1. The Importance of Big Data Analysis for Risk Management

    As technology evolves and becomes a more integral part of financial services, the amount of data available is growing significantly, and this has already begun to benefit the niche companies that have gotten on board. There are now many different opportunities for using big data in a variety of areas, particularly in the area of risk management. Thus far, big data has already contributed a lot to the development of risk management solutions, particularly in the world of finance. However, what has already been uncovered is only the tip of the iceberg; the many potential applications of big data for risk management is only now beginning to be fully realized.

    Big Data Definition

    Big data is defined as large amounts of data, as well as the use of this data in making decisions and managing processes. Financial institutions have long used internal data to accomplish this, but more and more external data is being used to manage financial risk. External data may be directly given to a financial institution, already prepared and organized, or they may collect the data themselves; for example, through social media.

    The Potential of Big Data

    Big data is capable of enhancing the quality of risk management models because of the increasing availability and diversity of statistics. Now, big data can be used to simulate a variety of scenarios in order to realize all of the potential risks, leading to faster reactions to developments within the market. Big data also allows financial institutions to identify fraud quicker and with more precision by comparing internal and external data.

    Beyond the risk management applications, big data can be applied to other areas in the world of finance. For example, big data provides far more ability to customize products through the use of location data, click streams, and social media analysis. This will enable financial institutions to better retain their client base, as well as attract new clientele. It is also worth noting that implementing the use of algorithms and big data to anticipate market exchanges has great potential.

    Current Big Data Success Stories

    Financial institutions are already in the process of implementing big data measures. One example of this can be see in Singapore’s UOB bank. It recently tested a risk management system that used big data to streamline the calculation of total-bank risk, reducing calculation time from 18 hours to mere minutes. In the future, stress tests can be carried out in real time, allowing quicker reactions to new risks. Another example of the successful implementation of big data for a financial institution is Morgan Stanley. The bank launched a big data program to better their analysis of their portfolio’s size and results. With technology that enables pattern recognition, this analysis is set to improve risk management significantly.

    Kreditech, a German business that offers credit scores for individuals, has also implemented a successful big data project. They use location data, social media analysis, online purchasing behavior, and web analysis for risk management. Similarly, American company Kabbage uses big data to analyze the risks of providing loans to corporate customers, using external data from social media and online delivery services. Finally, Paymint, a U.S. company that specializes in compliance, combats credit card fraud using big data analysis to recognize fraud patterns. Their big data software analyzes millions of transactions each month to manage risk.

    How to Successfully Use Big Data

    To successfully use big data for risk management, it’s prudent to implement a structured evolutionary approach in order to accommodate the broad scope of big data. First, internal data should be collected and used. After that, you will have a clearer idea of data sources that will benefit you, so you can go to external sources, provided the benefit outweighs the cost. More important than amount of data is an integrated process of analysis. Taking small steps towards implementing big data programs allows you to identify any weaknesses or areas of risk.

    The biggest obstacle to using big data is data protection, according to a recent study from the Fraunhofer Institute. Other obstacles include lack of knowledge, budgetary restrictions, lack of access to expertise, and prioritizing other programs first. There are also smaller technical problems, such as immature technology, that are a factor, but they are much easier to fix. The importance of big data in risk management will be fully realized once these hurdles are addressed by a skilled financial data analytics company.


    In conclusion, the success of several financial service providers exemplifies the benefits big data can provide to risk management, but the full extent of how powerful this can be has not yet been realized. In order to get the full range of advantages big data analysis can provide you, it is wise to contract a financial data analytics company for assistance. At Meraglim™, we have both the expertise and risk assessment software necessary to provide comprehensive data analytics to manage risk. If you have questions about how Meraglim™ could help you, contact us today.


    Big Data: Opportunities and Privacy Challenges – Fraunhofer Institute

    Big Data & Risk Management in Financial Markets – Francesco Corea

    Big Data: Potentials From a Risk Management Perspective – Banking Hub

    The Big Data Opportunity for Audit, Risk Management, and Compliance – John Verver

  2. Sci Fi No More: The Reality of Quantum Computing

    Despite the rapid evolution of technology over the last few decades, you may be surprised to learn that the computers we use today are not so different from the first computer built back in 1941. Your computer, while much smaller and faster than its 30-ton predecessors, performs fundamentally the same task: changing and interpreting binary code into a computational result.1 Binary code is composed of “bits,” which are the smallest unit of computer data and are represented as either zero or one. Whatever task your computer performs, it does so by processing a series of zeros and ones through an algorithm, which produces a new set of zeros and ones. While traditional computing works for now, we are fast approaching a point where the transistors (memories) of computers will soon be as small as atoms.2 If computers are to continue to become smaller and more powerful over time as they have been, new methods of computing will need to be developed. That’s where quantum computing comes in.

    What is Quantum Computing?

    It may sound like something out of science fiction, but quantum computing is a reality today. In essence, quantum computing is the application of quantum mechanics to information processing.3 Where a traditional computer uses bits, a quantum computer uses quantum bits, or qubits. Just like bits, qubits encode zeros and ones; however, using the power of quantum physics, qubits can be zero, one, or both at the same time.4 This might be difficult to conceptualize in a world dictated by classical physics, but the world of quantum physics, which deals specifically with things on the atomic scale, opens up more possibilities. Qubits are able to behave this way due to the phenomena of superposition and entanglement.

    Superposition refers to a quantum system’s ability to be in multiple states at the same time, meaning that it can be both “up” and “down”, “here” and “there” simultaneously.5 Entanglement refers to a powerful correlation between two quantum particles that is so strong that even when they are far apart, they remain perfectly in unison. Due to superposition and entanglement, quantum computers are able to process an incredible number of calculations at the same time. While a traditional computer is slowed down by the limitations of only working with ones and ones, because a quantum computer can also work with superpositions of ones and zeros, calculations that were considered impossible can now be efficiently completed by a quantum computer, all while expending much less energy. This is why quantum computing is so important for the future of technology. As computer processors get smaller and smaller while the amount of information they compute must get bigger and bigger, eventually, they will reach a stalemate. Because quantum computers can calculate at a much quicker rate, they show promise in addressing this problem.

    History of Quantum Computing

    The idea of quantum computing was first introduced in 1982 by Richard Feynman, a physicist and Nobel Prize winner.6 During this time, physicists and computer scientists were exploring the concept of a computer based on quantum mechanics, but it was Feynman who ultimately first presented an abstract model that demonstrated how a quantum theory may be applied to a computation system. This meant that a physicist could carry out quantum physics experiments through a computer. In 1985, physicist David Deutsch built upon Feynman’s model and published a paper to introduce the concept of a quantum computer that could be used outside the world of physics; namely, a replacement for traditional computers.7 After publication, there was a lot of buzz around this concept, and many possible applications for a quantum computer were brainstormed. However, none of the concepts really took off until 1994, when Peter Shor created a method of solving an infamous problem in number theory called factorization using a quantum computer. This brought to light how one could use mathematical operations to factor large numbers at much more quicker pace than the traditional computer. This sparked interest in quantum computers outside of the scientific community.

    Throughout the 20 years since the publication of this paper, significant advancements have been made in the field of quantum computing. Most significantly, the first functional quantum computer was built in 2007 by D-Wave Systems.8 Their initial model at this time was 28-qubits. Since that time, they have doubled the number of qubits in their models every year, and in January of this year, they released the first commercially available quantum computer, composed of 2000-qubits.9

    Next Steps and Obstacles

    While quantum computing shows promise to revolutionize computers as we know them, there are several obstacles in the way of their widespread commercialization. First of all, in order to program a quantum computer, one must have extensive knowledge of quantum physics. D-Wave is working on this issue with the introduction of new software called Qbsolv, which is set to allow developers to program quantum computers without knowledge of quantum physics.10 Of course, the issue is, there are so few quantum computers in this world, that there is little opportunity to develop the necessary skills to program quantum computers. While there are simulators that you can download onto your computer that allow you to test out the D-Wave software, it is not quite the same as running it on a real quantum computer.

    Additionally, quantum computing may be more susceptible to errors than traditional computing. Qubits can be affected by a variety of factors, such as heat, noise, and electromagnetism.11 While IBM is currently researching a promising solution to detecting errors, this is only one problem facing quantum computing. Another is the issue of coherence.12 Coherence is a metric by which the quality of a qubit is measured, which means how long it maintains its quantum properties. Qubits must maintain these properties for an extended period of time for the quantum computer to function, so the next steps for many researchers will be to enhance the coherence of qubits.

    Military Applications

    The worlds of defense and intelligence have long been interested in quantum computing. One of the most important things quantum computing has to offer the military is the speed and types of calculations that can be performed by quantum computers.13 Given the ability of quantum computers to process data at a much quicker pace than traditional computers, processes that require sifting through large amounts of data could be streamlined using quantum computing. This would allow the military to be much more efficient, optimizing defense logistics such as which way to travel. Additionally, as software becomes more and more integral to operating many weapons, any type of technology that makes this process more efficient and effective is appealing.14

    Additionally, this technology has major implications for decrypting communications.15 Currently, encryption is dependent on the inability of hackers to solve long encryption keys. However, with quantum computing, a process that would be impossible before could be done within minutes. Therefore, there is currently a race between nations to develop the research necessary to have a leg up on spies and hackers with quantum computing.16 Whoever establishes this technology first will have a large strategic advantage. They will be able to develop encryption methods that render them “unhackable.” Currently, the U.S. Army, Navy, and Air Force are working together to establish a quantum communication network.

    Commercial Applications

    As stated above, the first commercially available quantum computer was released earlier this year by D-Wave Systems. Other companies working on producing Quantum computers include 1QBit, Optalysys, Quantum Biosystems, and MagiQ.17 Though only D-Wave has a commercially available quantum computer at the moment, it is safe to wager that with time, quantum computers will saturate the market. Beyond computers, there are other commercial applications for quantum computing that are on the horizon. Essentially any optimization problem, meaning when you are trying to find the best possible option within your parameters, can be aided by quantum computing.18 For consumers, this means that features that would be too complicated for a traditional computer to handle could be available within the next few decades. Most intriguing to many consumers will probably be the way this science will change their smartphones. On a smaller scale, quantum computing is set to optimize the apps on our phones that tell us the weather and the best route to take to work, as your device will be better able to analyze data.19 Additionally, the encrypted communication methods the military discovers will likely create the most secure methods with which to communicate and perform transactions over the internet, transforming the financial services industry. Additionally, quantum computing is set to enhance machine learning to a whole new level, meaning that soon, our computers could identify what is in an image, learn more about your habits as an individual, and even develop intuition.20 On top of all this, quantum computing sets to transform research as we know it by enabling scientists to process data at lightning speed.21 If this proves true, the possibilities for new medical advancements and technological developments are endless.

    For now, quantum computing remains accessible to only a small number of people on earth. Yet if the true potential of this science is harnessed, in the future, quantum computing could be behind every major technological advancement. And given how quickly D-Waves managed to make this theory become a reality, that future could be sooner than we think.

    Further Information

    Want to learn more about quantum computing? Check out the links below.

    Quantum Computing – Stanford Encyclopedia of Philosophy
    How Does a Quantum Computer Work? – Veritasium
    How to Fight a War With a Quantum Computer – The National Interest
    How Quantum Computing Will Change the World – Forbes
    How Quantum Computing Could Help Mankind – Bloomberg TV

    1. https://www.cs.rice.edu/~taha/teaching/05F/210/news/2005_09_16.htm
    2. http://www.explainthatstuff.com/quantum-computing.html
    3. https://uwaterloo.ca/institute-for-quantum-computing/quantum-computing-101
    4. https://plus.maths.org/content/how-does-quantum-commuting-work
    5. https://plato.stanford.edu/entries/qt-quantcomp/#BriHisFie
    6. https://www.doc.ic.ac.uk/~nd/surprise_97/journal/vol4/spb3/
    7. http://ffden-2.phys.uaf.edu/211.web.stuff/Almeida/history.html
    8. https://en.wikipedia.org/wiki/Timeline_of_quantum_computing
    9. https://www.dwavesys.com/press-releases/d-wave%C2%A0announces%C2%A0d-wave-2000q-quantum-computer-and-first-system-order
    10. https://www.wired.com/2017/01/d-wave-turns-open-source-democratize-quantum-computing/
    11. http://www.nature.com/articles/ncomms7979
    12. https://www.fastcompany.com/3045708/big-tiny-problems-for-quantum-computing
    13. http://www.bbc.com/future/story/20130516-big-bets-on-quantum-computers
    14. http://nationalinterest.org/blog/the-buzz/how-fight-war-quantum-computer-14708
    15. https://hacked.com/us-intelligence-launches-practical-quantum-computing-research-program/
    16. https://defensesystems.com/articles/2016/12/09/quantum.aspx
    17. http://www.nanalyze.com/2016/09/10-quantum-computing-companies/
    18. https://www.dwavesys.com/quantum-computing/applications
    19. http://www.businessinsider.com/quantum-computers-will-change-the-world-2015-4
    20. http://www.explainthatstuff.com/quantum-computing.html
    21. http://www.nature.com/news/quantum-computers-ready-to-leap-out-of-the-lab-in-2017-1.21239
  3. The Fourth Dimension: The Evolution of 4D Printing

    By now, you have likely been wowed by the incredible technology of 3D printing. Currently, 3D printing is one of the most popular areas for technology research, as the industrial applications are abundant. Not only that, 3D printers have saturated the market, and are becoming increasingly more affordable and available to the public; you may even know someone with a 3D printer in their home. With a 3D printer, one can turn a digital file into a three-dimensional object before their very eyes, which seems to offer endless possibilities.1 It may seem like 3D printing, also known as additive manufacturing, has only just been invented, but in actuality, it has been 30 years in the making.2 As 3D printing has turned a corner, so comes the new technology that everyone is talking about: 4D printing.

    What is 4D Printing?

    4D Printing uses 3D-printing technology and takes it to the next level. You could think of 4D printing as adding a fourth dimension to 3D printing: time. Essentially, 4D printing creates a three-dimensional object that changes according to its environment.3 4D printing uses geometric code so that the printed object can transform by itself.4 These “smart objects” can assemble themselves or change shape according to their environment. This exciting new technology has caught the attention of a variety of industries due to its many potential uses.


    4D printing is a new technology that has only been in development since 2013.5 However, 3D printing — its predecessor that is essential to the technology, has been evolving over the last 30 years. It may seem as though 3D printing is newer than that because there have been so many recent innovations with the technology, but it all began in the 1980s with Charles Hull, co-founder of 3D Systems.6 In 1986, he patented stereolithography, a process that used digital data to create a three-dimensional model.7 In 1992, 3D systems created the first machine that performed this technique, called a stereolithographic apparatus (SLA) machine. Meanwhile, the two other main 3D printing technologies were being invented. In 1988, Carl Deckard of the University of Texas patented SLS technology, which 3D prints using a laser to fuse together powder grains.8 That same year, Scott Crump, co-founder of Stratasys, patented the Fused Deposition Modelling (FDM) method of 3D printing, the most commonly used today.9 In Europe, EOS GmbH was founded by Hans Langer, which created the first “Stereos” system that offered the first production applications for 3D printing.

    In the 1990s, the world of 3D printing expanded, with new leaders emerging with new technologies. In 1992, Stratasys patented FDM, leading others to develop new ways to 3D print. Tools for 3D printing became more widely available, facilitated in part by the Sanders Prototype (now Solidscape) that was one of the first players to offer tools specifically designed for additive manufacturing.10 The ‘90s also saw incredible new applications for 3D printing in the medical field; the first lab-grown organ was engineered at the Wake Forest Institute for Regenerative Medicine, opening up the door for a 3D printed prosthetic leg, mini-kidney, and blood vessels.11

    In 2004, the first self-replicating 3D printer was created. This enabled the mass production of these machines, and now people could have them in their homes. In 2005, the first color 3D printer was released by ZCorp.12 In 2009, the FDM patent was released to the public domain, which facilitated the invention of a slew of FDM 3D printers, the lowering of the price of 3D printers, and more visibility around this technology. Since then, the production of 3D printers has skyrocketed, and public awareness of 3D printing is higher than ever; in his 2013 presidential State of the Union address, Barack Obama mentioned 3D printing as a major issue for the future of the country.13 In the last ten years, 3D technology has seen giant leaps within the medical and commercial industries. In 2013, head of the Self-Assembly Lab of MIT Skylar Tibbits started research into 4D printing, which continues to develop today thanks to the teamwork of Self-Assembly Lab, Stratasys, and Autodesk.14 Today, with the new evolution of 4D technology, we have seen that the future is full of more incredible developments.

    How it Works

    A 4D printer is essentially a 3D printer that has been adapted to be able to print “smart” materials.15 3D printers use a layering process to create shapes, whether by SLA or any of the other methods. Regardless of which method is used, the basic premise of 3D printing is to successively build layers on top of one another to create a shape. In 4D printing, this same process is used, but is applied to create models that can change themselves. During the process, the smart material bonds with the plastic used to print the object and can absorb water. Once the object is printed, the water in the smart material expands, causing the shape to change. This enables the printed object to have several different dimensions; it could go from a 1D object to 3D, a 2D surface to a 3D object, or morph from one 3D shape to another.16 Each 4D model is specially designed to react and form a new shape when the water expands. While water is used in current prototypes, this material could potentially be made out of a variety of activation materials, such as temperature, vibration, pressure, or light. Once these new activation methods have been fully developed, the possibilities are endless.

    Military Applications

    The military has shown interest in 4D printing, granting a $855,000 grant to the 4D research efforts of a team of researchers from The University of Illinois, The University of Pittsburgh Swanson School of Engineering, and Harvard University’s School of Engineering and Applied Science, respectively.17 While the research is still in its infancy, there are a lot of potential military applications for this technology. For example, there is a vision of a military vehicle that adapts to the environment in order to protect it from damage and corrosion.18 Additionally, there is talk of uniforms that are able to transform based on environment to better camouflage soldiers or to protect against poisonous gases or shrapnel, as well as self-assembling weaponry.19 This investment in 4D technology reflects the U.S. military’s desire to have a firm technological advantage in the battlefield, and 4D printing may reveal itself to be a great boon in the future.

    Commercial Applications

    The concept of 4D technology already has several commercial industries excited, and it isn’t hard to understand why. One such industry is the sportswear industry.20 Research is currently being conducted on a “smart shoe,” which would be able to turn into a running shoe when you run that would turn waterproof when you meet a puddle or otherwise adapt to changes in the environment. While many experiments have been conducted into other commercial applications for 4D printing, one can imagine how every industry could ultimately benefit. For example, boxes printed on a 4D printer would be able to unfold and refold themselves.21 Businesses could ship their inventory in these boxes, the boxes would fold themselves, and they could ship them back to the warehouse, saving them millions of dollars on the cost of shipping materials. Just imagine buying a piece of furniture and having it assemble itself once it is out of the box!22 4D printing could revolutionize so many industries that we cannot even fathom everything it will bring. When thinking along these lines, the possibilities are endless.

    Medical Applications

    Perhaps most astounding developments are the potential medical applications for 4D printing. Currently, the ARC Centre of Excellence for Electromaterials Science (ACES) at Wollongong University is researching 4D printing applications for medicine.23 As we know, 3D printing has already revolutionized the medical field by making prosthetics and implants as well as fabricating tissues and organs.24 4D printing has the potential to be even more radical. One area of research currently being explored is the idea of 4D-printed medical implants.25 These implants could change shape according to changes in the body. For example, a 4D-printed cardiac tube could change shape in response to a sudden change in blood pressure. Additionally, this technology could be used to make drug capsules that release medication in response to illness; for example, if it were to respond with body temperature, the drugs would be released immediately when a fever begins.26

    Future Expectations

    In the future, 4D printing will have completely changed our world. Houses will be delivered to you in boxes and will assemble themselves. Bridges will never collapse because they will have the ability to repair any damage they experience.27 Your pipes will never freeze because they will be able to expand, contract, and adjust temperature according to the weather. Our clothes will adapt according to temperature and climate. We will live longer because our wearable medical technology will let us know the moment there are any health concerns on the horizon. We will be able to build structures on other planets because we will be able to send materials to deep space without the need for human beings or robots.28 Energy will be completely revolutionized as 4D printers will create solar panels that respond to temperature, expanding and contracting according to their settings.29 Once more research has been conducted, 4D printing promises to change life as we know it.

    Further Reading

    Interested in learning more about 3D and 4D printing? View the links below.

    The Emergence of 4D Printing – TED Talk by Skylar Tibbits
    Programmable Matter: 4D Printing’s Promises and Risk – Georgetown Journal
    3D Printing Raises Ethical Issues in Medicine – ABC Science
    How 4D Printing Is Now Saving Lives – Computerworld
    A Review on Recent Progresses in 4D Printing – Virtual and Physical Prototyping

    1. https://3dprinting.com/what-is-3d-printing/
    2. http://theconversation.com/explainer-what-is-4d-printing-35696
    3. https://knowledge.ulprospector.com/5423/pe-multi-material-4d-printing/
    4. http://www.smithsonianmag.com/innovation/Objects-That-Change-Shape-On-Their-Own-180951449/
    5. http://3dprinthq.com/what-is-4d-printing/
    6. https://www.allthat3d.com/3d-printing-history/
    7. https://3dprintingindustry.com/3d-printing-basics-free-beginners-guide/history/
    8. https://www.sculpteo.com/en/glossary/selective-laser-sintering-sls-definition/
    9. http://www.livescience.com/39810-fused-deposition-modeling.html
    10. http://www.solid-scape.com/about/
    11. https://redshift.autodesk.com/history-of-3d-printing/
    12. http://www.industryweek.com/emerging-technologies/history-3-d-printing-slideshow#slide-0-field_images-71422
    13. https://www.youtube.com/watchv=TPSkwndBUpQ&feature=youtu.be
    14. http://www.selfassemblylab.net/4DPrinting.php
    15. http://quartsoft.com/blog/201304/what-is-4d-printing
    16. http://www.stratasys.com/industries/education/research/4d-printing-project
    17. http://gizmodo.com/why-is-the-us-army-investing-in-4d-printing-1442964294
    18. https://creators.vice.com/en_uk/article/the-us-army-is-investing-in-4d-printing-expect-crazy-results
    19. http://www.dailymail.co.uk/sciencetech/article-2440233/The-rise-4D-printing-From-self-assembling-furniture-camouflage-changing-tanks-U-S-Army-latest-group-develop-morphing-materials.html
    20. http://journal.georgetown.edu/programmable-matter-4d-printings-promises-and-risks/
    21. https://all3dp.com/4d-printing/
    22. https://sites.google.com/site/naomiastral/freaky-science/4d-printing-and-shape-shifting-technology—the-fourth-dimension
    23. http://www.azom.com/article.aspx?ArticleID=12387
    24. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4189697/
    25. http://www.aventurine.com/what-is-4d-printing/
    26. https://knowledge.ulprospector.com/5423/pe-multi-material-4d-printing/
    27. http://www.livescience.com/40888-army-4d-printing-grant.html
    28. http://newatlas.com/water-sensitive-4d-printing/37238/
    29. https://knowledge.ulprospector.com/5423/pe-multi-material-4d-printing/
  4. Autonomous Vehicles: The New Normal in the Near Future

    There is a lot of buzz about driverless cars right now as automotive and technology companies have begun to roll out these autonomous vehicles. If you have been following the developments in self-driving cars, you are likely familiar with all the benefits that are touted by its advocates: fewer accidents, less congestion and pollution, improved land use, and more mobility for the disabled.1 Many people are quite excited for this technology, while others remain skeptical and fearful of it. Regardless of which side of the spectrum you fall on, the technology is fascinating and presents many possible applications that are important to consider. It is likely that in the near future, autonomous vehicles will be a part of our daily lives, so it is best to gain an understanding of how this new technological development could impact you.

    History and Development

    The first attempt at a driverless car was in 1925 by a man named Francis P. Houdina.2 Houdina toured the country that summer, demonstrating how his invention worked. The automobile, called the American Wonder, was controlled via radio by a driver who followed the driverless car in a separate vehicle. While Houdina continued to tour the car for several years, it had significant safety issues; at one point, it crashed into a car filled with cameramen. Therefore, it was never mass produced or sold commercially.

    After this, technology focused more on developing automatic highways rather than automatic cars. In 1956, GM introduced the concept of the Firebird II, a car that would be steered with an electric highway.3 This idea was taken a step further in 1959 by the Radio Corporation of America. A test model for this “highway of the future” was built in Princeton, NJ, which featured an electrical cable that warned the car of any obstructions ahead, which then triggered the car to either brake or switch lanes. The engineer behind this project, Vladimir Zworykin, believed that the widespread use of this technology would address the growing problem of automobile accidents in America, and anticipated these electric highways to become the norm within a decade or two. However, the infrastructure costs both in installation and maintenance stopped the project before it really began. In 1977, Japan’s Tsukuba Mechanical Engineering Lab released what was considered the first truly autonomous car.4 The vehicle worked using analog computer technology and two cameras for signal processing. It was able to drive up to 18.6 MPH with the help of an elevated rail.

    In the ‘80s, movies such as “Christine” and “Knight Rider” brought into the public eye the idea of an autonomous vehicle.5 Simultaneously, more research started being conducted into making driverless cars a reality. One research team at Bundeswehr University in Munich turned a van into a self-driving vehicle that they called the VaMoRs. At the same time, researchers at the Carnegie Mellon Robotics Institute started a line of robotic cards with the transformation of a panel van into an autonomous car. These projects required vans in order to hold all of the necessary equipment.

    In 2004, the Defense Advanced Research Projects Agency (DARPA) unveiled the Grand Challenge series, which is a competition that gives robotics departments at universities and robotics companies the opportunity to develop an autonomous vehicle.6 While DARPA is clearly concerned with this technology for military purposes, the technology that is coming out of this project are directly creating the commercial driverless cars that are being developed. Google has hired the best researchers to come out of the Grand Challenge series to develop the Google car.

    How They Work

    Current models of self-driving cars build on several features that are already used in driver-controlled cars. For example, developments in the ‘80s and ‘90s in vehicles focused on automation to enhance safety.7 An example of this is anti-lock brakes; while previously, the driver needed to pump the brakes to prevent them from locking, anti-lock brakes do the pumping for you. About a decade of the development of anti-lock brakes, automobile manufacturers took this technology a step further to create sensors that adding traction and stability control. These steps in safety development of standard cars represents the move towards driverless cars. Additionally, the evolution of other technologies has contributed to the development of autonomous vehicles.


    Light Detection and Ranging (LiDAR) is a technology that autonomous vehicles use to create a three-dimensional map and detect hazards by using laser beams to determine the distance between the car and other objects.8 In the Google Car, a Velodyne 64-beam laser is mounted on the top of the car so it has an unobstructed, 360-degree view on a custom-built, rotating base.


    While LiDAR works to accurately map surroundings, it is unable to monitor speed of surrounding vehicles. Therefore, autonomous vehicles also use bumper-mounted radar units for this purpose.9 Driverless cars are outfitted with two sensors on the front bumper and two on the back bumper, which send signals to the on-board processors to move out of the way or apply the brakes. Radar technology works with other technologies in the car, such as gyroscopes, a wheel encoder, and inertial measurement units, in order to help the car make informed decisions to avoid crashes.


    The cameras used in the different models of driverless cars vary, but cameras are commonly used.10 One example is that it is mounted to the exterior, allowing the car to get an overlapping view of its surroundings. Just as the human eye uses different overlapping images for peripheral vision, depth, and dimensionality, the driverless car uses multiple cameras to create a complete image. The camera has a 50-degree view up to 30 meters. Cameras are just one piece of the puzzle that is a driverless car; if they were to malfunction, the car could still work.


    Some prototypes of autonomous vehicles also include sonar technology.11 Sonar technology has some disadvantages when compared to LiDAR and radar technologies; namely, it has a narrow field of view and a short effective range. What sonar technology truly adds is a redundancy that allows the car to cross-reference multiple sources of data to make its decisions.


    In order to get anywhere, autonomous vehicles require advanced positioning systems to keep on course and to route to its destination.12 In the case of the Google Car, it uses Google Maps, GPS satellites, a wheel encoder, and inertial measurement units to maintain correct driving speed and route the car. Using real-time data from the cameras combined with GPS, the system can determine the speed of cars surrounding it, while correcting for things like construction or traffic.

    Advanced Software

    The software required to power driverless cars is quite impressive. Using all the data that it acquires from the sensors, cameras, and GPS, this software create algorithms to make its important decisions.13 The car is hardwired to respond in certain ways, such as stopping at a stop sign, but many responses are learned from experience. Every time a self-driving car is used, it learned more solutions that can be used in different situations, just like a human driver. This software also processes the data of other cars in order to learn.

    Military Applications

    Like many forms of technology, autonomous vehicles as we know them today developed out of military research. In 2016, the U.S. Army began testing self-driving vehicles, part of a long-term plan to implement driverless technology in the battlefield.14 First, they tested semi-autonomous trucks in Michigan, driving as a convoy over the course of seven miles.15 A three-phase pilot program is run by the Army Tank Automotive Research, Development and Engineering Center (TARFEC) out of Fort Bragg, NC.16 The vehicles are essentially autonomous golf carts which are used to pick up injured soldiers at the barracks and take them to the medical center, which is about a half-mile distance. One goal of this project is to cut military costs; as appointments at the medical center are quite expensive, if a soldier fails to show up, it is a huge cost. The hope is that by providing this transportation, they will cut down on missed appointments.

    A more military important goal for this technology is to improve safety for soldiers.17 Driverless technology could enable the military to send supplies into dangerous areas without putting soldiers at risk. By removing the need to have soldiers drive convoy vehicles, they are removed from roads that potentially contain IEDs. Additionally, the implementation of driverless cars could speed the deployment process, allowing freight trucks to move at maximum efficiency in large platoons without the concern of human error. Additionally, the military uses autonomous helicopters to carry cargo to risky areas in which a human would be unable to safely and efficiently deploy.18 Between 2011 and 2014, these autonomous helicopters carried more than 4.5 pounds of cargo throughout thousands of missions in Afghanistan.

    Commercial Applications

    There are currently several automobile and technology companies developing self-driving cars. Last October, Tesla announced that it would begin equipping their cars with technology that would eventually allow them to become completely autonomous.19 GM has announced that within a year, it will be testing self-driving electric taxis with Lyft.20 Uber currently has 100 driverless cars in use in Pittsburgh, which are free as they are only part of a test at the moment.21 Additionally, a Singapore-based company called nuTonomy is testing a self-driving taxi service. Other automobile companies that are currently looking into driverless cars include Ford, Volvo, Honda, and Fiat.22

    Everyone has heard of the Google Car, and currently, it looks as though it is well on its way to be commercialized; Google recently created a new company named Wayno, indicating that it is past the research phase and it now ready to release the car on the market.23 Meanwhile, it seems Apple’s efforts to create their own self-driving vehicle is being downgraded in light of lack of progress and the success of other companies.24 Clearly, the market of driverless cars is quickly developing, with some saying that they could be commonly used on the road by 2025. The eminence of this change is demonstrated by the United States Department of Transportation, which released the Federal Automated Vehicles Policy as a guideline for automakers.25

    What’s Next

    Given the speed with which this technology is now developing, we can expect to see more and more autonomous vehicles come to the commercial market within the next 10 years.26 Beyond cars, we will see many other autonomous transportation. Most intriguingly, Rolls-Royce is currently developing autonomous vessels under a project called Advanced Autonomous Waterborne Applications.27 This has fascinating implications for the maritime industry. Robotic ships could make cargo shipping safer, more efficient, and less expensive.28 Not only would it reduce accidents, it would also reduce the threat of piracy, because the ship could not be overtaken by any intruders. Additionally, with no need to accommodate a crew, these ships would have larger capacity for shipping, and make the ships lighter with fewer operating costs. This would also solve the issue of fewer and fewer people having maritime skills as seafaring becomes less and less attractive for work; instead, people with mechanical and electrical skills would be required more than people who could steer ships. Given how advantageous autonomous vessels could be, it is likely that by 2025, self-steering ships will be commercially used.

    The technology behind autonomous vehicles will certainly have a dramatic impact in the coming years. In as little as a decade, we can expect the market to be saturated with self-driving cars. As with all new technology, there will be advantages and disadvantages, but one thing is for certain: autonomous vehicles will be revolutionary.

    Further Reading

    Interested in learning more about the technology and future of autonomous vehicles? Read the links below for more information.

    How Lidar Works – Lidar-uk.com
    When Cars Drive Themselves – New York Times
    Auto Correct – The New Yorker
    The Ethics of Autonomous Cars – The Atlantic
    Autonomous Vehicle Technology: A Guide for Policymakers – Rand Corporation
    How Will Self-Driving Cars Change Cities? – Slate
    Forget Autonomous Cars – Autonomous Ships Are Almost Here – IEEE Spectrum

    1. http://www.rand.org/pubs/research_reports/RR443-2.html
    2. https://www.engadget.com/gallery/self-driving-cars/#gallery=312063&slide=3580756&index=0
    3. http://spectrum.ieee.org/geek-life/history/selfdriving-cars-were-just-around-the-cornerin-1960
    4. https://www.wired.com/2012/02/autonomous-vehicle-history/
    5. https://www.theatlantic.com/magazine/archive/2014/11/the-secret-history-of-the-robot-car/380791/
    6. http://www.darpa.mil/news-events/2014-03-13
    7. http://auto.howstuffworks.com/under-the-hood/trends-innovations/driverless-car2.htm
    8. http://www.lidar-uk.com/how-lidar-works/
    9. http://www.makeuseof.com/tag/how-self-driving-cars-work-the-nuts-and-bolts-behind-googles-autonomous-car-program/
    10. https://www.nytimes.com/interactive/2016/12/14/technology/how-self-driving-cars-work.html?_r=0
    11. http://spectrum.ieee.org/cars-that-think/transportation/self-driving/teslas-model-s-will-offer-360degree-sonar
    12. https://www.2025ad.com/in-the-news/news/driverless-cars-gps-systems/
    13. https://www.technologyreview.com/s/601910/oxboticas-new-autonomous-vehicle-software-learns-as-it-goes/
    14. https://www.trafficsafetystore.com/blog/military-testing-autonomous-vehicles/
    15. https://www.wired.com/2016/07/armys-self-driving-trucks-hit-highway-prepare-battle/
    16. http://www.autonews.com/article/20160822/OEM06/308229999/army-develops-autonomous-vehicles-for-use-on-bases-first-battlefields-
    17. https://www.forbes.com/sites/jeffmcmahon/2016/10/21/behind-teslas-headlines-the-military-drives-autonomous-vehicles/#7bc9d3f0247e
    18. https://www.wired.com/2014/11/militarys-self-flying-helicopter-gets-modded-fight-wildfires/
    19. https://www.nytimes.com/2016/10/20/business/tesla-autonomous-autopilot-vehicles.html
    20. https://www.wsj.com/articles/gm-lyft-to-test-self-driving-electric-taxis-1462460094
    21. http://www.slate.com/blogs/future_tense/2016/08/18/uber_driverless_cars_in_pittsburgh_actually_have_drivers.html
    22. https://www.nytimes.com/interactive/2016/12/14/technology/how-self-driving-cars-work.html?_r=0
    23. https://www.nytimes.com/2016/12/13/technology/google-parent-company-spins-off-waymo-self-driving-car-business.html
    24. https://www.nytimes.com/2016/09/10/technology/apple-is-said-to-be-rethinking-strategy-on-self-driving-cars.html
    25. https://www.transportation.gov/sites/dot.gov/files/docs/AV%20policy%20guidance%20PDF.pdf
    26. http://www.driverless-future.com/?page_id=384
    27. http://www.rolls-royce.com/~/media/Files/R/Rolls-Royce/documents/customers/marine/ship-intel/rr-ship-intel-aawa-8pg.pdf
    28. http://spectrum.ieee.org/transportation/marine/forget-autonomous-cars-autonomous-ships-are-almost-here
  5. The Past, Present, and Jaw-Dropping Potential Future of Virtual Reality

    Every life experience, from our birth to our death, can be reduced down to electrical stimulation of our brains from sensory organs providing us with information about the world around us. “Reality” is our interpretation of these electrical signals, which means that our brains are essentially our own reality. Whatever you feel, hear, see, taste, or smell is an interpretation of the world around you that exists solely in your own brain. In general, even if we understand this concept, we work under the assumption that our interpretations are pretty close to the external world. Actually, this is not true at all. In certain crucial ways, the brain “sees” things that do not actually reflect the information that is being presented to our senses. We each live in our own reality bubble, constructed of both how we perceive using our senses and how our brains interpret these perceptions. This is exemplified by the concept of color. Color in itself is not a property of the world around us; rather, it is a category created by our perceptions. To experience the world with meaning, the brain just filter the world through our lenses. This is what makes virtual reality so intriguing for the future of communication in a variety of fields.

    Now, our method of communicating our perception is with words. Words have proven to be ineffective for relaying our intentions and interpretations. With virtual reality, there is the potential for us to literally show each other way we see. Virtual reality allows us to reveal a world without our filter, which could endow mankind with a new method of communication that is a sort of telepathy, bringing the gap that exists due to our own unique interpretations of the world. With virtual reality, there is no ambiguity of what we mean like there is when we speak our intentions. This results in a truly perfect understanding, as all parties hold the exact same information. Understandably, excitement about these possibilities translates across a variety of fields. In this blog, we will look into the history of virtual reality, how it works, and its various applications.


    Though the concept of virtual reality has been around since the 1950s, most people were not aware of it until the 1990s.1 However, the beginnings of this revolutionary concept started well-before it was conceived. If you think about virtual reality getting its start under the idea of creating the illusion of being somewhere other than where we actually are, it can be traced back to the panoramic paintings of the early 19th century. 2 These murals were designed to fill the entire field of vision of the viewer to make the paintings come to life, creating the illusion of really being there. Clearly, the desire to see things differently than our reality has been present for centuries.

    In 1838, scientific research integral to the development of virtual reality was conducted by Charles Wheatstone. This research showed that each eye processes two different two-dimensional images, bringing them together to make one three-dimensional image. This is how he invented the stereoscope, which gave illusion of immersion into an image using this science. This later inspired the invention of the View-Master, which was designed for “virtual tourism.”

    In the 1930s, Stanley G. Weinbaum would predict virtual reality in his science fiction short story, “Pygmalion’s Spectacles.”3 The story centers around a virtual reality system that uses goggles to broadcast a holographic recording of different experiences that involve all of the senses. In 1956, the first step towards virtual reality came to existence with the invention of the Sensorama.4 The Sensorama was invented by cinematographer Morton Heilig, who produced short films for the machine that immersed the viewer in the experience using a 3D display, vibrating seats, and smell generators. In the 1960s, Heilig followed the Sensorama with the invention of the Telesphere Mask, which was the first head-mounted display and featured stereoscopic 3D imagery and stereo sound.

    In 1961, Philco Corporation engineers created the Headsight, a head-mounted display as we know them today.5 This technology used a different video screen for each eye as well as a magnetic motion tracking system linked up to a closed circuit camera. It was designed to see dangerous situations from a distance for military purposes. As the user moved their head, the camera would move so they could look around the environment naturally. This was the first step towards the head-mounted displays we know today, though it was not integrated with a computer. This would come later, in 1968, when Ivan Sutherland with his student Bob Sproull created the first virtual reality head-mounted display that connected to a computer called the Sword of Damocles.6 This heavy device hung from the ceiling as no user could comfortably support the weight of the machine, and required being strapped into it. In 1969, computer artist Myron Kruegere developed a series of “artificial reality” experiences that were responsive.7 Projects GLOWFLOW, METAPLAY, and PSYCHIC SPACE ultimately led to VIDEOPLACE technology, which allowed people to communicate through this responsive virtual reality.

    In the 1980s, despite the fact that much technology had been developed in the field of virtual reality, there wasn’t actually a term for it. In 1987, the term “virtual reality” was coined by Jaron Lanier, who founded the Visual Programming Lab (VPL).8 Through VPL research, Lanier developed a series of virtual reality gadgets, including virtual reality goggles and gloves. These represented a giant leap forward for haptics technology, meaning touch interaction.9

    In 1991, virtual reality became publicly available through a series of arcade games, though they were still not available in homes. In these games, a player would wear VR goggles, which provided immersive stereoscopic 3D images. Some units even allowed for multi-player gaming. In 1992, the sci-fi movie “The Lawnmower Man” introduced the concept of virtual reality to the general public, with Pierce Brosnan playing a scientist who uses virtual reality to turn a man with an intellectual disability into a genius.10 Interest in virtual reality peaked, and in 1993, Sega announced that they would be releasing a VR headset for the Sega Genesis console, though this technology failed to develop and it was never actually released. In 1995, Nintendo also attempted to release a 3D gaming console, though it flopped due to how difficult it was to use and it was discontinued shortly after it was released. In 1999, the concept of virtual reality became mainstream with the film “The Matrix,” in which some characters live entirely in virtually created worlds; though previous films touched on the concept, it was “The Matrix” that had a major impact.

    In the 21st century, virtual reality technology has seen rapid development. As computer technology has evolved, prices have gone down, making virtual reality more accessible. With the rise of smartphones has come the HD displays and graphics capabilities necessary for lightweight, usable virtual reality devices. Today, technology such as camera sensors, motion controllers, and facial recognition are a part of daily technological tasks. Today, companies like Samsung and Google have started offering virtual reality through their smartphones, and videos game companies like PlayStation offer VR headsets for their games. The rising prevalence of virtual reality headsets has made this technology widely known. Given the strives VR technology has made in the last decade, the future of virtual reality offers fascinating possibilities.

    How it Works

    For the sake of simplicity, we will explain how virtual reality works through head-mounted displays, as this is the most widely known virtual reality technology. In most headsets, video is sent from a computer to the headset using an HDMI cable.11 They use either two feeds to one display or one LCD display per eye. Additionally, lens are placed between the pixels and the eye, which can sometimes be adjusted to the specific distance between the eyes. These lenses are used to focus the picture for the individual eye and create a stereoscopic 3D image using the technology that Wheatstone created centuries ago.

    VR head-mounted displays also immerse the user in the experience by increasing the field of view, meaning the width of the image.12 A 360-display is not necessary and too expensive, so most headsets use around a 100 or 110 degree field of view. For the picture to be effective, the frame rate must be a minimum of 60 frames per second, though most advanced headsets go beyond this, upwards of 100 frames per second.

    Another crucial aspect of VR technology is head tracking.13 Head tracking means that the picture in front of you moves with you as you move your head. The system used for head tracking is called 6DoF (six degrees of freedom) and it plots your head on a X,Y, and Z axis to measure all head movements. Some technology that may also be used include a gyroscope, magnetometer, and accelerometer, depending on the specific headset.

    Headphones are also used in VR headsets to increase immersion. In general, either binaural or 3D audio is used to give the user a sense of depth of sound, meaning it can sound like a sound is coming from the side, behind, or a distance from them.

    Currently, motion tracking technology is still being perfected in these VR headsets. This means that some technology uses motion sensors to track body movements, such as the Occulus Touch, which provides wireless controllers that allows you to use your hands perform actions in a game.

    Finally, eye tracking is the latest component to be added to certain VR headsets. In these, an infrared sensor monitors the user’s eye movements so that the program knows where you are looking in your virtual reality. This allows in-game characters to react to where your eyes are and it also makes the depth of field more realistic. Further development of this technology is also set to reduce motion sickness, as it will make it feel more realistic to your brain.

    With a greater understanding of this revolutionary technology, you can see how it can be useful in an infinite number of ways to a variety of different realms.

    Military/Defense Applications

    Virtual reality has already provided a lot of value to the military as one of the earliest motivations for this technology, with more possibilities on the horizon. Currently, virtual reality is being used to train soldiers for war.14 It is not hard to understand why the military leapt on this technology, as it allows a user to experience a dangerous environment without any actual danger to them. This makes military training not only safer, but more cost-effective in the long run, as real or physically simulated situations are quite expensive and can cause damage to costly equipment.15 Combat simulators are a common application of VR for the military, using headsets to give soldiers the illusion of being at war.16 This not only prepares them for the experience of war, it gives them a space in which they can practice using military technology with the ability to do it over again if they make a mistake. It also allows them to practice with each other within a virtual world, enhancing the communication of a unit.17 These virtual reality headsets also allow soldiers to prepare to make important decisions while in stressful situations.18 Given the demographics of army recruits in training (young adult men), this method of training is highly effective, as this group has grown up playing video games and finds this learning method appealing.19 Not only does virtual reality have applications for training soldiers, it may also be a helpful tool for helping them heal after combat; specifically, it may help treat PTSD.20 The idea is that virtual reality may allow soldiers to be exposed to potential triggers in a safe environment that allows them to process their symptoms and enables them to cope with new situations.

    In the future, the military will likely take advantage of further developments in VR technology by enhancing the realism of the simulators. It is likely that more humanitarian and peacekeeping training will be done through the use of VR. It is likely that facial recognition technology will be incorporated in order to assess a person’s emotional state, which may help enhance communication further both between soldiers and with interacting with people in foreign countries. Regardless of how this new technology is applied, it is certain that the military will be at the cutting edge of the latest VR technology.

    Commercial Applications

    Presently, the entertainment industry is next in line after the military to benefit the most from further development of virtual reality technology. Most obviously, the world of gaming has seen impressive (and not so impressive) advancements with VR headsets. Just a couple years ago, virtual technology through video games seemed unlikely to actually come to fruition. Today, the three most prominent VR game systems are the Oculus Rift, Playstation VR, and the HTC Vive.21 Each features games that allow the user to immerse themselves into an environment, whether it is a boxing ring, a truck, or Gotham. The future of VR in gaming will likely center around the development of better eye tracking and motion detecting within virtual reality. With these developments, video games will be more immersive than ever.

    Today, mobile phone companies are competing to create the most compelling VR device. Google recently released the Daydream View, a VR headset that is designed to be more comfortable and technologically advanced than its predecessor, Google Cardboard.22 Samsung has also recently released a comparable device called the Gear VR.23 Both of these devices allow the user to virtually visit anywhere in the world, use a series of apps, and also, as can be expected, play immersive games. As virtual reality technology becomes more prevalent, affordable, and usable, it is certain that more of these devices will saturate the market.

    Psychological Applications

    Finally, virtual reality has shown promise in the field of psychology. As mentioned above, potential has been shown for the use of VR for the treatment of PTSD. Beyond that, there is evidence to suggest that virtual reality could be applied to the clinical treatment of other anxiety disorders, such as phobias.24 Additionally, there is currently research being conducted in how virtual reality could help treat people with schizophrenia deal with their delusions and paranoia, allowing them to face their fears.25 Finally, virtual reality has the power to change how psychological research is performed entirely. With the use of VR, psychological researchers could have complete insight into the minds of certain people, giving them greater understanding of how to treat certain conditions.26

    The future of virtual reality is beyond anyone’s wildest imagination at the moment, but suffice it to say, it is safe to assume that the technology will only get more realistic from here. The potential applications for this technology are enormous in the military, the private sector, and the world of psychology, but other areas are set to benefit as well in ways we cannot anticipate. With time, virtual reality may be commonly available in everyone’s living room. Regardless of its specific future applications, virtual reality is set to change the world.

    Further Reading

    If you want to learn more about the fascinating technology behind VR or its applications, see the links below for further reading.

    The Future of Virtual Reality – TheNanoAge.com
    Virtual Reality in the Military: Present and Future – René ter Haar
    Everything You Need to Know Before Buying a VR Headset – Wired
    A Virtual Out-of-Body Experience Could Reduce Your Fear of Death – Seeker
    The Use of Virtual Reality in Psychology – Computational and Mathematical Methods in Science

    1. http://electronics.howstuffworks.com/gadgets/other-gadgets/virtual-reality8.htm
    2. https://www.vrs.org.uk/virtual-reality/history.html
    3. http://www.gutenberg.org/ebooks/22893
    4. https://www.wareable.com/wearable-tech/origins-of-virtual-reality-2535
    5. http://www.redorbit.com/reference/the-history-of-virtual-reality/
    6. https://www.freeflyvr.com/time-travel-through-virtual-reality/
    7. http://thedigitalage.pbworks.com/w/page/22039083/Myron%20Krueger
    8. http://www.jaronlanier.com/general.html
    9. https://www.vrs.org.uk/virtual-reality-gear/haptic/
    10. http://www.imdb.com/title/tt0104692/
    11. https://www.wareable.com/vr/how-does-vr-work-explained
    12. http://electronics.howstuffworks.com/gadgets/other-gadgets/virtual-reality.htm
    13. http://ftp.hitl.washington.edu/projects/knowledge_base/virtual-worlds/EVE/II.G.Military.html
    14. http://science.howstuffworks.com/virtual-military.htm
    15. https://www.geospatialworld.net/article/virtual-reality-trains-soldiers-for-the-real-war/
    16. http://fortune.com/2015/12/16/army-training-with-vr/
    17. http://citeseerx.ist.psu.edu/viewdoc/download?doi=
    18. https://www.wareable.com/vr/how-vr-is-training-the-perfect-soldier-1757
    19. http://abcnews.go.com/Technology/treating-ptsd-virtual-reality-therapy-heal-trauma/story?id=38742665
    20. http://www.techradar.com/news/gaming/15-best-vr-games-best-virtual-reality-games-for-pc-and-mobile-1300576
    21. http://www.trustedreviews.com/google-daydream-view-review
    22. http://www.trustedreviews.com/news/samsung-takes-the-fight-to-daydream-vr-with-new-gear-vr-controller
    23. http://ieeexplore.ieee.org/document/1106906/?reload=true
    24. https://www.psychologytoday.com/blog/know-your-mind/201605/how-virtual-reality-could-transform-mental-health-treatment
    25. https://www.hindawi.com/journals/cmmm/2015/151702/
  6. The Fragility of China’s Economy

    In the current global landscape, China teeters on the edge of financial collapse.1 Between current foreign military pressures and their domestic economic insecurity, they remain in a precarious position, set to be crushed by these two opposing forces. Currently, foreign military issues can be traced to their expansion into the South China Sea.

    South China Sea

    Much of the foreign military pressure on China comes from their recent actions in the South China Sea. In recent years, China has acquired 90 percent of the South China Sea, creating artificial islands using dredging equipment.2 This is much to the distaste of their neighbors who have competing claims. In 2016, it was discovered that China was using these artificial islands for military purposes. While this is hardly a surprise, it does bring to question exactly how helpful these territories will be for their military strategy.

    Starting in 2009, China began their efforts to militarize the South China Sea by submitting a map to the UN with the (now infamous) Nine-Dash Line, boundary dashes across the South China Sea that declared it the territory of China. Since that time, China has expanded a minimum of seven different reefs and islets by using sand from the ocean floor, include Mischief Reef, Hughes Reef, Subi Reef, Johnson Reef, Fiery Cross Reef, Cuarteron Reef, and Gaven Reef. They have created more than 3,200 acres of land, according to the Asia Maritime Transparency Initiative.3

    At first, China claimed to be using the South China Sea for non-military purposes, such as humanitarian aid and scientific research, yet several of these islands are now home to airfields, antiaircraft/antimissile guns, and naval guns. For example, Cuarteron Reef has a High Frequency radar for detecting aircrafts, which is hard to claim for “peaceful purposes”. On Woody Island, they have installed HQ-9 long-range missiles.

    When considering former leader Hu Jintao’s movement towards “peaceful rise,” this clear territorial grab seems out of character.4 These actions have alienated their neighbors and brought in other powers such as India, Japan, and the US. A theory to rise out of these actions is that leadership decided that it was worth the potential diplomatic trouble to have a secure sea-based deterrent bastion.

    This echoes the Soviet Union’s actions during the Cold War, when their missile submarines were operated from “bastions” in the Barents Sea and Sea of Okhotsk. This made it so that Soviet missile submarines could be covered by land-based and naval forces in the event of enemy attacks.

    China’s land- and sea-based missile rely upon four Jin-class submarines. It is China’s belief that the US’s ballistic-missile defense are a threat to the credibility of their nuclear deterrent, which makes these protective bastions in the South China Sea much more important. Due to China’s geography, there is essentially one ocean for their bastion. The Northern Pacific is out due to the U.S. Navy and the Japan Maritime Self-Defense Force. In contrast, the South China Sea is bordered by countries that are no threat to China’s nuclear missile submarines.

    By installing a permanent presence in the South China Sea, China’s regional dominance is unquestionable. It also allows for China to install a permanent sensor system. Further construction will most certainly lead to complete defense against any submarine warfare against China’s sea-based nuclear weapons. They will also likely develop more surface-to-air weapons and land-based antiship missiles to, at the very least, protect their current military installations. Heavier defenses are being justified due to freedom-of-navigation operations the US and other allies.

    This shows the main weakness to China’s series of islands; there is only so long they can be defended. While ships can move, islands cannot. An island cannot be stocked with enough weaponry, food, water, and electricity to be a viable defense outpost. Islands’ inability to defend themselves is exemplified by Iwo Jima and Okinawa. Should a military confrontation arise between China and the US in the South China Sea, China’s at-sea outposts would have to be rolled back quickly in response to missile attacks and airstrikes, which would strand People’s Liberation Army Navy personnel on the island. The way China would respond to such an attack is an important question to be considered, as this victory could actually be a dangerous turn of events. While these islands offer strategic value, as a defensive solution, they are prone to destruction in the event of war. These military islands are a violation of China’s agreement to not militarize the sea, which is why it is of such concern to foreign militaries.5 This tension is putting more pressure on China’s economy.

    fragility_china_blog_innerimageDomestic Economic Health

    China’s economy is not only in peril due to foreign military pressures, but their own domestic economic well-being. Increasingly, central bankers fear a systemic collapse of China’s market. Their fears stand to reason: before the 2008 financial crisis, their debt-to-GDP ratio was 147 percent; now, it is at about 250 percent. Quietly, Chinese leadership has begun to lower growth expectations. While the official growth rate given was 7.5 percent, privately, the government believes that 6.5 percent is more realistic over the next year.6

    The methodology used to calculate this figure is not publicly known, but it uses economic data that can be manipulated to make it appear that they have more success with their economic plans than is true. What components are used to determine GDP are shifted between quarters, and the aggregate numbers are often built upon inaccurate or intentionally manipulated data.

    There are other metrics by which to analyze economic growth, such as through the ISM manufacturing index, which many countries use. The ISM can be somewhat unreliable, however, because the surveys upon which it is based may be inaccurate. Other indicators include coal, iron, cement, and copper inventories; though these can still be unreliable measures of growth. Recently, before taking his current position, Premier Li Keqiang suggested indicators such as electricity consumption and auto and excavator sales, indicating that this could be what China uses. However, these measures have actually recently seemed to suggest growth deceleration.

    Domestically, there is growing anxiety about China’s financial market as well. Local banks are failing to perform, with non-performing debt increasing. Non-bank financial institutions referred to as the “shadow banking system” are spreading, with little regulation or common understanding. There is so little regulation that meaningful data about these systems is difficult to come by. While two of these financial intermediaries have failed at this point, it’s hard to say how quickly or how many more may fail. While the government claims to be trying to better control this system, they seem to be having difficulty balancing regulation with the possibility of systemic collapse. There also seems to be a degree of corruption, with local government official tolerating and perhaps even encouraging sketchy practices by investors, such as hyperbolic assessment of assets and little documentation to prove their claims. Between this and short-term debts from foreign banks, the entire shadow banking system is threatened with collapse.

    Another Chinese economic issue is the real estate market. Commercial real estate bubbles are abundant, and residential real estate values have begun to fall. This threatens the possibility of social unrest, as many families begin to lose more and more money to this problem. As is typical with many countries, the Chinese government measures inflation by adjusting it downwards to conceal the impact it has on households.

    While China has been able to rapidly grow recently with global trade, the Lehman collapse plateaued world trade, hitting China where it hurt, as exports accounted for more than 40 percent of their GDP. While global trade did pick back up eventually, but more recently, as started to slow again, rising slower than world production rates when in the past, it grew twice as fast. With this slow growth, China is losing competitiveness in the market place. With the growth of the Chinese economy came the need for higher wages. In turn, China escalated their export products to a higher value, beginning to manufacture more technologically advanced and complicated products. In turn, quality suffered, which caused foreign markets to stray away from Chinese components. More and more, foreign manufacturers moved away from China in favor of other countries, such as Vietnam. China is no longer the place for overseas production; foreign companies only enter when they are targeting the domestic market. World trade growth continues to slow as the consequences of the 2008 financial crisis live on today. Therefore, China must focus more on building their domestic economy. With a shrinking population, the aged population with be responsible for more and more economic output. This will prove to be difficult, and only more so given the fractious nature of their government.

    A Fractious Regime

    From an outside perspective, the Chinese government seems unified and orderly. However, this is hardly the case. In the United States, we are aware of the competitive powers in place. In the two-party system, we often see tension between the people in power, particularly if we have a democratic president and a republican Congress or vice versa. Yet we often fail to recognize these tensions in foreign governments. In China, just as in the United States, different political groups hold different views on what policies should be put in place and how they should be enforced. This stands true even within the Politburo itself.7

    Currently, there are two separate factions within the Politburo that came out of Deng Tsao Ping’s death. These are the Shanghai bang, which is led by Jiang Zemin (former leader of China), and the Youth League Faction, led by Hu Jintao (another former leader). Xi Jinping, current leader, is of the Shangbai bang. However, once Jiang Zemin passes away, it could be that the Shangbai bang breaks into even more different segments. Two other political factors are the New Left (which emphasizes disciplined management) and the Princelings (sons of former Party leaders and their families).

    Bo Xilai, now disgraced, was a Princeling, and used this to create a network within the New Left as well as with military and state security leaders, as well as a political base within the Chongqing province.8 Currently, Xi Jinping is leading an effort to eliminate this power network by accusing those connected with it of corruption. Xi has reformed the Politburo, Central Committee, and Standing Committee as of this time. He has also started in on state security, going so far as to arrest former head Zhou Yongkang for corruption. Xi has also begun a reconfiguration of the PLA leadership, but this has proven to be tricky.

    The PLA is present in seven different military districts, the most power of which is the Shenyang district, which borders North Korea. The connection with the PLA, Bo Xilai, and Zhou Yongkang are quite strong in this region, and there are rumors that the generals are involved with North Korea. One way Xi has attempted to take greater power is by putting more of the military budget behind the Navy and Air Force, granting less money to the land-based military.

    Thus far, Xi’s leadership has not been tested to see how long it can be sustained. While efforts against corruption have been launched, it is not expected that all corruption will be removed. In reality, some parts of Chinese authority are likely to lose power, while others will gain more. Since Xi came to power, many wealthy Chinese people have anticipated moving their wealth abroad, as little has been known about how Xi’s power will come to affect them. This can be demonstrated by the elevated demand by Chinese residents for properties in cities all around the world, including New York, London, Toronto, and Sydney. Wealthy Chinese children are increasingly educated abroad and left to manage the family wealth overseas.

    fragility_china_blog_innerimage2Given the political turmoil, it is understandable why foreign central and private bankers are questioning whether the Chinese can handle reconfiguration of the financial market. The ability to make unified decisions is severely questioned by the fractured nature of the government. Bankers are apprehensive of China’s ability to navigate their bubble-ridden economy at the moment.

    At the moment, China’s number one goal is to prevent social unrest. There are greater efforts to unify China as a whole against their neighbors (in particular, Japan) so that its citizens feel loyal to their country against another. While China may be able to reform certain economic issues such as that of shadow banking, it is also likely that they will damage their foreign interests in the process.

    The fragility of China’s economy is important to understand given the current state of the global market. An understanding of the big-picture impact of the turmoil of foreign economies is one of the many ways our team of experts at Meraglim™ can help you understand what actions to take within the global market. If you need financial data analytics, we can help with our experienced staff and unique risk assessment software. Contact us today to learn more.

    1. http://www.tradingeconomics.com/china/gdp-growth-annual
    2. http://nationalinterest.org/blog/the-buzz/what-makes-chinas-fake-island-military-bases-the-south-china-19399
    3. https://amti.csis.org/long-term-strategy-scs/
    4. http://nationalinterest.org/feature/the-real-reason-chinas-massive-military-buildup-12502
    5. http://thediplomat.com/2017/01/the-civilization-of-chinas-military-presence-in-the-south-china-sea/
    6. http://www.sldinfo.com/chinese-economic-difficulties-exploiting-global-tensions/
    7. http://www.strategicstudiesinstitute.army.mil/pdffiles/PUB995.pdf
    8. https://muse.jhu.edu/book/1385
  7. The World-Changing Impact of Blockchain Technology

    In the last few years, you may have heard some buzz about blockchain technology. In a recent report from the World Economic Forum, it was estimated that by 2025, 10 percent of the GDP will be stored using blockchains or within related technology.1 With this in mind, it is imperative to understand this technology so you can take the jump on what will certainly be an abundance of opportunities.

    What is blockchain technology?

    Blockchain technology has been described as “the internet of value.”2 The internet is where we share information, and while we can transfer value (money) online, it requires intervention by financial institutions like banks. Currently, all online payment methods (like Paypal or Venmo) require connection to a bank account or credit card. Blockchain technology is intriguing because it offers the potential to eliminate the need to involve banks in transactions. Blockchain technology records transactions, confirms identity, and arranges contracts, all of which previously required a financial institution. Currently, blockchains, also known as “distributed ledgers” or “digital ledgers”3, are used to keep track of economic transactions of bitcoin and other cryptocurrencies; however, this technology has the potential to revolutionize far more than financial services.

    Bitcoin and other cryptocurrencies

    The blockchain was invented by a person (or group) who goes by the pseudonym “Satoshi Nakamoto,” the creator of bitcoin.4 Bitcoin are a kind of digital currency that is exchanged directly between two people in a transaction; no bank is necessary as an intermediary.5 Bitcoin was invented in response to the 2008 financial crisis; the mysterious Nakamoto, whose real identity has not been established, published an essay outlining the problems of the traditional fiat currency and presented bitcoin as an alternative.6 When it was first released, bitcoin excited people because it offered the possibility to escape the credit bubble cycle that is a staple of traditional currency. However, financial institutions also keep track of every transaction to ensure that no dollar is spent twice, and clearly, with paper currency, you can’t keep reusing the same bill over and over. With digital currency, there was the potential issue of someone using the same bitcoin again and again. Nakamoto created blockchains to combat this issue. This innovative cryptography is so advanced that it has proven impossible to attack, leading many to believe that either Nakamoto is a complete genius or is the pseudonym for a team of advanced programmers and economists. However, it is unlikely that the true identity of this brilliant innovator will be publicly known anytime soon; after all, it makes sense to hide when it comes to experimenting with currency too publicly. After all, when Hawaiian resident Bernard von NotHaus produced and sold “Liberty Dollars” in 2009 he was arrested and charged for breaking federal law. Nakamoto’s anonymity allows him (or her, or them) to provide this astounding digital currency to the world without repercussion.

    How it works

    In the context of bitcoin, the blockchain serves as a database that holds the payment history of every single bitcoin, serving as proof of ownership.7 The blockchain is then broadcast to a network of thousands of computers, which are known as “nodes.” These nodes are all over the globe and publicly available. Despite how open it is, it is also incredibly secure and trustworthy. How is that possible? Through its “consensus mechanism.” This is how nodes work in tandem to update the blockchain in response to transfers from one person to another.

    For example: Jill wishes to use bitcoin to pay Bill for his services. Jill and Bill both have their own bitcoin wallets, which is software that is used to store bitcoin by accessing the blockchain without identifying a user to this system. Jill’s wallet communicates with the blockchain, asking that her wallet loses bitcoin and Bill’s gains them. To confirm this, there are a number of steps the blockchain must go through. Upon receiving the proposal, the nodes work to check whether Jill has the bitcoin necessary to make this transaction. If she does, a specialized group of nodes called miners combine this proposal with other similar transactions, creating a new block for the blockchain. To do this, miners must feed data through a “hash” function, which simplifies the block into a string of digits of a certain length. This is a one-way process: while it’s simple for data to go to hash, hash cannot go back to data. While hash does not host this data, it is entirely unique to it. If a block is changed in any way, whether entirely or by a single digit, a different hash will result.

    The hash is then put into the header of the block. This header is used for a mathematical puzzle that again uses the hash function. This puzzle can only be solved using trial and error. Miners go through the trillions of possibilities to look for the answer to this puzzle. Once a miner discovers this solution, it is checked by other nodes (while solving takes time, checking is a simple process), and the solution is confirmed and updates the blockchain. The header’s hash becomes the new identifying string of the block, and it is officially part of the blockchain. Jill’s payment to Bill is confirmed and reflected in their bitcoin wallets.


    This method introduces three factors that ensure the security of bitcoin. The first is chance. There is no way to predict which miner will find the solution to the puzzle, so it is impossible to determine who will update the blockchain; this makes it difficult to trick the system. Next, the extensive history within the blockchain serves as security. Within each header, there the hash of the previous header, which contains hash from the one before that, and so it goes on to the very beginning. This is what composes the blocks of the blockchain. Therefore, making any change in any of the headers, even back to the earliest blocks, changes the subsequent headers. As the blockchain no longer matches the latest block, it will not be accepted.

    Is there any way to cheat the system? Technically, but it is highly unlikely. Say Jill decides she wants to rewrite the history so that instead of the bitcoin goes to Bill, they actually stay in her wallet. If she knew how to mine well, she could potentially solve the puzzle and produce a new blockchain. However, in the time it took her, the rest of the nodes would have added more headers to the blockchain, lengthening it, because nodes always work on the longest version of the blockchain. This is to stop issues from occurring when two miners find the solution at the same time; with this measure, it just causes a temporary fork. This also prevents Jill from cheating the system. In order to get the system to accept her version, Jill would have to lengthen the blockchain faster than the rest of the system is working on the original. In order to do so, she would have to have control over more than half of the computers, making cheating pretty much impossible.

    The final way the security of bitcoin is ensured is through incentives for the nodes. When a new block is forged, it makes new bitcoin. The miner who solves the puzzle earns 25 bitcoin, which currently is worth roughly 7,500 dollars.

    However, as clever as this system is, bitcoin is still not an extremely attractive currency. Its value is unstable and the amount currently in circulated has been intentionally limited. However, the blockchain technology functions so well, it has created a lot of buzz about its potential uses outside of bitcoin. Clearly, there is great potential for this technology to disrupt the financial services industry. Blockchains will likely help improve existing processes, making them more secure, inexpensive, and efficient. Additionally, new products that are beyond what we can even conceive of right now will be invented, turning financial institutions on their heads. However, the applications of this technology go well beyond the world of banking.

    Defense applications

    In the world of defense, blockchains show promise due to their incredible security. Currently, the Defense Advanced Research Projects Agency (DARPA) is looking into ways to use blockchain technology to secure military systems and ensure safe storage of nuclear weapons, among other potential applications.8 Because blockchains are near impossible to hack, the military is interested in using this incredible technology to maintain the integrity of highly sensitive data, and has contracted computer security company Galois to verify a blockchain technology created by Guardtime.9 If the project goes well, blockchain technology could soon begin to be implemented into military technology. What is particularly attractive about blockchain is not only that it is nearly impenetrable, even if a hacker were to enter into a security military network, they would be unable to make any damaging changes to the code, as only authorized users can.10 This is ideal for military use as it would prevent anyone from being able to hack in and gain control over military satellites or nuclear weapons. Today, even if a hacker couldn’t gain direct control over a weapon, they could interfere with military communication without being noticed. This is why they are particularly interested in using blockchain technology to develop a new messaging platform that would allow for completely secure communications.11

    Commercial applications

    Blockchains have clear applications for the financial services industry and the military, but it can also be used to enhance the experience of consumers. The widespread use of blockchain has the potential to enable a shared economy.12 A movement towards this can be seen through companies AirBnB and Lyft, but by enabling peer-to-peer transactions on a wider scale, blockchain technology could create a sharing economy that doesn’t require a middleman (and therefore, transaction fees). Consumers could also benefit from blockchain technology because they could have greater access to information about what exactly goes into their products. More and more, consumers want to verify claims companies make about their products, and through the transparency that blockchains create, it would be far easier to either verify or disprove lofty claims. This would mean that reputation would be more important than ever for businesses. Additionally, people will be able to feel more comfortable using the internet for financial transactions, as blockchains make identity management quite simple; by being able to verify identity online, both the business and the consumer can trust the transaction. This is truly only the tip of the iceberg when it comes to commercial applications of this technology.

    Government applications

    One place people are started to buzz about blockchains is in the world of governance.13 Blockchain could usher in an era where voter fraud and government corruption could be exposed through code. Traditional voting systems would have to be altered to be online, which would then ensure more transparency because it would hold the voting system accountable. Additionally, the extensive history that blockchains provide would prevent outright lies from being spewed by politicians, as there would be hard data to the contrary that everyone could accept; the public would be more intimately knowledgeable about the truth because the blockchains could serve as a built-in lie detector. It could even come to be that the decision-making process is streamlined through code, meaning necessary changes in law could occur at a much more accelerated pace.

    Blockchain technology is set to revolutionize financial institutions, the military, the private sector, and the world. The potential uses of this technology are coming to light more each day as more industries become aware of the security and reliability of this technology. Though initially created for bitcoin, whichhas faced controversy and may not stand the test of time, blockchain technology has the potential to change the entire world.

    Further Reading

    Want to learn more about blockchain technology? Read further with these links below.

    What is Blockchain Technology? – Blockgeeks
    5 Ways to Invest in the Blockchain Boom – Investopedia
    The Great Chain of Being Sure About Things – The Economist
    Bitcoin Blockchain Technology In Financial Services: How The Disruption Will Play Out – Forbes
    Block Chain 2.0: The Renaissance of Money – Wired

    1. http://www3.weforum.org/docs/WEF_GAC15_Technological_Tipping_Points_report_2015.pdf#page=24
    2. http://www.forbes.com/sites/bernardmarr/2016/05/27/how-blockchain-technology-could-change-the-world/#70108f1c49e0
    3. http://www.blockchaintechnologies.com/blockchain-definition
    4. http://blockgeeks.com/guides/what-is-blockchain-technology/
    5. https://bitcoin.org/bitcoin.pdf
    6. http://www.newyorker.com/magazine/2011/10/10/the-crypto-currency
    7. http://www.economist.com/news/briefing/21677228-technology-behind-bitcoin-lets-people-who-do-not-know-or-trust-each-other-build-dependable
    8. https://www.deepdotweb.com/2016/10/20/blockchain-technology-may-borrowed-darpa-secure-military-networks/
    9. https://qz.com/801640/darpa-blockchain-a-blockchain-from-guardtime-is-being-verified-by-galois-under-a-government-contract/
    10. http://www.popularmechanics.com/military/research/a23336/the-pentagon-wants-to-use-bitcoin-technology-to-guard-nuclear-weapons/
    11. https://bitcoinmagazine.com/articles/darpa-nato-looking-at-military-applications-of-blockchain-technology-1464018766/
    12. http://blockgeeks.com/guides/what-is-blockchain-technology/
    13. http://blockgeeks.com/blockchain-voting/
  8. How to Invest in Gold

    dreamstime_xxl_18339679Gold is the categorical dollar hedge investment. To counter the falling dollar, the best course of action is to invest in gold, whether you invest directly in the metal itself, purchase gold mining stock, or choose mutual funds. As the dollar falls, gold rises. The American blue chip industry cannot compete in the global economy anymore. Gold will be the key to growth. Even if we do not return to the gold standard, the value of gold has always been high (as you can see by reading our History of Gold post), and this will not change. Therefore, it is in your best interest to invest in gold now. Fortunately, there are several different ways you can invest in gold, which we will outline below.1

    Direct Ownership

    The gold bullion is pure value. This can be seen by man’s relationship with gold throughout the centuries. This can be demonstrated by ancient Egyptian civilizations that buried mountains of gold with their pharaohs as they believe it would be necessary to use in the afterlife. Gold has started many wars, and we can see people’s desperation for this precious resource by the conditions endured during the Gold Rushes. This stands to reason, as gold is far more valuable than paper money could ever be. Gold cannot be controlled by governments the way paper money can; hence why governments go off the gold standard.

    The value of gold rises based on the simple economic principle of supply and demand, regardless of policy around interest rates or the manipulation of paper money. The one significant disadvantage of gold is that there is wide spread between bid and ask prices, so you cannot expect a quick profit. You will buy it at retail price and sell it at a wholesale price, so the jump between these needs to be significantly even just to break even. That is why gold should not be seen as speculative asset; instead, consider it a defense asset to hold value. As your dollars will fall in value, gold allows you to preserve value. To own gold directly, it best to invest in minted coins, such as Canadian Maple Leafs, American Eagles, or South African Krugerrands.

    dreamstime_l_27669109Gold Exchange Funds

    Another way to invest in gold is a gold exchange traded fund (ETF). ETFs are kind of mutual fund that trade on the stock exchange; the portfolio is fixed and won’t change. So gold ETFs are composed solely of gold bullions as the asset. There are two ETFs in the U.S.; “GLD” (SPDR Gold Trust) and “IAU” (the iShares COMEX Gold Trust). Either is a sensible option for holding gold.

    Gold Mutual Funds

    Gold mutual funds are a sensible alternative for holding gold bullions for those who hesitate to invest in physical gold. Gold mutual funds hold stocks in companies that mine for gold. An example of this is Newmont Mining (NEM), a well-capitalized company with a good track record for making a profit. This is an example of a senior gold stock, which is invested in a company that owns well-established mines that produce a fair amount of gold every year. This is a more conservative play than investing in newer gold companies.

    Junior Gold Stocks

    Junior gold stocks are more uncertain than senior gold stocks. They are in companies that have less productive mines or may be exploring, which can lead toa large profit, but presents a greater risk. These stocks are best for investors with a wider risk tolerance, and who can accept potential losses for possible major gains.

    Gold Options and Futures

    Options may be the right move for seasoned investors. They allow you to speculate gold prices. In the options market, you can make guesses for movements in either direction. Buying a call means you will hope prices rise. A call fixes the purchase price; the higher that price goes, the larger the margin between your option price and the current market price. On the other hand, when you purchase a put, you anticipate the price falling.

    Buying options is a risky way to invest; most people fail. About 75 percent of all options bought are worthless. This is a complex market that requires vast knowledge. There are two primary traits of an option, one that is positive and one that is negative. The positive trait is that investors are able to control their large investment using a small amount of money. The negative trait is that options expire after a certain amount of time. As the expiration date comes closer, the time value of the option vanishes. For the majority of investors, the futures market is out of their league. Even experienced investors see how high risk the futures market is. Large profits can be made, but can be lost almost instantly.

    We don’t know when the dollar will collapse, or how long it will take. We just know that it will happen. After years of mismanaged monetary policy by the Federal Reserve, there is no question of its inevitability. The removal of the U.S. dollar from the gold standard has had a long-term impact. Nixon saw this as a way to solve the economic issues of the time, but as a result, we see ever-growing debt, trade deficits, and endless money-printing creating a credit-centered economy. Taking a broad view of the global economic market, an investor can see that problems are inevitable. We have delayed this trouble slightly due to China’s parallel economic troubles.

    China has built debt upon the troubled U.S. dollar, bringing with it other Asian economies. The fall of the dollar will be a major issue for not just the U.S., but many other countries with it. To offset this, commodities are a logical choice, such as oil, and yes, of course, gold.

    This exemplifies the ironically predictable pattern of monetary policy. Governments will overprint money, destroying their currency. Then, they will go back to gold, going through much expense and suffering. At this moment, we are at the precipice of another collapse, as poorly planned monetary policy fails us. However, we do not have to wait for the dollar to collapse. Respond today. By being proactive now, investors can anticipate this collapse by investing in tangible assets that will hold value regardless of what happens to the U.S. monetary system.

    Currency is not valuable in itself. It is essentially an IOU that today holds no real value. Once the national credit limit is reached, monetary policy will have to be changed, and investors will lose. Investors who hold stock in goods with a tangible value will be the ones who benefit. The key is starting from a good position before this collapse.

  9. What We Can Learn from Market Bubble Bursts

    Just like the bubbles children blow on playgrounds, economic bubbles all eventually burst. However, people often have a short memory when it comes to these bubbles because it is difficult to see a bubble for what it is in real time. When we look back on price charts later, it is easy to identify bubbles, but when the bubble starts to inflate, we only see one piece of the puzzle. Markets are a direct reflection of people’s opinions. When people feel the market is healthy, it functions well because people put more money into it. As people’s good opinions of the market grow, the bubble grows with them, and this is where the trouble comes in; the opinions are skewed. Investors make more impulsive decisions, while they more level-headed investors become overwhelmed by their overly enthusiastic counterparts.

    People Become Irrational

    iamge-1A common definition of a bubble is when prices rise above a logical valuation of the asset. Naturally, this is subjective; while one person might think it is set at a fair price, another would think it completed overpriced. The bubble involves more than just more “overpriced” valuations; it also involves people abandoning logic that they held before the bubble. In a stock market bubble, this may present itself in the form of new valuation metrics that are justified with claims that an industry is “different” than others. This arguments are sometimes valid, but often they are not. This is a good warning to you to be diligent before investing. People will make claims that this new asset is so radically different than anything before it that old rules do not apply. However, this thought process does not incorporate the full picture.

    While a new industry may bring some change, there are certain things that never change, like human nature. Many aspects of our human nature come together to make bubbles possible. For example, human beings are not great at judging scale, so while we may be able to judge that a narrative may justify a price rising, we are not great at justifying just how high it goes. Additionally, bubbles are caused by confirmation bias; with every piece of news that supports the new valuation metrics reinforces the group mentality of this being radically different. Any negative stories are brushed aside because they do not confirm what they wish to be true. A true sign of an impending bubble is when you see story after story emerge before they can be challenged; this is a clear indication that the market is being dominated by emotion rather than logic.

    Participation Falls

    As prices rise, the risk for betting against these prices get higher and higher, and doubters retreat to the sidelines. This makes the only participants in the market the people who are jacking up prices. Eventually, this exponential rise must shift as people begin to sell and the price falls. Then, the doubters come back, and the cycle continues. Bubbles occur when the market skews towards investors that are too positive about an asset. This is not just a theory; it can be seen in three different bubbles that have occurred around three assets in the 21st century: gold, oil, and the internet.

    Gold in 2011

    image-2In 2000, gold traded at about 300 dollars an ounce. At the end of 2010, this had soared to 1,300 dollars. This figure was steadily climbing throughout 2011, reaching a peak on September 6th of $1,921 an ounce. People just continued to buy and buy as the price rose out of an emotional response; they needed to invest in gold because it was clearly becoming more and more valuable, right? However, rather rapidly after, prices again began to fall. By the end of that year, it was back down to 1,600 dollars, and continued to bounce around until April 2013 when it crashed to 1,200 dollars. The bubble burst and gold investors took a hit.

    This is not to dissuade investors from gold. Gold can be volatile, but with the right approach, it is an essential investment. Gold is a long-term investment and an important asset to have in the event of a financial crisis. Gold is tricky to value as its price moves up and down based on the current political and economic climate. However, when the market comes crashing down around us all, based on history, we can expect gold to skyrocket. Gold is the best fallback for a financial crisis, but you cannot expect to instantly make money on it.

    Oil in 2008

    By mid-2008, it was clear that stocks were on the way down, and many investors feared the worst (rightly so!). Others responded by throwing all of their efforts into investing in oil. The price of oil started to rise quickly, just as gold would three years later. The difference is that the demise of oil took a much shorter amount of time, and fell far more dramatically. After peaking at 147 dollars a barrel on July 11, 2008, it started to drop; by December, it was just about 30 dollars. This obviously had devastating consequences for oil investors.

    Of course, much of this was due to the United States’ recession, which took most of the developed world with it. However, the demise of oil could have been predicted had investors not bought into the narrative of it being the solution. People saw that demand for oil was high and supply was low, which seemed to be a clear indication that it was time to buy stock in oil, but there were clear indications that a bubble was forming. One indication of a bubble is that the market only listens to one narrative, ignoring the negative side of the story. Investors saw the high demand for oil, but refused to see the impending recession.

    When it comes to investing in oil, it’s important to keep in mind both sides of the equation. In 2008, people saw the incredible demand for oil as a clear indication that they could make a lot of money off of it; however, this was a singular way of looking at it. Once the recession hit, demand slumped, and oil investors got hit bad. The lesson here is that these variables can change drastically and quickly against you. If you are going to invest in oil, it’s wise to be selective about what companies in which you buy stock. While oil prices will vary and they will be affected by it regardless, a company with a good business and smart management will weather the unpredictability better than a company without those essentials.

    Again, oil serves as a reminder that it is smartest to invest with the long term in mind. This makes you less likely to jump on a trending asset just because it looks like you will make an immediate profit. It also means you can weather the variability of the market better and wait out any undervalued asset, knowing that it will inevitably rise again.

    At the moment, oil seems to be volatile for a while. This is due to shale. Starting in 2011, the United States began producing more and more crude oil due to fracking, the production through which oil and gas deposits are withdrawn from shale rock. This not only increased the supply of oil, but took away Saudi Arabia’s ability to set the oil price for the world. With shale, the production of oil could respond to the rising price. This development is a significant change in the oil industry, as previously, it was believed that it would take years for more supplies of oil to be made, and it would cost billions of dollars. Currently, shale oil suppliers have not stopped production as prices have fallen; in fact, in Saudi Arabia, production has increased.

    The Dot Com Crash of 2000

    At the beginning of 1997, the Nasdaq Composite, a stock market index weighted towards tech stocks, was at 1,291. By 1999, it had tripled. It peaked at 5,132 in March 2000. For the rest of 2000, however, it slowly fell. By 2001, it was trading under 2,500. By October of the following year, it was at 1,108, falling below the pre-bubble level. How could this happen? Again, people fell victim of listening to only one side of the story. The internet was set to change everything; we were no longer restricted by geography, and technology was set to serve millions of consumers. Investors anticipated gigantic profits.

    This story wasn’t completely wrong; the internet has delivered many of the benefits promised to us. However, investors took these promises and invested ten-fold. While some of the internet companies, such as Amazon, did deliver the anticipated returns for the people who stayed with them, there was a lot of variability during this course. People who bought Amazon stocks for 100 dollars a share then have seen it trade at four times that; however, these people had to stick through 2001, when it dropped to seven dollars a share. For every Amazon, there are a dozen or more companies that never got off the ground.

    So how do you avoid getting burned by tech stocks? Don’t buy them. This is not to say that we advise you not to buy them; rather, risk is inherent to investing and trying to avoid risk is a waste of your time. Instead, keep in mind how much you are willing to risk because it is possible that nothing will come of your tech investment. Consider whether the buzz around a company has raised the price of shares higher than their true value. Also consider how much of their growth you will be able to benefit from yourself; does the company have a competitive advantage in the market? How much of the money they acquire from growth is going to have to spent to keep up with the competition? Finally, consider how long you are willing to wait to turn a profit. Take the example of Amazon; can you wait the decade it took for them to become a profitable investment?
    With years of experience in industries such as defense, finance, intelligence, law, and the private sector, our team at Meraglim™ has keen insight into market moves and can provide your team with accurate predictions of future bubbles and their impending bursts. When you need financial data analytics, take advantage of our team of experts paired with innovative risk assessment software. Contact Meraglim™ today to learn more about how we can help you.

  10. 2017 U.S. Economic Trends

    Though the financial crisis of 2008 is now nearly a decade behind us, we still see its impact in the global and U.S. economies alike today. As we begin 2017, we reflect on the economic trends of the recovery period of the last seven years: slow and underwhelming growth, low labor market participation, and high cost of urban living. Now that “recovery” is over, things have returned mostly to normal, and growth peeters out, economic growth will be significantly more difficult to achieve. As we face the new year, we can anticipate certain trends based on past few years.

    Back to “Normal”

    At the end of 2016, economic growth has returned to its normal level. Since September 2015, unemployment has not been over 5 percent, and reaching a low of 4.6 percent in November 2016. GDP has also been steadily growing, but not impressively; when the figure is adjusted for inflation and population growth, from the third quarter of 2015 to that of 2016, GDP grew 0.8 percent. Private domestic investment grew to 17 percent during the recovery period, but has plateaued since then. With 16 to 17 percent GDP, investment is just barely treading water. Increasing domestic investment will be a high priority for policymakers.

    Additionally, labor market participation has not recovered from the recession. This can partially be accounted for due to baby boomer retirement: those who were born in 1951 turned 65 last year. However, the younger population is also less likely to either be working or looking for work when compared to workers before the financial crisis. One of the main challenges for policymakers will be this low participation in the labor force.

    The one exception to the relative normalcy the economy has returned to in monetary policy. For years, inflation remains below the two percent target set out by the Fed. As a result, the Fed has left their policies in recovery positions, where they will likely remain until inflation is two percent.


    For a recovered economy, the GDP has been reasonable; however, it is far below what was expected before the recession. In previous recessions and depressions, GDP bounced back to what it had been previously. For example, after the Great Depression, incomes returned to normal from before the crash, and the economy continued to thrive for the next two decades. In the current economic environment, however, growth is lower and slower than this trend. The recovery from this recession has been disappointing because it has been slower than anticipated, and it did not return to normal in line with the historical precedent.

    At the beginning of 2009, the CBO predicted that the economy would grow at more than 3.5 percent a year for four years starting in 2011, and would produce $20 trillion in 2016. In 2016, output actually was below $19 trillion. This equates to a 7.5 percent income loss for investors and workers in the U.S.
    As a result, the BCO has down downgraded expectations for the future of the U.S. economy. In 2017, it anticipates production to be $19.4 trillion, as opposed to the $21 trillion they predicted in 2009. In 2009, they predicted the business sector would grow 24 percent before 2017; now, they estimate 14 percent growth.

    This lack of growth can be attributed to the combination of three factors: low productivity, low capital, and low labor. The lack of productivity growth is a direct explanation of this output loss. Indirectly, it also explains that lower productivity means lower ROI, which reduces output as investors shy away.

    Wage Growth

    Though economic growth has been underwhelming, wages have picked up. However, this is lower than anticipated, and wage growth in 2015 to 2016 can be partially attributed to energy prices dropping.

    General average compensation is mostly determined by labor productivity. The link between compensation growth and labor productivity has been established for decades. Labor productivity is determined by the amount of capital production per worker and the total factor productivity. Total factor productivity is a combination of technology, regulatory waste, market flexibility, and management practices.
    Potential labor force productivity estimates by the CBO suggests that certain factors have stifled wage growth: low productivity growth and low investment. In 2009, the potential of labor productivity was predicted to grow by 18 percent by this time. This estimate has now been dropped to 10 percent.

    In 2017, policymakers must focus on raising wage growth by focusing on how to increase labor productivity. This can be done two ways. One, promote investment production cutting the marginal tax rate on new investments. Additionally, reforming regulations can help by lowering the number of anti-competition policies because these discourage investors. Alternatively, policymakers can boost wage growth by increasing total factor productivity growth; however, this is easier said than done. To get productivity even back to before the financial crisis would be a feat, but there is no single action that can be taken to increase productivity.

    Productivity is largely determined outside of policy. However, the most promising action that policymakers can take is regulatory reform. The issue is that there are few significant enough regulations that could improve the economy through change alone. It must be done over multiple sectors and through all levels of government.

    meraglim_2017economictrends_blog_innerimage2The Labor Market

    There are fewer Americans working today than there were before the recession. This is true even when excluding retired people or students. However, labor force participation did grow after the growth of real wages in 2015. In 2017, the optimistic view is that wage growth will continue and more non-working people will get off the bench and start contributing to the economy.

    Much of what has transformed in the economy is due to two factors: changes in traditional family dynamics, and the implementation of certain public assistance programs. The traditional nuclear family of the U.S. up until as recently as 1980 has depicted men as the breadwinners of the family. Both the fact that male-dominated professions were higher income and the impact of the social expectation contributed to the strength of men in the labor force. Men were forced to stay at their jobs, even if wages fell, because it was required for their family.

    Now, women work much more than they ever have, and many households are headed by females. There are now more single moms than ever, or women as the sole breadwinners of the family. There are also substantially more two-income households that come with lifestyles that require both spouses to work. Now, fewer men are committed to the labor force. Without a high enough wage, they have other options, such as living off their spouse or partner.

    There are also an increased number of people living on disability insurance, permanently detaching from the productive economy. Therefore, in 2017, welfare reform must be a high priority for policymakers, particularly in regards to disability insurance. As it is, welfare programs penalize working; easing these restrictions means that more people could start to work, supplement with welfare, and slowly transition off of it. Additionally, housing assistance discourages marriage; eliminating penalties for marriage may encourage people to combine incomes, enabling them to get off of these social programs.

    meraglim_2017economictrends_blog_innerimageIncreased Cost of Living

    The value of workers’ wages is dependent on the prices of their purchases. With increased regulation and restrictions on trade, U.S. prices have elevated. These policies could stifle the economic growth of 2017.

    On a federal level, increasing tariffs on energy, a proposed solution, would raise consumer costs, again stifling the benefits of economic growth for Americans. On the state and local levels, there are also regulations in place that are set to continue to raise prices. For example, in 2016, New York City places limits on short-term home rentals. These regulations lower incomes, increase costs, and decrease flexibility in the market.

    On both coasts, limits of residential construction are increasing the cost of living. In Silicon Valley, the ever-growing technology sector is not having the economic growth impact it should due to regulation on construction and urban growth in the area. Historically, when a thriving industry is in a certain city, it translates into shared prosperity. Now, local laws that limit development and population density prevent the economic growth of these cities. Working-class renters are in turn priced out of the housing market and forced to move. Yes, these regulations have other benefits that can be widely shared. However, these benefits are often narrowly focused, only aiding in the constituencies of those who have power and oppose reform.

    Living standards are heavily impacted by these regulations. In 2015, the Heritage Foundation published a report that found that the average household was set back $4,440 per year due to just 12 regulations. Though there has been little improvement since then, Congress did repeal the crude oil exports ban, which brought that list of regulations down to 11. In order to foster economic growth in 2017, policymakers at all levels need to prioritize deregulating consumer markets; most important, housing, transportation, and energy.


    In conclusion, while the U.S. economy did recover from the recession, the results have been underwhelming. There are fewer jobs, fewer workers, lower incomes, and higher prices than anticipated due to history. Today, people are more content to not contribute to the labor force and to not invest, leading to dragging economic growth.

    Since the 2008 financial crisis, the fixes put into place by policy makers have failed, including stimulus spending, bailouts, large deficits, and financial market regulation. These attempts have not increased investment or economic participation in general, and the cost of living question has not been addressed for the majority of the country.

    Going forward in 2017, it is imperative for policy makers to increase investment incentives, reengage non-workers into the economy, and lower the cost of living. With the right policies and the united efforts of investors, workers, and inventors, income growth can be restored to pre-recession levels, and the average household income will rise. Additionally, regulatory reform aimed at lowering the cost of living may also increase income for the average American.

    At Meraglim™, our unique combination of risk assessment software and a panel of experts allows you to predict financial market moves before anyone else. If you want to learn more about how our team can help yours, contact us today.