Fintech Fantasyland – Raisin and Coinbase

In more innocent times once upon a time, I walked into a branch of Barclays opposite where I worked, showed them my staff pass card and 20 pounds to get the ball rolling, and walked out with a shiny new Barclays bank account. No passports, name rank and serial number proof, no pack drill, just me and them. They knew The Firm, they knew what a staff card looked like, and that was good enough. They knew their customer, in an analogue way.

Nowadays the process is grief-stricken and involves webcams picturing your driver’s license(sic) and all sorts of aggravation. I figured I should start to get a teeny bit better return on my cash than 0% as the amount started to creep up to Harry Browne regions, so I was tempted by Hargreaves Lansdown’s Active Savings, on the principle that I already had an account with them, so I wouldn’t have to go through all that customer ID crap. I stopped as soon as I read signing up for active savings means they will always send an SMS to log in, even for my SIPP. I am sick of this stupidity. It’s the easiest job in the world to slam your phone number to some ne’erdowell, particularly if you live in rented accommodation with a shared mail access. But it’s not that hard to do for everyone else.

We had/have a perfectly serviceable alternative – your bank card and one of those reader things to generate a one-time password. But no, it the general fetish to have everything on your damn smartphone, SMS messaging is a less secure alternative they are pushing. Because every bugger has a smartphone surgically implanted, FFS.

The advantage of Active Savings is that you have a single interface to the account, and they then let you save with a number of other organisations without signing up with those separately. Which is good, because the process of signing up for a bank account in the UK is absolutely horrible now with all the ID checks, I’m sick of it.

So I looked for an alternative, and Raisin seems to do the same thing. Given that I have a SIPP with HL, running with a separate FSCS institution seems a good idea anyway, and though I have to suck up the SMS bullshit at least I only have one sign up process to do.

The time to worry about bail-ins is before they happen

If you look at Raisin’s FSCS protection page, once you have signed up for savings account through Raisin, you get the FSCS (or Euro equivalent) protection of the destination institution. One of the biggest drags about savings is having to sign up with many institutions, the implication here is that you could break up your holdings below the 85k FSCS amount all through Raisin, provided you were careful where the destinations were.

There is some argument that holding more than the FSCS limit in cash is mad, unless you are really, really old. However, at current valuations I can see myself doing that for some time. Inflation is not the only hazard I see, and looking at what happened in Cyprus the FSCS limit is roughly where you become a tall poppy and a source of emergency bank funding of last resort.

So far so good, but though Raisin is associated with Starling Bank and I used Starling as a feeder account, it seems to be taking its time to happen – transferred about 10am and only got there 11pm. In general I expect better from Starling, my experience to date has been of quiet, understated competence, and blistering speed at posting details of transactions. Pay for something using the card, and by the time you have picked up the phone and opened the app that transaction is there to be seen in your account right away.  I don’t bother to ask for paper tickets for those card transactions because there’s no point.

For other Starling customers wondering what the hell their sort code is, Starling tell you there is only one: 60-83-71 at the time of writing.

I found Raisin confusing in operation. Some of this of course is that the nominee method of banking is new to me. For example I applied for a 32 days Investec notice account, paying 0.8% APR. Time to order some tiny fireworks, eh? So I get an email saying the Ts and Cs for the Investec savings account you viewed, and I think fine and dandy, to be treated to a pdf with 16 pages of solid cruft about Meteor Asset Management, with nary a peep about Investec. If you look at How Raisin Works you will see that Meteor Asset Management is the pool account front running Raisin’s customers, sort of analogous to a nominee account1, which is how you don’t get to streetfight the onerous Know Your customer crap for each and every share line in your ISA.

I happen to have read the how it works page before getting this 16 page Investec Ts and Cs not mentioning a word about…Investec. I was more tolerant of this rum carry-on because I had already qualified Starling as a competent operation, but that sort of inconsistency is going to scare the horses in customers of a more nervous disposition. Continue reading “Fintech Fantasyland – Raisin and Coinbase”

DB pension options – an object lesson in the power of inflation

The Ermine is advancing of years. It comes to us all, hopefully. I am not yet of the age when I would have quit The Firm after thirty years of service and gone to the pub to celebrate my forthcoming freedom. But it’s not that far off.

Seven years after retiring, I have now burned through half my DC pension AVC savings and invested the other half into the ISA. In cash-flow terms the Ermine is almost skint, and I am on the final approach to taking my main pension, a little early. So I asked them for the information pack.

Every pension is different, and with mine there is the usual  option to take some as a tax-free lump-sum. After that there are two options. One is to take a pension that is index-linked up to a cap, and the other option is to take a higher pension that is part non-increasing, and part index-linked up to the same cap.

Why on earth would you do that? Well, the logic is that you get a higher start, since they are paying you to take your claim of index linking off their hands. The higher start makes some sense – one is in best health at the start of retirement than at the end when you’re eyeing up a pine box. They also made something of the fact that the State Pension will turn up later, which should fight some of the later attrition.

Inflation can easily kill the higher start

It looked reasonable at first sight. There’s a common argument that people spend more in the early years of retirement, and less as they get older. Unless they are unlucky enough to end up in a care home, but fewer than 20% of us end up in a care home1. The difference between the higher start and regular isn’t huge, however, it is about three grand p.a. after tax. But it doesn’t take much inflation to erode that, it falls behind in my early seventies and typical inflation rates of ~3%. Some people take the argument that it is the cumulative shortfall that matters,and it is true that this falls below zero later on, a few years past the age that my Dad died. But I am in much better health than either of my parents were at my age. So I might be leery of assuming I cark it at the same age, though of course I could be flattened by a bus tomorrow. Risk is tough to qualify, eh? Continue reading “DB pension options – an object lesson in the power of inflation”

When Money Dies, a 1975 cautionary tale from the Weimar Republic

Remember the three day week, miners strikes and the glories of fixing British Leyland cars, where every motor was a Friday afternoon job? No, you probably don’t because you weren’t born then 😉 To be honest I was a kid then so I didn’t really understand the horror.

This was after the 1973 oil shock, and there was this thing called inflation stalking through the land. A chap called Adam Fergusson looked back in time, to 1930’s Germany, to garner information about inflation, and this book encapsulated what he found.

Though the stage had been set for the inflation by the conditions set at Versailles, the story has curious resonances with now. In the initial stages, the inflation took the form of a slow-motion economic train wreck, which is similar to now in terms of the middle classes slowly being destroyed by their purchasing power dropping. Some people who either have non-financial capital, particularly businesses connected abroad, do quite well, and foreigners do particularly well as their hard currency is highly sought after.

Now of course the German experience was far worse that anything we have experienced in recent times, and has had a deep effect on the German psyche, with a low tolerance of debt and a low tolerance of Club Med profligacy at the moment. This book is a powerful cautionary tale of what may lie ahead if we don’t get a grip on inflation.

Continue reading “When Money Dies, a 1975 cautionary tale from the Weimar Republic”

Inflation kills your money- a cautionary tale from a European fiscal giant

Money can die, it’s happened before and it’ll happen again. My great-grandmother saw it happen to her.

I was lucky enough to have met my great grandmother, who had lived in Germany through the 1920s. She didn’t trust paper money, she didn’t trust banks, her economic belief was in holding hard goods and land.

Bear in mind that though this was in the 1960s, the German Deutschemark already had a legendary reputation as a result of Konrad Adenauer’s Wirtschaftswunder. As a very small child, I visited her in a nursing home which seemed a model of clean and attentive services (she was physically though not mentally frail that I could see) and the Germany I travelled through by train was clean and modern. This struck me when compared with the shabbiness of early 1960s Britain and the bomb-sites that still littered London which would provide me and my schoolmates a playground in the years to come.

As another example of why this looked odd to even an unsophisticated pre-schooler like me, my grandmother wondered why there were so many bangers on the roads of Britain, compared to at home where the VWs, Audis, BMWs and Mercedes Benzes that were the output of the Wirtschaftswunder were humming up and down the federal highways of West Germany.

So against this backdrop, what on earth was this good lady on – after all, her son-in-law worked for a bank. My mother explained that she had seen some bad stuff happen in the past and had lost her life savings, twice.

Inflation in 1920s Germany

This kind lady’s eyes sparkled as she passed over a piece of knowledge across four generations in the peculiar way that only personal knowedge can, and my grandfather from the bank filled in the backstory over te years to come, I think he even showed me one of these, which I recently saw again in a free exhibition entitled Inflation, War and Global Financial Crisis at the Fitzwilliam Museum in Cambridge.

a 100,000 Mark note
a 100,000 Mark note

Here it is, a big, strapping 100,000 Mark note. It’s difficult to say how much this would have been worth, but the number on the front wasn’t so outrageous. For instance if it were Italian Lire before 2000 this would be about equivalent to a fifty pound note.

However, soon it wasn’t enough. It was causing the sort of problems the chap in the photo on this post was having. With the aim of easing the workload of the Weimar Republic’s chiropractors, and returning the country’s sack-barrows to the urgent task of moving barrels of Pilsner about, there was clearly a need for a bigger denomination.

Milliard Mark note
Milliard Mark note. I believe a Milliard is a US billion, a thousand million or 10E9. It's a lot, anyway

Now let’s think about this for a moment. We’ve shifted scale from 100,000 to 1,000,000,000, four orders of magnitude. Consider the UK currency, which manages with a smallest note of £5 and a largest denomination of £50, just one order of magnitude. The Euro manages with two orders of magnitude, €5 to €500. Something very dramatic must have happened in Weimar Germany to need such a range.

Germany inflation (from wikipedia)

You can see in the five years from 1918 to 1922 the German population ate a hit of 100 times inflation. That’s pretty bad – though I’ve spent enough time berating UK inflation as rotting savings, these poor Germans experienced the same amount of inflation in five years as you would if you took 20 five pound notes from Queen Victoria’s reign and presented them to the Bank of England in return for two shiny £50 notes. That’s tough, but nowhere near as tough as the ten thousand million to one inflation they experienced in 1923. This ended when the Reichsmark took over and twelve zeros were struck off the paper marks.

10 Reichsmark note

This story impressed me as a pre-schooler. Imagine what it did to the German nation.

The ghosts of those who lost everything the Weimar Republic still whisper across the generations in modern Germany

I noticed it as a young adult when I took my first road trip to Germany and Switzerland in the 1980s. I was able to use my credit card in France, but as soon as I crossed the border at Aachen I had to use Eurocheques and a Eurocheque card. The Germans just didn’t do credit, they had seen where that had gone and even three generations down the line they would have none of it.

Even nowadays though credit cards find wider acceptance you would be ill advised to rely on it in Germany for everyday purchases, and cash is used more than I am used to in the UK. Other apsects of life are touched by the background radiation of the 1920s still decaying in the German collective conciousness, for instance a German would look at the British twenty-something’s eagerness to buy a house with a mixture of pity and wonder. Germans tend to save money and buy a house in middle age; and as a result they have a rental market that is far more lifestyle-friendly than in the UK.

This attitude to credit is part of why Germany now looks around it and the wreckage of European Monetary Union and asks itself  “how did things get this way?” It is part of why Germans save more than Greeks, why they run a tighter fiscal ship.

Deep within the family traditions, the ghosts of the 1920s Weimar Republic are preserved and whisper to Germans why you don’t live life on the never-never, burning through tomorrow’s money today as we have been doing in the UK and in America. It wouldn’t be so bad if we spent it all on wine, women and song, but what we did with it is inflate the price of property, making ourselves feel richer by taking money from our future selves, and in a casual drive-by shooting of our younger folk inflating the price of an essential asset, accommodation.

History doesn’t repeat itself, but it can rhyme

There’s a clear takeaway from the German experience. It is harsh, and few people will have the balls to use it, but it is written in the graph above. As a German with financial wealth, you had one chance to do something about this, and it was in 1918 to 1919 (I’m aware that they may have been dealing with other problems as a result of action prior to 1918….) The message is this

When you have lost half your financial wealth to inflation within the space of a couple of years, convert your paper wealth into hard assets, or prepare to kiss it goodbye.

Now I’m not saying that it will happen here. Though our situation is dire, I’m not making the case that it is as desparate as that of the Weimar Republic. But I am saying that it could happen here.

It is hard to take that action under fire. It takes great intestinal fortitude to surrender the norms of one’s life to a new reality and then take action on that new reality. This sort of crisis is not within living memory in the West. It may take a different form, for instance peak oil and resource shortages might change the value of non-financial assets too. However, in general, the people that survive a black swan event are usually the people that do something different in response to their new reality.


The response to inflation and the threshold is my opinion, and should be read as such. Look at the data and form your own opinion, and act accordingly. None of this should be construed as investment advice.

Inflation ahoy – here’s how you can beat it

An increase in VAT seems to be on the cards, and that leads to pretty much the same increase in inflation, less a little to allow for the fact that food isn’t subject to VAT in the UK.

Tax-free Index-linked National Savings Certificates look like one way to try and claw this back from the Government, I am toying with throwing in the towel on my Cash ISA, which I struggle to get 2.5-3% variable on. RPI scans back a year on prices to get the interest rate. The VAT rise will probably be announced on June 22nd so buying certificates on the last day in May would capture the entire inflation boost from the rise in VAT on maturation in 3 years, plus of course the inflation boost from the earlier printing money like drunken sailors quantitative easing.

Since the purpose of an emergency fund is to buy stuff, probably VAT rated, doing nothing is letting George steal 2.5% from the value of my fund next month. True, if the emergency happens in the first year I am stuffed, as these can be cashed in early but attract no index-linking in the first year.

what can you do to preserve capital these days

Money performs two roles in the economy, One is to provide a medium of exchange and intermediation. If I have a goat to sell and exchange it for pounds, I can buy a loaf of bread from the baker even if he doesn’t need a small piece of a goat at the time 🙂

For most people, who earn money, and (ideally) spend what they earn but no more on their lifestyle, that is all they need money to do for them. It lets them transfer the value they gain from selling their services to their employer to paying out to whatever they need to support their lifestyle.

However, since I am trying to save to give to my future self, I need money to perform a second role. That role is one which the Great British Pound Sterling seems ill-suited to perform for me. That second role of money is as a store of value. If I forego a £100 worth of bread now, I would like some mechanism to be able to buy the same amount of bread in the future.

In theoretical terms I did quite well last year with global index ETFs, even after the hammering of recent weeks I am still about 20% up, in pound terms. However, against that I have to allow for the corrosive effects of inflation, currently at 5% and rising. I experience RPI-X as I have no significant housing costs being mortgage-free, so I experience higher inflation, as housing costs are artifically depressed by Government action on interest rates. Fuel and food in particular have gone up seriously over the last year.

I chose L&G’s global ETF in an attempt to diversify out of the UK, for in Britain we have been living beyond our means for almost a decade and these chickens seem to be coming back to roost.

RPI - 5% and rising
RPI-X - 5% and rising

However, we seem to be entering a dangerous period of probable monetary inflation, as a result of printing money, euphemistically called quantitative easing round these parts. That looks like being coupled with a nasty dose of asset deflation as the stock market rally falters or starts trading sideways, for the reason that there don’t seem to be any good underlying reasons for the rally to continue, other than providing a home to park some of that government-issued money.

So the question is, really, what can a chap do to store value? What I need is real stuff that holds its value, preferably something which can’t be printed by the government to devalue its debts. Commodities and land are the obvious choices, and yet both are lethally illiquid, and land is not fungible either. Preserving capital looks like it comes with some nasty baggage.

Kudos to Nat West for not shafting its previous ISA savers this year

It’s usual for banks to quietly trash the interest paid on older accounts, on the principle that most people can’t be bothered to move and the bank gets to keep the money they’d pay out in interest. so you end up with some derisory interest rate of 0.5%.

So hat tip to Nat West. I was getting ready to shift last year’s cash ISA, and looking mournfully at the paltry 2.75% that the best buy ISA accounts on Martin Lewis’s site offer for new business. Then I looked at the current rate I am getting, and so far, touch wood, they have retained the interest rate at 3.01% even though the account isn’t available for new business. That’s better than I could get if I shift it. So I get to save all the aggro of moving the ISA and get a better rate.

What’s not to like… oh yes, it’s that the RPI is skyrocketing at 4.5%, so at current rates I am losing 1.5% a year in purchasing power. Mind you, last year I was getting 3% when RPI was negative, so it wasn’t all bad. But this does not look like it’s going to a good place in future.

RPI - looks like 4.5% and rising. Yikes