I am a banking nerd I fear but the mechanics of payment systems is actually more interesting and important than I think is widely understood. I for one am regularly learning new insights on how the payment systems we take for granted actually works.
— Read on http://www.moneyness.ca/2025/03/trump-proofing-canada-means-ditching.html
Tony – From the Outside
We seem to take it for granted but this post by JP Koning on his Moneyness blog is a useful reminder that the reliance on Central Bank independence and interest rates as our main tool of monetary policy is a relatively new phenomenon.
The post discusses some economic policy experiments undertaken by some European countries post WW2 that took a radically different path. He also identifies some interesting parallels with the challenges we faced as we emerged from the COVID lockdowns.
Here is a flavour of the post
“In times past, central banks tended to lean heavily on changes in the supply of money, which may explain why in 1945, their main response — in Europe at least — was to obliterate the public’s money balances rather than to jack up interest rates to 25% or 50%.”
Read the whole post here
http://jpkoning.blogspot.com/2024/11/setelinleikkaus-when-finns-snipped.html
In the interests of full disclosure, I am an avowed fan of economic history but this is worth reading.
Tony – From the Outside
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
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
This may not be the definitive account of how the financial system we have today evolved but I got a lot of value out of the interview on the Odd Lots podcast. The role that Communist countries played in the inception of the Eurodollar market was certainly news to me. Josh cites Russia in his origin story but Wikipedia adds another version in which China was the country looking for a way to hold USD outside the USA.
You can find the Apple version of the podcast here
podcasts.apple.com/au/podcast/odd-lots/id1056200096
Tony – From the Outside
JP Koning offers an interesting post here speculating on the reason why Wise can pay interest to its USD users but USDC can or does not. The extract below captures his main argument …
It’s possible that some USDC users might be willing to give up their ID in order to receive the interest and protection from Circle’s bank. But that would interfere with the usefulness of USDC. One reason why USDC is popular is because it can be plugged into various pseudonymous financial machines (like Uniswap or Curve). If a user chooses to collect interest from an underlying bank, that means giving up the ability to put their USDC into these machines.
This may represent a permanent stablecoin tradeoff. Users of stablecoins such as USDC can get either native interest or no-ID services from financial machines, but they can’t get both no-ID services and interest.
Let me know what I am missing
Tony – From the Outside
From the outside 