Biography
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Izabella Kaminska joined FT Alphaville in October 2008, which was, perhaps, the best time in the world to become a financial blogger. (Added bonus: there was a free breakfast trolly.) Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP’s internal magazine. She has also worked as a reporter on English language business papers in Poland and Azerbaijan and was a Reuters graduate trainee in 2004.

Everything she knows about economics stems from a childhood fascination with ancient economies, specifically the agrarian land reforms of the early Roman republic and the coinage and price stability reforms of late Roman emperors. Her favourite emperor is one Gaius Aurelius Valerius Diocletian.

She studied Ancient History at UCL, and has a masters in Journalism from what was then the London College of Printing.

And yes, she is also a second-generation West London Pole (who likes mushroom picking, bigos and pierogi).

Blockchains? Where we’re going, we don’t need blockchains

In today’s daily blockchain bulletin we bring you news that next big thing in financial back-office technology isn’t actually the blockchain. Apparently it’s something called a “distributed concurrence ledger”.

We’re not yet convinced that’s a thing, but the white paper outlining the DisLedger DCL concept does at least provide a refreshingly honest account of the core problems with blockchains. Read more

DLTs and the “can’t we all just get along?” barrier

Another day, another blockchain distributed ledger technology (DLT) report*. Today’s comes from the World Federation of Exchanges, which provides us with a survey of what financial market infrastructure types are thinking about DLT. And, interestingly enough, the bulk of the survey is dedicated to unknown, unknowns.

Since DLT hype is exclusive to all other media outlets on the internet, we won’t feel bad about highlighting some of the real concerns being raised by market practitioners in the space with respect to DLT rollout. Read more

We already have a utility settlement coin: it’s called the euro

Four banks have stolen loads of column inches on Wednesday with news that they are developing “a new form of digital cash that they believe will become an industry standard to clear and settle financial trades over blockchain, the technology underpinning bitcoin”.

In the fanfare, however, lots of common sense has been abandoned.

The big idea here (allegedly) is that banks will use a “utility settlement coin” to bypass the need for costly and inefficient fiat liquidity from the cbank.

The utility settlement coin, based on a solution developed by Clearmatics Technologies, aims to let financial institutions pay for securities, such as bonds and equities, without waiting for traditional money transfers to be completed. Instead they would use digital coins that are directly convertible into cash at central banks, cutting the time and cost of post-trade settlement and clearing.

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Podcast: Alphachat’s inaugural film review tackles Tron and Tron Legacy

Alphachat is available on Acast, iTunes and Stitcher. Read more

How global money transfers will work in the future

Courtesy of WEF: How blockchain is going to become the beating heart of the global financial system, neatly summarised in two charts and a few explanatory bullet points.

Current process:

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More on Libor and that Japan connection

October 17 is going to be a big day for global USD money markets. It’s the deadline by which prime money market reforms must adjust to floating NAV models, leaving only those funds investing in government securities able to offer par value protection. The likes of Zoltan Pozsar at Credit Suisse are expecting banks to lose a significant whack of unsecured bank funding as a result. Read more

How I learned to stop blockchain obsessing and love the Barry Manilow

Financial hype cycles are predictable mostly because they mimic fashion fads and music fads.

For example, there was a time in this reporter’s life when she aspired to be cutting edge and cool. Joyfully, no longer.

This involved dying her hair pink (as much as she could get away with without being expelled), reading NME and Melody Maker, and listening to the most obscure bands available in the acceptable genre, which was Indy rock.

If and when the bands went “mainstream”, however — something assessed by whether the year below was listening to them — it was time to move on and find something more obscure. “Are you seriously listening to Blur? What seriously? Jeez. I much prefer Radiohead. What!? You’ve never heard of Radiohead? I can’t believe it. I’ve been a fan for like ‘forever’. You’re not cool.“ Read more

Bitfinex and a 36 per cent charge from the school of life

Publicly, the Hong Kong-based bitcoin exchange Bitfinex has lumped its users with a 36 per cent haircut on all balances to cover the $70m hack which it experienced last week.

The haircut applies to all customers irrespective of whether they were holding bitcoin balances or dollar balances or other altcoin balances. But customers don’t come away with nothing! No. Not in the world of virtual money creation. That would be crazy. They get a BFX token (an IOU) as compensation.

Privately and anecdotally, however, customers are reporting some variance with regard to the way the haircut is being imposed. Some US customers, for example, who only had dollar balances are reporting they’ve been able to get all their money back. Read more

Day three post Bitfinex hack: Bitcoin bailouts, liabilities and hard forks

On Wednesday, we argued that the loss of approximately $70m worth of bitcoin from customer segregated accounts held at Bitfinex should give the banking industry pause for thought with respect to adopting blockchain and bitcoin-based financial technologies.

Today, we’re going to look at the wider implications of the hack, and the potential fallout in terms of legal risk. Read more

The BoE and those companies materially contributing to the UK

Mark Carney is still giving more details of today’s policy actions (press conference here). But for now, if you’re a company considering leaving Britain because of Brexit, perhaps take a good hard look at this from the August 2016 inflation report: Read more

Time to reevaluate blockchain hype

The Hong-Kong based Bitfinex exchange is short 119,756 bitcoins after being hacked on Tuesday, though nobody can be sure what’s really happened because ‘hacking’ is a loose term and can encapsulate almost anything, including an internal security breach. (Do see the case of Mt Gox.) The mark-to-market value of the stolen coins is roughly $70m, but again who can really tell their true worth. Bitcoin is an asset class where the liquidation of 119,756 (approximately 0.8 per cent of the total bitcoin circulation) can move the market more than 20 per cent, suggesting a certain fantastical element to the valuation. Read more

Bitcoin’s panopticon problem

How much personal data is bitcoin really sucking out of the system courtesy of third party operators who have grown accustomed to datamining the blockchain and then cross-linking the information to their known customer lists? Read more

Cbank digital currencies and the path to Gosbankification

Central banks issuing their own digital currencies (on blockchains, naturally) is an idea currying ever more favour in high-brow economic and banking circles.

Fedcoin. BoEcoin. ECBcoin. They’re all (allegedly) at it — or at the very least contemplating the idea as a work-around to the zero lower bound and other niggling monetary problems.

This month the BoE issued a paper on the topic entitled “The macroeconomics of central bank issued digital currencies. A related blog “Central bank digital currency: the end of monetary policy as we know it?” was published this week. But if you Google “central bank blockchain” you’ll find a gazillion references or more from all over the world talking about the subject. Read more

Podcast: Gavyn Davies and Tyler Cowen on the productivity puzzle

Alphachatterbox is available on Acast, iTunes and Stitcher. Read more

Koo on why helicopter money just won’t work

Helicopter money won’t work in Japan, says Nomura’s Richard Koo in a note on Tuesday, because when the typical Japanese citizen finds a 10,000-yen note lying on the ground, she will turn it in at the nearest police station rather than spend it.

Put differently, a helicopter money policy can only work if the people in a country have little sense of right and wrong.

Koo, of course, is talking about the effectiveness of actual banknotes being thrown out of helicopters in the sky. It’s one of four ways he thinks helicopter money policy could be implemented — since the real challenge with helicopter money is how it would be distributed, and to whom. Read more

As goes correspondent banking, so goes globalisation

The IMF’s Christine Lagarde gave a speech to the New York Fed last week, lamenting another sign of globalisation going backwards — the decline of correspondent banking in some of the world’s most precarious countries: Read more

Engineers vs urban geometry

Should we really be surprised then that someone like Elon Musk, a man not just from Mars but an active card-carrying citizen of Mars, should be continuously confusing what are ultimately social problems for engineering ones?
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Supersonic helicopters with stealth capabilities and formidable arsenals…

What’s the difference between a perpetual zero-coupon government bond and charity? Not much…  Read more

Ethereum bailout complete. Long live Ethereum!

In our inbox just now from Stephan Tual, Founder & COO, of Slock.it, somehow related to the DAO and Ethereum by way of an unquantifiable number of revolving doors between respective blockchain projects/cabals:

Ethereum fork successful, all DAO token holders to be made whole

The title says it all – end of the hack that never was.
On Ethereum, Code is Law. It’s the network’s participants that determine its evolving rules, voting by way of updating their software. Today, they’ve done just that to nullify an exploit found in the DAO, proving their capability to self-govern effectively.
https://blog.slock.it/what-an-accomplishment-3e7ddea8b91d#.kznb3sjbx
Happy to chat at anytime on stephan.tual over skype.
Cheers!

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Brexit, the Target2 angle

Everybody knows much of the City of London was vehemently opposed to Brexit because of fears of what might happen to banks’ interests if so-called “passporting” rights into and out of the European system were lost.

What is less talked about, however, is Brexit’s impact on the European payments clearing system, Target2 — and how the passporting issue connects by way of Target2 to the realm of sovereign monetary policy.

At the absolute heart of the matter is the status and treatment of payment systems worldwide, and whether or not they can really be treated as something independent and thus distinct from national monetary policy (and hence open to commercial competition) — or as integral to sovereign interests. Read more

Bitcoin’s unfortunate liquidity problem, as inadvertently highlighted by an SEC order

The SEC has issued a cease and desist order against Bitcoin Investment Trust (BIT) and SecondMarket, both founded by Digital Currency Group CEO Barry Silbert — and dubbed back in September 2013 by the NY Times’ Peter Lattman and Nathanial Popper as “a reliable and easy way to bet on the future price of bitcoin”.

The Trust famously beat the Winklevoss brothers’ bitcoin ETF to market and drew significant column inches as a result. The Winklevoss ETF (for some strange reason associated possibly with risk?) is yet to receive regulatory approval, forcing the brothers to make significant amendments to their original regulatory filing if it’s to stand a chance of being approved. Read more

Rate cuts and sterling MMFs

Markets are increasingly expecting the Bank of England to cut the Bank Rate on Thursday.

As BoAML’s economic and strategist team observes in a note on Tuesday, the BoE really has nothing to gain by waiting. As a result they’re anticipating a 40 basis point cut, with a good chance of only 25 basis points because “Carney has said he is concerned about taking rates ‘too low’”. The current Bank rate is 0.5 per cent. Read more

Who is Theresa May?

Theresa May has become the UK prime minister, and the internet — in the style of looking up what the EU is only after the Referendum — is only now alive with articles/tweets about who exactly Theresa May is.

Indeed, amusingly enough, whilst a lot was being made of Andrea Leadsom’s “City” credentials, there was almost no word in the run up to the appointment of May’s own City credentials. Read more

Further reading

Elsewhere on Tuesday,

- The paradox of disclosure.

- Eugene Gourevitch’s Kyrgyzstan story: looting, corporate bribery, bagman, mob stuff.

- The potential costs of “short-termism” to US economic growth.

- Paul Krugman’s low-interest-rate tweetstorm.  Read more

When tech companies become more powerful than governments

Right now, governments determine the size and distribution of subsidies/welfare vis-a-vis the size and distribution of taxes in the economy. In the future, it might be commercial fintech platforms.

Loosely speaking, all these platforms have the scope to operate as stand-alone economic systems, managing demand and supply in something of an algorithmic Gosplan style; providing cheap credit incentives to those who have the capacity to supply goods when unexpected demand strikes — or is expected to strike — whilst deflecting oversupply to those who have the capacity to consume in exchange for customer loyalty or allegiance. Read more

Even lower rates? “Thanks but no thanks” say banks everywhere

Despite popular belief, we take no comfort in the decline in interest rates and argue that it should be viewed as a bad sign.

So says Shyam Rajan of BoAML’s liquidity insight report team, and in so doing echoes the thoughts and sentiments of probably the entire banking industry.

We’ve noted before – channeling Paul Krugman, no less — that zero rates (even more so negative rates) are not a banker’s cup of tea. Indeed, with little capacity to pass negative rates onto customers, the lower for longer scenario compromises hallowed net interest margins, the key source of predictable and sustained revenue for banks. All other services from origination to advisory collect one-off based fees. As great and balance-sheet light as they may be, they’re variable and thus unpredictable, hence inconsistent with the historical reason for buying bank stock. Read more

Why the world needs investment, not money chasing old assets

The liquidity trap, when monetary policy becomes ineffective at very low or zero interest rates, may be old news but the global dimension of the problem is a new and worrying phenomenon — not least because it’s starting to undermine the usefulness of the global monetary reserve balance, which is mostly debt financed.

And here’s the rub: so engrained is the notion saving is always thrifty and good that it’s become extremely hard to articulate why this state of affairs is so disastrous for the global economy. Read more

Some pivotal questions about UK real estate

Osmaan Malik and Charles Boissier from the UBS equities team breakdown some of the key questions everyone is asking about UK real estate post the Brexit vote. Surprise point: REITs may be better positioned than most expect Read more

Transaction costs as the saviour of UK real-estate?

Six open-ended UK property funds (and counting) have suspended redemptions on the back of Brexit induced volatility leading some to worry the market’s on the verge of a sizeable correction in UK real-estate prices.

But this isn’t the crisis of 2007, says SG’s Jean-David Cirotteau.

As Cirotteau and team observe, during the subprime crisis, UK office prices dropped by 38 per cent from peak to trough from the end of 2007 to mid-2009, and within that context the London residential price correction was more limited, with the market falling by 17.7 per cent. Read more

A REIT liquidity mismatch

Take one portfolio of illiquid building things, stir in some financial magic, liquidise, then bake for a few years in a market exposed to UKIP risk. Once Brexited remove carefully from the baking dish in the hope of not disturbing the liquid layer. It’s probably ready, even if the surface appears undercooked.

Serve with a caveat emptor disclosure. Await feedback on taste and texture from guests. Read more