New Money Review podcast: Recent Episodes
Paul Amery
The finance industry wants to use artificial intelligence agents to get customers to spend more, faster, bigger...
But AI agents don't mix easily with the security standards that ensure client safety in payments.
For more, listen to the latest episode of Unseen Money from New Money Review, featuring Paul Amery and Timur Yunusov.
In the latest New Money Review podcast, I interview Mordecai Kurz, Joan Kenney professor of economics emeritus at Stanford University.
Kurz, the author of "Private Power and Democracy's Decline", to be published in May 2026, says that it's time to suppress technology firms' market power---or we will lose democracy.
In the podcast, we cover:
- why free market capitalism and democracy are no longer compatible
- the similarities and differences between the first and second US "gilded ages"
- why tech firms' market power cannot be addressed by 20th century anti-trust laws
- the need to tax monopoly profits
- how social media threatens democracy
- the need to repeal Section 230 of the 1996 Communications Decency Act
- why AI will be the great battle of the 21st century
- why individuals have to step forward to support democracy
- the forthcoming implosion of the MAGA movement
- why we're heading for a financial and economic crisis
- why economists need to study power relations
In the latest episode of Unseen Money, Timur Yunusov helps Paul Amery unravel a strange real-life story involving a spoofed eBay delivery, Paul’s phone number and a photo of an Indian lady in a pink dressing gown.
The story is part of a rapidly growing form of crime involving so-called “synthetic” identities. In a synthetic identity fraud, criminals create fake online identities by blending real, stolen data with fabricated information. They then use those identities to conduct money laundering and fraud.
In the podcast, we cover:
(00’ 25”) How Paul got a DPD delivery notification for an eBay parcel he hadn't ordered
(1’ 20”) How DPD provided “proof of delivery” to a woman in a pink dressing gown
(2’ 45”) How eBay showed no interest in investigating the transaction
(3’ 15”) Why a synthetic identity combines real and fictitious information
(4’ 40”) How criminals use synthetic identities to decrease online friction
(6’ 40”) Possible use of synthetic IDs in buy now pay later (BNPL) fraud
(7’ 10”) Why synthetic identity frauds don’t fit the standard stolen identity playbook
(7’ 40”) Why synthetic ID cases deserve much greater scrutiny from anti-fraud teams
(11’ 30”) Identity theft (account takeover) and synthetic identities
(13’ 00”) Why synthetic identity fraud has boomed post-COVID
(21’ 40”) AI and machine learning have turbocharged synthetic identity fraud
(23’ 40”) Who’s buying the sets of synthetic IDs?
(24’ 30”) How criminals use synthetic identities in frauds
(29’ 30”) Dead souls, the Russia-Ukraine war and the exploitation of fake identity sets
Tech firms and governments are pushing passkeys as a replacement for online passwords.
They argue that using passkeys will help cut down on fraud, prevent account takeovers and protect against password theft.
But Paul Amery and Timur Yunusov are sceptical that passkeys will take off. Listen to the latest episode of Unseen Money from New Money Review to find out why.
Here’s what we discuss in the podcast:
- (0’ 45”) why we need to get rid of passwords
- (2’ 35”) safer and less safe ways of using passwords
- (3’ 05”) password management practices
- (4’ 10”) what is a passkey?
- (6’ 10”) how passkeys replace reliance on a password with reliance on a trusted device
- (7’ 10”) what if we are trying to use our phones less?
- (8’ 00”) using your laptop as an alternative
- (8’ 20”) hardware devices to store your passkey
- (10’ 00”) passkeys won’t protect you against state surveillance or a kidnapper
- (12’ 20”) passkeys are only as secure as the surrounding infrastructure
- (13’ 00”) what happens if you lose the trusted device?
- (14’ 20”) unresolved questions regarding lost passkeys
- (14’ 50”) Paul’s unhappy experience setting up passkeys
- (15’ 50”) why financial institutions lag in introducing passkeys
- (16’ 50”) Timur’s survey of security research on passkeys
- (18’ 10”) where is the weakest link in the passkey enrolment chain?
- (19’ 30”) why Timur is sceptical of tech firms’ invitations to enrol passkeys
- (21’ 00”) who’s pushing passkeys and why?
- (22’ 30”) why some friction in online transactions is a good thing
- (23’ 30”) why Timur would not use a web browser passkey to access a bank account
- (27’ 30”) why large-scale passkey adoption is still far away
- (28’ 30”) passkey technology could be imposed
Last week, Google’s threat intelligence group warned that artificial intelligence (AI) is making malware attacks more dangerous.
[Malware is malicious software—programmes designed to disrupt, damage or gain unauthorised access to computer systems—usually delivered via phishing emails, compromised websites or infected downloads]
“Adversaries are no longer leveraging artificial intelligence (AI) just for productivity gains, they are deploying novel AI-enabled malware in active operations,” Google said in a 5000-word blog.
Are malware programmes using Large Language Models (LLMs) to dynamically generate malicious scripts, obfuscate their own code to evade detection, and leverage AI models to create malicious functions on demand, as Google warns?
Or it this yet another case of tech firms selling solutions to a problem they have created themselves?
Listen to the latest episode of Unseen Money from New Money Review, featuring co-hosts Timur Yunusov and Paul Amery, to hear more about the effect of AI malware.
In the podcast, we cover:
- Google’s warning about the rise of AI malware – reality or hype? (2’ 35”)
- Why LLMs were originally protected from harmful behaviour (4’ 10”)
- How criminals learned to develop LLMs without guardrails (4’ 55”)
- Model context protocols (MCPs) and AI agents as offensive tools (5’ 30”)
- Malicious payloads and web application firewalls (7’ 35”)
- Tricking LLMs by exploiting the wide range of input variables (8’ 30”)
- The state of the art for fraudsters when using LLMs (10’ 10”)
- Timur used AI to learn how to drain funds from a stolen phone (11’ 05”)
- How worried is Timur about the rise of AI malware? (14’ 20”)
- AI has dramatically reduced the cost and increased the speed of producing malware (15’)
- AI, teenage suicides and protecting users (16’ 50”)
- AI for good: using AI to combat AI malware (19’)
- How a Russian bank used AI chatbots to divert fraudsters (19’ 40”)
- Data poisoning—manipulating the training data for AI models (22’ 10”)
- Techniques for tricking LLMs (23’)
- Only state actors can manipulate AI models at scale (25’ 40”)
- The use of SMS blasters by fraudsters is exploding! (27’)
Some people have labelled the recent alliance between Silicon Valley and right-wing populist leaders “techno-fascism”. Is that too strong a term?
No, says Jacob Silverman in the latest New Money Review podcast.
“What do you call it when the highest levels of the corporate world merge with the executive of the government?” Silverman asks in the podcast. “I think that’s corporatism or fascism.”
Silverman is the author of a new book, “Gilded Rage”, in which he chronicles the radicalisation of Silicon Valley.
Focusing on a few central characters—Elon Musk, Peter Thiel, David Sacks and Donald Trump—he poses a question that should concern us all. What happens if the world's richest and most powerful men decide to dismantle democracy?
“I think it’s very worrisome,” says Silverman. “We keep on breaching markers—things that haven’t happened before.”
Listen to the podcast to hear a discussion of:
- The post-9/11 convergence of technology and the security state
- How tech firms colluded with Trump to merge corporate and political power
- Why the technology of freedom may be incompatible with democracy
- Tech titans’ desire for social and physical escape
- JD Vance, the tech industry’s man in the White House
- The religiosity of Peter Thiel and JD Vance
- Rising nationalism and the booming defence tech industry
- How cryptocurrency catalysed the Republicans’ resurgence in the US
- Cryptocurrency as an accessory to political corruption
- How the AI boom was fed by the crypto bubble
- Why Jacob sued Twitter—and what happened next
- Donald Trump, Jeffrey Yass and the US government’s about-face on TikTok
- Social media as the informational battleground of global geopolitics
Long gone are the days when the Escobar family had to spend $2,500 a month on rubber bands to hold the cash they earned trading cocaine.
Now, the invention of cryptocurrency has made money launderers’ life a whole lot easier—or has it?
Investigative journalist Geoff White joins Paul Amery and Timur Yunusov in the latest episode of Unseen Money to discuss:
- Why a New York crypto money laundering case is attracting such close attention
- How technology has changed the business of crime
- Cryptocurrency mixers and decentralised finance
- North Korea and the Axie Infinity hack
- The ugly mix of organised crime, state sponsorship and espionage
- Sanctions regimes, cryptocurrency stablecoins and dollar hegemony
- Hackers, social media and money laundering
- Who will run the world’s digital money?
The decentralised finance (DeFi) market is booming—but the world’s best hackers are on a constant look-out for ways to steal your crypto tokens.
North Korea, which recently committed the largest theft in cryptocurrency history, is probably top of the hackers’ game.
What do crypto users need to know about the risks in this unregulated but fast-growing market?
In the latest episode of Unseen Money from New Money Review, Timur Yunusov and Paul Amery are joined by Arseny Reutov, chief technology officer at Decurity, a security audit and ethical hacking firm specialising in DeFi.
During the podcast, we discuss:
- Malware, ethereum and the recent $1.5bn Bybit hack
- State-of-the-art techniques in DeFi hacks
- Mixers, cross-chain bridges and the laundering of stolen funds
- How North Korea became the world leader in crypto hacks
- Ways of detecting flaws in DeFi smart contracts
- Who audits DeFi?
- Incentives to report, rather than exploit smart contract flaws
- Is DeFi security improving?
Most scams where the victim is tricked into paying money to fraudsters originate on social media—often on Facebook, Instagram and WhatsApp.
But in the UK around one scam in five—and nearly half by the total value stolen—exploits weaknesses in our telecommunications infrastructure.
That could be someone spoofing the number of a legitimate entity, such as the tax office or your bank, when calling you. It could be a scammer exploiting security vulnerabilities in the mobile network to compromise and intercept voice and SMS messages.
In a rapidly rising form of fraud, criminals impersonate the nearest cell phone tower and send messages that look like they’re from your bank or mobile service provider. One click on a link and you’re soon handing over valuable personal information or downloading malware that gives the scammers access to your payment app or crypto wallet.
In the latest episode of Unseen Money from New Money Review, my co-host Timur Yunusov and I are joined by telecom cybersecurity expert Dmitry Kurbatov, chief executive of UK-based company SecurityGen.
In the podcast, Dmitry explains how criminals can spoof a trusted entity’s phone number when calling you. We look at SIM swap frauds and discuss who bears responsibility for the continuing security flaws in mobile networks.
We highlight in which countries users are currently most exposed to mobile phone-based frauds. We look at the recent SK Telecoms breach in South Korea, which exposed the personal and financial data of up to 23 million users. And we describe the ever more ingenious methods being used by scammers to subvert telecoms networks.
Some technical terms used during the podcast:
“SIP trunking” is the digital method of making and receiving phone calls and other digital communication over an internet connection.
“SIP protocol” is a signalling protocol used for initiating, maintaining, and terminating multimedia sessions, including voice, video, and messaging.
“SIM farms” or “SIM boxes” bridge the internet and cellular networks, enabling the routing and redirection of calls or messages through multiple SIM cards.
“Rich Communication Services (RCS)” are a messaging protocol that enhances traditional SMS by offering richer features like multimedia sharing, group chats, read receipts and typing indicators.
“Drive-by smishing” is where fraudsters use fake base stations to force victims’ phones to connect to a fake mobile network and then use SMS messages to distribute malicious links or initiate scams.
In “software-defined radio”, components that are conventionally implemented in analogue hardware (e.g., mixers, filters, amplifiers, modulators/demodulators, detectors) are instead implemented by means of software on a computer.
A “global title” is an address used in SCCP (Signalling Connection Control Part, a network-layer protocol in telecommunications) for routing signalling messages on telecommunications networks.
“SS7” is a set of telecommunications protocols that are used to exchange information between different telephone networks.
“IPX” is a telecommunications interconnection model for the exchange of internet protocol-based traffic between customers of separate mobile and fixed operators.
The UK’s company formation process is fast, easy and cheap. The net result of being open to almost any business is that up to half the companies on the UK’s Companies House register may have no legitimate purpose.
Instead, those companies are used by fraudsters as a vital tool in scams and money laundering schemes. Many are set up using fake identities and addresses. Often, they break the reporting rules and never file accounts. And Companies House has become a honeypot for organised crime groups from around the world.
In the latest episode of the Unseen Money podcast, Timur Yunusov and I are joined by dark money expert Graham Barrow, who has exposed some of the worst failings of the UK’s company formation regime.
Belatedly, the UK government is acting to address those failings. But will new legislation go far and fast enough? Listen to the podcast to find out.
In the latest episode of Unseen Money, Timur Yunusov and Paul Amery talk about the role of QR codes in scams and whether these popular barcodes may lull users into a false sense of security.
Also in this episode:
- team Trump's Yemen fiasco, Signal and Telegram
- how scammers can mass-blast SMS phishing messages
- browser-within-browser attacks and their possible use in scams
- why the trend of limiting bank compensation to scam victims was inevitable
There’s a big security loophole affecting plastic payment cards—called a replay (or pre-play) attack. Banks have known about this loophole for years. But they may still blame you, the victim, if a scammer makes use of it.
In a 2022 fraud, a former British soldier holidaying in Brazil found that £20,000 had been charged to his bank card in eighteen separate transactions. The ex-soldier, Henry Williams, said he’d only used his card once and that most of the money had been taken from his account without his knowledge.
His bank, a well-known British high street name, initially refused to compensate him, arguing he must have authorised all the payments. Only a year later did the bank agree to refund him—partially and with a grudging apology.
Even after one of the UK’s best-known security experts intervened on behalf of the victim, the UK’s financial ombudsman, which is supposed to settle complaints between consumers and financial services businesses, sided more with the bank.
How does a replay attack occur? Most plastic debit (or credit) cards contain a chip which is used to identify and authenticate the user. The chip comes into action when the user taps the card on a contactless payment terminal (or inserts the card into the terminal and then enters a PIN code).
At this point, the payment terminal generates a number that is supposed to be unpredictable, ensuring that each payment transaction is a fresh one.
Unfortunately, payment terminals can be tampered with and the supposedly unguessable number can be manipulated. This opens the door to replay attacks—and to more paydays for criminals.
As many as half of all payment cards and half of all terminals may be vulnerable to exploitation, says my Unseen Money co-host Timur Yunusov, who demonstrates a card replay attack in this YouTube video.
In the latest episode of Unseen Money from New Money Review, we explore replay attacks: how they occur, why the vulnerability is still there more than a decade after it was exposed, and why the payments industry is so reluctant to address the issue.
We all now use one-time passcodes (OTPs) to verify our identity online.
In the last few weeks, I’ve personally received OTPs from Amazon, Apple, Google, the UK Driving Licence Authority, my pension provider, payments app Yotta, National Savings and parking app Ringgo. Some OTPs were sent to me in text (SMS) messages, others arrived via email.
Identity authentication online using OTPs is much safer than using a single piece of information like a password. But OTPs are not safe, for a number of reasons.
In the latest episode of “Unseen Money” from New Money Review, security researcher Timur Yunusov and I discuss some recent scams that involved stolen OTPs—from a $2m theft from the family of a Moscow teenager to an industrial-scale carding operation in China.
Our story covers the security of mobile networks, tech giants Apple and Google, the business models of criminal masterminds and bagfuls of stolen phones shipped around the world.
The UK prides itself in being open for innovative tech firms—and companies in general—to set up business. It takes only £12—and 15-20 minutes—to create a new company online.
But the laxity of the country’s system for new company formations has made the UK a goldmine for scammers. And the problem is getting worse: fraud, much of it digital, now accounts for over 40 per cent of all recorded crime in England and Wales
In the latest episode of Unseen Money, Timur Yunusov and I discuss a recent Financial Times article about a London-based fraud victim, Livia Giuggioli Firth, who was conned by scammers into sending £325k from her company’s bank account.
Instead of asking for compensation from her own bank for being a victim of an authorised push payment fraud, Ms. Giuggioli Firth took the unusual step of suing the scammers’ bank in court. This forced the disclosure of the names if not of the individual scammers, but of the network of companies they used to launder the stolen money.
The court case unveiled some of the principal weaknesses in the UK’s system for deterring and catching fraudsters.
In the podcast, we discuss:
- Why the UK is a heaven for digital fraudsters
- Why Companies House is still making it easy for criminals
- How the fintech and AI booms have fuelled scams
- Who’s responsible in the UK for fighting scammers?
- How criminals second-guess anti-fraud systems and the need for ongoing due diligence
- The role of cryptocurrency in laundering stolen money
- Should Zuckerberg and Musk reimburse digital fraud victims?
- Why AI-enabled scams are certain to become more dangerous
Want to join Timur and me on a future episode of Unseen Money to talk about how scammers use Companies House registrations to aid their crimes? Drop me a line at paul@newmoneyreview.com.
Having your identity stolen is a catastrophe. You can lose your reputation, your credit rating, your money, your home or even be accused of fraud yourself.
To victims, ID theft feels like a single, earth-shattering event. But it’s likely that the hacker has been stealing different aspects of your identity over time.
Your name, address, email address, phone number, bank account number, passport number, medical records and log-in credentials are all valuable bits of information to hackers. Combined, they may be enough for a digital hit on you and your bank account.
In the latest Unseen Money podcast, Timur Yunusov and I explore the “personally identifiable information” or “PII” that enables hackers to impersonate and rob us.
PII is now traded amongst fraudsters as a commodity. But what kind is most valuable to criminals? Where do they get it? How do they use it in scams? Once we’ve lost our PII, is there anything we can do?
Listen on for more.
In the latest episode of Unseen Money, Timur Yunusov and I discuss how to stop a bad dream turning into a real nightmare: when a phone snatcher has your mobile device and is trying to get hold of your money as well.
We cover:
- How a phone thief can access your bank accounts
- The security of contract and non-contract mobile phones
- Best mobile phone security practices and what to keep safe at all costs
- Multi-factor authentication and avoiding single points of failure
- Stopping a phone theft from becoming identity theft
- Face ID or touch ID to authorise payments?
- The unevenness of payment apps’ security
- Why little can stop the determined hacker
We also refer to these New Money Review articles in the podcast:
A phone grabber could drain your bank account in minutes
How safe are payment cards?
In the latest episode of Unseen Money, we talk about the recent $4.5 million fraud committed against Ol’ga Serova, a 71-year-old former bureaucrat from Samara, Russia. We discuss:
- KGB legacy: how Russian scammers play on people’s long-standing fear of the authorities
- Greed, fear and social engineering by country: how the weak points of fraud victims vary in Russia, the US and Europe
- Big brother in Singapore: new state powers to freeze the bank accounts of potential fraud victims
- AML, KYC and Timur’s past struggles to receive his salary into a UK bank account
- Fintechs fail: the knock-on effects from the UK’s new compensation rules for victims of authorised push payment fraud
- Will new in-app communication channels help prevent payment scams?
- Why small, iterative changes in anti-fraud technology are best
- Survival of the fittest: why the weakest and least secure payments firms must go under.
Last week UK prime minister Keir Starmer said artificial intelligence could help fix potholes, teach our kids and slash the cost of public services.
What he failed to mention is that AI is also a dream come true for scammers.
Listen to the latest episode of Unseen Money as Paul Amery and Timur Yunusov discuss how AI-enabled fraud is rocketing and why.
This is Unseen Money from New Money Review.
I’m Paul Amery and I’m joined by my co-host, security researcher Timur Yunusov.
Unseen money is our journey into the darker corners of digital payments.
For many of us, transferring money is now faster and easier than ever before. It takes a couple of swipes on a smartphone.
But with digital payments have come many new opportunities for criminals.
Perhaps you’ve suffered from a phishing attack, an ID theft or a cryptocurrency scam.
Maybe an online purchase went wrong, but you’re not sure how.
We’re here to investigate—and to report to you in non-technical language.
In this episode of the podcast, Timur and I discuss the UK’s new rules for compensating people who’ve been tricked into transferring money to criminals.
Have the rules deterred the scammers? Or have they just moved on to another type of payment fraud? Listen on for more.
The latest New Money Review podcast focuses on Trump, tariffs, deglobalisation and the currency markets.
My guest, Mark Astley, is a former colleague, a currency and fixed income specialist who recently retired as chief executive of asset manager Millennium Global Investments.
“We are living in an epochal time in the history of exchange rates and trade policy,” Astley says in the podcast.
During the recording, Astley suggests the 53-year experiment with a dollar-based floating exchange rate system may be coming to an end—and he suggests that tariff wars and rising geopolitical turmoil may bring an end to dollar dominance as well.
Listen in for a 30-minute discussion of the backdrop and outlook for global currencies. We cover:
- The benefits and costs of post-1971 exchange rate flexibility
- The great disinflation of 1981-2021 and the recent return to higher inflation
- Trump, tariffs, supply chains and interest rates
- Which global economies are least and most exposed to a trade war?
- Why dollar dominance may end slowly, then suddenly
- The breakdown of post-WW2 global institutions
- Implications for currency markets, precious metals and cryptocurrencies
In the last decade, the way we make our payments has become more seamless, faster and cheaper.
We’ve switched from signatures on paper cheques to a few swipes and a tap on a mobile phone.
But with these advances have come massive new opportunities for cybercriminals.
From cons using deception and social engineering to romance fraud, unauthorised transfers, hacks and identity theft, the cat and mouse game between scammers and those policing the payments system has now reached a new level of intensity.
In the latest New Money Review podcast I’m joined to discuss this topic by Steven Murdoch, professor of security engineering at University College, London.
During the podcast, we cover:
- Why technologists, lawyers and economists all focus on payments security
- How should we treat victims of payments fraud?
- Why tricking customers into transferring funds is now the most lucrative payments scam
- How limits on customer reimbursement may cause banks to stop pursuing fraudsters
- Balancing responsibilities in customer reimbursement schemes
- How AI may help payments fraudsters cast a wider net
- How the parameters of banks’ online payments systems can feed or starve fraud
- Does more secure always mean harder to use?
- Cross-border fraud and the reversibility of payments
- Cryptocurrency from the perspective of payments security
- Telegram and tensions over encrypted messaging networks
- The Horizon scandal and the legal presumption of reliable IT systems
When, why and how do countries go bust? That’s the topic of the latest New Money Review podcast, where I’m joined by Greg Makoff, a former physicist, banker, government advisor and now senior fellow at the Harvard Kennedy School.
Makoff is the author of a recent book on what has been called “the most contentious default in history”—Argentina’s 2001-2016 debt restructuring.
In the podcast, we discuss:
- When, why and how countries go bust
- What distinguishes a sovereign insolvency from a corporate or personal bankruptcy
- Who has jurisdiction over sovereign defaults?
- What brings governments and creditors to the table?
- Sovereign immunity and the negotiating power between debtor and creditor
- What went wrong in Argentina’s debt restructuring?
- How Elliott Capital Management made billions on defaulted Argentinian debt
- The broader public policy lessons of Argentina’s debt restructuring
- China, the IMF and the geopolitics of sovereign debt
- Default risk in domestic and foreign currency bonds
- Why sovereign debt problems will never go away
Supporters of the $10trn private equity industry say it fuels economic growth and delivers leaner, better-performing companies.
One leading critic of the sector is Ludovic Phalippou, who says that the industry routinely overstates its financial performance. And, he says, private equity funds charge a whopping 6-7% a year in fees, wiping out any potential benefits to investors.
In the latest New Money Review podcast, I interview Phalippou, who is professor of financial economics at Oxford University. We cover:
- What is private equity?
- How big is the private equity market?
- Why have private equity assets grown fivefold in a decade?
- What is the economic footprint of private equity?
- How should we measure private equity funds’ performance?
- How honest are private equity firms in reporting performance?
- Do private equity funds have higher returns than public equity funds?
- What do private equity funds cost?
- Agency conflicts in the private equity industry
- The impact of recent interest rate rises on private equity
- The need for standardised reporting of private equity performance.
Want to know what happens when fraud is a core component of your business model?
Want to know how a business idea described as an “economic fairytale” could be valued at $300m?
Want to know how an unknown cryptocurrency exchange could end up with a $1bn a year marketing budget, rivalling that of Microsoft?
Want to know how easy it is to corrupt auditors and journalists with crypto tokens?
All this is in Crypto Confidential, a new book by Jake Donoghue that’s coming out in August 2024.
I read a review copy, really enjoyed it and have invited Jake to talk to New Money Review podcast listeners.
Donoghue describes his book as “a record of the sheer extravagance, excess and absurdity I bore witness to on a daily basis”.
In the podcast we discuss:
- How an unviable betting start-up could be worth $300m on its first day of trading
- Why its founders switched focus from gambling to marketing
- Duplicitous tactics, shilling, pumping and dumping in crypto
- The confluence of politics and cryptocurrency
- Why did the cryptocurrency markets recover after the 2022 FTX/Terra/Luna frauds?
- From bitcoin to ICOs, NFTs and memecoins: how crypto has lost touch with its origins
- How influencer crypto marketing hit its peak in 2022
- When Bybit’s reported $1bn a year marketing budget rivalled Microsoft’s
- The innovation of crypto fundraising
- Why crypto journalism is an oxymoron
- Tether and sanctions evasion
- Why crypto projects are jumping onto the AI bandwagon
- What next for cryptocurrency?
In the latest New Money Review podcast, I interview Richard Comotto, a specialist in repo, the multi-trillion dollar marketplace used by large financial institutions to borrow and lend money in the short term.
Richard, who started his career at the Bank of England, works for the International Capital Markets Association (ICMA), for whom he has authored the ICMA “Guide to Best Practice in the European Repo Market”, its website FAQs on repo and the semi-annual survey of the ICMA European repo market, which has been running since 2000.
He has also advised on the development of domestic money and repo markets for bodies such as the Asian Development Bank, the International Monetary Fund and the World Bank.
He is also co-founder and chief product officer at London Reporting House, a fintech providing data and analytics on the repo market.
In the podcast, we cover:
- What is the repo market?
- The role of repo in the bond markets
- Did repo help trigger the 2008 financial crisis?
- The difference between repo and a pledge
- The difference between repo and a securities loan
- Why repo has largely replaced unsecured wholesale lending
- When and how can repo go wrong?
- How do central banks use repo?
- Is quantitative tightening (QT) the reverse of quantitative easing (QE)?
- The effect of blockchain on the repo market
- How shorter settlement cycles affect repo
- Could central clearing trigger a repo market accident?
The Stoic philosophers said we should manage our emotions when it comes to money and wealth.
But is this a realistic goal? How can we resist the siren call of riches? How can we persevere and stay positive through tough economic times?
In this episode of the New Money Review podcast I’m joined by Donald Robertson, philosopher, psychotherapist and author of best-selling books on how to apply Stoic principles to modern life.
In the podcast, we cover:
- Who were the Stoics?
- Why have we turned repeatedly to them over the centuries?
- What explains the latest surge of interest in their ideas?
- Stoicism and stoicism
- Why the former is good and the latter is bad for your mental health
- How Marcus Aurelius’s meditations speak to all of us
- The Stoics’ sophisticated understanding of emotions
- Why strong emotions cause cognitive biases
- Why we are blind to our own biases
- Stoic practices and modern methods of cognitive distancing
- Stoic beliefs on wealth and money
- Were the early Stoics communists?
- How the Stoics could save democracy
Almost half of the crime now committed in the UK is now fraud, most of it taking place online. But only 1% of police resources are devoted to catching the fraudsters.
In the last New Money Review podcast I looked into how to bridge this alarming gap, exploring the mindset of the cybercriminal with my guest Sarah Armstrong-Smith.
In this episode I dig into a small, but disturbing and rapidly growing part of the multi-trillion electronic crime business—romance fraud.
My guest is Dr Elisabeth Carter, a criminologist and forensic linguist who works at the intersection of language and the law.
She’s recently published a book in which she shows how criminal gangs exploit language to lure and then cheat their victims.
Romance fraudsters exploit psychological weak points as well, making it look as if they are on the victims’ side. As a result, when the fraud is exposed, the victim suffers both monetary and psychological harm. Even worse, the rest of us then often blame the victims, says Carter.
Listen in for the next 30 minutes to learn more—and how best to protect yourself.
We cover:
- Why a romance fraud often seems normal at the beginning
- How fraudsters harness the context
- Why a fraudster invites protective responses from the victim
- Secrecy, isolation and urgency—trademarks of the crime
- Why romance fraud is a long con
- Why fraudsters give gifts
- Coercive control--the psychological harms of romance fraud
- How a romance fraud may escalate to physical threats
- Negligence or abuse—should banks compensate fraud victims?
Cybercrime is often more than just a demonstration of hacking skills.
The attacker could be motivated by money, but equally by nationalism, a search for notoriety or revenge. The victim may be random and innocent, but he/she could have been singled out because of an emotional weak spot. Following the crime, other human emotions, such as guilt or shame, may prevent the attack from being disclosed.
So when addressing cybercrime, we need to focus as much on psychology as on technology.
As internet-enabled fraud reaches ever more alarming proportions, in the latest New Money Review podcast I interview Sarah Armstrong-Smith, author of a new book called “Understand the Cyber Attacker Mindset”.
In the podcast, we cover:
- Why pandemics and war are great news for fraudsters
- The amplification effect of social media
- How disinformation campaigns drive polarisation in society
- Why nation-state hackers are well-resourced and focused
- Why cybercrime and fraud are the invisible crime
- How police forces are scrambling to catch up
- "Pig-butchering": blaming the victims of fraud
- Seeing frauds as human-to-human relationships
- Bolstering our defences as organisations and individuals
- The need for transparency about cyberattacks
- Why sanctions are most effective at the individual level
We need a new approach to building trust in economic and monetary systems, says Ian Grigg, my guest on the latest episode of the New Money Review podcast.
Grigg, a computer scientist and cryptographer, is one of the pioneers of internet-based money. In the 1990s, he worked on digital cash systems, which applied strong cryptography systems to money transfers.
Grigg also published articles on shared ledgers, triple-entry accounting, proof-of-work systems, smart contracts and social reputation systems well before the emergence of bitcoin.
In the podcast, Grigg talks about the ballooning problems of financial exclusion, money laundering and financial crime. He argues that the current US-driven approach to isolating bad actors and excluding them from the financial system is bound to fail.
Instead, says Grigg, we need to focus on rebuilding identity and money systems from the ground up, using models found in countries where trust in governments and financial institutions is largely absent.
To listen to the podcast, click here.
In it, we cover:
- How the cypherpunks became interested in digital money
- Why Satoshi Nakamoto was a cryptographer, not a cypherpunk
- Why strong cryptography caused a revolution in accounting
- The prospects for triple-entry accounting
- Why state identity systems cannot fulfil humans’ need for trust
- How community money can fill the trust gap
- The ballooning costs and falling returns of banks’ compliance efforts
- Why anti-money-laundering (AML) and know-your-customer (KYC) rules have failed
- The problem of false positives in AML monitoring
- Why governments cannot beat the money launderers—the OODA loop
- Building virtuous circles of trust—in communities, countries and globally
In the latest episode of the New Money Review podcast I’m joined by someone who says we’re in the middle of a historic battle between the public and private sector over money. And it’s one the state can’t afford to lose, he argues.
Our future global money will be digital, cheap and mobile, says Richard Holden, professor of economics at the University of New South Wales, Sydney, Australia, but it may be issued by a tech giant or an emerging economy rather than the Federal Reserve, European Central Bank or Bank of England. And that right to issue money will confer massive power on the winner of the digital currency race.
In his new book, “Money In the 21st Century”, Holden makes a passionate defence of state money and says the US central bank should get its act together and start issuing its own digital money, which he calls Fedcoin.
In the podcast, we cover:
- Why should we go cashless?
- What about those who rely on physical cash?
- How should we go cashless?
- Why is it a problem if a private currency wins the digital currency race?
- Why should the US issue a “Fedcoin”?
- Aren’t faster payment systems enough?
- What did we learn from Facebook’s digital currency experiment?
- China, the US and the geopolitics of digital money
- The future role of the banking system
In the latest episode of the New Money Review podcast I’m delighted to welcome Satyajit Das, a former investment banker, derivatives expert and author.
His book “Traders, Guns and Money”, published in 2006, remains one of the best books ever written about the world of high finance.
It’s been called “a wickedly comic exposé of the culture, games and pure deceptions played out every day in trading rooms around the world. And played out with other people’s money.”
Das went on to publish “Extreme Money” and “The Age of Stagnation”, in which a common theme is the high global levels of debt.
In the podcast, Das talks in detail about debt and the complexities of measuring it. He says all financial markets are now at risk from excessive leverage.
Japan, whose currency has recently undergone a big devaluation, may point the way ahead for all of us, he says.
We discuss:
- Why debt is like heroin
- How the marginal productivity of debt has been falling
- Reaching the “trust moment” in government bond markets
- How vulnerable are US Treasuries to a liquidity crisis?
- Why inflation may be higher for longer…
- …and interest rates could overshoot expectations
- Debt on debt and the challenge of understanding leverage
- How tech entrepreneurs borrow against equity
- Complexities in leverage chains—the example of Greensill
- Why non-bank financing of debt is particularly risky
- Why regulators struggle to monitor shadow banks
- Cross-border exposures in the Evergrande bankruptcy
- Why the “usual disinfectants”—better disclosure and more capital—no longer work
- How Japan finally escaped its debt trap
- Why sovereign wealth funds are buying up global infrastructure
- The end of financial engineering
Excitement over the prospects for artificial intelligence (AI) has driven US stock market valuations to a historic high. Can AI technologies deliver on their promise? Or is this yet another case of irrational exuberance?
In the latest New Money Review podcast I am joined by Eric Siegel, a former Columbia University professor who has taught computer science courses in machine learning and AI. Siegel, now a consultant, has just published a new book called “The AI Playbook—Mastering the Rare Art of Machine Learning Deployment”.
In the podcast, we explore some of the paradoxes surrounding AI: why this tech tool with apparently unlimited greatest promise may be the hardest to use, and why computers promising us greater autonomy may in fact require more supervision.
We cover:
- What is artificial intelligence (AI) and what is machine learning (ML)?
- What is generative AI?
- What explains the current AI hype?
- How predictive analytics can improve organisations’ performance
- Examples of successful machine learning in practice: UPS and credit scoring
- Why do so many ML projects fail to reach deployment?
- Why artificial general intelligence (AGI) is “the most compelling ghost story ever”
- Why computers that seem more human-like may give us less autonomy
- What goals can ChatGPT reach and where does it fall short?
- Why AI hype may be costly
Against an uncertain economic backdrop, one industry is booming.
Internet fraudsters are scamming more and more victims worldwide. Using increasingly sophisticated methods, they are now stealing even from the most prepared among us.
But while the number of online frauds and the volumes of money involved are increasing, so are the efforts to stop scammers.
In the latest New Money Review podcast, I’m joined by Simon Miller, director of policy and communications at Stop Scams UK.
In the podcast, we discuss:
- Why the volumes of scams and the money lost are significantly underreported
- How scammers target our insecurities and vulnerabilities
- Why scams have shot up governments’ policy agendas
- Why cross-sector data sharing can help prevent scams
- Should all scam victims get their money back?
- Who should compensate scam victims—banks, tech firms or telecoms?
- Why fraudsters like digital payments
- Why fintechs face higher compliance costs
- Why combating scams requires global coordination
- Why artificial intelligence (AI) is both bad and good news
- The trade-off between privacy and fraud prevention
- How to reduce the chances of being scammed
- Why the Israel-Gaza war will drive new charity scams
If you thought tax was boring, the latest New Money Review podcast will change your mind.
Dan Neidle was a top corporate lawyer for 23 years—ending up as head of tax at London law firm Clifford Chance.
But in 2022 he retired to set up a new think tank called Tax Policy Associates. Its aim is to improve UK tax policy and to improve the public understanding of the subject.
This nerdish-sounding mission statement gave no indication of the political fireworks Neidle’s new venture was shortly to ignite.
In July 2022, he accused then-Chancellor Nadim Zahawi of having avoided £4m in capital gains tax a few years earlier.
It later emerged that Zahawi was under investigation by his own subordinates in His Majesty’s Revenue and Customs (HMRC), as well as being the subject of a separate inquiry the National Crime Agency (NCA).
Other campaigners had tried to expose Zahawi in previous years but had been put off by threats of legal action—the UK’s infamous ‘strategic lawsuits against public participation’ (SLAPPs), which often silence investigative journalists.
But when Neidle received similar threats from Zahawi’s lawyers he called the UK Chancellor’s bluff. He went ahead and published his investigations. Zahawi was forced to back down.
In September 2022, incoming UK prime minister Liz Truss replaced Zahawi as Chancellor and gave him another ministerial position. But in January 2023, Rishi Sunak, who had replaced Truss in October, fired Zahawi from the UK government.
Citing the tax investigation which Neidle had been instrumental in bringing to light, Sunak said Zahawi had committed ‘a serious breach of the Ministerial Code’.
Tax Policy Associates’ more recent investigations touch on such sensitive topics as UK inheritance tax, the ‘carried interest’ tax exemption enjoyed by private equity firms and the alleged involvement of the family of another Conservative politician, Michelle Mone, in a cover-up relating to government contracts for personal protective equipment (PPE) during the coronavirus pandemic.
In the half-hour podcast discussion, I quiz Dan Neidle on a number of tax-related topics, including:
- Separating the goals of tax policy from the tax rules
- Whether the complexity of tax codes aids illicit behaviour
- Why the make-up of UK tax revenues has changed remarkably little over time
- Why the Liz Truss tax-cutting experiment went wrong
- Three ideas to improve UK tax policy (value-added tax, income tax and land tax)
- PPE contract fraud
- Failures in the UK’s system of corporate transparency
- Why Companies House is a giant fraud robot
- Why the UK remains a spectacularly successful venue for money laundering
- Coordinating the taxation of multinationals
- Why we should encourage the OECD’s ‘Pillar 2’ project
Financial markets go up and down. And they usually fall faster than they rise.
But when does normal financial market turbulence tip over into a systemic collapse? How should policymakers prepare and how should they react?
In the latest New Money Review podcast, I interview Steven Kelly, associate director of research at the Yale Programme on Financial Stability. The programme’s mission is to create, disseminate and preserve knowledge about financial crises.
In the podcast, we cover:
- What defines a systemic financial crisis?
- The common threads of financial crises
- Deposits, short-term debt and bank runs
- The historic scale of the 2023 US bank failures
- How safe is the global banking system?
- Safe assets, repo and US Treasuries
- The impact of rising interest rates on financial stability
- The risks in stablecoins
- Sustainability, ESG and climate risk
- Why current conditions are ‘stable but fragile’
In the latest episode of the New Money Review podcast I’m delighted to welcome Tim Congdon, an economist and leading advocate of monetarism.
After a successful career in the City, Tim became founder and chair of the Institute of International Monetary Research at the University of Buckingham.
I’ve followed his work for over three decades.
In the early 1990s, when I was working as a bond fund manager, the UK’s central bank was keeping interest rates at over 10% in an attempt to make sterling shadow the deutsche mark.
Tim forecast that UK interest rates would soon fall from double figures, based on sluggish money supply growth that, in his view, meant a recession was coming.
In the end, the Bank of England had to abandon its exchange rate target, sterling rates fell sharply and—as I had followed Tim’s advice rather than the consensus view—my fixed income clients did very well.
Now we seem to be repeating the same, or at least a similar story.
Listen to the podcast for more. In this episode, we discuss:
- Why Congdon became a monetarist
- How money supply figures gave advanced warning of inflation in early 2020
- Why central bankers’ interest-rate-only macroeconomics is wrong
- Why we should assess central bankers’ performance against money supply targets
- Why quantitative easing was necessary in 2008/09
- Why low money supply growth now presages a recession
- Why we will soon see falling interest rates
- Why the basic principles of monetarism are common sense
- How money supply targeting could help dampen boom/bust cycles
- Why CBDCs could affect the way we measure money
We often look at colonial empires as territories gained and occupied by nation states. But across four centuries, colonialism has above all been the business of companies, says my interviewee in the latest New Money Review podcast.
Philip Stern is the author of a new book called ‘Empire, Incorporated’, in which he explores the role of the company in British colonial history.
In it, he argues that corporations conceived, promoted, financed, and governed overseas expansion, making claims over territory and peoples while ensuring that British and colonial society were also invested, quite literally, in their ventures.
Colonial companies were also relentlessly controversial, frequently in debt and prone to failure, says Stern.
Like empire itself, says Stern, the joint-stock company was an elusive contradiction: it was both public and private; person and society; subordinate and autonomous; centralised and diffuse; immortal and precarious; national and cosmopolitan—it was a legal fiction with very real power.
In the podcast, we cover:
- How private enterprise fuelled the growth of the British empire
- Why the joint stock corporation underpinned colonial expansion
- The political and legal advantages of the corporation
- Why the 16th century saw an explosion in adventuring and speculation
- Why many US states were formed as chartered corporations
- How the East India Company became the first ‘company-state’
- Why the 1880s/1890s ‘scramble for Africa’ followed corporate models
- Tech giants and new virtual empires
- Natural resources, private military companies and today’s geopolitics
Tim Yunusov is hacker with a special interest in banking and payment systems. He’s also written a series of articles on hacking for New Money Review.
He’s been hired by financial institutions to see if he could breach their online banking systems and mobile apps, their card payment systems or their automated teller machines (ATMs).
In many cases he could.
In 2019, for example, he showed how to get around the limit on contactless card payments (£30 at the time in the UK) by altering the information exchanged by the contactless device and the card reader.
In a more recent case, Tim went around UK petrol stations using cryptocurrency-based payment cards and found he could refuel for free.
Tim has also written articles on faking digital identity, how to steal money from buy-now-pay-later (BNPL) schemes and whether someone in possession of your mobile phone can drain your bank account (spoiler: the answer is yes).
His article on BNPL fraud didn’t go down well with one of the main lenders, who complained to me by email that it was “a step-by-step guide that will encourage criminals further in their activity of stealing money from consumers”.
I responded that Tim was showing BNPL’s security flaws in the public’s interest.
But there’s clearly a fine line between ethical hacking and breaching systems with malicious intent. So I asked Tim onto the New Money Review podcast to talk more about his work.
In the podcast, we discuss:
- Why cybercriminals love cards and payments
- Why every new technology comes with its own security risks
- Why the US and Latin America are honeypots for payments fraudsters
- Why ransomware led to a boom in cybercrime
- Why fintechs and crypto firms are more prone to fraud than banks
- Why combining crypto and payment card technology created security risks
- The global divergence in payments systems
- Fake IDs and the future of hacking
- How to stay safe when making digital payments
In this episode I’m joined by Kyle Gibson, a senior staff researcher and writer at the Massachusetts Institute of Technology’s Open Learning initiative.
I’ve been following Kyle on Twitter for years, where he has been a consistently funny and well-informed critic of the crazy world of cryptocurrency.
Today he joins the podcast to talk about another tech utopia that’s in the headlines: artificial intelligence or ‘AI’.
Are the claims made for AI overblown? How are AI models developed? What human inputs are required? Who funds AI? What’s the link between AI and cryptocurrency? Can cryptocurrency fix AI? And what’s AI got to do with geopolitics?
Listen in for the next thirty minutes to hear more.
2023 has been a year of bank runs, most notably in the US. What’s going on? And how should we invest in response?
In the latest New Money Review podcast, I talk money, credit, banking and markets with Alex Gloy, founder and chief executive of Lighthouse Investment Management.
Listen in to hear us discuss:
- What is money?
- The role of credit in the monetary system
- Interest and the sustainability of debt
- Why a bitcoin-based monetary system can’t work
- Digital bank runs and the stability of banks
- Should governments underwrite all bank deposits?
- Why markets believe interest rates have peaked
- How Facebook jump-started central bank digital currencies (CBDC)
- Why central banks are walking a tightrope with CBDC
- Why investors should prefer real assets to bonds
Former banker Sean Tuffy tracks the impact of global financial regulation on the investment business. In recent years he’s been paying a lot of attention to cryptocurrencies, digital assets and tokenisation.
In the latest New Money Review podcast we cover:
- How the FTX collapse will impact financial regulation
- Why the US is playing catch-up over crypto rules
- Comparing the Bankman-Fried and Madoff frauds
- Why crypto bankruptcies are so complex
- Should we regulate crypto or let it burn?
- Why the EU is a test case for crypto regulation
- Stablecoins, money market funds and regulatory arbitrage
- Crypto FOMO and the regulatory perimeter
Since the coronavirus pandemic, many of us have switched from paying by cash to paying almost exclusively by card or digital wallet.
My guest on the latest New Money Review podcast is someone who argues that, contrary to the mainstream narrative, the boom in digital payments hasn’t benefited either businesses or consumers.
Management consultant Bob Lyddon says that UK payments have become the domain of a technocratic elite, which is working in tandem with big tech firms and the major payment card brands.
According to Lyddon , digital payments have enabled a new kind of fraud, taken an increasing cut of businesses’ revenue and made the use of cash increasingly difficult.
If the UK goes down the road of introducing a central bank digital currency (CBDC)—as most people expect—consumers could suffer further, says Lyddon, while the Bank of England and tech company insiders will become even more powerful.
It’s time to derail the digital payments boom, says Lyddon. Consumers can fight back by paying in cash and dealing only with local businesses.
Listen to the podcast to hear more on:
- How the UK payments industry got round regulations capping intermediaries’ fees
- Why digital payments cost businesses up to 7% of the face value of sales
- How faster payments have enabled authorised push payments fraud (APPF)
- Why consumer protections in digital payments are inadequate
- How Open Banking failed to achieve its main objective—account switching
- What explains Rishi Sunak’s enthusiasm for fintech and cryptoassets
- Why the “Britcoin” (UK CBDC) project is shot through with vested interests
- The bypassing of democratic process in the digitisation of money
- The flaws in the e-money “safeguarding” regime for client funds
It’s been a torrid year for investors in cryptocurrency but the worst is not over, says Carol Alexander, my guest on the latest New Money Review podcast.
In 2023 the crash will shift to decentralised finance (DeFi), predicts Alexander.
DeFi, she argues in the podcast, is repeating the mistakes of the centralised crypto lending schemes—like BlockFi, Celsius and Voyager—that faltered this year. And DeFi’s “magic money tree” is bound to fail in the same way, she says.
Alexander is professor of finance at the University of Sussex. Now focusing in her work primarily on crypto markets, she has worked in financial risk management, in mathematical finance and as an econometrician.
She also blogs regularly on crypto, digital money and quantitative finance.
In the podcast we discuss:
- The role of clearing, custody, margin finance and insurance funds at crypto exchanges
- Why Alameda’s exemption from FTX’s liquidation algorithm was a big deal
- Why retail investors shouldn't trade on crypto exchanges
- Why crypto exchanges are rigged to benefit professional traders
- Why “proofs of reserves” at crypto exchanges are worthless
- Why crypto exchange audits require stress tests and operational checks
- Why DeFi will be the focus of the crypto crash of 2023
- Staking as a service, yield farming and the magic money tree of DeFi
- Why Tether is so dangerous
- How Tether and Binance are dollarising the world
- Why Tether and Binance may fight a stablecoin war
An auditor verifies the accuracy of a company’s financial records. He or she is supposed to spot any material misstatements, including those due to fraud or errors.
And yet in two of the largest financial frauds in history—the 2021 collapse of German payment firm Wirecard and the recent bankruptcy of crypto exchange FTX—auditors had placed a stamp of approval on the companies’ accounts.
How did they get things so badly wrong?
To find out how audits can mislead I’m joined on the latest New Money Review podcast by Francine McKenna.
Francine has worked for many years as an auditor and columnist writing about accountancy. She is currently a lecturer on accounting at the University of Pennsylvania’s Wharton Business School.
Listen to the podcast to hear us discuss:
- What happened at FTX
- Why FTX’s audit practices raised red flags
- The dangers of related party transactions
- The Tether and Circle stablecoins
- Why the 2002 Sarbanes-Oxley Act failed to stamp out corporate fraud
- Regulatory capture and political corruption
- Why audit is a process, not a test
- How investors can protect themselves
We are living in the golden age of fraud.
But we’re also in a golden age for data leaks.
In the last six years we’ve seen a cascade of information from places like Panama, Switzerland and Dubai—these are countries where lawyers, accountants and bankers promise secrecy while serving the rich and powerful.
The tens of millions of leaked documents have helped shine light on the financial affairs of the wealthy and well-connected. But they’ve also opened the ill-gotten gains of many corrupt politicians and bureaucrats to public view.
For every money movement through a tax haven, there’s a digital record that can be traced by a growing army of citizen journalists and activists.
In the latest New Money Review podcast I’m joined by someone who’s helped organise that activist army and tell some of their data-driven stories.
Paul Radu is an investigative journalist and co-founder of the Organized Crime and Corruption Reporting Project (OCCRP).
Paul is a winner of the Daniel Pearl Award, the Global Shining Light Award, the European Press Prize, and the Skoll Award for Social Entrepreneurship. He was also part of the Panama Papers team that won the 2017 Pulitzer Prize in Journalism.
When oligarchs, corrupt politicians or criminals seek to move their money out of the public eye, the OCCRP is there to shed light on what they are doing.
This is a global and a growing problem. The amounts being looted are increasing exponentially, reaching trillions a year. The money launderers are becoming ever more sophisticated in hiding what they are doing. There’s a global network of bankers, accountants, lawyers and PR agents supporting them. And in many countries, the oligarchs and criminals are effectively above the law.
This is a topic we should all know something about. Listen in for a fascinating discussion of large-scale financial crime, including:
- Why transnational organised crime groups are now more powerful than states
- How investigative reporting can combat their influence
- Why criminal money flows often follow a pattern
- How the OCCRP discovered the ‘laundromats’ that service multiple criminal groups
- Why banks didn’t notice the problem at the outset
- Why criminals are some of the cleverest entrepreneurs
- How money launderers exploit geopolitical rifts
- Why some countries with low corruption scores are enablers of financial crime
- How open-access real estate and property registries can combat money laundering
- Criminals’ Achilles heel—where to place their stolen money
- The Russia/Ukraine war and political grand corruption
- Coping with the enormous scale of leaked data
- Staying current with ‘follow-the-money’ techniques
- How a new generation of citizen investigative journalists can help
There are periods in human history when money and foreign policy converge—and this is one of them, says Paul Tucker, my guest on the latest New Money Review podcast.
Tucker, deputy governor of the Bank of England for several years in the aftermath of the 2008 financial crisis, is now a fellow at Harvard University’s Kennedy school of public policy and government.
During what is his first-ever podcast interview, Tucker talks about his new book, ‘Global Discord: Values and Power in a Fractured World Order’.
In the book, Tucker lays out principles for a sustainable system of international cooperation, showing how democracies can deal with China and other illiberal states without sacrificing their deepest political values.
Drawing on three decades' experience as a central banker and regulator, Tucker applies these principles to the international monetary order, including the role of the US dollar, trade and investment regimes and the financial system.
During the podcast, we discuss:
- Why economic policy and foreign policy are converging
- Do US/China interdependencies make the world safer or riskier?
- Proxy wars, Russia/Ukraine and the wider US/China conflict
- The relevance of the 18th century competition between England and France
- Why shadow banking policy should be part of national security policy
- Why central banks need to disclose on what terms they will bail out shadow banks
- The recent liability-driven investment (LDI) crisis in the UK
- How to resolve failing cross-border financial institutions
- Why the monetary architecture faces its biggest changes in 250 years
- Ensuring public oversight of digital currencies
- Why G7 governments should set out design principles for CBDCs
- Why the West cannot afford another financial crisis
In his 2017 book, “Before Babylon, Beyond Bitcoin”, David Birch predicted that we would all live in a world of multiple competing currencies.
And communities, said Birch, would be one of the five main future issuers of money (along with four other “Cs”—central banks, commercial banks, cryptographic protocols like bitcoin, and companies).
But community currencies have so far struggled to get off the ground.
In the UK, attempts to launch a local version of the pound in Brixton, Bristol and elsewhere have failed.
Bristol’s subsequent idea to launch a new app called Bristol Pay, which would reward community initiatives, is stuck at the funding stage.
But there are still plenty of attempts to build local money systems from the ground up.
In the latest New Money Review podcast, California-based non-profit and social entrepreneur David Anderson talks about community currencies.
Anderson is president and lead volunteer at Simbi, a California-based non-profit focused on community and individual development.
Simbi provides a web-based community platform to help non-profit projects find and reward volunteers. It aims to promote community development, mutual aid among those in need and the development of individual skills.
In the podcast, we discuss:
- Why local currencies are nothing to do with crypto
- Why community currencies need incentives to work
- Separating incentives from speculation
- The Simbi community currency model
- Community development and non-profit models
- Can community money compete with state, bank and bigtech money?
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 society
- The ancient debate over whether money should pay interest
- Why the lender at interest is ‘selling time’
- Enlightenment thinking, natural rights and interest on loans
- Low interest rates, credit bubbles, financial manias and crashes
- Why John Law’s 1720 Mississippi scheme prefigured quantitative easing
- How Ben Bernanke turned the Fed into the world’s largest hedge fund
- The parallels between financial markets and complex natural systems
- The UK’s leveraged pension fund debacle
- Why the lowest rates ever created the everything bubble
- Iceland’s post-2008 debt jubilee
- Capital controls and why financial globalisation is coming to an end
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 banks
- Why stablecoins pose a real challenge for policymakers
- Why the instantaneous settlement of digital money opens a can of worms
- The intraday float of the banking sector and the fungibility of money
- Should 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 collateral
- Why collateral moves around the system more slowly than pre-2008
“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 internet
- why eBay had to abandon its laissez-faire approach to managing its marketplace
- why the internet giants’ CEOs are now more powerful than heads of state
- how the digital gatekeepers now regulate markets for private profit
- how cryptocurrency lost its P2P promise and recreated the banking system
- addressing the bigtechs’ economic and political power
- the limits of public utility regulation and competition law
- how nations can deal with transnational platforms
- why internet platform users may end up governing these systems
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 hub
- Rapper Akon’s plans for crypto cities in Senegal and Uganda
- How Russia is projecting political power into Africa using cryptocurrencies
- Why Binance’s CEO is meeting the world’s politicians
- Disaster capitalism and cryptocurrency
- Natural resources and the new crypto colonialism
- Why many US and UK politicians are on the crypto lobbyists’ payroll
- How governments and regulators can fight back
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.
Record temperatures, droughts, war, COVID, bans on movement and meeting…it’s been a witches’ brew of events. Is nature telling us that humans have overburdened the planet?
Not yet, says Amlan Roy, author of “Demographics Unravelled” and our guest on the latest episode of the New Money Review podcast.
The global population can still grow further without triggering more damage, says Roy: technological advances and better education could let us add 2bn more humans by 2050, he argues.
The study of human traits such as population numbers—demographics—is the single most important subject that no one pays attention to, says Roy, citing management guru Peter Drucker.
But when people do pay attention to demographics, most then miss the point, Roy says in the podcast.
That’s because we all tend to focus on a single statistic—age—only.
“An 80-year-old in Japan is different from an 80-year-old in Sweden, Italy, Greece or Germany,” says Roy, citing the five countries in the world with the oldest average population.
“Consumption is different in those countries, workers are different, education is different and institutions are different.”
We need to research and understand these broader traits of humans to see what drives economies and financial markets, Roy says in the podcast.
Roy, a former investment banker, is a research associate at the London School of Economics and a fellow at the Institute and Faculty of Actuaries.
Listen in to a 30-minute discussion of:
- Why fewer workers are supporting more over-80s
- Why birth rates in both developed and developing countries are falling
- When the global population will peak
- How to meet the sustainability challenge
- Why we all need a hug
- Why different countries need different immigration models
- The importance of bridging the gender gap
- Why demographics drive GDP growth, inflation, debt and asset prices
- The pernicious effect of negative interest rates
Whoever dominates the world’s energy markets rules global politics.
Coal fuelled the expansion of the British empire. Control over oil flows helped the US dictate the settlement after World War 2.
Now we’re entering a more turbulent period. The climate crisis is upon us, meaning we have to slow—even cut—greenhouse gas emissions. This year, Vladimir Putin’s weaponisation of energy supplies has raised the stakes dramatically.
But as we race to replace oil, gas and coal with renewable energy technologies, it’s China that will dominate both energy and money during the next century, says John Bowlus, guest on the latest New Money Review podcast.
In the podcast, Bowlus also says he believes the end of the hydrocarbon era will bring two centuries of global economic growth to an end, shrinking the world population.
“The growth dynamic—that whole paradigm—is unsustainable,” he says.
Bowlus, an academic at Turkey’s Kadir Has university, researches how energy, especially oil, has shaped global politics, and how geopolitical risk and technological developments affect national and global energy regimes.
Listen in to hear a broad-ranging discussion of energy, power and currency regimes. We cover:
- The difference between the 1970s energy price shock and today’s crisis
- The global energy market power shift from the US to China
- China as the leader in renewable energy technology
- Why volatility in geopolitics is related to the energy transition
- How coal and oil helped drive past prosperity
- Why the climate crisis will shrink both population and economies
- The use of sanctions to defend the dollar and US oil markets
- The shift from hydrocarbons to renewables will end the dollar era
- The coming expansion of nuclear power
Take any story in the daily business news and there’s likely to be a securities finance angle to it, says Roy Zimmerhansl, my guest in the latest episode of the New Money Review podcast.
Under his original plan to buy Twitter, Elon Musk, for example, was supposed to pledge Tesla shares worth $62.5bn as part of a margin loan. The debt was to be secured by that Tesla stock, which could be seized by the lenders in the case of default.
Musk is now trying to back out of the deal. But such repurchase (“repo”) and securities lending agreements are a critical but little-understood part of the financial markets.
Roy is a securities finance expert and someone well-equipped to throw light on this area. A 42-year veteran of the financial markets, during his career he has specialised in global custody, securities lending, prime brokerage and securities finance.
He was in charge of securities lending for several banks and broker-dealers and now runs his own consulting firm, Pierpoint Financial Consulting Ltd.
In the 40-minute podcast, Roy tells listeners why we should all be paying closer attention to securities finance. We cover:
- Why securities lending and repo operations are critical to wholesale finance
- How lending and repo can lower the cost of finance
- Why your pension fund and insurer may be lending their shares and bonds
- How the 1982 Drysdale default changed bond lending practices
- How a US bankruptcy code change in 1984 sparked huge growth in repo
- Why Roy turned down Barings bank as a potential client
- Why having good collateral won’t protect you from a bad counterparty
- Short selling bans, frozen assets and market liquidity
- Why 2008 was the high-water mark for repo and securities lending
In 2008, a few obscure three-letter financial products—MBS, ABS, CDOs and SIVs—set off the biggest financial crisis in history.
Now, could a new alphabet soup of DAOs, NFTs, Dapps, DMMs and DEXes pose similar risks to financial stability?
Yes, says Hilary Allen, our guest on the latest New Money Review podcast. Allen is a professor at the American University Washington College of Law, where she teaches financial regulation.
The latest acronyms—for decentralised autonomous organisations (DAOs), non-fungible tokens (NFTs), decentralised applications, market makers and exchanges (Dapps, DMMs and DEXes)—all come from the decentralised finance (“DeFi”) market.
DeFi is a $210bn market of financial services built on top of cryptocurrency networks like ethereum.
DeFi activities parallel those undertaken in the traditional financial system, such as trading, lending and investing—but without banks, central trading platforms or investment firms.
The sector includes a number of automated lending protocols, such as Aave, bZx v2, Compound, Maker, Polygon Aave and Venus. It also contains automated market making protocols, such as Uniswap, Curve, and Balancer, and automated investment vehicles, such as Yearn and Convex.
But according to Allen, DeFi increasingly resembles the ‘shadow banking’ sector that triggered the 2008 meltdown—and very few people are paying attention.
Allen says that three key risks in DeFi—heightened leverage, rigidity, and the potential for investor runs—are the same as those that grew out of control fifteen years ago.
“What has really struck me the most,” Allen says in the podcast, “is how quickly we forget.”
On 28 February the US, EU and UK froze most of the Russian central bank’s $630bn foreign currency reserves, responding to the country’s invasion of Ukraine.
In the words of the UK government, the freeze aimed “to prevent the central bank of Russia from deploying its foreign reserves in ways that undermine the impact of sanctions imposed by us and our allies”.
But around 20 percent of the CBR’s reserves—the portion held in gold—could not be touched by sanctions.
That’s because Russia’s gold is held within the country. In theory, it is still free to use its gold as it wishes. Although Russia will struggle to find a counterparty in a Western nation to deal with it, it may find willing buyers elsewhere.
In the latest New Money Review podcast, John Read, chief market strategist at the World Gold Council, talks about gold’s role as the original censorship-resistant form of money, as well as its place in an investment portfolio.
John has over 30 years’ experience in the gold market as a hedge fund manager, a precious metals strategist, an equity analyst and as an employee of a gold mining firm.
He has a degree in mining engineering from the Royal School of Mines, a constituent of Imperial College, London.
Listen to the podcast, “the future of money in 30 minutes”, to hear John comment on the following topics:
- What’s driven the recent gold price rise?
- The role of central banks in the gold market
- Is Russia’s gold subject to sanctions?
- Gold market dislocation—what happened in March 2020?
- The physical delivery of commodities sets the price
- Only 10% of large investors own gold as a strategic allocation
- How gold impacts a portfolio’s risk-adjusted returns
- Will any country ever link its currency’s value to gold again?
- The dollar’s reserve currency status
- Gold as the ultimate store of value
- How to invest in gold
- How to keep track of gold market sentiment and trends
“In the case of Putin we are in this very dangerous place. We have reacted so aggressively and moved so far, so fast that he is personally humiliated under anything other than absolute victory in Ukraine. That makes it impossible for him to back down. It’s a very dangerous negotiating position to have put yourself into.”
In the latest New Money Review podcast, Mike Green, chief strategist at Simplify Asset Management, discusses geopolitics, game theory, market structure and risk.
Green believes our policymakers have created dangerously unstable financial, political and social systems by preventing diversity—whether that’s opinions on coronavirus, the Ukraine war or the way equity markets are structured.
“No-one wins in these unstable systems,” Green says in the podcast.
“Human society depends on relative stability to flourish but we’re creating conditions of extraordinary instability. And those marginally past the point of subsistence are the most likely to be damaged.”
Green is a former hedge fund manager, having worked for Peter Thiel’s family office and in a start-up seeded by Soros Fund Management.
His work on the changing structure of equity markets has been presented to the Federal Reserve, the BIS, the IMF and numerous other industry groups and associations.
Listen to the podcast, ‘the future of money in 30 minutes’, to hear Green discuss:
- How the rise of index investing has changed markets
- The risks of momentum-driven trading
- Coyotes and rabbits—how we’ve destroyed market heterogeneity
- Growing absolute scarcity in the world’s raw materials
- Cold War revisited—the new global competition for client states
- The rise of China—are we at the end of the dollar regime?
- Are any asset markets cheap?
- The sanctions craze and the lost art of diplomacy
- Why cornering Putin is dangerous
- Why the marketing of cryptocurrencies has been criminal
- Why decentralised finance is promising but needs proper governance
Over the last decade India has undertaken arguably the most ambitious digitisation programme of any country in the world.
Its so-called ‘India stack’—a public digital infrastructure that allows governments, businesses, start-ups and developers to interact—is the largest open software platform of its kind.
Nearly all of India’s 1.4bn citizens are now included in a biometric digital identity system, which is linked to a real-time payments network and a credential management platform.
India’s payments system has been called the most advanced in the world, and recent events have shown how far-sighted its planners were.
Since the coronavirus pandemic, more and more of us have turned to digital forms of payment, discarding cash in the process.
To make sure they stay relevant in the digital money era, governments around the world are now racing to introduce state digital currencies (also called central bank digital currencies or CBDC).
Some say China is well ahead in this global competition—it’s been trialling the new digital yu’an at the winter Olympics.
The US is playing catch up but in a serious way—the Federal Reserve has released two important papers about CBDC in the last month.
But India is also now firming up its digital currency plans. The country’s finance minister said earlier this month that India will introduce a new CBDC later this year or in 2023.
To discuss the digital rupee and its likely impact, I’m joined on the latest New Money Review podcast by Tanvi Ratna, a technologist and policymaker who’s based in Bangalore.
Tanvi, who is founder of a think-tank called Policy 4.0, has worked with both the US and Indian governments on technology policy and is closely involved with India’s digital currency debate.
In the podcast, we discuss:
- The origins of India’s digitisation push
- Aadhaar—India’s state digital identity system
- The India stack as a public infrastructure
- India as a rising fintech hub
- Digital currency and monetary policy
- The design of the digital rupee
- India’s plans to tax cryptocurrency
- The geopolitics of CBDC—the US, China and India
- Currency convertibility and international usage
- How India may lead in the global debate over digital privacy
In the last decade we’ve seen four massive leaks of data from offshore financial centres: the Panama, Paradise and Pandora papers and the FinCEN files.
No-one knows who leaked this information. But the data made one thing crystal-clear: the world’s rich and powerful, including its wealthiest criminals, love using shell companies to hide their assets.
And it’s not just a few small, sunny Caribbean or Pacific islands that make these financial flows possible.
It’s also corporate vehicles in places like the UK, where you can set up a limited company for as little as £12.
In the recent Danske Bank scandal, €200bn of suspicious transactions from the former USSR flowed through the Estonian branch of the Danish bank between 2007 and 2015.
In nearly all these flows, British limited companies and partnerships, owned by unknown entities, were critical in helping launder the money.
In the latest New Money Review podcast, one of the world’s leading experts talks about the mechanics of money laundering.
Graham Barrow has worked with many banks to help combat illicit money flows.
He is also co-host of a brilliant podcast called the Dark Money Files, which I spent a lot of time listening to last year.
The UK, where I live, keeps saying it will crack down on the abuse of shell companies.
More cynical voices argue that London is so dependent on dark money it has no real incentive to do so.
So far, the cynics seem right.
The UK government has failed to act on its promises to tighten up the rules on identifying the owners of companies.
But maybe all is not lost. Listen to Graham for thirty minutes and make up your own mind.
In the podcast discussion, we cover:
- What is dark money?
- Who benefits and who suffers from dark money flows?
- The impact of recent data leaks
- Professional money launderers—the enablers of dark money flows
- The transnational nature of money laundering schemes
- Why limited companies and partnerships are the money launderer’s tool of choice
- The dark money soup—UK legal entities controlled by offshore companies
- The need for UK Companies House reforms and a UK property ownership register
- Why only an idiot would launder money through cryptocurrency
- Why the information revolution will help combat dark money flows
- Explaining money laundering to the average citizen
- The money laundering connections surrounding the 2020 Beirut blast
In the latest New Money Review podcast, technologist Martin Walker tells Paul Amery how the cryptocurrency bubble has wasted huge amounts of capital and is only one of several interconnected manias.
By contrast with the dot.com bubble of 1999/2000, says Walker, little of use may be left behind from the current irrational exuberance.
Here are some excerpts from the podcast:
‘Decentralisation’ in blockchain is meaningless
“The word ‘decentralisation’ in the fintech and blockchain world is a very confusing term. It’s turned into an excuse to avoid accountability for running businesses and financial infrastructure.”
What is bitcoin?
“Bitcoin is a rather bizarre payments infrastructure that uses a private currency. It has nothing to do with any of the problems that we saw in the 2008 financial crisis.”
Regulators struggle
“It’s frustrating on many levels that regulation always seems to be a long way behind the curve. Someone used the expression: ‘The regulators tidy up the bodies, rather than stopping people getting killed’.”
“But you can’t just put things at the door of regulators. They are always on the back foot when innovation occurs. And they can only do what’s determined by the law. There’s a responsibility on politicians and governments to look at what’s going on. When you have things bubbling away and potentially causing problems the regulators need to have the appropriate powers.”
“There’s a degree of reluctance by many regulators to be seen as anti-innovation. That’s one of the things I really find disturbing about the current age. The number one duty of the regulator should be to protect the public and the financial sector.”
The crypto lobby is powerful
“The crypto lobby has become so rich and so powerful that you’ve got senators, congressmen, MPs and even whole countries brought in.”
New rules will follow the crash
“To get things under proper control you need some degree of international cooperation. But I don’t see that happening until you’ve had a really major crash, where a lot of ordinary people have lost their money.”
Conflicts of interest in cryptocurrency
“There are so many conflicts of interest [in cryptocurrency]. In the traditional financial markets, an exchange can’t margin finance its own customers. A traditional exchange does not take trading positions against its customers. You have to have a level of operational resilience. But in the crypto markets, if prices go the wrong way, all the exchanges mysteriously switch off.”
Tether is propped up by crypto insiders
“The biggest weak point in the cryptocurrency ecosystem is stablecoins, notably Tether. It’s essentially a major bank and payments company that has no real financial regulation. I find it quite bizarre that if you compare Tether to its predecessors, like Liberty Reserve and E-Gold, in the past there were criminal prosecutions of those running these unregulated quasi-banks.”
“There’s a relatively [small] number of players in big crypto who really control this industry: the big exchanges, Tether, the mining pools and large investors. There’s no reason for a tether token to be worth a dollar. But it’s in the interests of a small group of very rich people to maintain this illusion.”
Many bubbles will burst together
“What’s different between now and the dot.com boom is that now we have a bubble of bubbles. There’s the fintech bubble, the crypto bubble, a meme stock bubble, there’s a real estate bubble, an electric vehicle bubble. And there are degrees of interconnection between them. It’s just mind-blowing to consider how this might play out.”
“Who would think that you’d have the electric vehicle bubble connected with the crypto bubble? And we do, thanks to Elon Musk.”
“There’s been a massive misallocation of capital. That money has just been wasted.”
In the latest New Money Review podcast, psychotherapist Tony Marini talks about the growing problem of addiction to cryptocurrency.
Marini, a specialist in gambling addiction, works at the Castle Craig hospital in Scotland.
In the podcast, he says he’s seen a sharp rise in cryptocurrency-related self-destructive behaviour since the outbreak of the coronavirus pandemic—a period during which many of us have been stuck at home in front of a computer screen.
Marini explains how addiction to gambling often goes hand in hand with other addictions, such as to drugs or alcohol.
He says that only increased awareness of the risks resulting from gambling can help combat the problem. In the podcast, Marini calls for better society-wide education on the risks of trading highly volatile crypto assets.
During the recording, Marini and New Money Review editor Paul Amery discuss:
- How gamblers are often hooked by an initial big win
- Confusing skill with chance
- Chasing losses, obsession and self-destructive behaviour
- Dependency, the desperation phase and cross-addiction
- Gambling and suicide risk
- Accepting there’s a problem
- Building healthier relationships and behaviours
- Risk-taking and human nature
Tony Marini on addiction, gambling and cryptocurrency
“Addiction could be an escape from reality, grief or trauma. But once you cross the line into addiction you cannot go back—whether that’s alcohol, drugs or gambling.”
“Over the last eighteen months a lot more people have been working from home with two screens: one for their crypto and gambling, the other for work. And many are crossing over into other addictions, such as drugs and alcohol. You’re alone a lot and you think you’re going to perk up with an escape from reality. There’s a tenfold increase in people investing in cryptocurrency.”
“People are getting all this information on the internet from others who are saying, ‘I’m the expert, I can make you lots of money’. It’s absolutely ludicrous—this is gambling, pure and simple.”
“Those addicted to gambling are three times more likely to commit suicide than those suffering from any other addiction. I’ve seen so many people lose their lives to this. It’s just heart-breaking. There really should be a lot more done about this.”
“Education is the way forward. In schools, colleges and universities young people are told a lot about the risks in drugs and alcohol, but not about gambling, and especially not about cryptocurrency and where it can take them.”
“When we are buying or trading in cryptocurrency, we are gambling straight away. This is not regulated. There are lots and lots of people out there who want to take your money.”
A central bank policy mistake is likely to cause the next financial crisis, says Dan Awrey, my guest on the latest episode of the New Money Review podcast.
“The combination of near-zero interest rates and the restructuring of the financial system around near-zero rates means that central bank policy surprises are likely to be the match that lights the fire,” says Awrey, a professor of law at Cornell University, where he specialises in financial regulation.
Formerly a legal counsel to an investment management firm and a practising securities lawyer, Awrey has conducted research for and advised governmental organisations around the world.
These include the Bank for International Settlements (BIS), the UK Treasury, the UK Financial Conduct Authority (FCA), the Commonwealth Secretariat and the European Securities and Markets Authority (ESMA).
He is also a founding co-managing editor of the Journal of Financial Regulation, published by Oxford University Press.
I interviewed Dan Awrey a few days after three US government agencies issued a report calling for new laws to rein in the chaotic growth of the dollar stablecoin market. He was cited in the report as an independent expert.
(Stablecoins are digital tokens designed to track a specified fiat currency and whose value is backed by holdings of assets denominated in that currency. Given their ease of use and transfer, they represent an increasing threat to bank deposits).
In the 30-minute podcast discussion, we talked in detail about stablecoins. But I also asked Dan Awrey to explore some of the key policy issues facing financial regulators in the current era of near-zero interest rates, high levels of speculation and accelerating technological change.
Listen in to the podcast to hear us discuss:
- What went wrong in 2008—and have we fixed it?
- The perennial challenge of shadow money and shadow banking
- Structural weaknesses in the US government debt market
- Why near-zero interest rates distort financial regulation
- Should cryptocurrency be subject to the financial system’s rules?
- Stablecoin regulation and the safety of payments
- Stablecoin reserve policy and credit risks
- Unbundling banking, payments and money
- Digital currency in the US, Europe and China
- Are CBDCs the wrong approach to digital money?
- Payments data, social policy and the role of the private sector
- Why a central bank mistake is likely to spark the next financial crisis
Cryptocurrency is an experimental technology. But it’s also now a $2.5trn market with growing and increasingly complex linkages to the traditional financial system—whether through ETFs, the futures market, central clearing, repo or prime brokerage.
So who’s in charge if things go wrong, as they inevitably will at some point?
To answer that question, I invited Angela Walch, a professor of law at St. Mary’s University in San Antonio, Texas, and a research associate at the Centre for Blockchain Technologies at University College London, to the New Money Review podcast.
Walch was one of the first academics to look in detail at the governance of cryptocurrency, a topic often downplayed by promoters of the idea that cryptocurrency networks are decentralised, immutable and trustless.
In a recent testimony to the US Senate committee on banking, housing and urban affairs, Walsh warned that “flaws in academic, industry, and public understanding of cryptocurrencies can taint policy decisions, embedding risk to be revealed when reality bites.”
Listen to the podcast to hear Angela Walch share her views on:
- Why the reality of cryptocurrency governance doesn’t match the narrative
- Cryptocurrency and systemic risk
- The declining trust in financial system governance
- How decentralised is bitcoin and DeFi?
- Where hidden power resides within cryptocurrency systems
- Past episodes of critical bugs in bitcoin and ethereum
- Insider trading and information asymmetry in crypto
- Applying the existing infrastructure rules to cryptocurrency
- Why we need a new regulator for cryptocurrency—and fast
- Why crypto system operators gain limited liability by default
Stablecoins—digital currencies pegged to existing money, like the dollar, euro, pound or gold—are the hottest topic in finance.
From crypto-market dollars like Tether and Circle to Facebook’s Diem project and tomorrow’s central bank digital currencies (CBDC), many stablecoins are staking a claim to be the payments medium of the future.
But stablecoins are not a new idea, says Peter Wierts, a senior economist at the Dutch central bank, an associate professor at the Free University and our guest on the latest New Money Review podcast.
In fact, their design closely resembles the money issued by the 17th/18th century Bank of Amsterdam, says Wierts, who authored a paper on the topic last year with economists from the Bank for International Settlements (BIS).
Bank of Amsterdam money was the dominant global currency of its time, admired by Adam Smith and Voltaire.
But eventually it went wrong—and in a way that carries lessons for today’s stablecoin operators, says Wierts.
Listen in to the podcast to hear Wierts and New Money Review editor Paul Amery discuss:
- What ‘money’ means in a digital age
- How the Bank of Amsterdam resolved the problems of currency competition
- Why the Bank of Amsterdam is relevant for today’s stablecoins
- Stablecoins’ asset backing and why it matters
- Why the market value of stablecoins can differ from their intrinsic value
- How a stablecoin run can occur even with 100% backing
- Why the Bank of Amsterdam started providing credit
- How the governance of the Bank eventually failed
- Stablecoin governance and the importance of incentives
- The timetable for the introduction of European Union’s new digital currency
“We’ve never been so busy,” says Nick Furneaux, a digital forensic investigator who specialises in cryptocurrency crime.
Furneaux, our guest on the latest New Money Review podcast, works with law enforcement bodies and large corporates around the world, focusing on ‘the challenge of investigating crimes involving cryptocurrency’.
Listen to the podcast to hear Nick and New Money Review editor Paul Amery discuss:
How cryptocurrency created new avenues for crime
“What bitcoin did was to provide a method of transaction that at its core is anonymous. This has given the criminal a new method to mix and hide funds. It’s more challenging for law enforcement to deal with.”
“70-80 percent of arrested criminals have cryptocurrency wallets on their phones or computers. Our phone rings off the hook with calls from people who have lost money in scams, frauds and phishing attacks. On the ground, we’ve never been so busy.”
“A sizeable percentage of bitcoin traffic—high teens—comes through the TOR network. One has to ask why. I’d suggest that the number of people using TOR for libertarian reasons is small in comparison to the number of criminals using TOR to obfuscate the movement of funds.”
How criminals launder cryptocurrency
“There are people who are willing to launder crypto for you. They’ll just charge a huge percentage and give you the cash.”
The continuing frictions between cryptocurrency and banks
“We had to buy £500 of ethereum the other day for a class I’m teaching on DeFi and decentralised exchanges—the bank froze my business bank account until I could explain why. The banks are very twitchy with any sort of crypto movement.”
Why retail investors need to practise self-defence
“If you go back five years, an awful lot of the money in crypto was criminal. Now there’s a lot of retail money. And people are going to want to deal with companies that will make restitution if things go wrong.”
“If you’re going to get into cryptocurrency, make sure you understand the technology. Make sure you know the difference between a public and private key, and what a bitcoin address is compared to the private key that controls it. If you cannot understand that, do not get into crypto—you will just have ‘victim’ tattooed on your forehead.”
The global challenge of solving cryptocurrency crimes
“I don’t know how we solve the international issue. We’ve got countries that don’t care, and other countries that don’t have the people or the funds to train their law enforcement and legislators. We get calls from police forces around the world who can’t afford the blockchain forensic tools.”
Why ethereum, DeFi and NFTs are the new frontier of crypto fraud
“The biggest issue we are seeing criminally is what we generically term ‘crypto 2.0’—the ethereum blockchain with all of its tokens, and then the DeFi contracts. If a criminal stakes money into a DeFi contract and does so-called yield farming, they are earning clean money.”
“We’re seeing art fraud associated with non-fungible tokens (NFTs). You take a picture you own to auction, buy it from yourself for $100k, pay the commission, then put it back up for sale for $60k and sell it to a third party who thinks it’s cheap.”
The combination of finance and technology is driving us towards the biggest change in human history in 500 years, says Viktor Shvets, my guest on this week’s podcast.
Shvets, a Hong Kong-based investment banker with Macquarie and a widely followed markets analyst, specialises in the intersection between finance, technology, politics and history.
Viktor’s background—he grew up in the former USSR before moving to Australia in his early 20s—has given him a unique perspective into the great geopolitical shifts we’re living through.
He’s recently turned that perspective into a new book, “The Great Rupture”, a study of the profound impact of technology and financialisation on our collective future.
I found the book erudite, thought-provoking, convincing and at times a little scary.
Here are some excerpts from the podcast discussion:
The past is no longer a guide to the future
“The recipe for success over the last 500 years is now changing very rapidly.”
Economic success, personal and political freedom
“Is it possible to be wealthy, prosperous and even innovative even though you don’t enjoy the same degree of freedom? The lessons of the last five centuries are that without freedom you can’t have those things.”
The industrial age and the information age
“There are fundamental differences between the two. In the industrial age, capital was scarce, most activities were highly capital-intensive and labour was a primary driver of productivity. That’s why you needed literacy and a skilled workforce.”
“In the information age, we are drowning in capital and we have 5-10 times more than we require. Most activities these days are not that capital-intensive. The capacity constraints are much more fluid. And labour is losing marginal pricing power.”
Capitalism is over
“What we have right now is not capitalism. It’s just a question of how we define it and what are the rules for the new world.”
Financialisation is driving us towards a black hole
“We are rushing towards a black hole. On the other side, a different world lies. The two forces pushing us there are financialisation and the information age.”
“Any idea gets very easily funded. The low cost of capital is like pouring kerosene on the bonfire of the information age. It’s accelerating the progress of technology.”
Central bank money creation is no longer inflationary
“The more you grow the money supply faster than nominal GDP, the more you create disinflation rather than inflation. Money is getting stuck in the cloud of finance, rather than reaching the ground where people live.”
The end of the corporation
“In the future, the idea of having a long-living corporation, transacting in its own name, will seem ridiculous.”
Freedom may be optional
“The mixture of technology and financialisation could lead us into a world where freedom becomes optional.”
“Baby boomers’ obsession with freedom, choice and efficiency led to many bad outcomes, from environmental degradation to income and wealth inequality. Going forward, we will have less freedom. An emphasis on fairness and equality will be far more prevalent.”
Curtains for Facebook, Amazon and Netflix?
“The large digital consumer platforms are sunsetting. They’re suffering from diseconomies of scale and they are going to be attacked from a political, regulatory and societal level, as well as by start-ups.”
The public needs protection from the Wild West land grab that’s now going on in money, says Rohan Grey, our guest on the latest episode of the New Money Review podcast.
Grey, Assistant Professor of Law at Willamette University in the US, was one of the authors of a controversial bill brought before the US Congress late last year, called the ‘Stable Act’.
The Stable Act’s objective—it is due to return to Congress later this year—was to protect consumers from the risks posed by emerging digital payment instruments, such as Facebook’s planned new ‘Diem’ currency and other private sector ‘stablecoins’.
The authors of the Act called for stablecoin issuers to be regulated as banks, a suggestion that went down like a lead balloon with much of the cryptocurrency community.
Stablecoins are digital versions of existing fiat currency, such as the dollar, euro or yen. Their value has been growing explosively in recent years. They have also been called ‘the first battleground of the coming crypto regulation wars’.
Notable stablecoins include Tether, the cryptocurrency market’s version of the dollar, which has grown from $3bn to over $60bn in size in just a year.
There’s Circle, which is now growing even faster and whose issuer went public on the New York Stock Exchange last week. And there’s tech giant Facebook’s planned new version of the dollar.
Amidst all this private sector experimentation with digital money, what role is left to the state? According to Grey, we shouldn’t leave the crucial discussion over the future of money in the hands of private actors.
In his view, it’s time for national parliaments to step up and make crucial decisions on digital money’s design.
This is a crucial debate and one we’re going to hear a lot more about in coming years.
Here are some excerpts from the podcast discussion:
Why the money infrastructure is a public good
“It’s a matter of democratic legitimacy. We’ve seen throughout history these key infrastructural moments when we hand over control to certain private actors. Then we spend decades living in the repercussions. This is one of those moments. When it comes to the digitization of currency, this is a Wild West frontier land grab. I hope we don’t end up repeating the same political dynamics of most historical land grabs.”
The risks of shadow banks and shadow deposits
“If you allow private actors to create something that walks and talks like public money, but has none of the safeguards and none of the policy oversight that comes with public money, the result is recurrent crises and systemic breakdowns, where the public has to bail out these actors.”
“One of the major causes of instability in the lead-up to the 2008 financial crisis was that various actors which we now call ‘shadow banks’ were issuing instruments that were effectively deposits. But in US deposit law there’s a well-recognised and long-standing loophole: the definition of a deposit is as something a bank does. So if you’re not a bank, by definition what you’re issuing can’t be a deposit, even if it walks and talks and is functionally like one.”
Stablecoin issuers should be regulated as banks
“Let’s be very clear. These actors are issuing a deposit, version 2.0. They should be regulated as banks, not [under] the hodge-podge, barely regulated money transmitter framework they’re currently operating under.”
The risks in stablecoins
“The conversation ends up focusing on the asset side. Do we have enough collateral? Do we have enough reserves? In my opinion the focus should be on the liability side—what are you promising? If you can’t guarantee that promise under all circumstances, it’s not a safe promise. I’ve never seen a single theory of collateral that is actually safe.”
The US is now backstopping the world’s shadow money
“We now have this system of international swap lines [between central banks] precisely to backstop the shadow money issued around the world, where the US is effectively the insurer of last resort for the European banking system, among others.”
Tether is a ticking time-bomb
“I think Tether is a ticking time bomb. The level of opacity, the level of shadiness and the track record of the people involved are extremely worrying. And huge parts of the crypto ecosystem depend on Tether. The people who are going to be hurt the most are the suckers in that ecosystem.”
In our slippery world of risk, uncertainty, change and complexity, hard and fast rules can be rare. Sometimes those rules can even be a trap, says Gerald Ashley, our guest on the latest New Money Review podcast.
Ashley, a former banker, is now an author, financial historian, public speaker and consultant, specialising in risk and decision making.
In his podcast discussion with New Money Review editor Paul Amery, he argues that we often misunderstand risks and have too narrow a view of the models we use to quantify them.
And with no perfect solutions and many ‘known unknowns’ to the problems we face, we are often influenced by context and instinctive biases rather than rational analysis, says Ashley.
In an era of pandemics, social media-driven narratives and financial instability, the topic of risk management has never been more relevant.
Listen in to the podcast to hear Ashley describe:
- How humans assess risk
- Dynamic versus static risks
- The difference between risk and uncertainty
- When risk management works well—and when it doesn’t
- Measuring and managing risks
- Which industries have done best in addressing risks
- Market crash cycles and traders’ collective memory
- The power of the ‘dominant story’ in financial markets
- The dangers of leverage
- Journeys and destinations
- The importance of planning
Gerald Ashley’s interviews with key figures from the City of London during the 1970s and 1980s are available at the website of the Centre for Financial History, run by Darwin College, Cambridge University.
We should all pay attention to what’s going on in payments, because changes in the technology of money transfers are going to affect all our lives.
In the latest New Money Review podcast, Gottfried Leibbrandt and Natasha de Teran discuss their new book, ‘the Pay Off’.
Leibbrandt is the former chief executive at SWIFT, the messaging network that supports trillions of dollars a day in global money transfers. De Teran is SWIFT’s former head of communications.
It’s hard to keep up with what’s going on in payments. Technology is dismantling payment barriers while governments are erecting them.
Cash is on the way out, and cryptocurrency and BigTech are fighting their way in. The Europeans are heavily regulated, the Americans are still hooked on paper cheques and the Chinese are leading the way in new payments technology.
Changing the way we pay changes everything, say Leibbrandt and de Teran, because it touches so many aspects of what we do.
“The technology, the plumbing [of payments] is changing faster than ever before. I’ve been in the industry for thirty years and I can say it’s never changed as fast as it does right now,” Leibbrandt says in the podcast.
“I would also be very hard-pressed to make any predictions on where things will be five years from now,” he goes on.
“It’s this incredibly important part of our lives that we never stop to think about,” says de Teran.
“It isn’t really discussed outside the world of payment nerds. But the payments system is as important, if not more important than the rail and transport systems or the electricity grid.”
“The changes in payments will change things like who’s in charge, where your data is kept, what purchases you can make and how credit is extended,” Leibbrandt says.
“It’s something the average citizen should know about.”
Behind the changes in payments tech lie seismic shifts in global economic power, say the co-authors.
“We’ve gone from one third of the global population having access to financial services to two thirds in just seven or eight years,” says Leibbrandt.
“All that is thanks to the penetration of mobile technology. It’s a mind-boggling pace of change.”
At the same time, payments innovation raises serious concerns about cybercrime, financial inclusion and consumer protection, says de Teran.
Listen to the podcast to hear Leibbrandt and de Teran talk about:
- The accelerating changes in payments technology
- The rise of new payment services providers
- China and the geopolitics of payments
- Why tech giants love payments data
- The digitalisation of payments and financial inclusion
- Consumer protection in payments
- Why new payments tech is levelling the global playing field
- Digital identity frameworks and payments
- How payments growth has driven the fintech boom
In the latest episode of the New Money Review podcast, I interview an old friend and former colleague, Paul Craven.
After working for nearly thirty years as an asset manager, Paul is now a consultant, public speaker, coach and author.
He works with a range of clients, from investors to doctors to lawyers and entrepreneurs.
His specialist topic is behavioural economics, which Paul describes as “how real people make real decisions in the real world”.
His insights in this area don’t just come from a successful career in finance: Paul is also a trained magician.
As you’ll hear him talk about on the podcast, we all make mental short-cuts and, sometimes, our minds play tricks on us as a result.
Those short-cuts are exploited by magicians in their performances.
But they can also cause us to make big mistakes when investing.
The tendency for our unconscious mind to take over in certain situations can hamper us in our general lives.
So to help ourselves, we need to be aware as much of our own potential weaknesses as of our own strengths.
In the podcast, we cover the following topics:
- What links money and magic?
- The power of the unconscious mind
- The evolutionary origins of behavioural biases
- Countering biases when investing
- The herd instinct and financial markets
- Intuitive versus logical thinking
- Why process beats outcome
- Why diversity works
- Money relationships versus monetary transactions
- The importance of reading and creativity
The race to develop a central bank digital currency (CBDC) is often portrayed as one of polar opposites: the Chinese hare against the US tortoise.
But we should keep a close eye on a third contestant in the race, the eurozone, says Jonas Gross, our guest in the latest New Money Review podcast.
The new digital euro project is part of a package of measures undertaken by the European Union (EU) to ensure the region stays competitive in the increasingly internet-based global economy.
Last summer the EU introduced a draft regulation for markets in crypto-assets, while today the European Commission, the EU’s executive arm, is due to set out its plans for EU-wide digital identity wallets.
These wallets will offer access to a range of services for the bloc’s 450 million citizens and, presumably, be integrated with any future digital euro.
Although the European Central Bank (ECB) has not yet formally committed to launching a digital version of the single European currency, its decision is expected this month or next.
Gross, our podcast interviewee, is a project manager at the Frankfurt School Blockchain Centre and a PhD candidate at the University of Bayreuth. His specialist area of research is CBDCs, stablecoins and cryptocurrencies.
The ECB has been active in preparing for the launch of a digital euro: in October it issued a 55-page report and public consultation on the subject, and in April it published a summary of the 8,221 responses to the consultation.
In its reports, the ECB has examined the likely privacy features of a CBDC and its integration into existing payments systems.
It has also discussed the euro’s future role in international foreign exchange markets, where it is already the second-largest reserve currency.
In the podcast, Jonas Gross explores the critical unknowns regarding the digital euro and suggests where the CBDC debate might be heading. He discusses with New Money Review editor Paul Amery:
- Meeting the disparate needs of EU citizens
- Why a digital euro may carry greater privacy features than other CBDCs
- Digital currency and digital identity
- CBDC and the prospects for negative rates
- The global impact of the digital euro
- The European framework for regulating crypto-assets
- Why there are many dollar but no euro stablecoins
- Balancing benefits and risks in CBDC design
Belief in a new era, rampant speculation, insider dealing, market manipulation, fortunes being won and lost…
The cryptocurrency boom of 2020/21? Sounds like it. But it’s also an accurate description of the US stock market before the great Wall Street crash of 1929.
“It was the Wild West,” says Kathleen Moriarty, a securities lawyer and our guest on the latest New Money Review podcast, describing the roaring 1920s.
“Anything horrible that you imagine could be done would be done. Brokers were stealing people’s assets. Those running investment funds were preferring themselves to their customers. They would take the good securities and give the bad securities to the fund. You name it, they were doing it. When you read the history, it’s hair-raising as to how bad things really were.”
Moriarty, who describes herself as a ‘securities lawyer by accident’, is famous for her work in helping develop the first US-listed exchange-traded fund, the SPDR S&P 500 ETF, launched in 1993.
ETFs have since grown to become a multi-trillion-dollar industry and an integral part of the world’s securities markets.
More recently, Moriarty was involved in the Winklevoss twins’ attempt to create a US-listed ETF holding bitcoin. That initiative was blocked by the US securities regulator, the Securities and Exchange Commission, as have a number of other bitcoin ETF applications since.
“The SEC is looking out for the retail investor. That’s why the approval of a cryptocurrency ETF is taking so long,” Moriarty says in the podcast.
Amidst the rampant current speculation in cryptocurrencies, could the post-crash US securities regulations of the 1930s offer us all a blueprint for what may lie ahead?
Listen to the podcast recording to hear Moriarty and New Money Review editor Paul Amery discuss:
- The US share market ‘Wild West’ of the 1920s
- How regulators stepped in after the 1929 crash
- The four ‘New Deal’ federal securities laws of 1933-1940
- Why ETFs needed an exemption from those laws
- The ‘Howey Test’ and its impact on the US digital asset market
- Why the SEC has been so cautious on cryptocurrency ETFs
- Would a bitcoin ETF be successful?
- US cryptocurrency regulation in a global context
- Why the digital asset boom may herald a reset in geopolitics
In the latest New Money Review podcast, talk about the behaviours, attitudes and financial resilience of self-directed investors in the UK.
Britain Thinks recently conducted and published research on self-directed investing on behalf of the UK’s financial services regulator, the Financial Conduct Authority.
One of the consultancy's key findings is that self-directed investors—those making investment decisions on their own behalf, without the help of a financial adviser—are at risk of overconfidence and of suffering financial harm as a result.
This risk is potentially amplified by the role of social media in encouraging herd behaviour, say the researchers.
“When using social media, self-directed investors are often at risk of following the algorithm because they are being served content,” Rachel Rowlinson says in the podcast.
“They get the sense that there’s this big movement, that everyone is getting involved in this one thing and they don’t want to be left behind,” says Rowlinson.
“A big thing for this new group [of self-directed investors] is they see a lot of content, a lot of news about something as a short-cut to saying, ‘If people are talking about it, it must be either a good investment or a shortcut to safety’,” Rowlinson goes on.
“Something like cryptocurrency can be seen as massively overvalued, but they are not really aware of that.”
“They are unaware that, because they are looking at this content, the algorithm is actually tipping the scale.”
In the podcast, Carol and Rachel discuss their key research findings with New Money Review editor Paul Amery:
- Why self-directed investors’ journeys are complex and highly personalised
- Why self-directed investors tend to follow one of three archetypes—‘having a go’, ‘thinking it through’ and ‘the gambler’
- How emotional and social motivations often drive self-directed investing
- Why self-directed investors investing in high-risk, high-return investments may have too much confidence in their abilities, risking financial harm
- How a more diverse audience is getting involved in self-directed investing
From finance to politics, law to anthropology, technology to crime, the New Money Review podcast—‘the future of money in 30 minutes’—offers its listeners insights into the rapidly changing world of money.
Many large financial institutions have performed an about-turn in cryptocurrency during the last few years, moving from a position of outright hostility to one of acceptance and even enthusiasm.
But there are still a few outspoken sceptics of the now-booming sector.
One is Stephen Diehl, a software engineer, chief technical officer of a London-based fintech company called Adjoint and our guest on the latest New Money Review podcast.
According to Diehl, cryptocurrency is an internet-based lottery that serves mainly to enrich insiders at the many digital token projects.
“A cryptocurrency is a speculative financial product that has an embedded wealth redistribution function: it takes external capital and shifts it around to other people,” he says in the podcast.
“By comparison with traditional financial instruments, there are no external cash flows. The pay-out structure is contingent on new investors coming in. You can compare it to a lottery, but with a very unclear pay-out structure. It generally looks Ponzi-like,” says Diehl.
According to Diehl, there are rising risks from the assimilation of cryptocurrency into the broader financial system.
“These things are working their way into the larger economy. We’re seeing publicly traded equities holding large amounts of cryptocurrency. If things are left unchecked, they’ll be finding their way into things like pension funds and ETFs,” he says.
Uninformed consumers, says Diehl, particularly millennials, are highly exposed to losses when buying the many new tokens on offer.
“I’m particularly concerned about retail investors being exposed to products that come with a fair amount of counterparty, systemic and market risks. The education people are getting about these things is often from social media or online sources that have a vested interest in promoting them,” says Diehl.
“A lot of millennials don’t have the assets, savings or participation in the economy that previous generations had,” he goes on, explaining the popularity of crypto with the younger generation.
“For them, it makes sense to buy riskier things—products that have a more asymmetric upside. And there’s a lot of disenchantment with the financial system. So the narrative about creating an alternative financial system resonates with a lot of younger people—the story of bitcoin and alternative financial services is a very compelling one.”
But those investing in crypto as a way of expressing dissatisfaction with the status quo risk being sorely disappointed, Diehl says in the podcast.
“Whether that system is actually being built is a separate question,” says Diehl.
“I’d argue that it’s not. These things—cryptocurrencies—don’t provide anything other than [a means for] gambling. Bitcoin has hijacked the populist rage narrative to propose a story that tenuously makes sense. But if you dig into the details it doesn’t really feel solid.”
In the podcast, Diehl also talks about the distorting effect he believes cryptocurrencies are having on scientific research, as well as on the prices for computing services.
“Cryptocurrency has had an impact on the hardware market: it’s basically impossible to buy a graphics processing unit as these things all get snatched up by miners. That’s having an outsized impact on machine learning and artificial intelligence,” says Diehl.
“People working in these domains require specialised hardware and can’t actually purchase the devices they need. Ultimately, these price increases will be passed down to anyone using cloud computing services. Even if you’re not touching cryptocurrency, you’re going to see inflation propagate for anything it touches.”
And while the open-source nature of most cryptocurrency projects means their codebase can be audited, the same principle of openness doesn’t extend to many of the service providers in the sector, says Diehl. Here, he argues, there’s a major problem.
“Where the fraud occurs [in cryptocurrencies] is not in the code per se, but in the governance structure around the projects, the auditing of the alleged reserves and of the bank accounts that hold the actual money,” says Diehl.
Listen in to the New Money Review podcast, ‘the future of money in 30 minutes’, to hear the full discussion between Stephen Diehl and New Money Review editor Paul Amery.
The New Money Review podcast covers the future of money in 30 minutes
The changes in money are getting faster, more chaotic and more confusing. And it’s not just money that’s changing, but technology, finance, law, government and culture with it. Each week, we interview a leading expert on one or more of these topics. By listening to the podcast, you can stay up to date with what’s going on in money and prepare yourself for what lies ahead.
Political revolutions often go hand-in-hand with revolutions in money. Stores of value change, the way we make payments changes, our attitudes to credit change.
According to Rebecca Spang, professor of history at Indiana University, the author of a prize-winning 2015 book called ‘Stuff and Money at the time of the French Revolution’ and our interviewee in the latest New Money Review podcast, we may once again be living in revolutionary times.
“Past institutions no longer feel legitimate or stable,” she says in the podcast.
“The level of instability and uncertainty does make this a revolutionary moment.”
“We are seeing quite epic and dysfunctional levels of inequality,” says Spang.
When the French revolution took place in 1789, those owning debts suddenly wanted to be paid. France’s credit-based monetary system fell apart and the country hit a severe liquidity crisis.
France then embarked on one of the most famous monetary experiments in history: it issued a new paper form of money that was notionally backed by the property wealth of the old régime.
This so-called ‘assignat’ experiment eventually caused severe inflation and in 1803 France went back to a gold standard.
Could our current infatuation with different forms of money—from bitcoin to meme stocks and non-fungible tokens (NFTs)—be indicators of a shift similar to the one that took place in France more than two centuries ago?
Listen to the podcast to hear Spang and New Money Review editor Paul Amery discuss:
- Why we may be living through a monetary and political revolution
- Why France’s King Louis XVI had ‘fabulous wealth but very little money’
- How credit-based systems can fall into a liquidity crisis
- Why France’s land-backed money experiment failed
- How US civil war ‘greenbacks’ drew on France’s revolutionary money history
- How cryptocurrencies have revived arguments for privately issued money
John Kiff, our guest on the latest New Money Review podcast, has always worked in what he calls the ‘edgy’ areas of finance—from over-the-counter (OTC) derivatives to fintech and digital currencies.
For 25 years, Kiff worked at Canada’s central bank, where he was in charge of managing the country’s foreign reserve risk. He then worked as a senior financial sector expert at the International Monetary Fund (IMF), where he focused on questions of financial stability.
Kiff now publishes a widely followed daily digest of developments in financial technology (fintech) and digital assets.
In the podcast, he tells New Money Review editor Paul Amery that a single theme unites his past and present jobs.
“I’ve been called ‘the plumber’: my interest is in how things work,” says Kiff.
“In the context of derivatives, I was interested in how you do transactions, how you price them and how you manage the risk of them.”
“In the world of central bank digital currency (CBDC), I focus very much on how what design features central banks are playing around with. That’s where my interest lies.”
In a wide-ranging podcast discussion, Kiff explains why the ongoing changes in the structure of the global financial system are important—and suggests which indicators to follow.
Hidden connections and financial crises
“The things that can blow up in your face are often unseen. We missed too much back in 2007. I’m trying to atone for past sins and look for those hidden connections in this [cryptoasset] market.”
Risks in DeFi
“DeFi is definitely a concern to the financial stability and regulatory authorities to the extent that it is purposely designed to operate outside the regulatory sphere. But the major players—the likes of Morgan Stanley and Goldman Sachs—are not involved yet. When they get involved and perhaps take advantage of leverage opportunities, that might put them in danger if something goes off the rails.”
Programmable money
“There are some useful things you can pull out of a smart contract in a CBDC: the distribution of stimulus payments, for example. Smart contracts in the stimulus payments could direct the users to only spend that money at certain places. You couldn’t park the payment in your bank account or use it to buy cryptoassets, for example.”
Interest rates on CBDC
“They could become a tool that enhances the implementation of monetary policy. So far no central banks I know of are talking openly about introducing a CBDC that’s remunerated in any way. But in the case of runaway demand for CBDC, you might want to have the option of calibrating the rate on CBDC to make it less attractive.”
Developing economies’ motivations for introducing CBDC
“Most developing economies are looking at CBDC to save money. They’re hoping they can reduce the amount of cash in circulation. And that goes hand-in-hand with the financial inclusion aspect of CBDC.”
Tether and Diem
“So far, the main use cases for unregulated stablecoins like Tether seem to be inter-exchange and inter-platform flows. So many [crypto] platforms don’t have links to the traditional banking system. In Asia, Tether is also being used to bypass capital and exchange controls. But Facebook’s proposed stablecoin—Diem—would be orders of magnitude bigger than Tether. That’s why [regulators’] focus has been so far mainly on Diem. Overnight, it would be on people’s iPhones and Android phones. That’s what scares the authorities.”
Convergence of traditional finance and cryptocurrency
“We now see big firms like PayPal, Visa and Mastercard saying they’re embracing crypto rather than fighting it. I suspect we’re heading towards a meeting of minds. But it could still be that crypto and blockchain dramatically change the plumbing of the financial system.”
Improving payments and settlements systems
“Blockchain and distributed ledger technology can play a big role in lubricating the payments and settlement systems. But you need to get both the payment rails and the settlement rails operating on blockchain, which means you have to tokenise securities. There are lots of experiments going on in this area. There are gains to be made in terms of both efficiency and safety.”
A level regulatory playing field for traditional finance, crypto and fintech
“Right now, many firms operate outside the regulatory sphere. The challenge for global financial regulators will be in finding ways to bring everybody under the same umbrella. ‘Same risks, same regulations’ should be what we’re aiming for.”
According to Dr. Franklin Noll, our digital money future will look a lot like the past: we are heading back to a time when humans had to juggle between many different forms of currency.
Noll, our guest on the latest New Money Review podcast, is a historian who specialises in the technology of money—ranging from banknotes to cryptocurrency.
“Our recent history, where you only have one kind of currency, is kind of an aberration,” Noll says in the podcast.
“If you go back to colonial-era Massachusetts, you’d be dealing with pounds sterling, local Massachusetts pounds, stuff from other colonies, native American wampum and Spanish reals. You’d be juggling all this money.”
We should all prepare ourselves for a repeat, says Noll.
“In the future, we’ll have a lot of co-circulating currencies,” he says in the podcast.
But we’ll have some help from technology, he points out.
“We’ll have an app on our phone that will carry our different wallets and do the conversions. When we want to make a payment, our AI will see which is the most efficient way to make it.”
But despite the rise of digital payments, mobile money hasn’t taken over completely from banknotes yet. In the podcast, Noll predicts that cash will be around for a few decades more.
“Banknotes have a lot of tenacity,” he says.
“People have been predicting the end of banknotes since the 1960s, but they’re still here and people are using more of them than before. My guess is that banknotes, in some form, will still be around for a generation yet.”
According to Noll, banknotes could be made ‘smart’ in future by embedding technology that links them to an electronic network, perhaps one underlying a central bank digital currency (CBDC).
Such crypto-notes would be a physical token of the CBDC, says Noll, and could function as a transitional element between the cash we have now and a future, purely electronic form of money.
Smart banknotes could even be designed to embed a ‘carry tax’, says Noll. This would force them to depreciate in value over time. Such a design feature might suit a central bank wanting to impose a negative interest rate policy.
Listen to the podcast to hear Noll and New Money Review editor Paul Amery discuss:
- Mobile payments and the future of cash
- Why smart banknotes could play a role in money
- The threat to the dollar from co-circulating private money
- Back to the future with multiple currencies
- Why the design of money matters
- How cryptocurrency reignited interest in the theory of money
- Balancing anonymity and traceability in CBDCs
Covering a range of topics—from bitcoin to central banks, technology to politics, law to cybercrime and science to culture—the New Money Review podcast helps you stay abreast of the key trends in the rapidly changing world of money.