Bitcoin to me is an enigma so I try to understand what I can. I am still none the wiser but I recall the words of Hot Chocolate “I believe in miracles, where you from you sexy thing”. So do all those holders of Bitcoins apparently but I did learn something from Peter Hall of crypto mining company Argo Blockchain who said “We believe in Bitcoin. It is the reserve asset of today and tomorrow”. So as long as you believe in it that’s OK. It sounds to me just like any religion based entirely on faith. A Bitcoin investor named Michael Saylor even posted a pop at those Bitcoin heretics saying “ have fun being poor”. So what has this got to do with Lending well I can see how Stablecoins could become a great way of financing real assets once a proper market gets going but purely a digital coin supported by a whole load of bookkeeping entries on Blockchain. Sorry I just don’t get that. Also this is a real thin market controlled by a handful of religious fanatics. Remember Burt Lancaster in Elmer Gantry? Tell you what if you lose all your dough you can always pray to get it back.
Last year the bank of England cancelled the annual stress testing of banks so that the market could concentrate on assisting households and businesses. The so called reality will be further lockdown restrictions and the UK economy contracting by £ 800bn. Transparency will be useful but I am sceptical on how useful the health check will be in practice. In response to a very large increase in house prices in the second half of 2020 leading lenders tightened their credit terms quite drastically with further negative consequences for the overall economy. The fact is that nobody knows just yet where all this will pan out. We have never seen a situation like it. My own gut feeling is that things won’t be too bad so long as the major lenders don’t overreact to the undoubtedly apocalyptic conclusions that are bound to be drawn. Risk parameters are being redrawn. Have we learned how to re price properly?
Those of you living outside of the UK might not be familiar with the sad case of Grenfell Tower, a 24 storey apartment block in West London that burnt down with the loss of 72 lives and a similar number of casualties. This was a scandal as the fire was largely exacerbated by the ornamental cladding which had been used on the outside of the building. This caused the fire to spread quicker and together with some hard to understand advice from Fire Brigade chiefs added to the carnage. Remedial work will be needed on many other similar properties. Many of these properties are privately owned but are mortgaged and are now worth significantly less and in many cases unsalable. The government would like to hang the owners out to dry but this seems unlikely to happen given the circumstances. Another example of a black swan striking at asset prices.
Howard Tolman is a well-known banker, technologist and entrepreneur in London,
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