Not a fan of crypto but this Odd Lots podcast offers a concise update on the use case for stablecoins.
Also concludes with an interesting summary of three things that crypto tends to mis about conventional finance, banking and money
omny.fm/shows/odd-lots/the-booming-crypto-use-case-thats-happening-right
Tony – From the Outside
JP Koning is a regular source of interesting insights into the history of money. Here he delves into the history of currency debasement as a form of taxation and how rulers figured out better ways to extract the revenue they wanted. The analogy with the Mafia is a nice touch.
— Read on jpkoning.blogspot.com/2024/05/monetagium.html
Tony – From the Outside
One of the things about banks is the ability to get interest free funding. This great post by Marc Rubinstein explores the ways in which five non-bank companies also make money off interest free funding.
Fun fact, Marc notes that Starbucks gets to take funds in abandoned accounts to profit while banks are not allowed to do this. Inactive bank accounts get transferred to a government body where customers can make a claim if they come looking. This can be a relatively big number.
Worth reading
Tony – From the Outside
I think it is human instinct to interpret why organisations and people make bad decisions through a moral lens (e.g. they are bad people) but I am more interested in the question why organisations run by ordinary people seem to end up with often substandard outcomes. My current interaction with one of my financial service providers comes to mind.
This post by Marc Rubinstein and Dan Davies offers some insights that have prompted me to order Dan’s new book
What do bad decision-making organizations have in common? Quite a few things, but one of the clearest signs is something you might call an “accountability sink”.
Tony – From the Outside
Always on the look out for things we can learn from history. In that spirit here is an interesting post on a Bank of England blog that explores what lessons the switch from coins to paper money might offer for the expansion of digital currencies.
They identify five lessons. The one that resonates with me is that the adoption of new forms of money can depend on the extent of shortages in the conventional forms …
“Possible lessons for the adoption of digital currencies
Can we learn anything from the switch from coin to paper in the 1690s that might be relevant to any adoption of digital currencies today? One lesson is that shortages of money are a powerful force in stimulating new forms of money to emerge. In the 1690s the extreme shortage of silver created a compelling reason for merchants to adopt new paper currency. Arguably, this is a force driving some new forms of digital money to emerge – conventional forms of money being incompatible, or lacking the functionality to use, in some digital settings, creating an effective shortage.”
Tony – From the Outside
I have posted a few times challenging the often repeated assertion that advanced banks are subject to materially lower risk weights than their competitors operating under the standardised approach (see here for example).
I have not seen the argument asserted for some time but APRA has chosen to publish a short note repeating their conclusion that the difference is nowhere near as big as claimed.
Here is a link to the APRA note but the short version is
“APRA estimates that the average pricing differential for housing lending due to differences in IRB and standardised capital requirements is 5 basis points.4 Taking into account the IRRBB capital charge and higher operational costs for IRB banks would further reduce this pricing differential.”
Tony – From the Outside
One for the banking and finance tragics I suspect but I thought this is a pretty good list. In the author’s own words
I have my own opinions about what are more and less convincing answers to these questions. But my goal is not to convince you, or my students, of the answers. My goal is to convince you that these are real questions.
— Read on jwmason.substack.com/p/thirteen-questions-about-money
Tony – From the outside
Interesting post from JP Koning exploring what you find when you read the fine print
jpkoning.blogspot.com/2023/11/kraken-v-kraken-or-how-to-protect.html
Tony – From the Outside
… exploring why dealing with banks can be hard. US focus but I think it probably rings true across most banking systems. It will be interesting to see if advances in machine intelligence help address any of these long standing issues.
www.bitsaboutmoney.com/archive/seeing-like-a-bank/
Tony – From the Outside
Nice post by Marc Rubinstein discussing the Kelly Criterion against a backdrop of Sam Bankman-Fried’s risk appetite. Whether you agree or disagree with the Kelly Criterion, I think at a minimum it is well worth understanding what it says about the optimal betting strategy. Lots of useful links to other posts on the same topic.
— Read on www.netinterest.co/p/risk-of-ruin
Tony – From the Outside
From the outside 