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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Guest post: The Panama Papers — what exactly is the problem?

It’s almost five months since 11m private documents leaked out of a Panamanian law firm, Mossack Fonseca. This guest post from Howard Bilton, chairman of off-shore advisory specialist The Sovereign Group, looks at the broader state of play for those looking to minimise their tax bills. Read more

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

Markets Live: Friday, 12th August, 2016

Live markets commentary from FT.com 

FT Opening Quote: Nationwide upbeat in face of low rates

Nationwide upbeat in face of low rates, AP Moller-Maersk earnings up, strike at Eurostar. FT Opening Quote is your early Square Mile briefing. You can sign up for the full newsletter here. Read more

Further reading

Elsewhere on Friday,

- The Economist does the Keynesian multiplier.

- What is the opportunity cost of additional government borrowing?

- “Contrary to market perception, bank recapitalisation and bailouts [in China] have begun,” said UBS’s Jason Bedford.

- Central bank deposits for you and me.

- Brexit harm denial and the exchange rate. Read more

FirstFT – US equity indices hit record highs, the art of the Irish pint and how the Arab world came apart

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A trifecta of benchmark US equity indices hit record highs on the same day for the first time since 1999, as investors — hampered by a growing world of negative yielding debt — turn to US stocks in a hunt for yieldRead more

About that persistent slowdown in productivity…

Trapped by low productivity, MS strategists reckon longer-term annual growth potential across the developed world currently stands at just 1.25 per cent, compared to the 2.75 per cent typically seen 20 years ago. So, instead of doubling about every 25 years, GDP might take 56 years to double from here. Read more

Markets Live: Thursday, 11th August, 2016

Live markets commentary from FT.com 

Join the FT Alphaville Fantasy Football League

The UK’s football season kicks off again this weekend. So, in the spirit of reducing physical activity to numbers on a screen, Alphaville is running its first ever Fantasy Football League.

Of course, we aren’t doing it off our own backs. We’re running it on the official Premier League rails. Read more

An auction addendum…

So, while we were knee-deep in game theory trying to determine the best way to sell gilts, the Bank of England had some trouble buying them.

The BoE’s purchase of long-term government debt fell short of target Tuesday, which is noteworthy for plenty of reasons. One is that it’s yet another sign of that safe-asset shortage. But the thing is, the competitive bids are intermediated by banks and dealers. And that calls attention to a BIS paper from last month, which shows the results aren’t always pretty when economic policy collides with the zero-sum world of trading. Read more

FT Opening Quote: L&G unloads Cofunds

L&G sells Cofunds, Tui earnings up and Southern strike suspended. 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

Pax Global and the occasional woes of a negative sell-side analyst…

Pax, Origin Latin, literally ‘peace’.

Er, yeah.

From Macquarie’s Timothy Lam:

PAX Global held an analyst briefing on Aug 10. Before the meeting started, we were asked by the company’s CFO to leave the meeting room. We believe all analysts should be able to attend analyst briefing, regardless of their view on the company.

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Further reading

Elsewhere on Thursday,

- “Trite phrases like ‘move on’, ‘be positive’, ‘just do it’ and ‘we are where we are’ reflect a failure to understand the magnitude of the Brexit task.”

- Krugman on the revealed murkiness of zero-bound economics.

- Adair Turner: The question isn’t whether helicopter money would work, it’s “can we design rules and institutional responsibilities that ensure that monetary finance is used prudently?”

- And Peter Stella on heli money: “I not believe the permanent fiscal expansion must be financed with a permanent increase in bank reserves.” Read more

FirstFT – Gilt yields turn negative, the retreat of Isis and what teens need most from parents

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British government bond yields traded in negative territory on Wednesday, compounding fears that a global collapse in government borrowing costs has tipped the UK’s pension industry into a funding crisis. Read more

Could immigration controls be the solution to New Zealand’s frothy housing market?

Here’s an interesting thought from Grant Spencer, the Deputy Governor in charge of financial stability at the Reserve Bank of New Zealand:

While boosting the capacity for development and housing supply is paramount, it is also important to explore policies that will keep the demand for housing more in line with supply capacity…We cannot ignore that the 160,000 net inflow of permanent and long-term migrants over the last 3 years has generated an unprecedented increase in the population and a significant boost to housing demand…There may be merit in reviewing whether migration policy is securing the number and composition of skills intended. While any adjustments would operate at the margin, they could over time help to moderate the housing market imbalance. Read more

How much auction information is too much?

Some people aren’t terribly happy with the way government debt is sold in the US and UK. Some even say using auction data and game theory that full pre-auction information sharing between dealers and investors would raise $4.8bn more revenue for the US Treasury each year than a fully closed bidding mechanism where no information is shared. Read more

No one man should have all that Powa

Dan Wagner (photo by Matthew Lloyd/Bloomberg)

Over the past six months or so, we have delved into the details around the collapse of Powa Technologies, a British technology startup that was reported to have a $2.7bn valuation and was praised in 2013 by the then Prime Minister David Cameron. Read more

Markets Live: Wednesday, 10th August, 2016

Live markets commentary from FT.com 

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

FT Opening Quote: ITV fails in bid for Peppa

ITV’s bid for Entertainment one falls short, G4S celebrates success and markets await BoE reassurance. 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

Elsewhere on Wednesday,

- Taibbi: A Republican Workers’ Party?

- Yes Minister Brexit special – Sir Humphrey explains all.

- Transmitting liquidity shocks across borders: evidence from UK banks, from the BoE.

- Soaring CEO pay is also the right’s problem.

- Icahn: “Trump is right on about our economy. A capitalistic system cannot exist if government is at war with business.” Read more

FirstFT – Anger over Trump gun remarks, the dangers of cupping and why livestreaming is still a gimmick

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Republican presidential candidate Donald Trump has sparked more outrage by suggesting his supporters could stop his Democratic rival Hillary Clinton by exercising their gun rights. Read more

Cryonics coming to a sovereign debt restructuring near you soon?

The decade-long legal war between Argentina and a bunch of US hedge funds led by Elliott Management ended in a lucrative victory for the latter earlier this year. But the potential implications continue to reverberate.

Some observers – including Joe Stiglitz, the International Monetary Fund, the Vatican and the United Nations – fret that Elliott’s triumph will upset the delicate balance of sovereign debt restructuring. Here’s what the Nobel laureate told the FT earlier this yearRead more

Lending Club’s latest results tell us a lot about the online credit business model

Lending Club released its second-quarter results yesterday. Besides the updates on repairs after its scandals earlier in the year, executives provided an insight into some broader shifts that have been bubbling under the surface for some time.

Let’s start with this interesting comment from outgoing chief financial officer, Carrie Dolan, during the call with analysts (our emphasis): 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

Markets Live: Tuesday, 9th August, 2016

Live markets commentary from FT.com 

Finger still in air, GBP forecasting edition

Right, with the warning that we are back in The Forex and nothing is certain, this from HSBC is an unpleasant paragraph for those long the Great British Krona*:

In our view, GBP is the main part of the adjustment mechanism but the adjustment is not over yet. We still see GBP-USD at 1.25 by end of Q3 and 1.20 by year-end. However, we now see GBP weakness extending into 2017 and we now forecast GBP-USD at 1.10 by end-2017. This aligns with our economist’s view that the Bank of England will ease even further, cutting rates by 15bp in November and expanding QE in February next year.

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FT Opening Quote: The CMA to the barricades

The CMA’s banking ‘revolution’, Wm Morrison-Ocado renegotiation and UK retail bounce. 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

Elsewhere on Tuesday,

- Fannie and Freddie will be profitable after their next bailouts, too.

- Are European stress tests stressful enough?

- “Negative rent!” she exclaims. “It doesn’t exist in other parts of the world, but in Puerto Rico, sí!”

- Dean Baker and John Cassidy on Trump’s economic speech: “The Detroit Economic Club was the final destination, and it marks the resting place of Donald Trump the economic populist.”

- Bernanke on why the Fed is rethinking everything. Read more