The year of the central bank is upon us according to Stefan Bielmeier, chief economist and head of research at DZ Bank.
Bielmeier was the first keynote speaker at the Bellin Treasury 1TC conference in Rust, Germany, on Wednesday as he discussed ‘Economic trends defying politics’.
While the world has seen dramatic geopolitical shifts in the last 18 months, such as Brexit and the US election of Donald Trump, global economic growth has remained strong.
“Central banks have helped to emancipate the economy from politics,” argued Bielmeier. ”It will work for a while but when the politics is too bad, it will have an impact.”
Some volatility has come back to global markets in the recent months. “The main reason for this is the central banks, not politics,” he said.
“Central banks are the most important players in world financial markets right now,” he added.
“Central banks are the most important players in world financial markets right now”
The global economy has seen about eight years of growth, but Bielmeier predicted that we are starting to see the end of this prosperity which is responsible for the recent volatility.
Historically, economists have expected inflation to rise hand in hand with a strong rise in liquidity, but this has not been happening in the last 12 months.
So, why is inflation so low considering the strong rise in liquidity?
“The liquidity provided by central banks is only partly put into the real economy. A major part of this liquidity is in the banking system as base money, not the real economic money supply,” said Bielmeier.
“If corporates start demanding more credit and liquidity, the situation would change significantly,” he predicted.
Automation is also keeping inflation low. “Digitalisation just starting in my view. All non-reactive workplaces will be replaced in the next few years,” Bielmeier said.
“Artificial intelligence (AI) is only just starting now which will mean that workplaces will be required to be even more sophisticated.
“Automation makes it possible for inflation to stay so low”
“Automation makes it possible for inflation to stay so low,” he said, adding that this is the case in the US and Europe.
What does treasury have in common with a light bulb?
The 2018 1TC conference is not only the largest yet with about 350 attendees from over 70 countries, but it also marks Bellin’s 20th anniversary, as it is with GTNews, with both brands being established in 1998.
Martin Bellin, Bellin’s CEO, welcomed the delegates by saying this year’s focus was on empowering the treasurer.
“What does treasury have in common with a light bulb?” he asked. “The single lightbulb is only as useful as the surroundings it is placed in and the treasurer is only as good as the company they work in.”
Next level reporting and steering
Primetals group treasurer, Jeremy Hamon, spoke on ‘Next level of treasury reporting and steering’ in partnership with Deloitte – the firm that he worked with to overhaul his own departments reporting.
They worked together to upgrade their reporting capabilities and processes to ensure it was as efficient as possible.
Following a status quote analysis, Hamon found that while his treasury painstakingly produced about 25 pages of reporting every month, only the first three to four pages were often read by the C-suite.
To tackle this problem, Hamon and consultants from Deloitte looked at what data the CFO needed. They also worked together to create a bot that would extract the necessary data from Primetals TMS – Bellin’s TM5.
Hamon stressed the importance of working with the company’s IT team on this as not only is it partly an IT project but it must work in harmony with other IT systems.
Blockchain is a revolutionary as data science
Blockchain is a technological advancement comparable to that of data science, said doctor Phillip Sandner, professor at the Frankfurt School of Finance and Management, in his afternoon session titled ‘Blockchain: leveraging the potential of a revolutionary technology for B2B banking’.
Blockchain will eventually allow you to transfer value immediately in a dematerialised form, similar to sending an email. This is similar to what is being witnessed in the cryptocurrency market.
“At the moment we are using the internet for information transmission. What is coming is an entirely new layer of the internet that will allow you to transfer values as well as information without borders, across the globe, more or less instantaneously in a dematerialised form,” he said.
Sandner argued that bitcoin does have value purely because of strong consumer demand and it can be used to buy other cryptocurrencies, but it does not have any further use case as Ethereum does.
He predicts that intermediaries will not disappear, however, they will have to hand a lot of their responsibilities over to technology. This will lead to these companies still being profitable but with diminished margins, argued Sandner.
Blockchain technology will also enable an invoice and purchase order to become the same thing as all of the data will stem from a system resting on the same information source, whereas today it comes from two separate IT systems, said Sandner.
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