The Deutsche domino

Is there something particularly hubristic about a German bank being the bank to trigger a renewed eurozone banking panic? We think so. Read more

The euro crisis and the French Revolution

There are lots of good reasons to study history, but perhaps the best is to avoid being misled by people who claim to have “learned the lessons” from the past when they don’t actually know what they’re talking about. For example, the policy mistakes exacerbating the euro crisis may have been partly caused by a profound misunderstanding of the causes of the French Revolution.

The thought occurred to us while reading The Euro and the Battle of Ideas, an intriguing new book we reviewed in this weekend’s FT. Two of the authors, Markus Brunnermeier and Harold James, are academics at Princeton. The third, Jean-Pierre Landau, was Deputy Governor of the Banque de France from 2006-2011 after a long career in the French Treasury and the International Monetary Fund. Consider the following passage, from pages 256-7 in the hardcover, emphasis ours: Read more

Markets Live: Wednesday, 28th September, 2016

Live markets commentary from FT.com 

The ECB, innovation and yield targets

Where the BoJ leads the ECB may/may not follow.

You will all remember that last week the BoJ unveiled QQE with yield control — a 10yr yield target that may signal the end of QE as we know itRead more

MMF flows and restricted money-ness

About $700bn has shifted from prime to government money-market funds this year. Here’s what that says about regulations and the illusion of safety in certain assets. Read more

FT Opening Quote: RBS settles two US lawsuits

RBS settles two US lawsuits, AA in low gear and Deutsche Post to buy UK Mail. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here.  Read more

Further reading

Including…

– How Merrill Lynch sold some stocks too fast.

– Want to punch Martin Shkreli in the face for a good cause? You could get a chance.

– “These days, working at a big bank must feel like Stalin’s Russia, only without the warm and fuzzy feelings of happiness and security.”

– Your Rosie O’Donnell stock market bubble, and Trump vs the Fed.

– On presidential debates, social media, Neil Postman and Marshall McLuhan.

– Roger Farmer on the liquidity trap and how to escape it.

– And how another “significant source of stupidity in firms we came across was a deep faith in leadership.” Read more

FirstFT – Wells Fargo chief to forfeit $40m, Elon Musk’s mission to Mars and the nuclear project beneath the Arctic ice

John Stumpf forfeits more than $41m in pay as the board investigates the bank’s sales tactics Read more

“No hidden fees” fintech lender settles with CFPB for, amongst other things, charging hidden fees

LendUp CEO Sasha Orloff tells me they’re giving the startup time to build a long-standing brand in finance “the right way”, rather than squeezing as much profit as possible from its customers in the short-term.

Everything has to be transparent. There is no fine print. No hidden fees. And everything has to get someone to a better place” Orloff insists.

That’s from a TechCrunch story in January about LendUp, a payday lender backed by Andreessen Horowitz, Google Ventures, QED and Kapor Capital, with debt funding from Victory Park Capital.

And this is from a press release just put out by the California Department of Business Oversight:

 Read more

Inquiring minds want to know: can blockchain reconcile 200% institutional ETF ownership?

A good questioned posed to us by former financial “ops guy” Fred Sommers (now retired) on Tuesday, relates to whether or not a blockchain can deal with the phenomenon of lots of different institutional parties thinking they own the very same ETF share? Read more

The diminishing returns of blockchain fetishism

Rather than pretending resources spent on data systems in information exclusive industries (like banking) can lead to longstanding productivity gains which don’t just buy us a little time until the next paperwork crisis in five years time, perhaps we should invest that money in the expansion of industrial capacity?  Read more

Markets Live: Tuesday, 27th September, 2016

Live markets commentary from FT.com 

Rocket Internet would like to see your business idea

great_2048x1152

Rocket Internet, the Berlin-based clone factory that made its name copying other people’s business ideas in new markets, is looking for Europe’s “most promising start-ups, scale-ups and tech for social impact companies” and would like to hear from you. Read more

Racing to the bottom in boats, clouds and ZEDEs

E-commerce often gets billed as the great equaliser of trade. The argument is that it allows small businesses to reach buyers who’d otherwise be accessible only to multinational corporations, which can afford the necessary lobbyists and project managers who work on boring but important things like logistics.

The United Nations Conference on Trade and Development, or UNCTAD*, did its best to make that case when it named Chinese e-commerce tycoon Jack Ma as a special adviser last week. Read more

How would a Fed rate hike affect consumers?

We don’t really understand how changes in the level of short-term interest rates affect things we actually care about, such as growth and employment. There are too many moving parts and leaps of logic required, many of which are based on bogus assumptions about how the world works.

So it’s always nice to find new research into a small piece of the monetary transmission mechanism that’s grounded in facts. Researchers at TransUnion, the credit reporting company, looked at which American consumers would be exposed to an increase in the Federal Reserve’s policy rate corridor and the dollar magnitude of the impact of different tightening paths. We recently had a chance to discuss their findings with Nidhi Verma, who led the project. Read more

FT Opening Quote: Sterling windfall for Wolseley

Sterling windfall for Wolseley, UK oil and gas down, dollar firms after US debate. FT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Further reading

Including…

– The penny stock chronicles, a series.

– The stakes of the helicopter money debate, a primer from DeLong.

– How power poses are dead.

– Why traffic is fake, audience numbers are garbage, and nobody knows how many people see anything.

– And how Zombie Moore’s Law shows hardware is eating software. Read more

FirstFT – A fiery first presidential debate, the prospect of bank break-ups and going au naturel in Paris

Stakes could not be higher as American polls tighten but much depends on which Donald Trump shows up Read more

SDRs and the renminbi

China will join the exclusive club of “hard currency” issuing countries when its currency, the renminbi, becomes a fully fledged member of the IMF’s special drawing right basket on October 1. Read more

Good idea, bad idea: Yield targeting edition

Good idea: More reactive than a quantitative target; can signal long-term commitment to policy; potentially reduces purchases required if market believes your yield target is credible; potentially good for effectiveness of fiscal policy; potentially good for banks as it can imply a steeper yield curve; and allows for an “automatic exit” from the policy if everything goes to plan.

Screen Shot 2016-09-26 at 15.45.52

 Read more

Guest post: Productivity and shocks

This guest post is from Peter Doyle, an economist and former IMF staffer Read more

Markets Live: Monday, 26th September, 2016

Live markets commentary from FT.com 

Deutsche’s new market cap, in context

Bear with us, it’s down here somewhere…

Screen Shot 2016-09-26 at 13.22.28 Read more

FT Opening Quote: City fears for a “hard” Brexit

City fears for a “hard” Brexit, Aldi to revamp stores, investment boost at MonarchFT Opening Quote, with commentary by City Editor Jonathan Guthrie, is your early Square Mile briefing. You can sign up for the full newsletter here.  Read more

Further reading

Including…

– John Hempton with comments on investment philosophy.

– Gavyn Davies on the global pivot towards fiscal policy.

– George Magnus on the City and passporting.

– How some “six in ten rupees deployed by Tata are in businesses yielding returns below its cost of funding…”

– And Macro Man on the student loan debacle. Read more

FirstFT – Russia accused of supporting ‘barbarism’, living without a smartphone and a rare view of imperial China

Sign up to receive FirstFT by email here.

The US accused Russia on Sunday of supporting “barbarism” over the bombing of the Syrian city of Aleppo as the west stepped up diplomatic pressure on Moscow. Read more

Thought for the weekend

Week Five: FT Alphaville Fantasy Football League

Our league hasn’t been going all that long, but it seems like some congratulations are in order. Specifically self-congratulations.

Despite some trouble at the start of the season with a small number of bad actors, we have managed to clean up the system. Everything is in order. Everyone is on net positive points. Everyone got a net positive score last weekend. Everything is ok. The market works. Read more

Are bank reserves meaningless?

Is the central bank in the business of lending bank reserves for final and absolute settlement purposes, or is it now in the business of lending safe assets like Tbills for final and absolute settlement purposes?  Read more

Alphachat: Tina Fordham on pricing in the risk of Trump vs Clinton

Our guest this week was Tina Fordham, chief global political analyst for Citi and lead author of papers on geopolitical risk and women in the global economyRead more