterized by being unable to expand beyond wealthier Americans or those who have had a desire to watch programs deemed unsuitable for ordinary TV. In the 1970s, ‘80s, and ‘90s, Home Box Office was something that very few people had instead of cable. Instead, it was something that almost everyone who had it had in addition to cable.

Not only was Netflix able to innovate through its aggressive transition from mailing DVDs to offering on-demand streaming services, it has also been a company that has fundamentally been replacing cable and satellite television. In fact, according to recent data gathered by the Pew Research Center, the majority (61 percent) of Americans aged 18-29 use online streaming services as their primary source of television programming. Older demographics are also trending upward with regards to this statistic and, based off of current projections, this trend will eventually describe a majority of the nation as a whole as well.

Netflix hasn’t been gradually overthrowing cable by accident.

  • At $10.99 per month (standard), Netflix is significantly cheaper than essentially all cable or satellite packages
  • Netflix is commercial free
  • Netflix has addressed consumer preferences by shifting away from the “once per week” episode release format to letting consumer watch every episode at once
  • Netflix also offers consumers the ability to watch their favorite shows on demand

While cable companies operate with a time-specific schedule, Netflix offers viewers a much more flexible range of options. However with several thousand movies and television programs to choose from – including roughly 700 originals – it quickly became apparent to the company that they would need to present their range of programs to viewers in an effective way.


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Netflix’s recommendation algorithm has helped the company sustain its value

If a Netflix user has a specific program they would like to watch in mind, they could easily access that program using the search bar. However, as has been conclusively the case with many individuals watching cable, many people turn on Netflix simply for the sake of seeing “what is on.” Because Netflix does not have channels in the traditional sense and because all programming is streamed at the viewer’s leisure, it becomes up to the company to present undecided viewers with a list of potential options.

Creating an algorithm for Netflix may be more difficult than some people might initially assume. For example, if Netflix only considered things that you have watched in the past, you may very well find yourself watching The Office or Breaking Bad again, again, and again (not that there is anything wrong with that). In creating the recommendation algorithm, Netflix has to consider the general popularity of certain programs, the general interests of the prospective viewers “like” the user, and the specific shows that the user seems to have enjoyed in the past.

Two individuals with different watch histories that are browsing a specific category – even if it is a very specific category such as “Visually Striking Movies for Ages 11 to 12” – may see an entirely different list of programs to choose from. Netflix rigorously tests its algorithm with a group of roughly 300,000 users every year and continually makes adjustments as time goes on.

It seems that what makes the Netflix recommendation algorithm so remarkable is its ability to simultaneously shape and be shaped by the various tastes of its users. Though the company was originally able to establish itself as industry behemoth because of its superior streaming services, it seems that the algorithm – in addition to its “first to market” advantage – has been what has allowed it to stay ahead of other streaming alternatives.

If the company can continue finding new ways to innovate and maintain its competitive advantage, then the company’s current success is something that is likely to be sustained. While Netflix has the market positioning of a company that has already reached maturity, it has still been enjoying the growth rate emblematic of a company with a much more recent IPO.

What Happens if Italy Leaves the Euro?

Distinctively different than Brexit

The populist movement that has been underway in Italy has been frequently compared to the movement underlying Brexit by some outside observers. However, there are several variables that make the current political situation in Italy very different than what occurred in the United Kingdom.

The first, and perhaps most obvious, the difference is that the United Kingdom never implemented the Euro, to begin with. Though the UK’s departure from the Europe Union had a decisive impact on the European economy, the continuous use of the pound (GBP) likely minimized the blowback experienced by global currency markets.

Additionally, it is important to note that some leaders of Italy’s Five Star Movement – who were recently allowed more time by President Sergio Mattarella to form a full government – are primarily focused on abandoning the Euro and are less focused on actually leaving the EU. However, abandoning the Euro could still be the first step to leaving the EU altogether and, with enough momentum, it is still possible that both of these actions could happen simultaneously.

Recent polls conducted by the Pew Research Center do indicate the Italian support for the EU is declining. However, the fact that 56 percent still advocate for membership (with only 35 percent advocate leaving) suggests that a “Leave” referendum comparable to Brexit would likely not succeed.

A decrease in Exchange Values

The primary concern surrounding Italy’s threat to potentially abandon the Euro is that the currency itself would begin to lose its exchange value. Italy’s population and economy both compose major portions of the Eurozone and, consequently, losing both the labor and capital that Italy has to offer could have some far-reaching and negative consequences.

However, it seems that the main issue with exchange values may actually be the level of uncertainty that exists in the status quo. Between November 2017 and mid-April 2018, the Euro lost a significant amount of exchange value when compared to the US Dollar. Since then, the Euro has seen a major rebound followed by a minor retraction. When compared to the past ten years of currency exchange data, it is clear that global currency markets have been experiencing greater degrees of variability. Though there are obviously many different variables contributing to these changes, the future uncertainty of Italy’s role in the Eurozone has undeniably had a major impact.

Domino Effect

Another common concern from both political and economic analysts is that Italy’s departure from the Eurozone – whether this is simply an abandonment of the Euro or a complete leave from the EU – could potentially contribute to a much greater domino effect. In reaction to issues relating to immigration, unemployment, and the concentration of power, populism has measurably been on the rise in a number of European nations. In addition to Italy, populist movements in Hungary, Czechia, Austria, and even EU-powerhouse Germany have all gained momentum over the past few election cycles.

Because of the parliamentary style of governing, that is inherent to most European nations, fringe movements typically have a limited amount of power and are often excluded from the governing coalition. But, if a major Eurozone nation such as Italy could successfully abandon the Euro and even the EU, then the precedence for future nations doing so would be systematically increased. In addition to what has already occurred with Brexit, it has become clear that the Rome Treaties’ goal of “Ever Closer Union” will certainly be tested over the next decades to come.


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Major Changes in the EU

Ultimately, it seems that Italy’s recent wave of Euro-skepticism could yield multiple different outcomes. Without the ability to form a full government, then Italy leaving the Eurozone will likely be incredibly difficult and many efforts to do so may eventually be abandoned. But if Italy is able to successfully form a government, ruled largely by the populist Five Star Movement and Northern League, then it seems that Italy, EU, and the rest of the world will likely experience a wave of major changes.

Italy’s abandonment of the Eurozone would likely result in the remaining members revisiting the debates about the structure, purpose, and implementation of the Euro and the European Union as a whole. Additionally, changes in policies relating to the distribution of wealth between nations, lending, currency values, and immigration will all likely be revisited. Though, in the long-run, it is quite possible that both the European Union and Italy may find themselves in a stable position, the current state of uncertainty is undoubtedly a cause for concern.

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