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Facebook outage and outrage

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The global economic woes have expanded this week. As the challenges continue to emanate from the Chinese real estate market, the social media giants have accrued mammoth losses owing to a six hour shut down of their services.

By ATIM KABRA


The criticality of modern day social media in our day-to-day lives and our dependence on them was brought home forcefully when Facebook, WhatsApp and Instagram went down for nearly 6 hours; one of their longest outages. Facebook in particular was the worst hit with nearly 2.7 billion users suffering outages and this too at a time when Facebook stands accused of putting profits objectives before the well-being of its users and society at large. Facebook lost an estimated $90 million and more from their top line due to the outage.

However a much bigger issue for Facebook is the testimony from a whistle-blower which seeks to establish that Facebook has been prioritising profits at the cost of societal balance and well being. This has the potential of mobilising a backlash against the group and a potential slowdown in their introducing new product lines especially the ones targeted at teens and preteens, a critical age group for Facebook group. Catching them young and growing with them is an important strategy for the group's various platforms.

There was suffering at the business end too. Modern businesses and individuals both alike depend to a large extent on smooth functioning of social media and the smooth functioning of the various platforms is taken for granted.

The need to have back up plans and alternate means of reaching out to customers, employees and all stakeholders in the businesses is critical and gets reinforced by such outages. Spreading business across geographically spread out competing social media platforms, regular data backups and non-dependence on any one particular platform whether for internal or external purposes seems to be a very logical conclusion when it comes to seeking insulation against similar outages in the future. 

The ongoing debt crisis in China

There has been a looming crisis in the property sector in China with contagion effects due to Evergrande, one of the largest Chinese property management services companies, defaulting on its debt related obligations, with the company missing due payments to bondholders. The regulators in China seem to be focusing more on containing the impact of the default from spreading out into the wider economy.

One such attempt was seen in an engineered sale of one of its divisions to another Chinese property company which generated nearly $5 billion of cash for the beleaguered group. China has significant resources and belief continues to be that a smooth landing with limited impact on the broader economy will be successfully managed. The crisis has been long in the making with extensive coverage and availability of time to adjust to the possibility of significant losses. This has kind of taken out the shock value to the system without which a contagion effect is unlikely.

Property and related sectors contribute nearly 25 per cent or more of China’s economy and a cascading impact across the broader economy is inevitable. Much more worrisome is an almost willful default by Fantasia Group, a small Chinese property developer which inspite of cash in its books has chosen not to make the payments due on its bonds. Needless to say, the bond markets have nosedive across-the-board expecting a similar disregard for contractual debt related obligations payments. It’s like a slow moving train wreck in the making. 

Atim Kabra is a keen observer of global social, political & economic trends and is based in Singapore. He is also the founding Director at Frontline Strategy Funds


BOX - Central banks explore digital currency

IMF managing director Kristalina Georgieva made a fascinating revelation that a whopping 110 countries are at ‘some stage’ of looking into Central Bank Digital Currencies (CBDCs). She went on to say that the crypto is too volatile to be money, but CBDCs would be more reliable. 

While El Salvador has adopted Bitcoin as a legal tender, a whole host of governments have been exploring digital currency with the backing of the central bank. Not only will such a currency have more legitimacy but will also enable better tracking of money flows in the system, bring transparency and result in better policy formulations. Of course, privacy concerns remain a big bottleneck for wider adoption of such currencies.

Laos has also officially thrown its hat in the ring and is actively exploring an ‘official’ cryptocurrency. Visits to Cambodia and many such small emerging markets demonstrate a wider acceptability of the US dollar as a currency of transaction existing alongside the official currencies of these countries. Wider adoption of digital currencies can result in their weaning off from hard currencies for these economies. China has been working on its digital currency, the E-Yuan, for quite some time for not only its domestic markets but also to facilitate cross-border transactions effectively challenging the hegemony of US dollars as the default currency for international trade settlements.



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