How Generational Forces Have Set the Stage for a Retirement Crisis (w/ Neil Howe)

Neil Howe, author of “The Fourth Turning: What the Cycles of History Tell Us About America’s Next Rendezvous with Destiny” and managing director of demography at Hedgeye, joins Real Vision’s Ed Harrison to discuss the demographic forces shaping the coming retirement crisis and the future of America. As one of the world’s foremost demographers, Howe breaks down the collective personality of generations – what he calls “generational archetypes” – and explains why he’s optimistic about the future relationship between Baby Boomers and Millennials. Filmed on February 4, 2020 in Washington, D.C.

Banks Must Adopt Blockchain, Or Become Obsolete

It might seem that,because of China’s e-yuan launch, governments around the world have been clamoring to get a digital version of their currency. The consensus is that a central bank digital currency (CDBC) will give the nation behind it 21st century economic advantages as well as the opportunity to blaze a trail into the blockchain wilderness.

Ever since cryptocurrencies swept the world in 2017, the discussion of what to do about their inner workings never went away. It was suggested that the accounting methods used by today’s banks are rendered “legacy” compared to what can be done with blockchain. Even now, with little in terms of official response past a crypto card and study promises, crypto transfers flourish. El Salvador made bitcoin an official medium of exchange, in other words, outsourcing the role of CDBC to a market-proven cryptocurrency. Ukraine recently joined the line-up of nations legalizing crypto.

And it looks like things might be staying this way for a while.

Top bankers giving crypto a second look

As reported by the Bank Administration Institute, banks might simply attempt to integrate the crypto market into their systems with a plug like ACH or Fedwire (the often-dismissed “legacy” payment services). It’s a way to speed things up and avoid disruption when things are getting out of hand, but in a good way.

Some banks outside of the top 10 in the U.S. have already made a good effort out of converting to a wholly blockchain system. But even after all this time, they still mostly offer U.S. dollar tokenization. That’s not quite the same as full-bore crypto adoption; more of a workaround intended to enable dollar transfers on blockchain without actually transacting in cryptocurrencies.

Perhaps this is the ideal way of going about things. A wholly decentralized financial market, plugs included. Maybe the future of DeFi is more about blockchain technologies than the cryptocurrencies that run on blockchains?

“Crypto is a challenge to traditional banking”

Still, Benoît Cœuré, head of the innovation hub at the Bank of International Settlements (BIS), sees the crypto market as a possible challenge to the banking system:

Decentralized finance (DeFi) platforms are challenging traditional financial intermediation. They all come with different regulatory questions, which need fast and consistent answers… But make no mistake: global stablecoins, DeFi platforms and big tech firms will challenge banks’ models regardless.

“Financial intermediation” means the middleman business. Specifically, Cœuré is telling banks they’re missing out on the market-making business. DeFi lets private individuals lend and borrow from one another without a single bank standing in the middle, taking its share of the profits.

He’s sounding a wake-up call: “Hey, stodgy old financial institutions! A bunch of early adopters are eating your lunch, and if you don’t get to the table soon there’ll be nothing left but crumbs!”

Cœuré goes on to praise CBDCs, stating that countries should work together on acquiring one. While he doesn’t tell us why, he does mention how CBDCs preserve today and lay the groundwork for tomorrow. It seems that Cœuré sees digitalization as a way of preventing a sovereign currency from getting out of hand.

For banking corporations, even the largest ones, what’s at stake is profit and market share.

For global central banks, what’s at stake is much larger. If they don’t move fast, they stand to lose control of their own economies. A CDBC offers all of the ease-of-use benefits of cryptocurrencies, and all the “benefits” of a national currency: legislation, regulation, control over interest rates and inflation. Cœuré is telling central banks what they need to do in order to stay relevant as institutions in an age of cryptocurrencies and decentralized blockchain-enabled smart contracts.

If digitalization is a necessary measure, that means things are already failing on other fronts. Cœure, too, notes that stablecoins just as stable as those we expect from governments are already here. One can purchase or own them on the independent market. While Cœure acknowledges that central banks seem unwilling to get into the “nitty-gritty”, the market has long moved past the point where the actions of one bank can have a serious negative effect.

Cœuré is announcing, loud and clear, that central banks must act. Cryptocurrencies aren’t going away, and they can’t be ignored any longer. They’re such a serious threat to economic control and authority that we need to see a FedCoin, a EuroCoin, a YenCoin and all the rest.

The alternative is to either outsource CBDC creation like El Salvador did, or simply to close up shop and brush off the résumés. Those are the choices facing banks today.

The Coronavirus May Change College Admissions Forever

In the context of a pandemic that has killed about 190,000 Americans and economically devastated many millions more, getting into the college of your dreams is a boutique concern. But for many teenagers who have organized their school years around that goal, it’s everything.

And it’s going to be different this admission season. It may well be different forevermore.

That was what I concluded after a recent series of conversations with Jeffrey Selingo, whose widely anticipated new book, “Who Gets In and Why: A Year Inside College Admissions,” will be published on Sept. 15.

Selingo was given extraordinary access to the selection process and the selectors at Emory University, Davidson College and the University of Washington. He uses it in his book to present one of the most nuanced, coolheaded examinations of the admission process that I’ve read. He explodes certain myths — for example, that SAT and ACT scores are absolutely pivotal — and confirms other suspicions, such as the ridiculous advantage conferred on middling students who play arcane sports.

But his knowledge and insights also put him in an excellent position to speculate on matters beyond the book’s bounds: specifically, the little, big, temporary and permanent ways in which the coronavirus pandemic, which dawned after his research was done, will change the way colleges evaluate students and vice versa.

College admissions is never going to be the same,” he told me.

He was focusing on selective schools, which educate a small minority of Americans in college but loom monstrously large in the psyches of many high school students, who intricately game out how to breach these exclusive sanctums. Well, the rules of that game just changed.

Selingo predicts that many schools that allow “early decision” applications, with which a student sets his or her sights on one preferred institution and commits to attending it if accepted, will fill more of their slots that way than ever, meaning that these applications will have better odds of success than ones submitted later. Schools leaned extra hard on early decision in the shadow of the Great Recession, he said, and now face the same economic anxiety, the same motivation to figure out as soon as possible which new students will be arriving and how much financial aid they’ll need.

But a more broadly consequential change involves standardized tests. Because the pandemic prevented students last spring from gathering to take the SAT and ACT exams, many selective schools are not requiring them for the time being. That will force them to focus more than ever on the toughness of the high school courses that students took and the grades they got.

Which students will benefit from that? It’s complicated. On one hand, affluent students who are coached for these exams and usually take them repeatedly won’t get to flaunt their high scores. On the other hand, less privileged students from high schools whose academic rigor is a question mark in screeners’ minds won’t have impressive scores to prove their mettle.

While these exams have been blamed for perpetuating inequality, they in some cases play the opposite role. In fact, a special committee of educators in the University of California system produced an exhaustively detailed report this year that determined that the use of SAT’s in admissions had not lessened diversity and that SAT scores were useful predictors of college success. (University leaders elected to switch to test-optional admissions for a few years anyway.)

The SAT’s downgrade won’t be fleeting, Selingo said. “We’re going to have a whole admissions year with scores of places going test-optional,” he said. “Once their world doesn’t come crashing down and they still recruit a class, those colleges are not going to flock back to the test. I think it’s been knocked off the pedestal permanently.”

He makes the same guess about what he calls “application bloat,” referring to the flamboyant multiplicity of clubs, causes, hobbies and other materials that applicants assemble and showcase. The pandemic put many of those activities on hold, creating a pause in which he believes that some schools and some students will recognize the lunacy of this overkill.

“It’s going to be difficult for students to fill in 10 spaces for extracurricular activities, flag down teachers for recommendations or take six A.P. courses and exams,” he said. “Admissions officers are going to have to focus on what matters. That means in the future they can pare back the application and reduce our collective anxiety about what it takes to get into college.”

Apart from the increased early-decision emphasis, which can favor in-the-know kids from in-clover families, the changes that Selingo predicts represent a back-to-basics streamlining of the process. It may have been born of terrible circumstances, but it’s also sensible and overdue.

That streamlining extends to how students will choose schools during the coming admission cycle. For epidemiological and economic reasons, many of them will forgo all the campus tours and all the assessments of how comfy the dormitories seem, how tasty the food is, how high the spires rise and how lushly the trees grow. They’ll perhaps look more closely at the course catalog, the roster of professors.

Selingo noted that many colleges based a big part of their sales pitch on their physical setting and even on lifestyle and social perks that are less relevant than ever, given pandemic-related restrictions. “That’s forcing parents and students to ask, ‘What are we really paying for?,’” he said.

The answer is, or should be, an education, and students may come to realize that excellent ones can be obtained at colleges that are less expensive than others in their sights and closer to home. The lure of going far away to college may diminish.

What I suspect will happen, at least in the short term, is that students’ thinking about colleges will be less emotional and more practical. The pandemic has soured the romance.

Colleges had previously presented themselves to students as nurturing homes away from home, then had to send those students packing when the virus spread. Colleges were endless parties, then the partying stopped. They touted the intimacies of classroom instruction, then had to defend the tuition-worthy effectiveness of remote learning. How can students not feel some skepticism in the wake of all that?

“This morning I listened to a Planet Money podcast called ‘The Old Rules Were Dumb Anyway,’” Selingo said. “It talked about the rules that went out the window because of the pandemic and which changes might be here to stay: alcohol takeout from restaurants, telemedicine, using nursing credentials across state lines.”

“It got me to thinking about the old rules that were dumb in admissions,” he added. And it got him to wondering how many were gone for good.