The Strategist

Saxo Bank's Outrageous Predictions 2021: COVID-19 vaccination will destroy corporations and major cities will stay empty

12/09/2020 - 04:45

On Tuesday, Danish Saxo Bank published its traditional Outrageous Predictions for the next year.

Saxo Bank describes its 10 'shocking predictions' as a 'series of unlikely and underestimated events which, however, could cause financial markets to be hit by a very powerful shock wave'. 

According to Saxo Bank, the retreat of the coronavirus due to mass vaccination in 2021 will dramatically increase the risks of corporate defaults. Analysts at the Bank note that "the pandemic has increased the accumulation of debt burden, which has been dangerously high since the 2008 financial crisis. 

The number of corporate paper defaults is rising to a multi-year high, with companies with the highest debt burden in the physical retail sector being the first to collapse, which was difficult even in a healthy pre-coronavirus economy.

However, according to Saxo Bank, one large corporation will have to take decisive measures to reduce the growing risks. According to the Bank, in 2021 the Internet retailer Amazon will "buy" Cyprus. The fact is that "Amazon and other high-tech giants are wary of governments that think they have become too powerful and pay too little tax. In 2021, Amazon will move its European headquarters to Cyprus. There, the giant corporation will help the country reduce its debt-to-GDP ratio, which is now almost 100%. 

In the EU itself, the situation will be difficult. Germany will be at the forefront of the problem, providing financial assistance to France, Europe's other leading economy. According to Saxo Bank, France's public debt will exceed 120% of GDP in 2021. 

As for developing countries, analysts are more optimistic. "In 2021, economists will find that economic growth in many border and emerging economies has been catastrophically underestimated in recent years. Close analysis shows that some technologies can provide far greater productivity gains in the private sector there than have been seen in developed countries in recent decades," says the Danish bank.

A technological breakthrough is also expected in the energy sector. "In 2021, advanced artificial intelligence systems will solve the most complex non-linear plasma physics problems, opening the way for the commercial use of nuclear fusion.

Another breakthrough technology in 2021 will be the Blockchain. It will deal a powerful blow to the sources and distribution platforms of fake news that have recently swept the world. In the financial market, Saxo Bank is expecting the arrival of a new Chinese digital currency, which will "provoke tectonic shifts in capital flows. 

As another consequence of the COVID-19 pandemic, the Danish investment bank sees the introduction of an unconditional basic income that will lead to the desolation of large cities. In its view, "the pandemic has accelerated the movement of the economy, which has increased inequality even without it. One person's income is far from sufficient to support a family, and the development of technology, software, AI and automation is reducing wages and destroying jobs in many industries".