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10 Best Fintech Books: The End of Banking has made it to the list!

December 1, 2015

We are proud that The End of Banking has been selected as one of the ten Best Fintech Books. You find the full list at the website of Fintech Singapore.

 

"Alongside offering the main problems of our financial world, The End of Banking also provides solutions to move forward into a modern financial system."

“Alongside offering the main problems of our financial world, The End of Banking also provides solutions to move forward into a modern financial system.” (Source: fintechnews.sg)

 

The small bug that crashed our economic system

November 5, 2015

Regulators came up with a long list of contributing factors to the financial crisis of 2007-08. But what if all these factors are only symptoms of one underlying, much more fundamental issue?

 

Limited_LiabilityLead

Deutsche Bank recognized that for 31 billion Euros of recorded assets, it lacks fundamental information for a precise valuation. Can we still trust in the accounting of limited liability companies? (Photo: geralt)

 

In this article, we want to draw your attention to a seemingly small flaw in the design of our economic architecture. One that did not matter for a long time, but that has become extremely destructive over the past decades. The most recent banking crisis is a direct consequence of this flaw, and if we do not deal with it, we will have to live with an increasingly fragile financial system. The issue we are talking about has been hard coded in an underestimated but critical component of our economy’s operating system: Limited Liability.

 

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Book of the Year Award!

September 16, 2015

We are pleased to announce that The End of Banking has been honored with a Book of the Year award by Foreword Reviews – time for us to look back on the past 10 months since publication.

 

We were in it to win it, and we did! Very happy to announce that we won a Book of the Year Award by Foreword

We were in it to win it – and we did it! Happy to announce that we won a Book of the Year Award by Foreword.

 

What has started in a London Pub four years ago has reached another major goal. The End of Banking has been honored with a Book of the Year award by Foreword Reviews. For us, this was another great step forward. We are happy to look back on the past 10 months, which have offered many highlights.

 

Let us revamp what has happened since publication.

 

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The Secret for Stellar Banking Profits

August 27, 2015

We all have become deeply accustomed to the fact that banks are among the most profitable companies. Many perceive the success of banking as something magic. In fact, it is based on a surprisingly simple trick.

Profitable banks as symbols for capitalism? Bank CEO’s as advocates for less government interventions? Oh, please...

Profitable banks as symbols for capitalism? Bank CEO’s as advocates for less government interventions? Oh, please… (Photo: jorgophotography)

 

Why is Apple among the most profitable companies on this planet? The answer is simple: Apple sells popular products. Some people might have difficulties to understand the religious zeal of Apple customers, but even Apple skeptics can easily understand why Apple is one of the most successful companies on this planet.

 

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Regulating Fintech: Getting the Response Right

August 4, 2015

Recent developments in finance challenge regulators around the world. Fintech companies are on the rise, and it is not clear what kind of new rules are needed. To shed light on these issues, one of the authors behind Jonathan McMillan gave a speech at the GovKnow conference on “The Future of Financial Services – Governance, Regulation and Accountability” in London.

Mind the regulatory gap between traditional banks and fast moving Fintech companies. (Photo: i am jae)

Mind the regulatory gap between banks and fast moving Fintech companies. (Photo: i am jae)

 

First of all, I’d like to thank you for this opportunity to discuss some perspectives on financial regulation in the digital age. In my view, this is a topic that has not yet received the attention it deserves. So let’s get right into it.

 

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It’s a Wonderful World … Without Banking

July 24, 2015

The End of Banking discusses abstract concepts such as information asymmetries, systemic stability, or money creation. Sure, these concepts are critical for our argument to end banking. But there are also very tangible reasons for a world without banks that are just as important.

The world will become a happier place without banking (photo by freeimages/mokra

The world after banking will indeed be a better place (Photo by FreeImages.com/mokra)

 

In The End of Banking, we describe how a financial system without banking can work. We show how life for both borrowers and lenders will improve, and how it will be better in supporting the real economy with credit. In this short blog post, we want to discuss a key feature of a financial system without banking: the absolute transparency and accountability you have as a saver.

 

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Austerity or Debt Relief? What we can learn from the Odyssey

July 15, 2015

Is there a better way to explain the Eurozone crisis than with Greek Mythology? Probably not, as Odysseus’ choice between Scylla and Charybdis offers a particularly neat analogy for the current situation in Europe.

 

Austerity or Debt Relief? This picture symbolizes both options quite well.

Austerity or Debt Relief? This picture symbolizes both options quite well. (Photo by Crinn Wolk)

 

“To choose between Scylla and Charybdis” means to choose between two very bad options. The two main options crystalizing from the never-ending Eurozone crisis has been debt-relief or austerity measures. Mainstream economists from the Anglo-Saxon countries predominantly advocate another generous bailout program for Greece paired with debt relief.

 

Let’s call this option Scylla.

 

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Investors Beware: Summers praised Marketplace Lending

June 9, 2015

If Larry Summers speaks about marketplace lending, it is advisable to listen. Not because he used to be the president of Harvard, the head of Treasury, and an economic advisor to Barack Obama, but because of his outstanding ability to predict the opposite of what is going to happen.

«The only useful banking innovation was the ATM» Marketplace lending seems to confirm Paul Volcker once again (Photo: striatic)

«The only useful banking innovation was the ATM» – Marketplace lending seems to confirm Paul Volcker once again (Photo: striatic)

Most people working in finance know one colleague with an outstanding sense for being wrong. It is the person who always buys at the peak and sells at the trough; he is the one you ask for investment advice and then do exactly the opposite of what he advised you to do. In the political sphere of Washington, this person is Larry Summers.

 

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How a Flawed Story Hides the Real Danger of Securitization

May 28, 2015

A common narrative to explain the last financial crisis goes like this: Banks used securitization to unload crappy loans on unwitting investors and thus did no longer uphold proper lending standards. This is a dangerously misleading story, particularly in light of recent developments in marketplace lending.

 

Wall Street has a different concept of liability than everyone else

If banks on Wall Street offloaded all the crappy loans to unwitting investors, why would they have suffered mind-staggering losses?

 

The “unload-crappy-loans-to-unwitting-investors-caused-the-crisis” narrative interprets securitization as a financial technique to distribute risks. Its proponents argue that banks did no longer care about risks which they distributed with securitization, so lending standards fell. Sounds intuitive, right? The only problem is that securitization is not a technique to distribute credit risk. The purpose of securitization is the exact opposite.

 

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Why bankers earn so much money (Spoiler: Not because of added economic value)

April 29, 2015

The perception that financial professionals earn more than people in the non-financial world is not wrong. Interestingly, however, there was a long period in the 20th century where this was not the case.

Rich_House

Since the 1990s, it is more likely that a banker lives in this villa than someone working outside the finance industry.

Every child knows: Bankers earn a lot. They actually bring back home much more than someone else with a comparable job outside the financial sector. But what drives this difference? Is it because bankers create so much economic value? Or are bankers just reckless people, better in getting the best deal possible for them?

 

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