Quotes that struck me as on-point: Chris Skinner says of SEPA or the Single-European-Payment-Area:
One of the key issues is that when SEPA was envisaged and designed, counterparty credit risk was not top of the agenda; post-Lehman Brothers crash and it is.
What a delight! Oh, to design a payment system without counterparty risk ... Next thing they'll be suggesting payments without theft!
Meanwhile Dan Kaminsky says in delicious counterpoint, commenting on Bitcoin:
But the core technology actually works, and has continued to work, to a degree not everyone predicted. Time to enjoy being wrong. What the heck is going on here?
First of all, yes. Money changes things.
A lot of the slop that permeates most software is much less likely to be present when the developer is aware that, yes, a single misplaced character really could End The World. The reality of most software development is that the consequences of failure are simply nonexistent. Software tends not to kill people and so we accept incredibly fast innovation loops because the consequences are tolerable and the results are astonishing.
BitCoin was simply developed under a different reality.
The stakes weren’t obscured, and the problem wasn’t someone else’s.
They didn’t ignore the engineering reality, they absorbed it and innovated ridiculously
Welcome to financial cryptography -- that domain where things matter. It is this specialness, that ones code actually matters, that makes it worth while.
Meanwhile, from the department of lolz, comes Apple with a new patent -- filed at least.
The basic idea, described in a patent application “Ad-hoc cash dispensing network” is pretty simple. Create a cash dispensing server at Apple’s datacenter, to which iPhones, iPads and Macs can connect via a specialized app. Need some quick cash right now and there’s no ATM around? Launch the Cash app, and tell it how much do you need. The app picks up your location, and sends the request for cash to nearby iPhone users. When someone agrees to front you $20, his location is shown to you on the map. You go to that person, pick up the bill and confirm the transaction on your iPhone. $20 plus a small service fee is deducted from your iTunes account and deposited to the guy who gave you the cash.
The good thing about being an FCer is that you can design that one over beers, and have a good belly laugh for the same price. I don't know how to put it gently, but hey guys, don't do that for real, ok?!
All by way of saying, financial cryptography is where it's at!
Yes, it's the first of May, also known as May Day, and the communist world's celebration of the victory over capitalism. Quite why MayDay became the international distress message over radio is not known to me, but I'd like to know!
The bank went through their customer base and identified which businesses were asset rich and cash poor.
Typically, the SME (small to medium enterprise) would require funding for expansion or to cover short term exposures, and the bank’s relationship manager would work with the business owner on a loan funding cover.
The loan may be for five or ten years, and the relationship manager would often call the client after a short time and say “congratulations, you’ve got the funding”.
The business owner would be delighted and would start committing the funds.
This would start the process of the disturbance sale of the IRSA.
The rest you can imagine - the bank sold an inappropriate derivative with false information, and without advising the customer of the true costs. This time however the costs were more severe, as it seems that many such businesses went out of business in whole or in part because of the dodgy sale.
In particular, the core issue is that no-one has defined whether the bank will be responsible for contingent liabilities.
The liabilities are for losses made by those businesses that were mis-sold these products and, as a result, have now gone into bankruptcy or been constrained so much that they have been unable to compete or grow their business as they would have if they had not taken these products.
Ouch! I have to applaud Chris Skinner and the Financial Services Club here for coming forth with this information. It is time for society to break ranks here and start dealing with the banks. If this is not done, the banks will bring us all down, and it is not clear at all that the banks aren't going to do just that.
Meanwhile back to the scandal du jour. We are talking about 40k businesses, with average suggested compensation of 2.5 million quid - so we are already up to a potential exposure of 100 billion pounds. Given this, there is no doubt that even the most thickest of the dumbest can predict what will happen next:
Mainly because of the Parliamentary investigation, the Financial Services Authority was kicked into action and, on June 29 2012, announced that it had found "serious failings in the sale of IRSAs to small and medium sized businesses and that this has resulted in a severe impact on a large number of these businesses.”
However, it then left the banks to investigate the cases and work out how to compensate and address them .
The banks response was released on January 31 2013, and it was notable that between the June announcement and bank response in January that the number of cases rose from 28,000 to 40,000. It was also noteworthy that of those 40,000 cases investigated, over 90% were found to have been mis-sold. That’s a pretty damning indictment.
Even then the real issue, according to Jeremy [of Bully Banks], is that the banks are in charge of the process.
Not only is the fox in charge of the chickens, it's also paying off them off for their slaughter. Do we really need to say more? The regulators are in bed with the banks in trying to suppress this scandal.
Obviously, this cunning tactic will save poor banks money and embarrassment. But the emerging problem here is that, as suggested many times in this blog (e.g., 2, 3, 4, ...) and elsewhere, the public is now becoming increasingly convinced that banks are not healthy, honest members of society.
But I see an issue emerging in the next systemic shock to hit the financial world: if the public's patience is exhausted, as it appeared to be over Cyprus, then the next systemic shock is going to cause the collapse of some major banks. For right or wrong, the public is not going to accept any more talk of bailouts, taxpayer subsidies, etc etc.
The chickens are going to turn on the foxes, and they will not be satisfied with anything less than blood.
One hopes that the old Lady's bank tear-down team is boned up and ready to roll, because they'll be working hard soon.
After a week of fairly strong deliberations, Mozilla has sent out a message to all CAs to clarify that MITM activity is not acceptable.
It would seem that Trustwave might slip through without losing their spot in the root list of major vendors. The reasons for this is a combination of: up-front disclosure, a short timeframe within which the subCA was issued and used (at this stage limited to 2011), and the principle of wiser heads prevailing.
That's my assessment at least.
My hope is that this has set the scene. The next discovery will be fatal for that CA. The only way forward for a CA that has issued at any time in the past an MITM-enabled subCA would be the following:
+ up-front disclosure to the public. By that I mean, not privately to Mozilla or other vendors. That won't be good enough. Nobody trusts the secret channels anymore.
+ in the event that this is still going on, an *fast* plan, agreed and committed to vendors, to withdraw completely any of these MITM sub-CAs or similar arrangements. By that I mean *with prejudice* to any customers - breaching contract if necessary.
Any deviation means termination of the root. Guys, you got one free pass at this, and Trustwave used it up. The jaws of Trust are hungry for your response.
That is what I'll be looking for at Mozilla. Unfortunately there is no forum for Google and others, so Mozilla still remains the bellwether for trust in CAs in general.
That's not a compliment; it's more a description of how little trust there is. If there is a desire to create some, that's possibly where we'll see the signs.
I got some good criticism on the post about accounting as a profession. Clive said this which I thought I'd share:
As an engineer who's father was an accountant I will give you three guesses as to what he told me not to do when I grew up... Oddly it is the same for engineers, we tend to tell our children to do other things. As I've said before if you want to get on in life you should learn to speak the language that the man who cuts your cheque at the end of the month does, or more correctly his boss ;)
So even if you are just a humble team leader get yourself three courses,
- Vocal training,
- Psychology or Method acting.
And no I'm not joking about 3.
He's talking about what we do when we get to 30 and beyond, e.g., most readers of this blog. For us older folks looking back, it is depressing that the world looks so sucky; but this is a time-honoured thing. The myths have been stripped away, the rot revealed.
But the youth of today is perpetually optimistic, and the question they ask is eternal and (Spence-like) opinionated: what to study, first?
What then do we recommend for a first degree for someone near 20? It seems that nobody promotes the accountancy field, including the incumbents. Accountants don't practice accountancy, if they are any good. The only accountant I ever knew well committed suicide.
An MBA doesn't work, this is something that should be done after around 5-10 years of experience. Hence, I'm not convinced a straight business degree ("Bachelors in Business Studies" ?) makes sense either, because all that additional stuff doesn't add value until experience is there to help it click into place.
I wouldn't suggest economics. It is like law and accounting, in that it helps to provide a very valuable perspective throughout higher business planes. But it doesn't get you jobs, and it is too divorced from practical life, too hard to apply in detail. Engineering seems far too specialised these days, and a lot of it is hard to work in and subject to outsourcing. Science is like engineering but without the focus.
To my mind, the leading contenders as a first degree are (in no particular order):
⇒ computer science,
⇒ biotech, and
Firstly, they seem to get you jobs; secondly, law, compsci and marketing are easy to apply generally and broadly, and pay dividends throughout life. I'm not quiet sure about Biotech in the "broad" sense, but it is the next big thing, it is the wave to ride in.
Comp sci was the wave of the 1980s and 1990s. Now it is routine. Any technical degree these days tends to include a lot of comp sci, so if there is a tech you enjoy, do that degree and turn it into a comp sci degree on the inside.
Law is in my list because it is the ultimate defensive strategy. Headline Law tends to offend with its aggressively self-serving guild behaviour ("a man who represents himself has a fool for a client and a fool for a lawyer") and as a direct practice (courts) the field seems made for crooks. More technically, all disputes are win-lose by definition, and therefore litigation is destructive by definition, not productive. This is offensive to most of humanity.
But litigation is only the headline, there are other areas. You can apply the practical aspects of law in any job or business, and you can much more easily defend yourself and your business against your future fall, if you have a good understanding of the weapons of mutual destruction (a.k.a. lawsuits). About half of the business failures I've seen have occurred because there was no good legal advisor on the team; this is especially true of financial cryptography which is why I've had to pick up some of it; what one person I know calls "bush lawyering."
The downside to studying law is that you can lose your soul. But actually the mythology in law is not so bad because it is grounded in fundamental rights, so keep those in mind, and don't practice afterwards. It's nowhere near as bad as the computing scene (no grounding at all, e.g., open source) or the marketing blah blah (your mission is to unground other's perceptions!).
Marketing is there because every successful business needs it, and you can only be successful with it. MBAs are full of marketing, which reflects its centrality (and also gives a good option for picking it up later). But marketing is also dangerous because it gives you the tools to fool yourself and all around you, and once you've become accustomed to the elixir, your own grounding is at risk.
I don't advise any of the arts (including Clive's points 2,3) as a primary degree for youth, because businesses hire on substance, so it is important to have some to offer. E.g., people who study psychology tend to end up doing HR ("human resources"), badly, perhaps because they lack the marketing sense to make HR the most important part of the business.
Likewise, avoid anything that is popular, soft, fun, nice and that all your touchy-feely friends want to do. When there are too many people and too little substance, the competition suppresses everyone and makes you all poor. That's the best result because at least it is honest; a very few dishonest ones become rich because they figure out the game. The notion that you can study acting, media, history, photography or any of the finer arts, and then make a living, doesn't bear talking about. It is literally gambling with lives, and has no place in advice to young people.