Showing posts from December, 2012

The end of the road

I write this post with some sorrow for what must end, and with both trepidation and curiosity (and, I admit, also with some excitement) about what the future holds. Ten years ago I left the high-pressure world of banking and finance, I thought forever. I had intended to leave years before, but the need to support a young family when my husband was out of work overrode my personal desire to - in the words of my little boy - "stay at home and do my big singing". But in 2012, following the breakup of my marriage, I decided that the time was right to leave. I was already teaching singing part-time and doing some professional singing, and I had gained my Royal College of Music Associateship in Singing Performance. Encouraged by my new partner, I took the plunge. I ended my consultancy at RBS and concentrated on building up my singing and teaching career. It worked stunningly well. Or at least the teaching did. All too well, actually. I quickly found myself working in schools d

Why do we never learn?

I found a fascinating report today. It dates from 1996 and is the Bank of England's report into the functioning of the Deposit Protection Scheme, the predecessor of the current Financial Services Compensation Scheme, which provides a measure of compensation to bank depositors and other small financial investors in the event of bank failure. A Deposit Protection Scheme was one of the provisions of the 1979 Banking Act. But it was not the only provision of that Act, and in many ways not the most important. In the words of the Bank of England (my emphasis) : Before the introduction of the first Banking Act in 1979 there was  no statutory requirement that a bank or similar deposit-taking institution be authorised to accept deposits or undertake banking business in the UK. There were disclosure requirements (Protection of Depositors Act 1963) on those institutions that advertised for deposits, including the obligation to include in their accounts prescribed information, which wer

Who pulled the switch?

One of the interesting features of financial and economic crises is their suddenness. It's as if the world is happily strolling along a well-trodden path on which someone has built a man-trap. We don't see the crash coming and we walk straight into it. Yet when we look back on what happened, we see all too clearly that the signs were obvious - we just didn't notice them. Economists have made numerous attempts to explain this apparent blindness without a great deal of success. The fact is that financial crises do not come out of the blue, and some people do see them coming. The world is warned about its folly, but chooses to ignore. Those who shout "WATCH OUT - THERE IS DANGER AHEAD" and try to suggest alternative courses of action are dismissed as Cassandras and their thinking is excluded from mainstream academia and the corridors of power. This suggests that the cause is more psychological than economic - it is rooted in people's behaviour. Like a Greek tra

The strange world of negative interest rates

There has been considerable discussion recently about central bank interest rate policy, and in particular, what further monetary easing they can provide when interest rates are at or close to zero. Central banks have been using a range of unconventional tools, of which quantitative easing is the best known, to depress market interest rates. I have serious reservations about the effectiveness of these for the real economy, and in a recent post suggested that QE is not only ineffective but actually toxic for the real economy. But there is evidence that central banks are starting to consider negative rates as a policy instrument, so in this post I shall consider what would be likely to happen if central banks reduced rates to below zero. There are two types of rate that central banks could reduce to below zero. One is the policy rate itself, which is the rate at which the central bank will lend to banks against collateral. The other is the interest rate that the central bank pays on e

The elusive tax haven definition

The Tax Justice Network's October podcast gleefully announced that Helsinki had "declared itself a tax haven-free zone". According to its presenter Naomi Fowler, "companies who use or have links to tax havens will no longer be able to bid for contracts providing goods or services to the public. This month, city councillors voted to sever ties with such companies". I was slightly puzzled by what they meant by this, not least because according to some Finland is itself a tax haven, so it is difficult to see how it can become a tax haven-free zone. And Richard Murphy's explanation didn't shed any light. So I went hunting for an explanation of exactly what Helsinki had agreed to do, and in particular, what they meant by a tax haven. The first thing I found was a press release , which among other things purports to include a link to the actual resolution. But as far as I can see it doesn't: the link is indeed to a list of Helsinki city council resol