Move towards a cashless society. Sweden has stated that it aims to be cashless in ten years. In France if you spend more than EUR 1,000 in cash questions are asked. Governments do not like the use of untraceable cash.
The Bank of England economist Andy Haldane has already made a speech condemning cash and pointing toward a cashless society. In February 2016 he was joined by Peter Sands, ex-Standard Chartered Bank boss, who called for the scrapping of £50 and $100 bank notes. It presents no threat to internet gambling but the traditional land-based gambling business relies on cash because most of the customers prefer it and many do not have a bank account.
Negative interest rates in Sweden, Denmark, Switzerland and Japan
This is how it works: if you have £100,000 on deposit, at the end of the year it will be worth £99,000 at a 1% rate of negative interest. After 5 years you will have only £94,149 (even less after taking any inflation into account). You are, therefore, incentivised either to keep money at home or spend it. The Swiss tax authorities told taxpayers only to pay their taxes on the due date and not before, so they could endure the pain of negative rates and not the tax man! Companies with large cash reserves will be hit and will be incentivised to invest which will push prices up. Many investments will be made to avoid the regression of negative rates rather than real rates of return.
In a press report from Davos made by Ambrose Evans-Pritchard of the Daily Telegraph he said ‘the global financial system has become dangerously unstable’.
He was referring to an interview with William White, the Swiss-based chairman of the OECD’s review committee and former chief economist of the Bank of International Settlements (BIS). White said “Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief”.
“It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something”.
I doubt that Governments or central banks will come to the rescue this time around. Bank failures will be met by bank bail-ins and not bail outs. This means that deposits over Euros 100,000 will be lost after bond holders and shareholders have been burned.
In this respect e-gaming companies are more vulnerable than the land-based counterparts. Many e-gaming firms have moved to second-tier banks that do not enjoy the credit ratings of the tier one banks. There is also some comfort in banking with a bank too big to fail. One option would be to insure client deposits. Many insurance companies enjoy AA status. GBGC has produced a briefing note to assist clients. Companies need to be one step ahead of the game, so as not to get trampled rushing to the exit with everyone else.
How will the Gambling Commission measure the success of its social responsibility policies? If the proposed database of excluded gamblers produces more problem gamblers than before, will that be regarded as a success? Or will the industry be blamed for encouraging addictive play? If revenue falls for the industry will that be regarded as a success? Drinkaware proclaim a fall in revenue of 16% over 5 years as a success. While social responsibility policies are essential many companies have not factored or planned for the cost.
The Baltic Dry Index measures the cost of shipping and is now 50% below the previous record low and still falling. This may reflect a boom in the number of ships built in 2006 to 2008 but even so this is a substantial fall. Also China’s debt problem is now beginning to unwind; growth in China is estimated by some to be closer to 2% rather than the Governments own figures at 6%. The Institute of Fiscal Studies in the UK says the Chancellor has a choice of raising taxes and cutting spending as the economy slows. The GBP is in a bear market so foreign earnings in Euros and Dollars will be enhanced for UK companies. The UK industry will do well if it can avoid a tax increase this coming March 2016 budget.
UK leaving the EU
GBP is already falling so markets are already pricing in the possibility. I cannot see any downside for the UK gambling industry. Tourists will benefit from a lower exchange rate which will be good for London casinos. There is legal and tax subsidiarity in gambling matters throughout the EU so I do not see any direct negatives to Britain either staying or leaving the EU, so far as gambling is concerned.
US Presidential Election
“The Donald” could be good for gambling. He has owned casinos and has said that the US should adopt Internet gambling. Would he be the President to cause the opening up of Internet gambling in the US? Be careful what you wish for, his foreign policy is – shall we say – an interesting departure from the past!