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When will humans peak?
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-80sWhy birth rates in both developed and developing countries are fallingWhen the global population will peakHow to meet the sustainability challengeWhy we all need a hugWhy different countries need different immigration modelsThe importance of bridging the gender gapWhy demographics drive GDP growth, inflation, debt and asset pricesThe pernicious effect of negative interest rates
Hydrocarbons, geopolitics and money
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 crisisThe global energy market power shift from the US to ChinaChina as the leader in renewable energy technologyWhy volatility in geopolitics is related to the energy transitionHow coal and oil helped drive past prosperityWhy the climate crisis will shrink both population and economiesThe use of sanctions to defend the dollar and US oil marketsThe shift from hydrocarbons to renewables will end the dollar eraThe coming expansion of nuclear power
Securities finance underlies every business story
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 financeHow lending and repo can lower the cost of financeWhy your pension fund and insurer may be lending their shares and bondsHow the 1982 Drysdale default changed bond lending practicesHow a US bankruptcy code change in 1984 sparked huge growth in repoWhy Roy turned down Barings bank as a potential clientWhy having good collateral won’t protect you from a bad counterpartyShort selling bans, frozen assets and market liquidityWhy 2008 was the high-water mark for repo and securities lending
DeFi’s dangerous alphabet soup
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.”
Gold in the time of war
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 marketIs Russia’s gold subject to sanctions?Gold market dislocation—what happened in March 2020?The physical delivery of commodities sets the priceOnly 10% of large investors own gold as a strategic allocationHow gold impacts a portfolio’s risk-adjusted returnsWill any country ever link its currency’s value to gold again?The dollar’s reserve currency statusGold as the ultimate store of valueHow to invest in goldHow to keep track of gold market sentiment and trends
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