18-Aug-14
When it comes to losing money on a grand scale, George Osborne's Bitcoin's withdrawal last week, did not meet the standards of his predecessor. Indeed, the British minister in 10 days Bitcoin fell 13 percent, a loss of 99.8% for the year, but the Royal Bank of Scotland shares won 99.99 percent of annual losses, after the bank was rescued by the Treasury. Even better, the taxpayers, Mr. Osborne's public relations gimmick by the ATM machine to pay.
By the Secretary of the Treasury to purchase emoney is something larger symbolic, though: the British want to encourage financial innovation. It is not alone, and Mario Draghi, ECB president, aims to re-design market securitized loans.
This seems a bit weird, policy makers and politicians and encourage financial innovation of new structured products just blew up the economy after seven years.
In fact, it's money for politicians to face history and economic needs.
In the past four centuries a series of skirmishes occurred regulators and politicians between, on the one hand trying to control the currency and the other trying to impose another round of tax rules and businessmen and bankers. Many have disputed tricks, now regarded as perfectly normal: it is even hard to explain a difference between economists of money and non-bank deposit. Exchange Act in the 19th century, from the beginning of the 1960s, or certificates of deposit Eurobonds abroad are beginning to how to avoid the tax or financial control.
In 2007, these innovations often funds prosperity. Economist Charles Kindleberger record monetary fanatical frenzy behind everything to John Law's 1720 Mississippi from 1637 credit-fueled bubble of tulips, the South Sea Bubble, the UK canals and railroads fanaticism, is perhaps the most extreme example is 1982 destruction of the Kuwaiti stock market.
In Kuwait, the former president wrote Edward fund managers, the shares doubled by postdated checks for an empty bank account "pay" for the time of speculators. In fact, $ 91bn check became money - until the speculators ask her check cashing, snapped illusion.
2007 bubble is exaggerated slightly better quality "money." As Richard Robertson, hedge fund Christofferson Robb academic and co-founder noted that financial innovation in 2000 is often about maturity transformation: turning long-term assets, such as housing becomes near cash. Mortgages, packaged into asset-backed securities sold to the bank's balance sheet SIVs from money market funds in the short-term loan financing. A 30-year mortgage became an overnight Monetary Fund Awkwardness, cash equivalents.
Maturity transformation in itself is a bad thing; but in 2000 it was too much, too fast, and before the financial bubble behind the novel.
Financial innovation is coming back as an alternative to banks.
Europe is suffering due to excessive expansion of bank credit to cut through the one aimed at preventing repeats of the new rules encourage excess. Although regulators to get what they want - less gear Bank - they are afraid, they are starving small business loans.
The ECB hopes to funnel money through securitization bonds of small businesses do not increase the risk of bank balance sheets. Britain wants to force banks refused by a borrower substitutes, such as peer to peer network lenders to help.
Avoid banks may seem popular now, but bypassing the regulatory authorities always end up worse in the past. Some past poisonous acronyms began recover. Collateralized debt obligations, or CDOs, saw more than half of all circulation year 2012 - even though $ 65 billion of new paper's $ 521bn in 2006 in a small part.
Now, whether CDOs, do not worry about other areas, such as subprime auto loans look big enough to blow up the financial system (similar to the liquidity maturity transformation although some ETFs offer and any possible further deterioration prices fell hard on the industry's assets such as junk bonds). The most significant risk peer is the risks that invest money underestimated. A debt-driven economy is still far from a peer - although it is well-known hedge funds are piling in.
Meanwhile, Bitcoin potential is unclear, but as a way to evade taxes, or anonymously buy online. It may be unlawful or objectionable buy useful, but curse the government.
Nevertheless, the work has been underway to reuse the basic Bitcoin technology, other applications; it is part of the burst of the real value of a broader financial innovation: the use of technology to reduce transaction costs.
If the government can encourage greater financial efficiency does not lead to another round of credit creation, Mr. Osborne's Bitcoin will be well spent. Unfortunately, history is not on his side.
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