Coppola Comment

Today, I bring you the sad tale of a crypto lender that promised safety and high returns to its depositors, but whose promises have proved to be as hollow as its name.  Donut Inc., a self-proclaimed DeFi" lender, has a "Proof of Reserves" section on its website . This is supposed to reassure customers that their deposits are matched one for one by the platform's liquid assets. I am firmly of the opinion that "Proof of Reserves" statements prove nothing without a corresponding statement of liabilities, since deposits aren't the only form of liability, and encumbered assets can't back deposits. But in this case, the "Proof of Reserves" is worse than useless. It is actually fiction. And it conceals a truly dreadful situation for Donut's customers.   As of today, this is what the "Proof of Reserves" says:  By itself, this doesn't prove anything at all. It's just an unsupported statement of what the company calls "ass

In June this year, a company called intu (no capitalisation) collapsed. Most people had never heard of it. But they knew what it did. It was the owner of many of the UK's biggest shopping centres. Lakeside in Thurrock, Metro Centre in Newcastle, and the Trafford Centre in Manchester - all of these were owned by intu. Indeed, they still are. At the time of writing, no disposals have been made.  So intu is the landlord of a significant part of the UK's retail sector. And it is dead, killed by the pandemic.  But like many of those killed by the pandemic, intu had underlying health issues that made it especially vulnerable.  Long before the pandemic struck, the retail sector was in trouble. Over the last few years, a  stream of household names have gone to the wall: Woolworths, Toys R Us, Mothercare, Maplin, BHS, Comet, and numerous fashion retailers. The department store House of Fraser was bought by Mike Ashley, owner of the lean and hungry Sports Direct. Numerous other retailers

Should Greece leave the Euro? That was the title of the Oxford debate at the Prague Summit in which I had the pleasure of participating yesterday. But this is the wrong question. Unless there is a considerable shift in Eurozone politics, Greece WILL leave the Euro - eventually. The question is when, and how. To see this, we need to look at the motivations of all the players involved in the negotiations. The Greek negotiations resemble a "prisoner's dilemma", in which the best outcome for everyone is achieved through collaboration but the participants don't trust each other enough to collaborate. Games are fundamentally psychological, and their outcome is often determined by unspoken or even unconscious drivers. In this case, despite the collaborative rhetoric of the Memorandum of Understanding , distrust and self-interest are the real drivers of the negotiations. In such a situation, true collaboration is impossible and the eventual outcome must be negative f

Via Business Insider comes this colourful map and chart of CDS spreads worldwide: Those who thought Greek bonds would be the most expensive to insure, since everyone knows it can't pay its debts, need to think again. Venezuela is the most expensive, by a long way.  Related to that is this: The yield curve has been deeply inverted all year, but yields at all maturities are now rising: When even the yield on long-dated bonds is heading for 30%, the public finances are completely unsustainable.  Venezuela, of course, is monetarily sovereign, since it issues its own currency. Well, in theory. In practice it is burning through reserves at a shocking rate to support its absurd managed exchange rate system: Don't be fooled by the uptick in June. That is because China lent it some dollars . It'll get through those in short order if it continues on its present path. To be sure, Venezuela is still earning FX due to its trade surplus, but its c

 Greece's banks have been closed since 29th June. The closure followed the ECB's decision not to increase ELA funding after talks broke down between the Greek government and the Eurogroup. The closure is doing immense economic damage. The cash withdrawal limit of 60 euros per bank card per day is restricting spending in the Greek economy to a trickle. Media generally focus more on the hardship that the cash limit causes for households: but far worse is the inability of businesses to access working capital and make essential payments. Businesses are failing at a rate of knots. People are losing their jobs. And bank loan defaults are rising rapidly. The closure was, of course, the decision of the Greek government, as was the associated decision to impose partial capital controls. But it is hard to see that they had any choice. Deposits have been draining from Greek banks for months, but when talks broke down the outflows increased to a full-blown bank run. The  ECB's

In a reply to a comment on my recent post about Target2 and ELA, I said this: There are no "Greek euros" or "German euros". There are only European euros. So the ECB is not exchanging Greek and German euros at par. Both countries are using the same currency, which is produced by the Eurosystem. The NCBs are not autonomous entities, they are part of the Eurosystem. They do not create their own currencies : collectively, they create the single currency. This is how a single currency works. If there are multiple "central banks" within a single currency area - as there are in the United States, for example - they do not produce their own currencies. St. Louis Federal Reserve does not produce St. Louis Dollars. It produces United States dollars. As does the Minneapolis Fed, and the New York Fed, and the Atlanta Fed, and so on. The twelve Federal Reserve banks collectively produce one currency, the US dollar. So the person who argued that Greek and Ge