Showing posts with label what is money. Show all posts
Showing posts with label what is money. Show all posts

Saturday 16 June 2018

Contactless Cards are a Major step Forward For everyone Except Consumers

You’re running through the London underground, you don’t have an Oyster card or time to stop and navigate the ticket vending machine or the bemused queues. You need a drink and nip into a shop but only have big notes to pay and can’t stand the jangling coins in your skinny jeans pocket. You’re wasting your life in the express queue at the supermarket waiting for everyone in front of you to rummage in their pockets for the change to pay for the 10 items or less. But, we now live in the future, a time when each of us carries a reusable coin that only needs to be tapped on a machine to complete our transactions. Welcome to the world of NFC technology, contactless cards where your entire bank balance and even your credit limit is available in your pocket just waiting to satisfy those moments when antiquated methods of payment are just oh too time consuming for our modern pace of life.

Twitshot
The advantages of tap and go payments are just too numerous to mention. Just think of the savings to governments of minting notes and coins, according to the US Federal Reserve it costs between 4-9 cents to strike a coin and 5-13 cents to mint dollar bills. There are nearly 30 billion coins in general circulation and 40 billion notes. General adoption of cards will slowly but surely reduce this expense. Plus, unlike cash, digital card payments leave a trail that can be very useful for governments and marketers alike. Forget Facebook, nothing profiles a person like their purchases. Eventually, it is the aim of all economies to eradicate all cash currency and with it the black economy. Strikes me that it could make it difficult for MPs and senators to get their back-handers, maybe they’ve thought of that one already.


The head of the Bank of England doesn't trust contactless 

So, general adoption of our flexible friends makes so much sense, not to mention the next step which is the integration of NFC chips in our phones so we don’t even need our cards. We have come so far from Pieces of silver with our sovereign’s face stamped on it. Or have we?
The trouble with cash is that it is instantly transferable, you give it to someone and they can use it. The same goes for if they stole it. Credit and charge cards gave us a signature with which secured our cash, remember how we used to get traveller’s cheques that could be cancelled if we got pickpocketed or mugged in some far-off land. Security has been the main selling point of cards. From signatures we went to chip n pin, again we had to verify a transaction with our mark. If our cards got stolen, we could cancel them and stop anyone using our hard-earned. The bank could verify this with the signature or block it with an incorrect pin. I had my card cloned once in the UK and didn’t lose a penny despite the perpetrators going on a spending binge racking up nearly £2000 of transactions before I had even noticed.
Now, contactless doesn’t have the same security, up to a certain limit per transaction if someone gets your card, they can go up the high street merrily tapping and going and with no verification, you will have a hard time proving that they are not your transactions. Basically we are back to cash. The sheer volume of small contactless transactions is too much for the banking system to process in real time so they have thousands of offline transactions that can be processed in bulk at times of lower traffic. So, it could be days after realising and cancelling your card before the real damage can be seen.
My wife recently lost her card. She realised it fairly quickly and cancelled it. When she ordered a replacement, she requested that it be non-contactless. “We can’t do that, they are all tap n’ go now.” She was told proudly. She asked if this facility could be disabled at the bank end as she never uses it. “No, we can’t do that.”
“How can I be sure that someone doesn’t steal my card again and spend my money?” she asked.
“Well, they can only buy up to a limit.” The helpful bank clerk assured her.
She couldn’t tell her what the limit was, it seems to vary (and will vary in the country that you are reading this) and she couldn’t tell her how many contactless transactions could be made in a time period but she could sell her an insurance policy. She could sell her a SMS alert service that could add insult to injury by notifying her of each time she lost more money.

How to disable your contactless card

I spoke to a bank employee who gave me very little more information apart from the fact that statistically online fraud is much higher than contactless and while there are fears of having your cards scanned while in your pocket or bag, they are quite easy to safeguard against. Apparently, an anti-NFC wallet (RFID blocking) will protect you from cyber-pickpockets although, I have read much to dispute this. Keys and other metal objects, including wrapping your cards in aluminium foil can also block the swipers.
This is an immature technology which seems to have many advantages for banks, governments and thieves and a few conveniences for us. The impetus for improved security will only come from pressure from you and I and will probably come wrapped in more intrusive data mining. In the meantime, don’t be seduced by the ease of use and the new svelte line of your trousers.

Further reading:
The head of the Bank of England discusses her mistrust of the technology and how demand for cash is actually increasing


Practical instructions to disable the contactless ability of your card


America, who is usually so quick to embrace new tech especially when it is ease of payment has been slow to adopt chip and pin and contactless. We Europeans are quick to judge the Yankees, maybe the joke will be on us


The Swedes are a trusting people but there is a limit


Sunday 5 April 2015

Who is the pilot on the GreekWings flight

The flight deck door is locked, autopilot is set, the passengers are frantically banging on the cabin door but can Greece bank before it crashes into the immovable Alps. And, more importantly, will we have to wait for recovery of the black box to discover who was really at the controls.

In these final few hours before impact the Eurogroup is steadfast in its position of total and complete capitulation by the Greek government before it will consider releasing €7.2 billion bailout funds. After reviewing Athens’ proposals for reform, the guardians of the purse strings have deemed them inadequate and even amateurish. So, what are the options for the eurozone if Greece does not satisfy their demands and defaults on the €450 million payment to the IMF on 9th April and who or what is driving those decisions.

The suspects are:


Alexis Tsipras, 40 year-old ‘Radical’ leader of left-wing coalition party, Syriza who has seen a meteoric rise in the last two years but has been in activism and politics since University. His mandate from the Greek electorate is the lifting of Austerity measures imposed by the Troika of creditors and to keep Greece in the single currency.



Jeroen Dijsselbloem, 49 year-old Dutch Labour party finance minister and president of the Eurogroup, the select committee of European finance ministers who since 2015 have jurisdiction over the Euro. His role is to maintain stability of the single currency.



Angela Merkel, 60 year-old German chancellor. She is the leader of the centre-right Christian Democratic Union. Germany’s position in the union makes it the de facto leader in negotiations but she has expressed a desire not to have the Euro fail under her watch.



Jeroen Dijsselbloem
If Greece defaults and a Grexit occurs then in the short term, the bond markets could go bear and the euro would go into free fall. In this age of bond market sycophancy, this is a big deal.

That said, any concessions given to the Greeks would become a precedent for other struggling Eurozone nations and while the band-aid needed to plug the hole in Greece is relatively small, Italy and Spain or even France could be far more damaging.

The austerity strategy appears to be working for some members such as Portugal and Ireland, both have exited the bail-out programme and re-entered the international credit market, the latter is now the fastest growing economy in Europe. However this is just balance-sheet understanding, many Irish and Portuguese are not seeing the benefits.

Many Eurozone nations would be watching Greece to see how it dealt with the divorce and depending on how painless it turned out or what could be learned from the experiment, there could be more departures from the single currency which could well lead to complete devolution.


Alexis Tsipras
In the event of an ill-prepared and messy Grexit the already fatigued Greek people would loose faith in the young prime minister, not only ending his career but sparking chaos and possibly an opening for the far-right fascist groups to seize control. Greeks have hankered for state reform for as long as I can remember but the reality would cause more collateral damage than they are prepared for.

An unnamed Syriza official recently said that as a left-wing government, faced with the choice of defaulting to the creditors or their own people it was a no-brainer. Brave words indeed but also damn straight, given the choice of paying the mortgage and feeding your kids, what would you do. No-brainer, right?

But his choice is not just death or dishonour.


Greece could gain support from Russia. Syriza harbours within its ranks some far left idealists who may still hold romantic notions of allegiance to Russia. They may not have realised that Putin’s Russia has bypassed communism to revert back to the days of the Tsars. 

However, Russia has its own liquidity problems and would not bailout Greece without some pretty heavy caveats whether declared or implied. Recent events in Ukraine are very telling of Putin’s ambitions. Russian gas supplies to Greece which are used for domestic use and electricity generation have already given it a significant political foothold.

Russians also represent a huge growth in tourism for Greece who are also buying up holiday property. In some tourist areas English has been demoted to third place on menus and shop signs.

Angela Merkel
Germany’s motives have much in common with the Eurogroup’s, but Angela must play to the home audience. Germany is running a sizable surplus due to its reluctance to take advantage of cheaper than cash credit which is available to it and the austerity measures it has been imposing on its own people, which it systematically blames on Eurozone slackers like Greece. Bending to Greece would be a domestic disaster for Merkel. While a short-term fall in the Euro could hurt but foreign currency holdings and cheap exports would buffer the blow and she would be seen as a saviour.

The Euro is significantly undervalued compared to the German economy. It is the only economy that could withdraw from the Euro with money in the bank but a return to the Deutsche Mark would mean more expensive German exports and it would go back to being another European nation rather than the epicentre of an EU empire.
If Greece were to be cut loose this would mean a constriction of the European borders especially in a very strategic area of the Mediterranean.

We forget though, there is a new wave of Eurozone candidate nations in the wings including Iceland, Albania, Montenegro and Turkey. Turkey gives access to the Med and the middle east, Albania and Montenegro who give access to the Ionian across from Italy and who along with Serbia and Macedonia go to bridging the northern members to Bulgaria and ultimately Turkey and beyond.

These candidates may be seen as more manageable than Greece and not to mention, a Greek withdrawal would make Macedonia and Turkey’s integration easier.

So who is in the driving seat then? 

Well, Merkel does seem to have the most options.

Tsipras is between a rock and several hard-places. Threats have been thrown of everything from Russia to opening the roads for Islamist extremists but ultimately his hand is bluff. Varoufakis’ and his post-election European road trip found few allies. His only option may be to steer into Russian and Chinese ploughed fields.

Dijsselbloem represents the auto pilot, his role is the result of programming. He can only prepare for the fallout.

And all the while the bond markets are licking their lips with glee, fail or fly the euro will make many hedge funds even more obscenely rich.

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Monday 30 March 2015

Go Greek for a Week



The Greek tragedy that is being played out like a car-crash reality show that gets recommissioned for a new series every time we think it is coming to the final episode. Like any of you who stuck with ‘LOST’ until the climax, the story just lost any semblance of reason. The Greek narrative is becoming so convoluted and discombobulating that it is difficult to make any sense of it. Are the Greeks the lazy feckless moustache twirlers who siesta’d away over 300 billion Euros or is it the insensitive megalomaniac Germans, hell bent on annexing their neighbours… again. Is Varoufakis an economics rock star Yoda or a naive idealist who still believes he can have his souvlaki and eat it and is Greece’s claim to WWII reparations that could effectively wipe the slate clean valid or simply risible. The fact is that all of this has clouded the real issues. For the simple answer I urge you to look no farther than yourself, your neighbours and your family.


For anyone following the will-they-won’t-they Grexit saga that is being played out in the media, you will notice that the story invariably falls into the language of bond yields and bank solvency. The macroeconomics of the situation are both baffling and contradictory. The Greek government was loaned more money than they could repay under the guise of a stable Eurozone member. Then, woken by the shock waves of the same crash that brought down some of the world’s biggest financial institutions, the markets began to panic causing a world recession which tipped Greece, among others, into a downward spiral. Greece is now locked out of the world finance markets beholden to the TROIKA for its life blood. The money needs to be borrowed in order to pay the loans that have stacked up and not to repay the loans but just the interest. So, more than two thirds of the bailout money is going straight back to the banks. But, it still holds a responsibility to its pensioners, unemployed and the people who earn a living working for the state.

The EU have attached certain conditions to these loans, the so called austerity measures, imagine the credit card company coming into your home and telling you what you can and can not spend your money on, imagine the bank telling you that in order to keep your overdraft facility you will have to sell your delivery van and service your customers with a bicycle then punish you for your business going down the tubes.

Stop!

I’m sorry, it is really difficult to talk about the Greek crisis without getting bogged down in the big picture, because it is so big and there is a reason for that. I did ask you to look to yourself for the answer and I will make good on that.

What did you do to create the property boom? Maybe you bid a little too high on the home you dreamed of, maybe you were a little creative with your mortgage application.

What did you do to cause the decline of the health service, did you worry too much about that lump, did you have an accident in your car, did you get into a fight.

What did you do to cause the downturn in industry that forced companies to move production to Asia, did you need too much to pay you rent/mortgage, did you pull a few sickies, did you spend a bit too much time on facebook.

What did you do to cause the credit crunch, did you fail to resist the sales, did you get tired of your old banger and borrow to get your family around in something cleaner and safer.

You will surely answer yes to many of these questions and more I could ask, so are you deserving of a country that has 25% of its workforce unemployed. A tax system that changes so unpredictably that businesses cannot plan or develop. Or as has recently started, main roads and high streets with the lights out at night because the council can’t pay the bills. No, of course you are not.

In 2011, channel 4 invited audiences to ‘Go Greek for a week’, they laid the blame for Greece's woes quite firmly on the population. This is a message that they intended you to internalise, to make you look to your own culpability in your nation’s flaws. There was some truth in the examples given but it did miss the point. The same point that is missed every time the media bang on about bond market yields and currency markets and GDP. The system manages the country not the other way round, the people took advantage of what was on offer, as you do. Government exists to manage a nation, bond markets exist to help finance these nations and the businesses that rely on the nation’s workforce and infrastructure to make profit. These same businesses and industries rely on the same population to consume their products and services.

The markets, industries, banks and governments exist because of the people, not the other way round. The EU and government’s sycophancy towards narcissistic markets has caused the problem, not you.

The markets are everything that Greece and all the other failing nations are accused of. They are fickle and myopic, they grab all they covet, they do not build civilisations, they do not nurture their own. They liquidate all they touch.

I would, once again, ask you to ‘Go Greek for a week’. Look at what is being allowed to happen to the people you met on holiday and whether you be British, French, German or anyone who feels above their plight to look around and see that you may not be the next Greece but that your time is coming.

The banks are so often described as ‘Too big to fail’ but surely this is a description that should only apply to nations of people.


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Also read: 
Europe needs councelling

I've been living in and writing about Greece for over 15 years This is my ride

Wednesday 25 March 2015

Investment tip: Go long on Jackboots

The clock is ticking for Greece, a new tranche of bailouts has been agreed on the caveat that Alexis Tsipras’ reforms are up to scratch, not something he managed last time. When the money runs out the banks will implode and Greece will default and fall out of Merkel's merry little club and start printing drachma, right? Wrong. My investment tip is go long on jackboots because there are groups in the sidelines rubbing their hands together for a chance to begin their own ‘Project Mayhem’. A wave is coming and it smells of smoke.


Greece's new government will be successful just so long as it can maintain some stability. At the moment, the people are behind them in sufficient numbers, 47% according to a recent Metro analysis poll (but since when have polls been bankable), because they are trying to stand their ground against the austerity measures that have brought the country economically and socially to its knees. But if Varoufakis’ game theory ultimately turns out to be Candy Crush vs Eurogroup’s World of Warcraft, things will change and fast.

The country’s neo-nazi group, Golden Dawn has had its head a little low of late. Its leaders have been in prison and it has fallen back a little in the polls but that does not mean their support has waned. The thing with single policy groups is that they always attract floaters who will align with whoever satisfies that need at that time. The need at the moment is HOPE and Syriza is selling it by the bushel. But, If their ring turns brass, as is inevitably will, the need will be ANGER and for that the far-right is one-stop shopping.

In Germany, the war of words between the Greeks and the Germans has stoked the fires of xenophobia. The German government has been running a surplus which has called for a its own brand of austerity. Wages have not been keeping up with inflation and many are feeling the pinch. The obvious cause of this turn of fortunes is the lazy Mediterraneans and the French who have not been pulling their weight. Many Germans are tired of bailing out the rest of Europe and neo-nazi groups have gained ground.

Nigel Farage’s Ukip seem to be talking to the people despite the derision in the media, they are saying something the people need to hear. The ‘squeeze on the middle’ has made the middle-classes less affluent in real terms and house prices are taking a huge chunk from their incomes. At the lower end, eastern Europeans are believed to be taking unskilled and semi-skilled positions driving wages down to a point where the minimum wage is a standard not a safety net.

In France, Marine Le Pen’s Front National took 25% of the votes in the recent local elections. This is largely due to the Charlie Hebdo and related attacks as well as the struggling economy. The people are looking for action not words, they don’t feel safe and could easily fall into getting more protection than they bargained for.

The right-wing Sweden Democrats have been maintaining a steady presence and are now the third party with 13% of the vote.

So why the comment at the beginning of this article about ‘going long’ on jackboots.

It seems that the current obsession with finance and economics, the bond markets, going long, going short, currency markets and yields has detracted for the reason for their existence. Adam Smith, the grandfather of capitalism in his 1776 seminal work “The Wealth of Nations” focuses on the people, population’s role in wealth and prosperity. Marx built his thesis around the needs of the people vs the aims of industry, JM Keynes with JF Roosevelt built a ‘New Deal’ that focused on putting liquidity into the market (shops and industry) through the workers’ pockets and even Milton Friedman recognised the fundamental role of the population.

‘The markets’ have become narcissistic in their Hubris, a self-serving Matrix with the right to all and responsibility to none. But, worse of all, we and especially the world’s leaders are buying into it. The Banks must be firewalled at all cost and market value is the only value. Our young entrepreneurs are told to seek out venture capitalists, Dragons den and Shark tanks. Work, build and form an exit strategy. Investment is the only real goal. The markets are betting on the Eurozone’s demise and in the bond markets they are trading sovereignty futures.The system is no longer serving anyone but the system.

And, while the world is looking the wrong way, certain groups are flourishing in the peripheral vision. Building networks, brewing hate and offering solutions.

It is often said that Europe sleepwalked into WWI but we couldn’t make that mistake again, after all, we all learned from the past mistakes, didn’t we. Could it be said in the future that we were not asleep just blindsided by the markets and the pursuit of a unified European trading platform.


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Friday 12 December 2014

Why Austerity IS Working


Ok, let’s start with a revelation. Austerity doesn’t work, that’s a no-brainer. Economists have been saying this for centuries and anyone living at the thin edge of the wedge in Europe will be living its failure. Incomes have been slashed, debts become unmanageable and few see any sign of improvement on the horizon. The amount of people without any health insurance is at an unprecedented high and the government telling us the same old story.


We must help bail out an economy that we were complicit in scuppering. 

Twitshot
retail wrecklessness
Oh! those heady days
Austerity purports to tackle the world recession caused by credit-happy shoppers like you and me consuming beyond our means. It is sold on the micro-economic understanding that if a household cuts spending on non-essentials for a while it can pay off its debts thus reducing expenditure and bring its outgoings below income. It is the credit-binge hangover that we are told we all need to take responsibility for. The belief is that by cutting back on the state’s expenditure and increasing taxation they will be able to wrestle the public debt back to a manageable level where we can all breathe a sigh of relief and get back to business as usual. This is not happening. The lack of investment is causing widespread unemployment and even more widespread underemployment. This in turn, is making it more difficult for the government to collect taxes while simultaneously putting increased pressure on social benefit systems. The result is that while we are paying and suffering for our sins.


That said, unless you have had your TV repossessed and your Internet cut, we all know that that is just a tiny piece of the story. Due to systematic deregulation of the markets by governments giving more power over sovereign currencies than the national banks themselves, they went ape-shit inventing new and more toxic ways to make profit from the movement of capital (read debt). Their abuse of their new-found freedom with currencies made them a systemic risk to national economies and thus “too big to fail”. And so, their private debts, far larger than any kitchen refit or big-screen TV have been transferred to the public balance sheet. However, yet again we are reminded that these same banks loaned us money and helped us buy our beautiful houses that cost more than we could earn in ten years plus interest. So, once again we are complicit. Incidentally, these houses could not have reached such prices were it not for the freely available credit in the market. We are also told that if we did let these banks loose, we would be in the middle of a zombie apocalypse and would die a horrible death. Tell that to the Icelanders.  

Maybe we are all looking at the problem from the wrong angle. 

Let’s consider firstly that this strategy was not implemented by my mum, it was devised by some of the most proficient macro-economists on the planet with access to the studies of the greatest economists of history from Adam Smith through Locke to Keynes and Hayek. They also had great social experiments such as Soviet Russia, Hitler’s Germany, New Deal USA, Thatcher’s Britain and more recently Iceland. In fact, to give any credence to the “Ooops!” factor would be to believe that the people running the world economy are less competent than my Mum when baking a pie. No, austerity is working if you consider that

Its goals may have very little to do with relieving public debt. 

The economy at the centre of the euro-zone and one of the main architects of the current austerity strategy, the German has become strong due to exports. It has learnt that you become powerful by making stuff and selling it to the world. It was busy during the credit-binge selling the world and those naughty Greeks Mercedes, BMWs and Volkswagens, helping them to get in debt. It has worked hard to build a reputation for reliability and prestige and most of us will make a b-line for a German product from stationary to power-tools to supercars, given the choice. But, on the world stage they cannot support the whole of the euro-zone with their premium commodities. They have diversified, buying Skoda and other budget brands but this is not enough. If the EU is to be successful in the world economy. 

It needs to make impact in the mass consumptions markets. 

Depression
Discount dignity
In order for the Euro-zone to compete with the huge production centres of China, India and the Far East, they need one more element. Traditionally, in order for a nation to increase the mass saleability of its exports it has devalued its currency making its products cheaper and more attractive. This is not so easy in the Euro-zone, not to mention the fact that when one currency does it so do others igniting a currency war with all currencies finding a similar equilibrium to where it started. There is one other factor which will allow this relative price index for exports; cheap labour. And it is here that austerity is doing the business. The highly educated, highly skilled workforce of Europe is now on sale. But in order to truly compete they will have to get a little cheaper. 

Austerity is working. 

It is producing a more cost-effective workforce by lowering the expectations of this and generations to come.  This is not a conspiracy theory, it is a business plan. My conclusions are based on the evidence that we are living and take into consideration the business model of the central economy of the Eurozone. If it was a company, it would need to position its product line in the open market. Seeing as the premium market is not large enough to support the 350 million people of the EU, it would definitely need to reposition, at least some of is portfolio to high-volume markets.  

In my next article I'll explore the next step of a strategy that could put Europe back at the centre of world production and how the current fall in oil prices could be the lever to expand the Eurozone.
       
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Wednesday 6 July 2011

Faith



The US owes over $14 trillion, the UK owes £900 million, Greece now owes another €340 billion, I owe nearly €100,000. How much do you owe, how much have you spent that you didn’t have and when will you have it.


National debt is calculated as a percentage of GDP (gross domestic product), this is to say how much you owe compared to how much you make. For me that means 2-3 years of giving every penny myself and my wife earn to pay off our debts, nothing for food, fuel, mobiles. Then there is the interest, this would put another year or so on that scenario. But, of course we have to eat and clothe ourselves and the fridge needs a beer or two. Take a look at your finances, how many years are you in the hole for. 
Twitshot

From Under Dark Clouds

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