Where finance and media intersect with reality


Spot Markets Live (22/03/2023)

fallof rome

Continuing our dispatches from the Fall of the Roman Republic, Frances Coppola is joined by Kathleen Tyson, chief executive, of Pacemaker.Global.



Morning everyone.

Kathleen Tyson11:01

Good morning. Thanks for inviting me.


Today I’m joined by Kathleen Tyson, chief executive of https://www.pacemaker.global/

Kathleen Tyson11:02

Oooh! Nice welcome, John!


it’s Fed decision day, so let’s start with a suitable meme….


Is the Fed going to raise rates, or is it going to pause until the banking system stabilises?

Kathleen Tyson11:04

I don’t envy him. Things are fragile out there on bank balance sheets and credit markets.


Analysts seem totally split on this

Kathleen Tyson11:06

Smith has a point. If bank laws can be rewrittten from Friday to Monday without reference to depositors, shareholders, bondholders, no prospectus has credibility.


The AT1 write-down affected bondholders, though. Shareholders suffered losses but not wipeout. That’s the problem.

So Terry is being a bit irrational

I also don’t agree that fintechs are supplanting banks. I think they are becoming banks.

Kathleen Tyson11:08

Yes, overturned waterfall expectations.Screenshot 2023-03-21 at 17.53.26.png


Look at the way crypto spawned a whole load of shadow banks when it discovered that trying to run on a fully-funded basis all the time was like trying to find water in the Gobi Desert

Kathleen Tyson11:09


Both ECB and Bank of England complained that they had spent more than a decade agreeing resolution waterfalls just to have them overturned in a weekend.


And they are also complaining about the US caving in on deposit insurance

Kathleen Tyson11:11

Someone shared the Swiss release and emergency legislation with me this morning: https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-93793.html


the US’s deposit insurance decision effectively upended the internationally agreed bank resolution framework

so it’s not just the Swiss who are overriding international bank resolution frameworks when it suits them

Kathleen Tyson11:13

The Saudi National Bank and Qataris were the largest shareholders. They are deep, patient money that has backstopped CS as recently as a few weeks ago. Wiping them out would ensure there was never a further recapitalisation from them again in future.


Interesting that the proximate cause of CS’s failure was the Saudi National Bank refusing to stump up more capital

Kathleen Tyson11:14

As a former New York Fed attorney I find the lawlessness of recent events really shocking. There are no red lines anywhere anymore. Everything is in flux.

11:16If Yellen is serious about insuring all $17 trillion in US deposits, the rationale for a competitive banking system with 4000 banks kind of goes out the window because there is no one responsible for ensuring banks are run appropriately. If there is no cost to failure, they can take any risks. Hard to know what the rationale could be. Maybe they want banks to double down on commercial real estate?


I’m actually more worried by the prospect of a temporary lifting of the FDIC limit. If they abolished it permanently, at least people would know where they stood.

Kathleen Tyson11:18

Well, they had just put in $1.5 billion and seen it written down in days. Saudi NB chairman said they were limited to below 10% holding.

Canada has 5 large, boring banks and has never had a crisis. I’m beginning to think it is a more rational model. Maybe that is the endgame?


The US is very fond of its little banks though.

Kathleen Tyson11:20

Oh, I know. But they do lunge from crisis to crisis. 300 resolutions last year by FDIC.


The problem is not the little banks, it’s the midsize ones that want to be regulated like little banks but backstopped like big ones.

Little banks are resolved over a weekend by FDIC and no-one even notices.

But we now know that midsize banks are systemically important.

Kathleen Tyson11:20

Silicon Valley Bank did lobby to get itself less regulation, and we see how that turned out.


It’s not just SVB. US needs to reimpose SIFI regulation on the midsize banks.

And imho this should be the quid pro quo for lifting the FDIC limit.

Kathleen Tyson11:22

All regulation is subject to watering down by lobbyists.

11:23I’m a big fan of Danish Mortgage Bonds – matched maturity, tenor, fixed interest rate to term – 240 years without a default.

I read $17 point something yesterday.


We need Dan Davies here, he’s a big opponent of Danish mortgage bonds because they make the mortgage market illiquid

Kathleen Tyson11:24

Danish Mortgage Bonds are the most liquid market in Europe and outperformed gold and US Treasuries as counter-cyclical bank capital in 2008.


yes but they make the housing market illiquid, that’s his point. But he’s not here so let’s move on.

Kathleen Tyson11:25

Yes, Fed Day! Inflation! PetroYuan!


Talking of inflation… the UK’s CPI inflation has surprised to the upside and is now over 10%

Kathleen Tyson11:26

And accelerating. {R^}


11:27Main driver is foodstuffs, which rose by 18%

Kathleen Tyson11:27

My view is that inflation in UK could be 15% by year end because Sunk has put a 2 year target on war with China in the latest budget. War is inflationary. If Asia starts stockpiling then UK will be worst affected by surging inflation because pound unanchored and economy a shambles.

Sunak, not Sunk. Though maybe spellchecker had it right.


Yeah, but Sunak is going to lose the next election

Kathleen Tyson11:29

Starmer is owned by same Davos crowd. I love the interview where he was asked if he preferred Davos to Westminster and he said, “Davos, absolutely. Westminster is a noisy, shouty place.”


My view is that because the UK is not self-sufficient in food (has not been since the Napoleonic wars) foodstuff inflation is largely caused by movements on global markets, which are affected by the Ukraine war (Ukraine being a major food producer), and by the trade barriers created as a result of Brexit.

Kathleen Tyson11:29

60 Minutes on Sunday: “The Coming War with China”


Trade war with China, for sure. Hot war? I am less convinced.

Kathleen Tyson11:30

I’ve always wondered who was buying wheat, oil, natgas and nickel contracts in April 2021.


However, the inflation print in the UK makes a rate rise by the BoE a racing certainty

irrespective of what the Fed does today

Kathleen Tyson11:31

Japan has bought 400 Tomahawks. Australia just agreed to buy 220 Tomahawks. These are not defensive weapons. They are first-strike to take out airports, ports, infrastructure in the first hour of war.

Agree. BoE has to raise just to keep gilts stable.

11:33UK has the largest exposure to foreign owners of its debt of any OECD nation. They are already jittery. Foreign owners started selling hard last August, even before the Kwarteng budget blew things up.


So far the UK’s banking system appears relatively unaffected by the Swiss mess and the US fires. SVB UK was quietly handed over to HSBC, and the BoE acted quickly to stamp on worries about AT1s. UK bank stocks today are slightly up.

So the worry for the Bank will be the impact on the mortgage market, which is extremely sensitive to rate rises, and the consequent possibility of triggering a recession.

Kathleen Tyson11:35

Kishida overturned a defensive only posture for Japan’s military (Constitution) in December when he agreed to the purchase of 400 Tomahawks and two new forward US bases on islands closest to china for the missile batteries.

HSBC bought half of the UK tech sector for £1. Great deal!


We haven’t talked enough about what a stonking deal that was for HSBC…

Kathleen Tyson11:36

My CFO had another company in SVB UK. He had a very bad weekend until the HSBC deal was announced.


HSBC is now the go-to banker for the UK’s entire tech sector.

Kathleen Tyson11:36

HSBC also got relaxed regulatory treatment . . .

The SVB business model deserves a mention: founders and VC were told to keep entire amount of raised funds in SVB in exchange for subsidised mortgages and personal loans against equity.

11:38I have to say, if we’re going to have bank failures, I’m glad Andrew Bailey is governor. He sorted all the failed banks in 2008 and 2009 before going over to FCA to rewrite the rulebooks.

Yeah, questionable whether VCs and founders were too self-interested and not exercising fiduciary duty of care over funds.


I think the SVB business model was one of the main reasons for the US Treasury’s decision to insure all deposits

if uninsured depositors had taken losses, many of the tech startups would have been left with massive loans they couldn’t repay

Kathleen Tyson11:39

A lot of billionaires put on a lot of pressure, made lots of calls to politicians and regulators they own.


Not to mention starting fires on twitter

Kathleen Tyson11:40

Indeed. This was the first bank failure in ‘Twitter time’. Wednesday VC newsletter to Friday failure.


The UK would have been under a lot of pressure to insure deposits in SVB UK if it hadn’t found a TBTF buyer

Kathleen Tyson11:41

Oh. Am I supposed to be more discreet? Ummm. Allegedly, then.


Nah, we like it!

Kathleen Tyson11:42

Signature held a fundraiser for the guy now investigating the failure weeks before they were taken down.


While the West blows up its banking system, shall we talk about Putin, Xi and the petroyuan?

Kathleen Tyson11:43

Oh, yes! Putin invited all of Asia, Africa and Latin America to buy Russian oil in yuan at the close of President Xi’s state visit to Moscow. PETROYUAN is here!

I called the end of Bretton Woods II on 9 December when Xi invited all the heads of state of Gulf Cooperation Council to trade oil for yuan. This is rolling at speed now.


The means to exchange yuan for rubles has been in place for some years now https://www.reuters.com/article/us-china-yuan-rouble-idUSKBN1CH0ML


So this is bypassing the dollar system

Kathleen Tyson11:45

Yuan as a proportion of Russian reserves has gone from 3 percent to 40 percent in one year.

11:46What is happening is what I call Multicurrency Mercantilism. By that I mean the alternative to the dollar is the dollar and ALL OTHER currencies. No new hegemon. No hegemonic asset. And the transition is event-driven, one deal at a time.


Here’s the FT piece on Trafigura and Vitol https://www.ft.com/content/f1344e47-17d7-4f89-9be9-9ab5d378cbd2

Kathleen Tyson11:47

The weird thing is FT cannot discuss PetroYuan. The failed entirely to report the GCC Summit in Riyadh last December and no word of the story today either.


The US is aware of it though.

Kathleen Tyson11:47

It is a really glaring omission.


Unintended consequences of the day:

So the US is undermining its own sanctions

I’ll have to learn how to do images.

Angell Paradox: economic sanctions between interdependent nations devalue all similar claims, credits, property interests, contracts.

Geneva has already moved to Dubai.


You had more luck with that image than me, Izzy. I tried several times to post it.

Kathleen Tyson11:50

Swiss had one job: stay neutral in external conflict and preserve depositor claim above all rival claimants. They quit that job last March.


Neutrality is for the birds now.

Kathleen Tyson11:51

I don’t think I’ve ever seen all 7 together before.

Oh! Good timing. I plan to write up a brief intro to Multicurrency Mercantilism later today.

I was working on a book, but events are moving too fast.

My startup pivoted from UK funding to Dubai funding last Friday. Already in talks. I had forgotten how fast Dubai can move compared to UK.


So are we moving to a multipolar financial world?

Kathleen Tyson11:53


It is already here and now.


China has wanted this for years

Kathleen Tyson11:54

I write a Multipolar Transition Timeline @MultipolarMoney on Twitter to catalog events I see as relevant because it is being done one agreement, one deal at a time.

The next BRICS meeting should be a corker.


How will the US respond, do you think?

Kathleen Tyson11:55

I’m an optimist about it. We are already seeing peace break out all over: Iran-Saudi reconciled, Syria-Saudi reopening embassies, India-China settling border dispute. It could be a more peaceful, cooperative world. Just the West excluded.

Well, the 60 Minutes segment on ‘War in China’ gives a clue. US sees this as existential if they lose dollar hegemony.


Cold war or hot war?

Kathleen Tyson11:57

The ex-president of Taiwan is going to Beijing this week. If he could pull off a peaceful reconciliation like East – West Germany, that would forestall the coming war by removing a caucus belli. Taiwan does not want to be the next Ukraine.


arguably the cold war was a war between the dollar zone and the ruble zone

Kathleen Tyson11:58

causus belli. Spellcheck doesn’t like Latin.


I can’t see the US allowing Taiwan to become a vassal state of China.

Kathleen Tyson11:59

The one thing both Taiwan and China agree on is the territorial integrity of China. Taiwan is China.

The most recent Beijing offer was they could keep current administration and military.

“You’ll drive a smaller car and feel good about it!”

Amazing RMT got 14% deal. Well done, Mick!

Interesting to see more resource countries shift the model, insisting on local refinery for value add before export.

Ghana’s lithium tender insists on local refinery.


Net zero in the chat: I’d just like to add that pivoting away from fossil fuels towards a minerals-based economy is already creating massive shifts in the international balance of power

Kathleen Tyson12:03

And Iran just happened to announce the largest lithium deposits ever.


Well there’s a surprise.

12:05This has been a fascinating chat, but sadly we’re out of time. We can continue it on Signal… Izzy do you have the link?

Thanks to Kathleen for sharing her amazing insights

Kathleen Tyson12:05

Signal? I just learned this thing!


And to you all for great comments today.

Kathleen Tyson12:05

Thanks for having me. It’s been fun.


Tomorrow I’ll be here with Anjuli at 11 am to pick up the aftermath of the Fed’s decision and the continuing fall of First Republic (already down 7.7% in pre-market trading)

And anything else that blows up in the next 24 hours.

yeah I might mean Discord, thanks David

Bye for now everyone

Kathleen Tyson12:08

Bye. Thanks for making me welcome here.



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