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Frances Coppola

Frances Coppola

I’m Frances Coppola, writer, singer and twitterer extraordinaire. I am politically non-aligned and economically neutral (I do not regard myself as “belonging” to any particular school of economics). I do not give investment advice and I have no investments.Coppola Comment is my main blog. I am also the author of the Singing is Easy blog, where I write about singing, teaching and muscial expression, and Still Life With Paradox, which contains personal reflections on life, faith and morality.

Articles by Frances Coppola

Crypto’s Weimar

4 days ago

A cryptocurrency has just re-enacted the Weimar hyperinflation.Yesterday, the price of the cryptocurrency TITAN crashed to zero, and its related stablecoin IRON fell off its USD peg, trading as low as 69 cents to the dollar. It was a sudden and dramatic collapse that left investors shocked and bewildered. Equally shocked and confused, the coins’ issuer launched an immediate investigation: Iron Finance issued its post mortem a few hours later. This is the key paragraph:Later, at around 3pm UTC, a few big holders started selling again. This time, after they started, a lot of users panicked and started to redeem IRON and sell their TITAN. Because of how the 10mins TWAP oracle works, TITAN spot price drops even further in comparison to the TWAP redemption price. This caused a negative

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Bank capital and cryptocurrencies

8 days ago

The BIS’s draft proposals for capital regulation of stablecoins and cryptocurrencies have just been released. The headline proposal was a risk weighting of 1250% for what the BIS called "Group 2 cryptoassets", which includes all cryptocurrencies, all algorithmic stablecoins, and reserved stablecoins  that don’t meet the capital, liquidity and disclosure requirements for "Group 1 cryptoassets" specified in the same document. Bitcoin and Ethereum, the two major cryptocurrencies, would fall into Group 2, along with most existing stablecoins. The proposals were widely misunderstood in the crypto community. As ever, much of the misunderstanding was about the nature of bank capital. Many people confuse bank capital with reserves. Reserves are cash deposits at the central bank and vaulted

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Tether’s smoke and mirrors

May 17, 2021

Tether has issued what it calls a “breakdown of its reserves”. It actually consists of two pie charts. Here they are:Seriously, this is all Tether has seen fit to reveal.  Furthermore, the pie charts only purport to show the breakdown of Tether’s reserves on the 31st March 2021. We do not know whether Tether’s reserves still have the same composition now. Nonetheless, the crypto world took these charts as an indication that Tether was, if not fully cash-backed, at least mostly. “76% of its reserves are in cash or cash equivalents, whereas banks only have 10%!”, crowed several people.In both the reserve report and the monthly attestation, Tether takes “reserves” to mean total consolidated assets. The monthly attestations from Moore Cayman essentially say: 1. Tether’s total consolidated

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Calculus for Economists

May 11, 2021

Gabriel Sterne complains about economists’ loose use of mathematical terminology: Of course, it’s not just economists who use "increase" and "accelerate" interchangeably. But economics is a mathematical discipline, and in mathematics, "increase" and "accelerate" mean different things. So is Gabriel’s observation true, and if it is, is it a problem?To test Gabriel’s hypothesis, I ran a little Twitter test. I asked this question: This was of course far from rigorous: the sample was self-selecting, there was no way of restricting it to economists (though I did ban finance tweeps from answering), and it all depended who was on Twitter this morning. And the terminology I used was itself confusing – deliberately so, since this is how economists often write. But the results were nevertheless

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David and Goliath

May 7, 2021

Yesterday, someone who had been watching one of my (all too frequent) Twitter arguments about money made this comment: The "unknown person with few followers" was my protagonist. And the blue tick "classical expert" was me. I am Goliath. But ten years ago, I was David. Armed only with Blogger and Twitter, and my knowledge of banking and finance, I set out to slay the financial Philistines that rampaged across the internet in the aftermath of the 2008 financial crisis. I published my first Coppola Comment post on 20th February, 2011. It throws slingshots at a media pundit who had written an article about short selling, on which he was far from expert. You can still read it, if you like. My early posts were rough and ready, and my terminology is at times excruciatingly loose, but I was sure

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From Carbon To Metals: the Renewable Energy Transition

March 16, 2021

The world is transitioning from a carbon-intensive to a metals-intensive economy. Low-carbon technologies use much larger amounts of metal than traditional fossil fuel-based systems. Demand for metals is thus rising exponentially, fuelling a boom in mining and production.But this creates an environmental challenge. Metals extraction and processing is a significant contributor to global warming and a major pollutant. Unless more environmentally-friendly ways of generating energy from renewable sources can be found, saving the planet from carbon emissions may prove extremely costly for our fellow creatures and even for ourselves.  
Climate change is driving a metals and mining boom The Paris Climate Agreement, which was ratified by 174 countries and the European Union in 2016, aims to keep

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The dismal decade

March 8, 2021

Earlier today, the Governor of the Bank of England, Andrew Bailey, gave a speech at the Resolution Foundation outlining the nature of the Covid-19 crisis and the challenge that it poses for monetary policy. But as his speech progressed, it became clear that the Bank faces a much larger challenge. Covid-19 hit the UK economy at the end of a dismal decade. Returning to "where we were" before the pandemic won’t be good enough. Just how dismal the 2010s were is evident in this chart from Andrew Sentance: Even before Covid-19 struck, average GDP growth was well below its historical average and heading downwards. The 2010s were, to put it bluntly, a decade of stagnation.  The 2000s were slightly worse, but that was because they included the deep recession after the financial crisis, during

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Democracy won’t save you

February 2, 2021

The fashionable concentration on democracy as the main value threatened is not without danger. It is largely responsible for the misleading and unfounded belief that so long as the ultimate source of power is the will of the majority, the power cannot be arbitrary. The false assurance which many people derive from this belief is an important cuase of the general unawareness of the dangers which we face. There is no justification for the belief that so long as power is conferred by democratic procedure, it cannot be arbitrary; the contrast suggested by this statement is altogether false: it is not the source but the limitation of power which prevents it from becoming arbitrary. Democratic control may prevent power from becoming arbitrary, but it does not do so by its mere existence. If

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Bitcoin fixes Microstrategy (or does it?)

January 10, 2021

Do you have a poorly-performing company that you don’t know what to do with? Bitcoin fixes this! At least, that’s what Michael Saylor seems to think. Since August 2020, Microstrategy, the company of which he is simultaneously CEO, chairman and principal investor, has invested heavily in Bitcoin. And Saylor has joined the select group of billionaires fronting the campaign to promote Bitcoin’s widespread adoption (and talk up its price). Microstrategy has been bumping along the bottom for quite some time. MarketWatch helpfully reports the income statements for the last five years. They make grim reading. Here are the bottom-line net income and key financial metrics from 2015 to 2019 inclusive:Yes, there’s been some improvement in net income, but just look at that EBITDA….The financials

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Reconciling IS-LM and endogenous money

January 5, 2021

This post was sparked by conversations with people who have opposing views of how money creation works. Some people think that classical models such as IS-LM don’t work with endogenous money theory, therefore the models need to be discarded: others think that there’s nothing wrong with the model and the problem is endogenous money theory. Personally I think that simple models like IS-LM can be powerful tools to explain aspects of the working of a market economy, and it behooves us therefore to find ways of adapting them to work with an endogenous fiat money system. So this is my attempt to reconcile IS-LM with endogenous money. I don’t claim that it is anything like the final word on the subject, so comments are welcome. The IS-LM model looks like this::where M is the quantity of money in

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The asymmetric mechanics of Tether

November 30, 2020

Tether is the issuer of the cryptocurrrency world’s premier stablecoin, USDT. Stablecoins aim to guarantee the value of cryptocurrencies in dollar terms, hedging volatility risk and making it easier to realise notional gains from cryptocurrency’s wild price rises. But Tether’s relationship with the main cryptocurrencies, particularly Bitcoin, is controversial. There is a raging battle between those who think that USDT issuance pumps up the price of Bitcoin, and those who argue that USDT issuance has nothing to do with Bitcoin’s price. But in my view, the truth is more complex. Tether’s asymmetric mechanics both support and disprove the arguments of both sides. USDT, Tether’s "token", is a representation of the US dollar that can be readily traded on cryptocurrency markets. People exchange

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The asymmetric mechanics of Tether

November 30, 2020

Tether is the issuer of the cryptocurrrency world’s premier stablecoin, USDT. Stablecoins aim to guarantee the value of cryptocurrencies in dollar terms, hedging volatility risk and making it easier to realise notional gains from cryptocurrency’s wild price rises. But Tether’s relationship with the main cryptocurrencies, particularly Bitcoin, is controversial. There is a raging battle between those who think that USDT issuance pumps up the price of Bitcoin, and those who argue that USDT issuance has nothing to do with Bitcoin’s price. But in my view, the truth is more complex. Tether’s asymmetric mechanics both support and disprove the arguments of both sides. USDT, Tether’s "token", is a representation of the US dollar that can be readily traded on cryptocurrency markets. People exchange

Read More »

Trade, saving and an economic disaster

October 12, 2020

The UK is running a trade surplus. No, really, I am not joking. This is from the ONS’s latest trade statistics release:The UK total trade surplus, excluding non-monetary gold and other precious metals, increased £3.8 billion to £7.7 billion in the three months to August 2020, as exports grew by £21.4 billion and imports grew by a lesser £17.5 billionIt’s the first time the UK has run a trade surplus since the late 1990s: And if you were thinking this was because of the lockdown, you would be wrong. The UK has been running a trade surplus since the beginning of 2020:Admittedly, the trade surplus widened under lockdown. But the UK economy reopened to some degree from June to August – and yet the trade surplus continues to widen. This is no doubt music to the ears of balance of payments

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Trade, saving and an economic disaster

October 12, 2020

The UK is running a trade surplus. No, really, I am not joking. This is from the ONS’s latest trade statistics release:The UK total trade surplus, excluding non-monetary gold and other precious metals, increased £3.8 billion to £7.7 billion in the three months to August 2020, as exports grew by £21.4 billion and imports grew by a lesser £17.5 billionIt’s the first time the UK has run a trade surplus since the late 1990s: And if you were thinking this was because of the lockdown, you would be wrong. The UK has been running a trade surplus since the beginning of 2020:Admittedly, the trade surplus widened under lockdown. But the UK economy reopened to some degree from June to August – and yet the trade surplus continues to widen. This is no doubt music to the ears of balance of payments

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A Financial View of Labour Markets

October 2, 2020

We are used to thinking of workers as free agents who sell their labour in a market place. They bid a price, companies offer a lower price and the market clearing rate is somewhere between the two. Free market economics, pure and simple. But actually that’s not quite right. The financial motivations of workers and companies are entirely different. To a worker, the financial benefit from getting a job is an income stream, which can be ended by either side at any time. But to a company, a worker is a capital asset. This is not entirely obvious in a free labour market. But in another sort of labour market it is much more obvious. I’m talking about slavery. Yes, I know slavery raises all sorts of emotional and political hackles. But bear with me. I am only going to look at this financially.

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A Financial View of Labour Markets

October 2, 2020

We are used to thinking of workers as free agents who sell their labour in a market place. They bid a price, companies offer a lower price and the market clearing rate is somewhere between the two. Free market economics, pure and simple. But actually that’s not quite right. The financial motivations of workers and companies are entirely different. To a worker, the financial benefit from getting a job is an income stream, which can be ended by either side at any time. But to a company, a worker is a capital asset. This is not entirely obvious in a free labour market. But in another sort of labour market it is much more obvious. I’m talking about slavery. Yes, I know slavery raises all sorts of emotional and political hackles. But bear with me. I am only going to look at this financially.

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Statistics for state pension age campaigners

September 22, 2020

Another day, another takedown of claims made by women’s state pension age campaigners. This time, it’s figures for benefit claims by women in their early 60s. David Hencke claims that sharp rises in the number of women in this age group claiming unfit-for-work benefits (ESA and legacy incapacity benefits) proves that losing their state pension entitlement is wrecking the health of women in this age group. And he argues that this calls into question the DWP’s recent victory in the Court of Appeal:The disclosure of these figures -obviously not available at the time of the hearing – does undermine the forceful case made by Sir James Eadie, QC, who represented the Department of Work and Pensions, that any poverty or ill health suffered by these women could not be linked to the rise in the

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Statistics for state pension age campaigners

September 22, 2020

Another day, another takedown of claims made by women’s state pension age campaigners. This time, it’s figures for benefit claims by women in their early 60s. David Hencke claims that sharp rises in the number of women in this age group claiming unfit-for-work benefits (ESA and legacy incapacity benefits) proves that losing their state pension entitlement is wrecking the health of women in this age group. And he argues that this calls into question the DWP’s recent victory in the Court of Appeal:The disclosure of these figures -obviously not available at the time of the hearing – does undermine the forceful case made by Sir James Eadie, QC, who represented the Department of Work and Pensions, that any poverty or ill health suffered by these women could not be linked to the rise in the

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The inhumanity of Ofqual’s algorithm

August 24, 2020

To everyone’s relief, the Government eventually caved in over the awarding of grades to A/AS level and GCSE students who had not been able to take their exams. The algorithm that awarded aspiring young people grades they did not expect and did not deserve was discarded in favour of grades set by their schools and colleges. But only if the grades awarded were too low. Those to whom the algorithm awarded over-high grades got to keep them. As a result, the "rampant grade inflation" that the Education Secretary was so desperate to prevent is now even worse than it would be if only the centre-assessed grades were used. What a mess. But it is not the current mess that bothers me, bad though it is. Nor even the mess there will probably be next year, when universities are faced with cramming

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The inhumanity of Ofqual’s algorithm

August 24, 2020

To everyone’s relief, the Government eventually caved in over the awarding of grades to A/AS level and GCSE students who had not been able to take their exams. The algorithm that awarded aspiring young people grades they did not expect and did not deserve was discarded in favour of grades set by their schools and colleges. But only if the grades awarded were too low. Those to whom the algorithm awarded over-high grades got to keep them. As a result, the rampant "grade inflation" that the Education Secretary was so desperate to prevent is now even worse than it would be if only the centre-assessed grades were used. What a mess. But it is not the current mess that bothers me, bad though it is. Nor even the mess there will probably be next year, when universities are faced with cramming

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What went wrong at intu?

July 11, 2020

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,

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What went wrong at intu?

July 11, 2020

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,

Read More »

Britain was not “nearly bust” in March

June 23, 2020

"Britain nearly went bust in March, says Bank of England", reads a headline in the Guardian. In similar vein, the Telegraph’s Business section reports "UK finances were close to collapse, says Governor":Eh, what? The Governor of the Bank of England says the UK nearly turned into Venezuela? Well, that’s what the Telegraph seems to think: The Bank of England was forced to save the Government from potential financial collapse as markets seized up at the height of the coronavirus crisis, Governor Andrew Bailey has said. In his most explicit comments yet on the country’s precarious position in mid-March, Mr Bailey said ‘serious disorder’ broke out after panicking investors sold UK government bonds in a desperate hunt for cash. It left Britain at risk of failing to auction off the gilts needed

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Britain was not “nearly bust” in March

June 23, 2020

"Britain nearly went bust in March, says Bank of England", reads a headline in the Guardian. In similar vein, the Telegraph’s Business section reports "UK finances were close to collapse, says Governor":Eh, what? The Governor of the Bank of England says the UK nearly turned into Venezuela? Well, that’s what the Telegraph seems to think: The Bank of England was forced to save the Government from potential financial collapse as markets seized up at the height of the coronavirus crisis, Governor Andrew Bailey has said. In his most explicit comments yet on the country’s precarious position in mid-March, Mr Bailey said ‘serious disorder’ broke out after panicking investors sold UK government bonds in a desperate hunt for cash. It left Britain at risk of failing to auction off the gilts needed

Read More »

The true story of NI autocredits

June 18, 2020

There’s yet another bizarre claim doing the rounds in Waspiland. Or, more correctly, among the hardline Back to 60 fringe of the broader women’s state pension movement. I try to ignore most of the ridiculous claims made by Back to 60 campaigners, because they aren’t going to listen to me and I will simply end up with a sore head and a very frayed temper. But this one is more complex – and confusing – than most, and it doesn’t only affect women. So it is worth explaining. As always, the story starts with the unequal state pension ages of men and women. When the present state pension system was introduced in 1946, women’s state pension age was set at 60, and men’s was 65. To qualify for a full state pension, women had to make 39 years of NI contributions: because their state pension age was

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The true story of NI autocredits

June 18, 2020

There’s yet another bizarre claim doing the rounds in Waspiland. Or, more correctly, among the hardline Back to 60 fringe of the broader women’s state pension movement. I try to ignore most of the ridiculous claims made by Back to 60 campaigners, because they aren’t going to listen to me and I will simply end up with a sore head and a very frayed temper. But this one is more complex – and confusing – than most, and it doesn’t only affect women. So it is worth explaining. As always, the story starts with the unequal state pension ages of men and women. When the present state pension system was introduced in 1946, women’s state pension age was set at 60, and men’s was 65. To qualify for a full state pension, women had to make 39 years of NI contributions: because their state pension age was

Read More »

Pandemic economics: the role of central banks and monetary policy

June 15, 2020

Below are the slides from my presentation at Beyond Covid on 12th June. The whole webinar can ve viewed here.The pandemic seems to me to resemble the "nuclear disaster" scenarios of my youth: hide in the bunker, then creep out when the immediate danger is over, only to find a world that is still dangerous and has fundamentally changed in unforeseeable ways. Rabbits hiding from a hawk is perhaps a kinder image, though hawks don’t usually leave devastation in their wake. And I like rabbits. So this presentation is illustrated with rabbits, not nuclear bombs. This is where we were in March/April/May. Hiding in our homes, waiting for the danger to pass:And this is what central banks should have been doing then:To their credit, this is exactly what they did. By supporting sovereign finances

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Pandemic economics: the role of central banks and monetary policy

June 15, 2020

Below are the slides from my presentation at Beyond Covid on 12th June. The whole webinar can ve viewed here.The pandemic seems to me to resemble the "nuclear disaster" scenarios of my youth: hide in the bunker, then creep out when the immediate danger is over, only to find a world that is still dangerous and has fundamentally changed in unforeseeable ways. Rabbits hiding from a hawk is perhaps a kinder image, though hawks don’t usually leave devastation in their wake. And I like rabbits. So this presentation is illustrated with rabbits, not nuclear bombs. This is where we were in March/April/May. Hiding in our homes, waiting for the danger to pass:And this is what central banks should have been doing then:To their credit, this is exactly what they did. By supporting sovereign finances

Read More »

So when did this recession start, exactly?

June 9, 2020

Is the U.S. in recession? If so, when did the recession start, and what caused it? The usual economic definition of "recession" is two successive quarters of negative GDP growth. But in Q1 2020, growth was positive, though it was apparently slowing sharply (more on this shortly):So using the standard economic definition, the U.S. is not yet in recession.But according to the Business Cycle Dating Committee of the National Bureau for Economic Research (NBER), the U.S. entered recession in February: The committee has determined that a peak in monthly economic activity occurred in the U.S. economy in February 2020. The peak marks the end of the expansion that began in June 2009 and the beginning of a recession. February? The New York Fed’s nowcasting report for February showed no sign of

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So when did this recession start, exactly?

June 9, 2020

Is the U.S. in recession? If so, when did the recession start, and what caused it? The usual economic definition of "recession" is two successive quarters of negative GDP growth. But in Q1 2020, growth was positive, though it was apparently slowing sharply (more on this shortly):So using the standard economic definition, the U.S. is not yet in recession.But according to the Business Cycle Dating Committee of the National Bureau for Economic Research (NBER), the U.S. entered recession in February: The committee has determined that a peak in monthly economic activity occurred in the U.S. economy in February 2020. The peak marks the end of the expansion that began in June 2009 and the beginning of a recession. February? The New York Fed’s nowcasting report for February showed no sign of

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