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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).

On the Swiss franc’s non strength

Remember when the SNB stopped defending its floor against the euro in January and the Swiss franc’s value surged? Not so much on Friday:

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When bank balance sheets become scarce commodities

Distortions are occurring in collateralised funding and swap markets meaning secured funding is weirdly costlier than unsecured.

Bankers are blaming post-crisis leverage ratio regulation for the anomaly.

But what really does the aberration in the collateralised Fed-funds spread reflect?

Credit Suisse’s FI team puts it relatively simply this Thursday: it’s all about the cost of balance-sheet rental, which is now as scarce a commodity as oil: Read more

Knowing me, not knowing you – Barclays edition

Barclays was slammed with a £72m FCA fine over financial crime risks on Thursday, this time for “ignoring its own process” over how to handle risky very rich clients and basically, allowing the (theoretical) risk of money laundering to creep in via an elephant deal of the century with a “Politically Exposed Person”.

Corporate governance fears aside, the FCA case file makes for fascinating reading (as usual). Read more

SWF redemptions as a 2016 risk factor

Remember the days when SWFs were considered the saviours of the universe? The white knights of the banking crisis? The clients every asset manager wanted to have.

Well, fast-forward seven years or so and they’re bullet point number seven in Morgan Stanley’s “10 Surprises for 2016″ outlook piece. A bigger risk, they add, than retail mutual fund redemptions. Who’d have thought, eh? Read more

Cœuré and the paradox of integration; a.k.a how the euro project accidentally created a homogenised monster

A kindly hat tip to the FT Alphaville reader who directed us to the following speech by the ECB’s Benoît Cœuré from last Friday, and specifically this observation:

If every economy were to react to their domestic challenges by exporting their slack, it would only trigger a race to the bottom.

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Dreams and growth; risky, also interesting

Via Chinese research shop Red Pulse on Tuesday:

Ant Financial announced the beta version of an online private equity trading platform, Antsdaq, on November 23. Antsdaq supports four different types of products, aiming at fundraising between RMB2m and RMB10m. Trial fundraising will start on November 30, through to the end of December. However, investors need to prove net assets above RMB1m in order to be qualified; this can be illustrated by balances on Yu E Bao and other investment tools from Ant Financial, or tied to a credit card with an RMB50,000 limit.

For those who don’t know, Ant Financial is Alibaba’s financial services affiliate which (among other things) manages Alipay’s Yu E Bao money market product offerings. Alipay is Alibaba’s answer to PayPal, albeit a much more shadow banking-esque incarnation of the latter. Read more

What mobile money giveth, it also taketh away

Mpesa, the digital money system rolled out in Kenya by Vodafone-owned Safaricom, is frequently cited by mobile money advocators as an excellent example of what can be achieved when you give emerging markets access to mobile money services.

But, as we’ve previously written, some unique and hard-to-replicate drivers were responsible for Mpesa’s success in Kenya — not all of them good.

Notably, in its early days, Mpesa drew major benefits from its extremely monopolistic market positioning, at one point even threatening the seigniorage power of the central bank and that of the regulated banking system. Read more

When unsecured is cheaper than secured borrowing

A strange thing is happening in money markets: the cost of borrowing unsecured wholesale funds is now below the cost of borrowing secured funds.

The problem, according to repo dealers, is that new leverage ratio rules are set to make it far too costly for repo market participants to transact.

Meanwhile in the world of swap spreads, as Bloomberg’s Tracy Alloway has been noting, rates have plummeted to historic negative lows which defy market logic. Read more

How information technology is shrinking the pie

An essential read from Martin Wolf this Thursday on the manner in which corporate surpluses are contributing to the savings glut problem and causing all sorts of distributive chaos in the process.

So, whereas it used to be the sovereigns over-hoarding international claims and under-consuming/under-investing in their own infrastructure for the benefit of getting a leg up in the global hierarchal order, it’s now corporates over-hoarding retained earnings for the sake of protecting their dominant positions instead (retaining earning piles being different to explicit cash piles, which can be generated with debt not just profit). Read more

Copper says it’s not looking good for China’s ‘old economy’

Goldman’s on to the seismic shift occurring in Chinese metal markets. Specifically copper markets.

Of note: Read more

Where’s my liability, dude?

Something doesn’t add up in the world.

And when things don’t add up, you can only really blame the accountants.

Here’s the problem.

As per Gabriel Zucman’s book, The Hidden Wealth of Nations, the world’s financial liabilities are worth about $7.6 trillion more than the world’s financial assets. Roughly $6.1 trillion of these extra liabilities take the form of equity and long-term debt, with the other $1.5 trillion held in low-yielding deposits and money-market funds. Read more

SDR inclusion doth not a reserve currency make

As has been well reported, the IMF has recommended that China’s renminbi should join the basket of currencies used to value its own de facto currency.

There’s been lots of talk, as a consequence, of China now being in a position to properly disrupt the US dollar’s global reserve currency status.

Except, SDR inclusion doesn’t imply anything of the sort.

Furthermore, we’ve very much been here before*. Read more

London, house builders, marketing suites

From the FT’s Kate Allen this weekend:

Data published last week showed that new housing construction has surged by 19 per cent in the past year to 155,080 new homes. That figure is a quarter higher than previously reported government statistics, which suggested that only 124,520 new homes had been built during the period. The figures for London, where the housing shortage is biting the hardest, show the greatest difference. Last week’s data showed that over 24,000 new homes were created in 2014-15, whereas the communities department’s quarterly statistics show only 18,270.

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Interest rate hikes are bad news for cultural rent seekers

A funny thing happened this decade.

The fairly logical-minded world of computer science stumbled into the world of alchemical cult value by way of the cryptocurrency phenomenon, and didn’t even realise they’d taken leave of their senses. And still don’t.

For some, the discovery has been something akin to a religious experience. Question ‘Satoshi’ and the kingdom of the eternal blockchain, and well, just see this.

Artists, of course, have been at this game for a whole lot longer. And been way more efficient about it.

No fancy computer servers needed for their money-printing operations, just some palette knives, some canvases and some oils. Even talent — which used to be the difficulty factor that kept their store-of-value unit scarce — has long been abandoned. Read more

Fintech and banking risk; cognitive dissonance de semaine

Chancellor George Osborne, speaking on Wednesday at a Bank of England Open Forum event, once again declared his desire to turn the UK into the “fintech capital” of the world.

Which is weird, because the comment followed directly on from remarks praising regulatory efforts to de-risk and capitalise banks, as well as remarks acknowledging the role challenger banks played in risking-up the system in the first place. Read more

Towards global hyper fungibility

The euro may have been pointless, but it might have been a whole lot less pointless if there’d been political union from the onset. So implied Mario Draghi, ECB President, at the BoE Open Forum on Wednesday.

For the laissez faire radicals out there, here’s how he went on to define the nature of “truly free” markets in that context (our emphasis):

Consider the case of markets that are truly open – by which I mean, as open as the Single Market of the European Union, where internal frontiers have been abolished entirely, where passporting of services across the entire EU is a right, not a privilege.

In this situation, national governments, or national courts of law, cannot alone provide full protection to their citizens against abuse of property rights or any form of unfair competition that may arise from abroad. Nor can they alone protect the rights of their citizens to carry out business abroad unimpeded by protectionist restrictions. For the market to be truly free, there needs to exist a judiciary power that can enforce the Rule of Law on all, everywhere. It has to have jurisdiction across the entire market.

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Should banking be easy?

The Financial Stability Board wants banks to raise up to €1.1tn in so-called “total loss absorbing capital” (TLAC) to make the banking system less risky.

It’s their attempt to put skin back in the game for bank stakeholders and ease them off the notion that the government will always be around to rescue overly imprudent institutions.

The authors of “The end of banking”, however, see things somewhat differently. In a post last week they outlined how it’s the digital age which has rendered the limited liability corporate structure unfit for purpose and in the process made the world much more systemically risky. Read more

‘I’m no crook,’ declares MMM scamster, while claiming credit for the Bitcoin price spike

One of the ironies of the information age is how it’s turning out to obscure rather than improve our understanding of what’s really going on. The pressure to report quickly errs towards unverified reporting, or reporting based on facts distributed via unchecked sources or biased lobby groups intent on propagating causes, which in turn leads to an abundance of misinformation which confuses everyone.

A racketeer like Mr Sergey Mavrodi, the man behind the MMM “transparent” pyramid schemes we drew attention to last week, flourishes in such an environment. The more contradictory the information about him on the internet, the better for him. The same goes for other transparent pyramid schemes (such as all cryptocurrencies). Historically-tested logic about why pyramids are economically flawed is reduced to an opinion, much the same way that scientifically-verified proof about how carbon emissions are causing climate change also gets reduced to an opinion by certain special-interest groups.

Below we share a Q&A with Mavrodi. And he’s done us a little video to prove that we are communicating with the man himself…

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Depositor risk is now a thing in Saudi Arabia

Changes are afoot in Saudi Arabia’s financial system.

According to the Financial Stability Board’s latest review, the Saudi Arabian Monetary Agency, which manages the kingdom’s foreign exchange reserves, is in the process of bolstering its defences (as it was recommended to do by the FSB in previous reviews). Read more

Gold, gold everywhere, not any drop to drink

UBS looks at the fundamentals of India’s new gold monetisation schemes on Thursday and in the process comes up with one of the best summations we’ve ever seen on why gold investing in and of itself is stoopid — especially when done en masse by a relatively poor economy.

Indians directly or indirectly hold an estimated 22,000 tonnes of gold worth USD 800bn or 39% of Indian GDP (banking system credit is c50% of GDP). Gold thus held is problematic to some because unlike most capital goods it derives its expected value not from its ability to produce (directly or indirectly) goods or services that will meet the material demands of consumers. Instead it derives its value from investors’ collective perception of what it is worth.

Indeed. Read more

Ponzi ideology + social media = disaster

Touting Ponzi schemes, or as the hip and the cool prefer to call them these days ‘mutual aid’ programmes, is so much easier if you have a handy Marxist-esque ideology to hand.

The MMM scheme, which we wrote about on Wednesday, has an ideology and it certainly doesn’t disappoint.

Some snippets from the imaginarium of Mr. Sergey Mavrodi:

The modern world is bad. It is inhumane, unfair and unjust. This is the world of money. It is not for people. It is for those who who produce this money, for bankers and financiers, government and millionaires. And people are mere “pawns” in this game. They just serve them as attendants.

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Introducing the Chinese Social Financial Network

You don’t even know what the thing is yet. How big it can get, how far it can go. This is no time to take your chips down. A million dollars isn’t cool, you know what’s cool?

A billion dollars.

And you know what’s even cooler than that? A trillion dollars via MMM, the Chinese Social Financial Network:

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The Die Hard risk in your bank account

It is a business now, some of these organisations have complexes not quite as big as Google but it is an office facility and people come to work. Instead of coming to work out how to create things for cell phones, they go after banks because that’s where the money is.

That’s from cyber-security expert Clay Calvert, director of Cybersecurity at MetroStar Systems, who we contacted last week to get some insight on the multiple ways banking is turning into a cyber-security story.

Also, we wanted to know the degree to which everything is spiralling out of control for banks because cyber criminals are now organising themselves in the style of more materialistic criminal syndicates before them. It is, experts fear, the beginnings of a new cold war, of Spectre-style proportions. The criminals aren’t lone hackers in basements anymore. They’re highly organised networks, often working out of jurisdictions which are happy to protect them. Read more

Maritime capital markets are shrinking

A profit warning from Clarkson’s, the shipping broker:



Clarkson PLC (Clarksons) is the world’s leading shipping services group. From offices in 20 countries on six continents we play a vital intermediary role in the movement of the majority of commodities around the world.

The multi-cyclical and volatile nature of our markets has continued to pose both opportunities and challenges in the second half of 2015. This has benefitted some areas of our broking business including tankers, specialised products and gas, underpinning a strong performance in 2015. However, the dry bulk market remains severely depressed and the low oil price continues to put offshore operators under significant pressure, giving rise to contract slippage and cancellation.

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If you call it a blockchain, it’s not a single-entry system

Techies look upon the financial world and find its messy structures hard to reconcile with the physical reality around them.

Which is why we’re going to propose that the blockchain fad is mostly about putting finance in terms that are understandable to techies — i.e. as something absolute – and having them learn for themselves through trial and error why that’s actually a flawed assumption in finance. Read more

If you call it a blockchain, it’s not a competent administration story anymore

Nasdaq has launched Linq, a private blockchain-powered system designed to help private companies keep track of their share ownership in a bid (we think) to make themselves more investable in private markets.

Why is this a thing? Presumably because tech start-ups can’t be trusted to hire experienced accountants or company secretaries to comptetlybtrack three things for them. A problem if and when they want to tap private share markets fluidly and without legal or dilution risk. Read more

If you call it a blockchain, it’s not an OTC story anymore

You may have encountered some fanfare this week surrounding Nasdaq’s unveiling of “Linq”, its blockchain-enabled platform for managing and trading shares of private companies.

Here’s the extremely upbeat press release:

NEW YORK and LAS VEGAS, Oct. 27, 2015 (GLOBE NEWSWIRE) — Nasdaq (Nasdaq:NDAQ) today announced the initial roster of private company clients for Nasdaq Linq, its blockchain-enabled platform. The first participants will include:, ChangeTip, PeerNova, Synack, Tango and Vera. Nasdaq will unveil a first-ever demonstration of its blockchain technology at the Money20/20 event today in Las Vegas.

The first platform of its kind, Nasdaq Linq is a digital ledger technology that leverages a blockchain to facilitate the issuance, cataloging and recording of transfers of shares of privately-held companies on The NASDAQ Private Market. It will complement ExactEquity, NASDAQ Private Market’s cloud-based capitalization table management and stock plan administration solution. Nasdaq Linq clients will be provided with a comprehensive, historical record of issuance and transfer of their securities, offering increased auditability, issuance governance and transfer of ownership capabilities.

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Commodity financing as a deflationary feedback loop of hell

Money printing was supposed to cause an inflationary collapse, right?

Except, points out Seth Kleinman at Citi on Wednesday, by encouraging investment in risky commodity ventures like shale, easy money has in reality ended up causing a deflationary feedback loop of hell.

Here’s Kleinman:

The access to cheap financing that low rates and QE generated has been deflationary in two key ways: 1) the growth of shale and the sanctioning of very high breakeven projects that cheap financing made possible has glutted the markets with oil; and 2) the rampant growth of shale, which is located in the middle of the cost curve and has significantly shorter lead times for first oil versus conventional production, acts as a buffer against price rises. Furthermore, given how much of the EM growth story of the previous decade has been driven by the rise of commodity exporters, the negative growth shock from lower commodity prices is compounding the first order deflationary impact in the US and Europe.

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The mainstreaming of technological abundance thinking

FT Alphaville started its “beyond scarcity” series in June 2012, having explored the core tenets of technological abundance theory and utopianism from about February 2012 onwards — influenced at the time by the thinking of Kurzweil, Diamandis, Brynjolfsson and a whole bunch of technological utopians who had come before.

Fundamentally, it was our way of going against the grain at a time when markets were still overly obsessing about the causes and side-effects of the global financial crisis, the Eurozone crisis, the subprime banking crisis and in general maintaining a “glass half-full” outlook on growth and the global economy. Read more

The television is not the medium of the message anymore

You know the score with cable television: thousands of channels and nothing to watch. A lot of time just spent flicking through and stumbling into stupid ads or re-runs of Columbo.

Give people a chance to skip that process, and it turns out they will. Especially if they haven’t been habituated to it. Read more