How rising inflation could disrupt the world’s economic policies

The debate is hotting up

THE DEBATE about whether high inflation will emerge out of the pandemic is becoming more pressing. In January underlying prices in the euro zone rose at their fastest pace for five years. In America some economists fear that President Joe Biden’s planned $1.9trn stimulus, which includes $1,400 cheques for most Americans, may overheat the economy once vaccines allow service industries to reopen fully. Emerging bottlenecks threaten to raise the price of goods. Space on container ships costs 180% more than a year ago and a shortage of semiconductors caused by this year’s boom in demand for tech equipment is disrupting the production of cars, computers and smartphones.

Headline statistics on price rises will soon contribute to the sense that an inflationary dawn is breaking. They will go up automatically as the collapse in commodities prices early in the pandemic falls out of comparisons with a year earlier, and the recent rise in the oil price begins to bite—on February 8th Brent crude rose above $60 a barrel for the first time in more than a year. In Germany the reversal of a temporary cut in VAT has already helped year-on-year inflation rise from -0.7% to 1.6% in a month.

For most of the past decade the world economy’s problem, judged by central banks’ targets, has been too little inflation, not too much. As a result it is easy to view the coming acceleration in prices as welcome. In fact, it is worth worrying about, for several reasons.

One is that it weakens the hand of those arguing for more fiscal stimulus in places that need it. There is little prospect of the euro zone sustaining higher inflation, for example. Its main rate of interest has not been cut during the pandemic and its

deficit spending remains inadequate given its economic outlook and lack of monetary firepower. Much as the European Central Bank mistakenly raised rates in response to a temporary burst of inflation in 2011, the danger this time is that a temporary acceleration in prices emboldens fiscal hawks who are complacent about the dangers of a depressed economy. The same danger lurks in Japan, the archetypal low-inflation economy. Its prices started falling during the pandemic. Japan will probably escape deflation this year, but beyond that it looks destined to remain in a low-inflation trap, having seemingly given up on its brief attempt to spring out of it in the mid-2010s.

Higher inflation could also cause gyrations in monetary policy in America, where rising inflation expectations and a faster rebound mean price rises are more likely to prove persistent. Financial markets imply a one- in- five chance that consumer prices will grow by at least 3% per year on average over the next five years. The Federal Reserve has promised to keep interest rates low and to keep buying bonds because it wants inflation to overshoot its 2% target, in order to make up for today’s shortfalls. But its new “average inflation targeting” regime does not allow for an enduring or large overshoot. Eventually the central bank will want to raise interest rates to bring inflation back down.

The faster prices rise this year, the sooner that tightening could come. Richard Clarida, the Fed’s vicechairman, has said that the central bank will make up only for inflation shortfalls that have occurred over the preceding year, meaning the point at which catch-up is complete could come surprisingly quickly. On February 7th Janet Yellen, the Treasury secretary, tried to reassure critics of Mr Biden’s stimulus by saying that America has the tools to deal with inflation. But higher rates are not without consequence, and if the Fed finds itself pouring cold water on an overheating economy, the risks of another recession will rise.

Kenya has overtaken Nigeria as the most attractive destination on the continent for startups venture capital (VC) investment deals in 2020 despite the COVID-19 pandemic.

A recent venture capital data compilation by Startuplist Africa – a data-driven platform that focuses on African start-ups shows that Kenya accounted for 25percent of the total start-up investments in Africa in 2020, while Nigeria, Africa’s biggest economy accounted for 23percent of the total. Kenya topped the list of venture capital investment deals with a total of $266million, followed by Nigeria with $237million investments for the period.

South Africa, Africa’s most industrialised economy came in third with $198million investment deals, followed by Egypt and Ghana with $125million and $90million respectively. Kenya, Nigeria, South Africa, and Egypt remain emphatically Africa’s big four from a funding perspective, accounting for 77 percent of funded start-ups and 89.2 percent of total investment during the period.

The fin-tech sector was, yet again, the most attractive to investors in 2020, with more start-ups securing funding than any other sector and a combined total that exceeded others.

Nigeria’s start-up ecosystem has been gaining lots of momentum in recent years. Lumos, Flutterwave, Infracredit, Accelerex, and 54Gene topped Nigeria’s most funded startups for the period.

“Nigeria and Kenya have been the leading destination of start-up investments in recent years. So, it is either Nigeria comes up top or Kenya,” said Femi Egbesola, national president, Association of Small Business Owners of Nigeria (ASBON).

“A lot of start-ups are coming up with amazing solutions, especially in the fintech sector. This is fast changing the entrepreneurial ecosystem in the country,” Egbesola said.

Similarly, Oo Nwoye, executive director, Tech Circle says that star-ups in Nigeria have created thousands of jobs and activities within the ecosystem and striving to consolidate the nation’s status as a top-notch international hub by attracting investors and stimulate entrepreneurship in the country.

Nwoye says that Nigeria is transitioning into a dynamic ecosystem offering start-ups a platform to potentially grow into million-dollar businesses.

“Last year, tech companies such as Flutterwave received huge funding from abroad to strengthen their mobile payment solutions,” he said.

Five-year data analysis of startup investment in Africa’s entrepreneurship ecosystem shows that Nigeria has the most deals with a total of $1.74billion, followed by Kenya with $1.09billion. Uche Aniche, the convener of Startupsouth, believes that the Nigerian ecosystem has transformed in recent years.

“Thanks to the wave of fresh young talents. Lots of start-ups and small businesses have taken off, creating a surge of co-working spaces and a collaborative spirit that is vital for the success of innovation hubs,” Aniche said.

He says investments in Nigerian companies have grown steadily over the past year, pointing to a relative improvement of the investment in the ecosystem and a huge amount of money available to invest in start- ups. Nigerian start-ups have continued to scale amid the pandemic as many are now re-strategizing their business model to survive the economic fallout of the pandemic.

Telegram led the most downloaded nongaming apps table with more than 63 million installs in January, representing more than four times what it recorded in 2020.

New data released by Sensor Tower a provider of market intelligence and analytics for the mobile app economy, showed that Telegram beat competition from Tiktok, Signal, Facebook, and Whatsapp to clinch the crown.

Telegram saw the most growth from India at 24 percent, followed by Indonesia at 10 percent. India is Whatsapp’s largest market contributing more than 340 million users to the Facebookowned messaging platform.

Although there may be other factors like updated features that have contributed to Telegram’s rise in the mobile apps world, Whatsapp’s so- called misstep on January 4, is considered the major factor.

The world’s largest messaging platform, Whatsapp had said it was releasing a new set of terms and conditions that will involve sharing users’ data with Facebook companies. Users were given until February to make up their minds to accept the new privacy policy. The deadline was however extended after a backlash that saw many users pledging anew allegiance with competitors such as Signal and Telegram.

The most uproar had come from its largest market, India where the government had in very unequivocal terms asked Whatsapp to withdraw the proposed update. According to India authorities, citizens of the country should be respected given that it is home to the largest user base for Whatsapp. The ministry also said that the new terms of service and privacy policy are cuase of grave concern regarding the implications for choice as well as the autonomy of the users in India.

A study by Cybermedia Research ( CMR) found that 79 percent of users across India’s top eight cities including Delhi, Mumbai, Kolkata, Bengaluru, Chennai, Hyderabad, Ahmedabad, and Pune are reconsidering using Whatsapp with 28 percent of those even planning to leave the platform after the implementation of its privacy policy.

Whatsapp had topped the Sensor Tower report in the past but as of January it is not only yielding ground to Telegram, Signal also beats it to the third position. Here is how Telegram and Signal compare to Whatsapp and why many users may be dumping the latter for good:

Security

Like Whatsapp recently found out, security is the most important feature users can ask for.

Social media security breaches have the potential to cause up to $ 6 billion in cybercrime damages by 2021, according to a report by Thycotic and Cybersecurity Ventures. The report found that over 3 billion user credentials and passwords were stolen in 2016, which meant that criminals hacked and stole 8.2 million passwords per day, or approximately 95 passwords stolen every second.

For many experts, Whatsapp really had it together until it tangled with Facebook. Currently, Whatsapp collects about 16 data points from the latest updates it has to share with Facebook companies.

Telegram and Signal do not share data with a third party and do not collect as much as 16 data points like Whatsapp.

Telegram collects only 3 data points, Signal makes use of linked data and only stores your phone number.

Whatsapp and Signal make use of the same encryption protocol. The difference is that Signal’s encryption is open source, meaning it can be examined for vulnerabilities by security researchers. Whatsapp, on the other hand, uses its own proprietary deployment and it is not open source.

The three platforms support self disappearing messages.

Some experts say Telegram can technically access a user’s message given that the Mtproto, the encryption protocol used by Telegram is - like Whatsapp - proprietary and only partly open-source.

Sunday Alawode, a software programmer, told Businessday he uses Signal to chat with fellow programmers and foreign clients because of the high security. Signal allows you to relay voice calls to its servers so your identity remains concealed from your contacts. The feature is somewhat similar to what a VPN does.

Groups

Whatsapp groups have a capacity of 256 users.

Telegram, however, brings support for groups with up to 200,000 members. The interesting part of Telegram group chats is the multiple group-specific features like bots, polls, quizzes, hashtags, among others that make users’ experience in groups a lot more fun. The large group capacity also means it is possible to get lost in the conversation.

Creating groups on Signal is a lot different from Whatsapp and Telegram. While you can broadcast messages to multiple contacts at once in a group, you don’t have the option to do this on Signal. But to compensate, Signal recently added a feature that allows group video calls. Whatsapp’s video calls allow 8 users per time.

Users can also export their group chats from Whatsapp to Signal using a feature on the settings. You can migrate as many group chats as you want.

“I successfully migrated four group chats from Whatsapp to Signal ( including my family),” said a new user, @anazhqan on Twitter.

File sharing

On Whatsapp, photos, videos, and audio files can be shared up to 16MB. It also allows you to share all sorts of files and documents up to 100MB.

The size limit for sharing files on Telegram is 1.5GB.

You can send files of all kinds on Signal securely. Signal by default also encrypts all the local files with a 4-digit passphrase.