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Central banks’ zero-rate folly
By keeping interest rates near zero for over a decade, central banks have created profound economic insecurity and financial fragility.That’s the argument of financial historian Edward Chancellor, guest on the latest New Money Review podcast.Chancellor, author of a new book called ‘the Price of Time’, says that extremely low interest rates have caused unsustainable asset price inflation, including the recent bubbles in cryptocurrency and tech stocks.And near-zero rates, says Chancellor, are also largely responsible for the weak economic growth, rising inequality, zombie companies, elevated debt levels and the pensions crises that have afflicted the West in recent years.Listen to the podcast to hear Chancellor and New Money Review editor Paul Amery discuss:How low interest rates have created tensions in markets, the economy and societyThe ancient debate over whether money should pay interestWhy the lender at interest is ‘selling time’Enlightenment thinking, natural rights and interest on loansLow interest rates, credit bubbles, financial manias and crashesWhy John Law’s 1720 Mississippi scheme prefigured quantitative easingHow Ben Bernanke turned the Fed into the world’s largest hedge fundThe parallels between financial markets and complex natural systemsThe UK’s leveraged pension fund debacleWhy the lowest rates ever created the everything bubbleIceland’s post-2008 debt jubileeCapital controls and why financial globalisation is coming to an end
Why stablecoins disrupt the financial plumbing
Two events in the last fifteen years have fundamentally altered the way the financial system operates—and neither was planned by global policymakers.The great crash of 2008 stopped banks from extending loans to counterparties without taking any security in return. Henceforth, large credits would require collateral to be posted by the borrower.And cryptocurrencies have spawned a new form of digital money—the stablecoin—that threatens to torpedo central banks’ control of the monetary system.One person who has kept a close eye on the role of collateral and stablecoins is Manmohan Singh, a senior economist at the IMF and guest on the latest episode of the New Money Review podcast.Singh, whose specialist area is the plumbing that underlies our money markets, says getting the design of the system right is crucial to ensure adequate lending and continuing economic growth.And the stakes are getting higher as central banks unravel their quantitative easing programmes, while the digital money revolution picks up pace.Listen to the New Money Review podcast for more on:How digital money is changing the role of central banksWhy stablecoins pose a real challenge for policymakersWhy the instantaneous settlement of digital money opens a can of wormsThe intraday float of the banking sector and the fungibility of moneyShould fintech money be kept separate from bank money?Should fintechs have direct access to central bank wholesale payment systems?Bank money and stablecoins—which provides better economics?Should stablecoins pay interest?Working out the net effect of quantitative tightening (QT)Why QT will be offset by the release of collateralWhy collateral moves around the system more slowly than pre-2008
How the internet went wrong
“Competition is for losers,” Paypal founder, early Facebook investor and bitcoin enthusiast Peter Thiel once said.But now the monopoly power of the big tech firms has outgrown even Thiel’s wildest dreams.In the latest New Money Review podcast, I ask Vili Lehdonvirta, professor of economic sociology and digital social research at the Oxford Internet Institute, University of Oxford, whether we can loosen the tech platforms’ grip on money and power. Lehdonvirta is the author of a new book, “Cloud empires: how digital platforms are overtaking the state and how we can regain control”.In the podcast, we cover the reasons for the rise of huge internet companies like Google, Amazon, Apple, Facebook, Tencent and Alibaba. We discuss how the libertarian ideas of the early internet have long been lost, to be replaced by concerns over excessive corporate control and rising economic, social and political inequality.How should the increasingly powerful global digital economy be governed?Listen to the podcast to hear more on:the lost optimism of the early internetwhy eBay had to abandon its laissez-faire approach to managing its marketplacewhy the internet giants’ CEOs are now more powerful than heads of statehow the digital gatekeepers now regulate markets for private profithow cryptocurrency lost its P2P promise and recreated the banking systemaddressing the bigtechs’ economic and political powerthe limits of public utility regulation and competition lawhow nations can deal with transnational platformswhy internet platform users may end up governing these systems
The worrying politics of cryptocurrency
Cryptocurrency billionaires are gaining a political foothold in countries rich and poor. Their influence now extends into governments, legislatures, charities and educational establishments around the world. In the US, cryptocurrency businesses’ lobbying power now exceeds that of the big tech, pharma and defence sectors, traditionally among the biggest contributors to politicians and their parties. And crypto promoters are finding a ready audience in some of the world’s most deprived and war-torn countries, often those with sizeable natural resources.Despite the recent failure by El Salvador to achieve the domestic adoption of bitcoin, the leaders of several African countries are now following suit, pushing their own cryptocurrency projects.In the latest New Money Review podcast, Pete Howson, assistant professor in international development at the UK’s University of Northumbria, talks about the worrying shift towards a global political system influenced by a very undemocratic creation—cryptocurrency.In the 30-minute podcast we cover:Why did El Salvador make bitcoin legal tender?Why has the country’s bitcoin experiment been a dismal failure?Given this failure, why are other countries copying El Salvador’s lead?Central African Republic’s plans to build a cryptocurrency hubRapper Akon’s plans for crypto cities in Senegal and UgandaHow Russia is projecting political power into Africa using cryptocurrenciesWhy Binance’s CEO is meeting the world’s politiciansDisaster capitalism and cryptocurrencyNatural resources and the new crypto colonialismWhy many US and UK politicians are on the crypto lobbyists’ payrollHow governments and regulators can fight back
North Korea—the new money superpower
There’s a rising superpower in the world of money—a country that’s cut off from the global financial network, but which is playing an increasingly prominent and disruptive role within it.Though the country denies it, researchers are almost certain that over the last three decades, North Korea has been behind some of the most audacious and brazen frauds in history. These have involved counterfeiting, theft, hacking, bank raids, ransomware and cyber-attacks. The attacks have been planned well in advance and executed with military precision. North Korea’s evident skills in these areas have both shocked and impressed the analysts who have studied its exploits. As more and more of our payments move online, North Korea’s ability to disrupt the financial system through hacks, thefts and other disruptive activity is getting more dangerous.To talk about this important topic, in the latest New Money Review podcast I was joined by Geoff White, an investigative journalist, a specialist in cybersecurity and the author of a recent book on North Korea called the Lazarus Heist.Listen in for a thrilling story that anyone involved in finance, technology or politics should know about.
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