[Dave Birch] A digital currency is a currency that only exists in the virtual world of computers. It has no mundane rump like the Pound. Most Pounds — around 96% in fact — only exist in the virtual world of computers, but 4% also exist in pockets and purses and sofas through the land. If I decided that I didn’t like Pounds, and wanted to create a new currency of my own, it would be a bit of a hassle to have to start minting coins, printing notes and persuading Sainsbury’s to add another draw to their cash register. In the world of Apple, Angry Birds and Amazon though, this isn’t a problem. I can just make up my digital currency and off I go. Although, as the economist Hyman Minsky famously observed, creating money is easy. Getting it accepted is the hard part.

Why would someone take new currency, my Wessex e-Groats instead of Euros? Convenience, for one thing. Look at the private currencies, such as Marks & Spencer’s vouchers or Amazon Coins, as a pointer. A friend of mine paid at a farmer’s market in Surrey using a Marks & Spencer’s voucher and got change. They are money, at least in Surrey. And I spend a fortune on Amazon, so I’d have no problem in taking a tenner’s worth of Amazon coins instead of the tenner you owe me down the pub. Two decades ago, the lateral thinker Edward de Bono published a pamphlet called “The IBM Dollar”, building on the Hayekian platform of competition in currency as the way to obtain sound money and he has a point. But even he could not have imagined how the revolutionary capabilities of the internet and, in particular, the mobile phone make this not only possible, but inevitable.

It’s hard to imagine popping to the shops with half-a-dozen different kinds of banknotes in my back pocket, but not hard to imagine an app on my smartphone managing these for me and choosing the best currency for the purpose at hand. It isn’t all about convenience and efficiency though. Some currencies, and Bitcoin is a current example, a really more idealogical in nature. The people who champion Bitcoin are only partly concerned with transactions. They are more concerned with removing the governments hands from the monetary reins. You don’t trust the government to run supermarkets, they might say, so why let it run money? The same goes for many who advocate electronic gold or some kind of world currency based on commodity prices and the like.

Others think, and I’m one of them, that the future of digital currencies is more closely connected with the future of communities, both physical and online. In places where the current monetary arrangements have all but collapsed, such as Greece, we already see local groups developing their own currencies to replacing the misfiring euro and we see the first experiments here too, with the Brixton Pound and so on. The economy of London is already distinct from the rest of the United Kingdom, so that would be a good place to start. If London started its own digital currency and if Scotland started its own digital currency, then their utterly distinct economies could be freed from the mutual shackles of national monetary policy.

In so far as the government, rather than international bond markets, controls that monetary policy you can see the possibility for some form of oversight or governance. But in a world of hundreds, thousands of digital currencies it will be the market that sets the values. Right now, we use one currency, Sterling, for everything. But I suspect our children might regard this as outdated as the Edwardian gold standard we so fondly remember in the slang “half a dollar” moniker for the half-crown coin. They might use Bristol Pounds or World of Warcraft Gold when they go shopping, but put Kilowatt Cash and Motorway Moolah in their pension funds. It seems to me that as the currency iceberg slips under the waves of the cyber-sea, we’re going to see a new world of choice between currencies that embody different values, and that’s a good thing.

(You can listen to the interview based on this essay via the BBC iPlayer here, starting at 45 minutes in.)

These are personal opinions and should not be misunderstood as representing the opinions of�
Consult Hyperion or any of its clients or suppliers

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

[Dave Birch] I woke up this morning to a story on the Today programme about Scottish independence, this time talking about monetary policy and currency. It was based on a Treasury report on why an independent Scotland could not use the Pound Sterling.

The British government closed the door to a formal agreement with Scotland for its continued use of the pound if it votes to become independent next year, citing the tumult in the 17-nation euro region during the debt crisis.

[From U.K. Scorns Pound for Independent Scotland Citing Euro Lessons - Bloomberg]

It happened that I was working at home this morning, so I heard the Chancellor giving his speech about this live on the wireless. He referred to the difficulties of currency union and spoke about the problems in Ireland, Greece, Portugal and Cyprus. He spoke about the problems of maintaining monetary policy across currency unions between economies with different fundamentals. All true. But he didn’t explain why this is different for the UK. How is the insanity of trying to maintain a currency union between Germany, Luxembourg and Greece any different to the insanity of trying to maintain a currency union between England, Wales and Scotland? The fact that they are in a political union does not alter the facts on the ground: they have fundamentally different economies. The Chancellor was arguing that after independence, it would be impossible to maintain a currency union between England and Scotland. But surely that is true now! The best monetary policy for England is not necessarily the best monetary policy for Scotland, and technology means that what was optimal for commerce at the time of the Napoleonic Wars may no longer best for commerce today. This makes, to my mind, the final column in the Treasury table not the outlier but they way forward.

If the argument for currency union is about transaction costs, then dear old John Major showed us the way forward many years ago with his perfectly sensible alternative to the euro, which was at the time was labelled the “hard ECU”. The idea of the hard ECU was to have an electronic currency that would never exist in physical form but still be legal tender (put to one side what that actually means) in all EU member states. Thus, businesses could keep accounts in hard ECUs and trade them cross-border with minimal transaction costs, tourists could have hard ECU payment cards that they could use through the Union and so on. But each state would continue with its own national currency — you would still be able to use Sterling notes and coins and Sterling-denominated cheques and cards — and the cost of replacing them would have been saved.

What about resurrecting that idea the other way round? Why couldn’t Scotland have a hard e-thistle? Everyone in Scotland could carry on using Sterling notes and coins, which would remain legal tender, but they could open e-thistle bank accounts and have e-thistle credit cards and so forth. The Scottish government would naturally pay its domestic bills (e.g., public sector salaries and pensions) in e-thistles that it would “print” itself, the value of the e-thistle would slide against Sterling and soon enough the situation would sort itself out. English people would start spending money in Scotland, investing in new business there and go on holiday there.

The thistle would never exist as a physical thing, purely as an electronic currency. There is no need for physical currency. It’s a badge of national vanity, just like an airline used to be. It would be no big deal to, over time, to see the prices in shops in thistles but hand over Sterling to pay for them. The Scottish government might want to produce some thistles for ceremonial purposes or for souvenirs, but not to create the circulating means of exchange. After all, one of the Scottish government’s goals would be to increase the efficiency of the economy (and reduce tax evasion, crime etc) by reducing the cash in circulation and increasing the use of electronic payments. Scotland actually has a proud history of innovation in this field and their fantastic inventions in free banking, overdrafts, cheque books and so on ground to a halt, crushed under the English yoke in the 19th century. As Niall Ferguson points out — in “The Money Printers” in “The Cash Nexus”, p.137–162 (Basic, New York: 2001) — Scotland was once more advanced that England.

In 1850, more than 90% of transactions in France were settled in gold and silver coins compared to just over a third in England and only a tenth in Scotland.

My point is that not only could Scotland adopt its own currency if it had to — without having to mess about with notes and coins thanks to the key technologies of the internet and mobile phones — it would be better off doing so. So why wait for independence? Why not do it now? Floating exchanges rates are far more efficient than government transfer payments in bringing economic rejuvenation. Sir Richard Body (rather famously one of the “bastards” who John Major railed against in 1993) gave a memorable talk on this topic at the second annual Consult Hyperion Digital Money Forum back in 1999, arguing not only for national currencies rather than the supranational euro but for regional currencies within the UK.

Why would regions bother to do this? Well, as Sir Richard Body MP has pointed out, this represents a democratisation of currencies. What’s more, allowing the regional exchange rates to float would be a much more efficient and effective tool for economic stimulation than regional aid.

[From We should create an electronic euro | Technology | The Guardian]

It’s time for some truly radical thinking on this front. Technology means that the dynamics around currencies are changing and the connections between the unit of account, means of exchange, store of value and mechanism for deferred payments are being broken apart. They make take our circulating medium of exchange but they will never take our freedom!

These are personal opinions and should not be misunderstood as representing the opinions of�
Consult Hyperion or any of its clients or suppliers

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

[Dave Birch] As part of the debate around NFC at BAFTA, Forum friend Tony Moretta from Weve went up into his attic and dug out some amazing props to bring along. I won’t bore you with all of them, but check this out: it’s a vintage Mondex phone (Tony said that when he showed this to his son, his son asked “was that the first-ever telephone?”) of the type I last saw in my parents’ house circa 1997.

Why did my parents have one of these when Mondex was piloted in Swindon-City-of-the-Future a couple of decades ago? Well, I pulled a few strings so that they could one to play with. I have to say that they loved it. The main reason why they loved it was nothing to do with Mondex: it was because, in those pre-smartphone days, it was a way of seeing your account balance without having to go to the bank or phone the branch. Thus, they could see when salaries had been paid in and when bills had been paid out. This was a genuine time- and labour-saving invention to them, and they were very sorry to see it go. The only thing they actually used Mondex for — and my Dad certainly did value it for that — was for car parking, where putting in the card (there was no PIN as, like everyone else who said that they wanted card lock/unlock devices all over the place, he never bothered locking) instead of searching for change was a really significant convenience play.

Tony had a Mondex wallet with him too, and took great delight in opening up the back to show… a Secure Element (as we now call them). Hhhmmm… a keyboard, a screen and a secure element… reminds me of something…

So why didn’t it work? Well, one explanation is that it was The Mark of the Beast. Another is that while it turned out to be easy to give people Mondex cards, it turned out to be difficult to get a large enough base of installed terminals to make acceptance wide enough. This is a problem that no longer exists. Today, instead of special-purpose Mondex terminals, we would use a mobile phone and an app. Come to that, instead of Mondex cards we would use a mobile phone and an app. And instead of a Mondex wallet we would use a mobile phone and an app. And instead of a Mondex lock/unlock device we would use a mobile phone and an app.

It’s important to remember what worked and what didn’t work. Too many people just white-out things that didn’t work and forget all about them rather than learning the real lessons. Mondex is where I learned a very valuable lesson. I’d done some work comparing the cost of payments, and I’d worked out that the marginal cost of Mondex payments was a tiny fraction of the cost of (say) credit or debit cards. Since Mondex transactions cost essentially nothing, I assumed that they would quickly become the dominant fraction. I mistakenly assumed that cost was everything.

“It will become ubiquitous – it’s the cheapest way of moving money around,” says Dave Birch,

[From 2.12: E-Money (That's What I Want)]

You see the same things being said about Bitcoin today. This turned out to be absolutely and utterly wrong. And it still is. I paid my taxi fare over to BAFTA using Hailo. I don’t know what it cost the driver (I think 10%). When I paid at the car park this week I think I was charged an extra 40p to pay using my mobile phone. I didn’t care. Was my bus journey cheaper or more expensive because I paid using my Arriva app. I have no idea. Cost? No, convenience trumped everything else. Mondex was inconvenient.

In the case of Mondex, for example, you had to have a bank account (ie, you already had a debit card) in order to get one: you couldn’t just walk into a bank with twenty quid and walk out with twenty quid on a Mondex card. Looking back, there were some technical limitations as well: balance reading, for example, was a pain because you need to use a keyfob or electronic wallet to find out how much you had left on the card. And the ATM implementation was plain crazy: you had to put your ATM card in, then put your Mondex card in (most people never did: they just drew out cash).

[From Digital Money: Money museum]

In retrospect, that last point about ATMs seems particularly bizarre. There must be someone out there who can remember the NatWest thought processes around this, so I’d love to hear from them. The real point that I want to make, though, is that all of the factors that made Mondex inconvenient have vanished in a world with mobile phones, perhaps there is a kid in basement somewhere right now cooking up a bastard son of Mondex and Bitcoin and the e-cash revolution is, after all, just around the corner.

These are personal opinions and should not be misunderstood as representing the opinions of�
Consult Hyperion or any of its clients or suppliers

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

[Dave Birch] We had a Tomorrow’s Transactions thought leadership day at the International Payments Summit in London thanks to Katie Gywn-Williams and the rest of the terrific team at ICBI. The idea was to look at a lot of different aspects of the fast-evolving world of retail electronic transactions to try and help those in banks responsible for strategy and planning in the field. We ended the day with, I have to say, a super panel session. I asked my good friends the paleofuturist Bernado Batiz-Lazo, the voice of reason Michael Salmony and next-generation banker Brett King to look at where electronic money might take banking, commerce and society over the the medium term.

It’s very difficult to predict even a few years ahead and Michael highlighted the dynamic around technology: we tend to overestimate the timescales for adoption but underestimate the long-term impact. In others, it will take longer than people like me think for electronic money to displace cash, but when it does the impact on society will be far greater than mass redundancies in the ATM business. Once you being to look more than a few years ahead, in fact, the social changes wrought by new technology become hard to imagine. A generation ago, on 3rd April 1988, the Los Angeles Times Magazine pub­lished a 25-year look ahead to 2013. It contained all sorts of bizarre views of life in Los Angeles today, including such unimaginable fantasies as supersonic jet travel and people smoking cigarettes. But it’s a fun read, and in Bernado’s spirit of paleofuturism, I encourage you to read it not to laugh at what they got wrong but to understand why they got it wrong. For example: what’s wrong with this picture?

After parking the van, Alma stops for some cash at the bank-teller machine in the lobby of her building. She punches in her I.D. number and then puts her thumb on the screen. After several tries, the machine finally recognizes her fingerprint and gives her two $20 bills with bar codes that verify the money has been issued to her.

Interesting that they thought biometrics and cash would co-exist in common use. Rather fascinatingly, and so very William Gibson, one of the key elements that is missing from the vision of 2013 is the mobile phone, despite the fact that it had already existed for a decade. The first AMPS (1G) cellular network was launched in the America in 1978. Yet in the vision for 2013…

Bill is trying to locate his wife to tell her about the dinner guests. Unable to reach her either at home or the office

My italics, of course. It’s been at least a decade since my wife called me either at home or at the office or, indeed, anywhere else. If she wants me, she calls me, she doesn’t call a place. The mobile phone didn’t just change the payphone business, it changed the very way that we think about communications. We understand now, of course, that the future of money over the next 25 years, in common with the future of a great many other everyday tools, is about the device formerly known as the mobile phone and what Sam Lessin of Facebook calls the “superpower” of being able to communicate with anyone else anywhere in the world at any time.

But back to Alma. The last time I went to the US — to Austin, Texas, for South-by-Southwest — I didn’t take any US currency with me and I didn’t get any $20 bills out of an ATM while I was there either. I paid for everything using cards and my mobile phone (LevelUp). Yet I read only recently, in a discussion about the near future, that…

There’s some debate about whether plastic credit and debit cards will be totally replaced by mobile payment systems in the next few years. However, there’s no doubt that, in 2030, my son will carry a wallet with cash in it, because we’ll still be using paper and metal money well into the future.

[From 15 Current Technologies We’ll Still Be Using in 2030]

Maybe it will be a class thing? The middle classes will have abandoned cash and it will exist only to serve the poor and excluded. That’s one scenario, but I don’t think so. As I have droned on about interminably, the device formerly known as the mobile phone is a way to accept payments as well as make them, and this is what does for cash. Brett quite rightly made fun of the UK government’s reaction to the suggestion that cheque clearing might be abandoned in a decade or so. “How will I pay my cleaning lady?” was the typical insurmountable hurdle to change erected in the pages of the The Daily Telegraph. This is exactly analgus to those mid-1980s comments about mobile phones, along the lines of “Well if I want to make a phone call when I out, I can always use a payphone”. Just for the record, I pay our cleaner using the Barclays mobile app and FPS, as I imagine do most normal people…

So what will be still using in 2030? When I was listening to the futurologist and Forum friend Richard Watson talking about the problem of forecasting across a generation, he said that one of the central problems is that our brains work in a lazy way. Our brains look for patterns so that they think they understand things (this is why people consistently see patterns in random noise) and made the point that the kind of digital bubbles people are living in lead to a kind of Balkanization of the future. As I’ve said once or twice at the Tomorrow’s Transactions Forum, we have to look out of the corner of our eyes to see how technology is being used in ways that might disrupt existing business models, and that is difficult. So this leads me to ask, just as our friends in 1988 didn’t see that the decade-old technology of mobile phones would be everywhere in 2013, which decade-old technology is going to be everywhere a generation from now, leading not just to disruption in old businesses and the creation of new ones but a fundamental shift in mental models? If I had to guess, I’d say it was 3D Printing, but I’m desperately keen to hear what you think. In fact, I will send a copy of “The Future of Money” (with a foreword by Vince Cable) to the person who posts the most plausible suggestion before the end of the month.�

These are personal opinions and should not be misunderstood as representing the opinions of�
Consult Hyperion or any of its clients or suppliers

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

[Dave Birch] I’m very curious about media interest in Bitcoin, which seems to have accelerated in the last couple of weeks. Last week, for example, I found myself being interviewed for the BBC’s current affairs flagship “Newsnight“. A couple of days later, this package appeared on the BBC News site. Here it is, in fact.

I forced my family to watch this. Afterward, my good lady wife (a lay person of great intelligence) told me that while she had enjoyed my performance on national television, “I know no more about Bitcoin than I already did – ie, nothing – and I really wanted it explained”. All of the graphics about cryptography hadn’t helped at all. That set me thinking about alternative ways to explain the technology. When I’ve tried to explain Bitcoin to lay persons before, I’ve not started off by talking about cryptography, I’ve started off with narrative.

The closest analogy to this is the stone currency of the island of Yap, in the South Pacific.

[From What should the “mainstream” think about Bitcoin?]

So what was the stone currency of Yap and why is it a useful way to explain Bitcoin? This was explained by the economist Milton Friedman in a famous 1991 paper called “The Island of Stone Money” and there was a terrific NPR programme about this a couple of years ago. Here’s my summary of the story and why it would have given the BBC better graphics for Newsnight!

The nation of Yap is a group of four islands in the South Pacific. The islands have no gold or silver or any form of precious metal that could serve the function of money that we are used to. Consequently where we developed the habit of using metal ingots as stores of value, the inhabitants of Yap used stones. A few centuries ago, they discovered a particular kind of limestone on another group of islands about 250 miles away. Since this limestone was not available on Yap, the supply was limited. From time to time, the tribal chiefs would organise expeditions to these distant islands to quarry and bring back new stones carved into disks. The disks were of various sizes, some only a few inches across and weighing a pound or two, while others could be 12 feet across and weigh thousands of pounds. At the end of a successful expedition the chief who organised it would keep the large stones and 40% of the smaller stones, the remainder being divided between the expedition members. A long-lived and successful chief might therefore have many very large stones outside his house.

Now, suppose that chief engages in some form of trade or has to pay a large dowry or give a gift to a neighbouring chief some reason. These large stones are too big to move without considerable effort, so the Yap islanders came up with a practical solution to the problem of minimising transactions costs. Since the stones were too big to move, they didn’t bother. The tribes just agreed that the particular stone no longer belonged to Chief A and now belonged to Chief B instead. Everyone was happy. Over time the stones might be traded again and again, each time staying exactly where they were but with all the tribes agreeing on their new owner.

The system worked even when the stones were invisible. Here’s what I mean. Suppose the expedition quarried some stones but on the return journey, as would happen from time to time, their raft (which I picture as being a bit like the Koni Tiki, below) got caught in a storm and to survive they had to chuck one of the stones off of the raft. When they got back to the chief they told him about the stone which is now five miles down at the bottom of the Pacific. Everyone agreed that the stone still belonged to the chief and when he used that stone in a trade all of the tribes agreed that the stone belonged to the payee. Not only does the stone not go anywhere, none of the participants in the trade have ever even seen it. In a way, and this was Friedman’s point, it doesn’t really matter whether the stone actually existed or not. Everyone agreed it did, and therefore it was money.

The tribal chiefs were the central bankers of this system because they organised the quarrying of the stone that brought the new money into existence and the distribution of the stones that formed a rudimentary system of taxation. It all worked reasonably well. It is very interesting to me that the stone money survived the arrival of fiat currency and reports from a few years ago seem to indicate that the value of the large stones had remained fairly stable over time. Interestingly, the 12 foot stone disk weighing thousands of pounds had one very significant advantage over a bar of gold, which is that you can steal a bar of gold but even the most skilled burglar isn’t going anywhere with a 12 foot limestone “coin”.

So this is the analogy with Bitcoin. In Bitcoin, instead of expending manual labour to find a kind of stone that is rare, we expend computing power to find sets of numbers that are rare. These sets of numbers have a particular mathematical property that makes them difficult to find but once you have found them it is easy to check that they have that property, just as the Islanders could easily check that your disk was made from the rare limestone from Palau. Once you (or rather, your computer) has found one of these numbers then it is yours and you can keep it or trade it.

Bitcoin releases a twenty-five-coin reward to the first node in the network that succeeds in solving a difficult mathematical problem requiring a certain amount of brute-force computation (known as a proof-of-work calculation.) The solution is then broadcast throughout the network, and competition for a new block and its twenty-five-coin reward begins.

[From The Future of Bitcoin : The New Yorker]

As in the case of the stones, if I send you my Bitcoin, the coin isn’t really going anywhere (after all, all I’m doing is sending you a copy of the numbers that I found) and what we are really doing is just telling everybody else that the coin now belongs to you and not to me. On Yap, the record of ownership of the stones was part of the collective cultural memory, but in Bitcoin it is the distributed transaction ledger known as the “block chain” (if you click on that link, you can see all of the Bitcoin transactions as they happen). In essence, when I give you a Bitcoin the record of that transaction is copied out to all of the other users so that everyone now knows that the coin belongs to you. Because of the particular mathematical properties of the numbers used in the Bitcoin system there is a finite suppy (21 million) of these numbers and once they are all discovered no more can ever be “minted”. It would be as if Palau had been eroded away by the Pacific storms so that no more limestone disks could enter the Yap economy.

There is one conceptual difference between Bitcoins and stone disks that is much remarked on in media reports. When it came to the stones, everyone knew who the stones belonged to. They knew that Stone X belonged to Tribesman A and everyone knew who Tribesman A was. But in Bitcoin, the coins are associated with cryptographic keys rather than individuals. You might know which internet address one of those cryptographic keys is associated with during a transaction, but that doesn’t tell you who the person is. So there is a kind of anonymity associated with Bitcoin that would have been impossible to imagine for the Yap islanders. This anonymity seems to be a focus for the media, with all the talk of the “Silk Road” market for drugs etc.

But back to my question at the beginning. Why the media interest? I think it points to something more interesting than Bitcoin itself, which is recognition that there is a latent demand for change. The media interest isn’t specifically about Bitcoin, to my mind, but about the appearance of an alternative to the state-issued, interest-bearing fiat currency money system that has been in place for the last forty years. The post-industrial economy needs a new kind of money and, I might suggest, it needs to cast the net for alternatives, not have the same representatives of the status quo framing the solution as they did the problem. We have been here before, you know.

Towards the end of the 17th century money the government gave up passing pointless laws (such as the 1660 act forbidding the export of bullion) and instead of asking investment bankers or celebrities for advice in the modern fashion, they decided to ask someone clever instead. Thus was the smartest man that ever lived, Sir Isaac Newton, then the Lucasian Professor or Mathematics at the University of Cambridge, appointed the Master of the Mint.

[From Digital Money: The only thing you learn from the study of history]

I’m not suggesting that the creator of Bitcoin is another Newton, but what I am suggesting is that the technology used to create Bitcoin could be used to create the new kinds of money and a new kind of economy needs.

These are personal opinions and should not be misunderstood as representing the opinions of�
Consult Hyperion or any of its clients or suppliers

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

[Jane Adams] Delegates often say that one of the most valuable things about the Tomorrow’s Transactions (or as previously known Digital Money) Forums is how they spark the imagination. A key part of this over the past few years has been the Future of Money Design Award competitions, organised by Austin Holdworth in association with Consult Hyperion. Austin is a visiting tutor and researcher within the Design Interactions Department at the Royal College of Art. He is the curator of the ‘Future of Money Design Awards’ sponsored by ACI Worldwide & Consult Hyperion.

“When bankers get together they talk about art. When artists get together, they talk about money.”

[Oscar Wilde]

The theme for the competition at Tomorrow’s Transactions Forum 2013 was Future Financial Crime. Entrants were asked to imagine a financial crime, based on future technology.

Three entries were shortlisted, based on written submissions and we asked the shortlistees, with only a week’s notice, to produce a video presentation about their imagined crime, to present at Tomorrow’s Transactions.

The three shortlisted entries were:

Tommy-Knockers by  science writer Frank Swain

This entry imagined a not too distant future in which the 19^th century ‘tommy’ or ‘truck’ system had been reintroduced. Inspired perhaps by Iain Duncan Smith’s suggestion that benefit recipients should be limited, by their benefit cards, as to what they could spend their benefits on, the entry extended this to workers too. Paid on stored value cards, workers were able to only spend their wages in company stores on a limited range of products at vastly inflated prices. In the 19^th century, this sometimes led to workers effectively paying to have a job. Similar systems were only recently in use in certain Russian industrial single employer cities. The crime lay in people working out how to hack the systems to allow themselves to spend their wages as they chose, but there was a clear ambiguity in the presentation as to whether the crime lay with the hackers or with the system itself.

Synedoche, Hills by Ilona Gaynor

This entry imagined a world in which Second Life was used to launder money, through the purchase of virtual art, property and other high value virtual objects in a virtual city run by fraudsters. In common with all the short listed entries, this appeared clearly feasible, given the convertibility of the Linden Dollar, used as the currency in Second Life (currently convertible at between 310 – 320 to the £). �

Bigshot by Joe Carpita and Craig Stover

The third shortlisted entry took the premise of the Kickstarter crowdfunding platform and using anonymising technologies such as Tor, extended it to a platform for funding organised crime called Bigshot. It appeared to be strongly influenced by Timothy C. May’s seminal 1988 work “The Crypto-Anarchists’ Manifesto”.

Delegates watched each video presentation, with the creatives providing a piquant contrast to the besuited delegates – Frank with his Mohawk hairdo, Ilona with her astonishingly funky glasses and Craig and Joe by their refusal to show up, an ostensibly nihilist position made excusable by the fact they were in Chicago (they linked in by Skype) and we were in London.

Then a panel of judges from the event sponsors ACI, Visa and WorldPay and from Consult Hyperion decided on the winner – Bigshot. The choice was extremely difficult – all the entries were feasible, imaginative and beautifully done. However the technical elegance and very high quality of the video from Craig and Joe stood out and they were declared the winners. Judge Gill Greenwood from ACI Worldwide explained, “The reason we chose Joe and Craig’s submission were:

1. It was felt to be more genuinely futuristic than the other two, which to some extent exist today
2. Crowd sourcing/funding and discussions around anonymity and privacy were felt to be important unresolved issues today and so the threats posed by a site such as Big Shot were felt to be potentially real and huge!�
3. The presentation was really good – communication was effective, and the execution was both creative and professional.”

Austin said, “Although this year’s competition ‘Designing A Future Financial Crime’ isn’t the usual theme for an art challenge – that ought to promote a nice corporate image, it did generate some intriguing concepts.  The artist’s shameless representation of our ugly nature hopefully provoked, challenged and entertained the audience at TT.  It perhaps showed the only difference between a great creative mind and criminal one is… errrmm… money.  Although the downside of the high quality of this year’s work means that next year’s competition will be a greater challenge… any ideas people?”

These are personal opinions and should not be misunderstood as representing the opinions of�
Consult Hyperion or any of its clients or suppliers

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

[Jane Adams] At the recent 6th London BarCampBank Unconference, organised in London by Consult Hyperion, 90 attendees managed to leap the waiting list and attend the sold out event.

Unlike traditional conferences, unconferences focus on generating ideas and knowledge from all attendees. First of all we asked each delegate to write down their interests on post-it notes. We then sorted these into themes and delegates were seated in round table discussions according to theme. The ensuing discussions were both vital and intense and generated a wide range of visions, wishes and inspirations about the future of payments. Here are the main outcomes.

One key theme was the nature of the future bank. Was it a platform? Was it a utility? How did it differ from non-banks and near banks?

While delegates disliked the idea of banking as a utility, there was some interest in the idea of the bank as a trusted service manager, presenting a set of APIs to applications whose quality would need to be rigorously controlled. The real innovation would come in the area of distribution of these services and applications.

There was concern that not everyone understands that what separates banks and non-banks is the taking of deposits. Perhaps the varying terminology doesn’t help – to near-banks and non-banks, attendees added the neologism neo-banks. However despite the industry leading role of many of the attendees, only 50% professed themselves ready to trust new entrants.

Add to that a regulatory regime that seems to benefit incumbents and new entrants might have a problem. Delegates stressed the importance of regulation that benefited customers as well as banks, leading to greater transparency and a pro-innovation mindset.

One area of genuinely contentious discussion was whether in this future scenario, Visa and MasterCard had a role to play. There were few ideas about what would happen to what one delegate claimed was the 3.6 billion accounts that currently carry association branding, nor to how the industry would do without chargeback. However there was some suggestion that the future might reverse a past trend with a return to smaller local brands rather than another global acceptance brand.

One of the biggest questions is what will happen to cash. Dave Birch makes no secret of his views on the burdens cash imposes on the economy but attendees seemed to think that if cash disappeared there would need to be some sort of replacement. Cash was seen as local, convenient, trusted and personal and any replacement would have to have those features too. Anonymity and privacy were also seen as desirable features. A future visioning ‘writers’ discussion’ which I chaired ran with this idea and came to the disappointing conclusion that the replacement for cash was probably cash.

One brighter idea was that there could be different types of money for different purposes, with money shifting away from being something national towards becoming something specific to different types of economy.

Prepaid should be free with the business case coming from added value to both parties, unlike many current prepaid approaches. In fact customers could even receive discounts for using it, with aggregators enabling the customer to compare and choose the best discount.

Delegates were also asked why mobile might be better than cards. Partly this question foundered on definitions but three points to consider in any discussion were defined – the axes of security versus usability and innovation versus regulation and also the question of who holds the power to take mobile forward – merchants, schemes or consumers?

Identity played a large role in the discussion, although there was much disagreement about how banks could be involved. Some felt that banks were uniquely placed to provide data provisioning for identification services but others pointed out that identity on the Internet is multiple and much more subtle than pure KYC based identity. Where ‘what we are’ is more important than ‘who we are’, a link between the two may not be helpful.

In all cases, payment should be under the control of the payer not the payee – my money, my control – with friction being self imposed. That means any viable future alternatives to current payments methods must feature push payments.   

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

[Dave Birch] Looking at the long list of mobile wallets posted by the good people at pvments.com, you can't help but feel that this will be one of the hottest payment topics of 2013 and it's an especially fun topic because no-one really knows how it is going to pan out. There are a great many different opinions coming from all perspectives. For example, Anuj Nayar, PayPal’s senior director, global communications, recently wrote that:

The problem is that mobile wallets don’t solve any customer pain points by themselves. They don’t offer intrinsic advantages over swiping a credit card or heaven forbid, paying cash

[From Mobile Wallets - PayPal Exec: Mobile Wallets Address Non-Existent Problem | PYMNTS.com]

I hope that Anuj won't mind nipping down to the ATM for me next time I'm stuck in a taxi with no cash or popping home to pick up my wallet for me next time I forget it. After all, I'll have my phone with me so I can easily give him a call! But that wasn't what I wanted to focus on. What Anul actually went on to say was

To gain mass adoption it has to be better, not just different,

[From PayPal is not a mobile wallet company]

Indeed. This is what I mean when I talk to clients about "hyper wallets": not an emulation of the wallet in your back pocket but a re-imagnation of what a wallet should be in the always-on, hyper-connected world that RBS talk about in their new report "Four Technology Super Trends and their Impact on Retail Banking". An always-on, hyper-connected wallet should be something fantastic, not just another wrapper around your existing payment cards.

A hyper wallet doesn't try and simulate a physical wallet: it meet the requirements for a wallet in the modern, online world. It doesn't emulate the leather wallet, it blows the leather wallet away.

[From Wallets, mobile wallets and hyper wallets]

Since wallets are such a hot topic, we're going to have an expert panel on the topic at Tomorrow's Transactions, the 16th annual Consult Hyperion Forum, which will be held in London on 13th and 14th March 2013. In case you are wondering: yes, this did used to be called the "Digital Money Forum", but we decided to change the name this year for two reasons:

1. Technology changes around identity and authentication are as integral to the future of retail transactions as technology changes around payments and the two are inter-related.
2. It makes sense to bring all of Consult Hyperion's thought leadership activities together under the single "Tomorrow's Transactions" brand. Tomorrow's transactions are where our thought leadership is focused, securing tomorrow's transactions is where our day-to-day work with clients is focused.

The name has changed, but the fun hasn't. The Forum once again promises the combination of discussion and debate, learning and fun, that has earned it the reputation as the place to be for people interested in the future of retail electronic transactions. It continues to be a unique event, where interaction and invention replace product announcements and “death by Powerpoint” sales pitches. This year we are again moving the agenda forwards to look at the leading edge in mobile transactions, Islamic e-finance, cashlessness and financial inclusion, amongst other topics, all in a relaxed environment where experts can explore the boundaries of strategy for banks, mobile operators, retailers, charities and government.

All delegates will receive a complimentary copy of the Tomorrow’s Transactions 2013 "blook" as well as Barrie Cook's "Angels & Ducats: Shakespeare's Money & Medals". The Forum is a not-for-profit event and any surplus generated will go to BUFFER (which provides specialist diagnostic equipment for breast cancer), Jubilee Action and Action Medical Research. The Forum is sponsored by Visa Europe and WorldPay with support from Olswang and ACI Worldwide.

The Forum will be limited a maximum of 100 people as always, and we have confirmed chairs, speakers and panelists from The Economist, University of Bangor, Gates Foundation, Mobile Industry Review, Yandex Money, InsideOps, We've, Visa Europe, Olswang, Validity Inc., MyBank, Droplet, Maris Strategies, British Museum, Department of Work and Pensions, Comic Relief, Toynbee Hall, the Cabinet Office, London Rebuilding Society, Verizon, ACI Worldwide and WorldPay and others. Book yourself a place now.

These are personal opinions and should not be misunderstood as representing the opinions of 
Consult Hyperion or any of its clients or suppliers

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

[Dave Birch] It was freezing when I left England yesterday and freezing in Toronto when I arrived for the first Digital Money Unconference here. I’m pretty sure it will be freezing in New York when I get there later in the week. Ice everywhere. I’m sure most readers will be familiar with story of the North American ice trade. In the 19th century there was a vigorous export trade, centred on New England, cutting blocks of ice from frozen lakes and sending them, packed in sawdust, in sailing ships, to London, New Orleans, Calcutta and all points in between. Barges loaded with Canadian ice packed in sawdust were taken down to the Caribbean, where entrepreneurs gave out cold beer to build demand for the product.

Dave Birch from Consult Hyperion.
Sincere thanks to MaRS for their hosting of the Toronto Digital Money Unconference�

When refrigerators were invented, the ice traders sensed a terrific new business opportunity: now they could make ice all year round instead of having to wait until the winter. So they began to manufacture ice instead of harvesting it from inland waterways. And then they packed it in sawdust and loaded it onto sailing ships.

Meanwhile, other inventors, entrepreneurs and visionaries were sending refrigerators around the globe so that everyone could make their own ice. In a decade, everyone could, and the global ice trade was gone.

This all happened a century before money as we know it today was was born (on 15th August 1971) when Richard Millhouse Nixon ended the external convertibility of the US Dollar into gold. Before that date, old money was linked, however tenuously, to something tangible. Since that date, money has been imaginary. That’s why it’s amusing to hear people talking about “real” money such as Canadian dollars and “virtual” money such as World of Warcraft Gold Pieces. Neither are real.

Now it is in its forties, money is having a bit of a mid-life crisis. It doesn’t know what it’s for any more. Is it to facilitate commerce? Is it to fund government spending? Is it to establish national identity and sovereignty? Is it to control inflation and deliver stability? Perhaps it is trying to be too many things at once, and this is why it is stressed. Perhaps its existential crisis began when it realised that it is imaginary. This must be most unsettling. We tried buying it a sports car, or “quantitative easing” as some people call it. In the UK, the printing presses were running flat out to put more than £200 billion into circulation. (Metaphorically, since only a tiny fraction of Sterling is in the form of cash.) Money should have been happy, but it’s still sulking (inflation is high), and it’s been refusing to come to work (economic growth isn’t).

According to the Bank of England, its policies have, over the last couple of years, transferred tens of billions from the cautious and sensible to the profligate and reckless to no avail. Perhaps it is time to begin a national debate on how money should work. It’s not a law of physics, unchanging and immutable. It’s the product of technology, culture and business: the current institutional arrangements could, and should, be changed so that money serves the community rather than undermining it.

Howard Hall from CHYP USA.
We really appreciated the support from the Royal Canadian Mint, Don River and ACT Canada who helped us create a terrific event.

There are a great many candidates for post-fiat currency, the next new money. People have been talking about time dollars in the US, the Lewes Pound in the UK and the WIR in Switzerland as potential successors for years, but there’s a new factor that is re-energising these discussions about community-based currencies. Technology and the financial crisis are like biorhythms in synch at last. Cash is on the way out, and it won’t be replaced by plastic cards or paper vouchers but by mobile phones.

Money will become a menu on the mobile, and the consequences extend far beyond the ease of redeeming fast food coupons or collecting loyalty points in every store. When choosing between Toronto Thalers or Vancouver Values in your local shop is simply a matter of a menu on a mobile phone, your relationship with currency will shift. Instead of being forced to hold depreciating national money, you’ll be able to hold any number of different kinds of money and technology will continue to lessen centralised control, to the point where it vanishes.

Now, when people have talked about “community currencies”, “money with values”, “local exchange” and the like before, they have been talking about physical, geographical communities. Hence when mobile technology arrives, it is used to make, for example, the Brixton e-Pound (launched in London in October 2011) out of the Brixton Pound. But technology has changed the nature of community itself. In a connected world, community no longer means a street or a town or any kind of place at all. It means subgroups in the Net.

It’s reasonably well understood that these subgroups, these online communities, are the power of the web, not the simple connectivity. I have virtually nothing in common with the people in my street, other than the geographic accident of proximity, whereas I belong to a number of virtual communities that are really, really important to me. Checking my Facebook page will always give me more of a thrill than going to the council web site. I used LinkedIn a couple of times yesterday, whereas I used central government web sites a couple of times in the last year (once to file may taxes, once to pay my car tax). I’m addicted to twitter (although I only follow people that I’ve met) feel very strongly connected to my twitter friends, as I do to my son’s soccer team, the writer’s circle that I belong to, the people at Consult Hyperion and so on.

These notions of community as the locus of the next money connect with the work of Gill Ringland, who wrote a report for Long Finance called “In Safe Hands? The Future of Financial Services”. The report explored four scenarios for financial services in 2050, labelled “Second Hand”, “Virtual Hand”, “Long Hand” and “Many Hands”.

In the Second Hand scenario we remain rooted in the physical world and geography still matters, the Washington consensus holds and we manage to muddle through.

The Virtual Hand scenario is one where the Washington consensus proceeds. The report, however, sees a breakdown of international institutions and regards this scenario as most unlikely, largely because it is insufficiently diverse and its homogeneity means it is unable to resist more shocks. Since it ends in chaos, it will collapse into one of the other scenarios.

In the more likely Long Hand scenario, there is a breakdown of the Washington consensus and it is replaced with agreements between what the report calls “affinity groups”. There’s a certain amount of tiptoeing here, because no-one wants to offend affinity groups that may coincide with ethnic or religious divisions, but I think we can all see that the nature of such virtual communities make this a realistic projection.

Personally, I can’t help but see the final Many Hands scenario as the most likely. In this scenario, international society reforms around city-states. This scenario explores the impact of parallel shifts in power away from nation states toward cities and away from “the West”. The report talks about a system of 50 or so global city-states (including London, Istanbul and Singapore in the first rank) forming the backbone of not just the economy, but society.

So what does all this mean for financial services in general and payments in particular? The report suggests that ICT will reduce the size of the financial sector overall, perhaps even doing away with some sub-sectors altogether (insurance being specifically mentioned as being under threat). It also, to my mind, supports the idea that community, rather than national, currencies are a more likely medium-term vision than some sort of global currency.

Nick Norman from Consult Hyperion chairs the NFC session.
Thanks to everyone who took part in the sessions.�

This why I watch the evolution of money in virtual worlds, online games and social networks with such interest, because I think that the seeds of new monetary arrangements and institutions are being planted here and not in the corridors of the European Central Bank. So the news that Facebook has a billion inhabitants catches my eye. So does the fact that the Google Wallet stores coupons and loyalty points as well as a credit card. So does Bitcoin appearing in The Economist and e-gold showing up in pension portfolios. This isn’t a vision of hippynomics or anti-capitalist fantasy. An ecosystem founded on a greater number of diverse form of money, particularly rooted in communities, whether those communities are geographic or virtual, offers greater flexibility and resilience. Stability is good for business as well as society. Banks won’t vanish because they are lending you kilowatt hours instead of Yen. (As a matter of fact, banks were invented a long time before money was, because people needed to store, and borrow, things like grain.)

What does this have to do with the winters of the eastern seaboard? Well, governments, central banks and the existing international monetary institutions are the ones using the newly-invented refrigerators to create ice that is being sent in wooden ships around the world. Meanwhile Facebook, Google and kids in basements the length of Silicon Valley are figuring out how to give everyone a refrigerator so that they can do it themselves. My message to the folks at Occupy? Stay cool. If you don’t like the man’s money, make your own.

These are personal opinions and should not be misunderstood as representing the opinions of�
Consult Hyperion or any of its clients or suppliers

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

[Dave Birch] A few years ago I had the pleasure of visiting Vienna in December and visiting the Christmas market at the Hapsburg Summer Palace, shortly before returning home to Woking to engage in the traditional Yuletide pastime of filling out Her Majesty’s Revenue and Customs self-asssessment tax return. Thus, while most people associate Vienna and Christmas with the market and mulled wine and carols, which were every bit as beautiful and wonderful as you might imagine (it was even snowing when I was there: perfect!), I naturally think about Vienna at this time of year because of the capture of King Richard I at Christmas 1192 and the tax returns that it lead to.

You’ll probably remember something of Richard from school, but as an aide memoire here is the potted description in Christopher Lee’s This Sceptred Isle. He summarises thus: “Richard I (1157-99) was to rule for just ten years, mostly in absentia. But in that decade he built a naval town, Portsmouth, on the south coast; drew up the first Articles of War; sold Scotland its independence; led a great Crusade; and would be called Richard Coeur de Lion”. What a guy.

Richard the Lionheart was captured on his way home from the Holy Land, taken near Vienna by Leopold V, Duke of Austria. Richard had fallen out with Leopold during the Crusade, when early attempts at forging a common European foreign policy towards the Middle East had faltered just short of Jerusalem. Leopold was quite rightly excommunicated for the kidnapping by Pope Celestine III (imprisoning a crusader really did cross the line in the twelfth century). Leopold sold Richard to the Holy Roman Emperor, Henry VI (was also excommunicated).

Henry demanded a ransom for 150,000 marks for the release of Richard. This is something in the region of two billion quid at today’s prices but that figure doesn’t quite convey the magnitude of the ransom. Sending two billion quid from London to Vienna can be done today with a transit van full of 500 euro notes, but in 1193, the problem of moving something like twice the total annual income of the English Crown across a thousand miles of warring European principalities took some amazing logistics. This was a unique episode in English history and had far-reaching consequences. Forum friend David Boyle wrote an absolutely outstanding book about this: “Blondel’s Song“. In it, he says,�

Taxation for Richard’s ransom had a profound effect on English government. The accounts may have long since disappeared – and may even have been destroyed by those who felt embarrassed by the public record of their generosity to Richard when his brother was on the throne. But it marked the beginning of the shift from feudal payments to the very start of taxing income.

I would be impossible to imagine collecting taxes on such a massive scale (or, indeed, at all) in many modern countries, so the feat should not be underestimated. It took an inventive series of taxes, enforced and collected, to get the King back.

Both clergy and laymen were taxed for a quarter of the value of their property, the gold and silver treasures of the churches were confiscated, and money was raised from the scutage and the carucage taxes.

[From Richard I of England - Wikipedia, the free encyclopedia]

Scutage was the tax paid by knights to get out of military service (and was one of the main causes of the discontent leading to the Magna Carta in 1215). Carucage was the land tax. The authorities had initially created it as the medieval equivalent of Nick Clegg’s mansion tax, imposed on anyone with property worth more than ten shillings. But this didn’t bring in the anticipated revenue, so a few months later it was time for a full-blown land tax. It was first imposed in 1194 and fell upon landowners at an initial rate of two shillings per 100 acres. Through these and other taxes, the English gathered several tons of silver. David says twenty tons, but in Alison Weir’s “Eleanor of Acquitaine: By the Wrath of God, Queen of England“, the figure implied is considerably higher, more like fifty tons. The money was brought to London in the form of treasure (melted down to form ingots) and coins.

My 1962 copy of “Money in Britain” says that there were no continuously minted gold coins in England until the reign of Henry III (1216-72). The coins for the ransom must have been mainly in the form of the silver pennies brought into existence under Richard’s father, Henry II. His mint master, Isaac the Jew, set the 92.5 percent pure silver standard (“the ancient right standard of England”) that continued until the 1920s.  In 1257 the twenty penny (one-twelfth of a pound Sterling) gold coin was struck. This didn’t last very long and in 1265 it was replaced with a twenty four penny “florin” worth one-tenth of a pound. There were still florin coins when I was a kid, as they were minted until 1967, but they didn’t have the same economic impact as Henry III’s florin which was worth a couple of hundred quid at today’s prices.

Meanwhile, under Queen Eleanor’s direction, the growing piles of cash were stashed in the crypt of St. Paul’s, then the administrative centre of London. It took a long time to build the ransom there. When the Germans popped in in 1193 to see how things we coming along — checking out the tally sticks and the pipe rolls to assess the rate of collection and to take delivery of the first tranche of the ransom — there were only about fifteen tons of silver. This was loaded onto a fleet of ships and sent off to Henry. At the end of the year, on 20th December 1193, Queen Eleanor set off with the rest of the cash, arriving at Henry’s court on 17th January, so it only took three weeks. Now, of course, sending money from England to Germany can take as little as three or four days.�

The money was transported to Germany under a simple regulatory structure, the “King’s Peril”, which meant that were the money to have been lost along the way, it was an English problem. Until the money was actually in Henry’s hands then it was Richard’s responsibility, even in Henry’s lands. Eleanor made it, and handed the balance of the ransom over on 4th February and Richard was released. He landed back in England on 13th March 1194, bringing this incredible episode in English history to an end and the only records of the greatest tax raid in English history that remained were the tally sticks.

Why did they send atoms, rather than bits about atoms? They had no alternative. The bill of exchange, the standard cross-border payment instrument in these pre-SEPA times, was a century away. And in any case, bills of exchange were not cheap. Peter Spufford in his magnificent� Power and Profit, the Merchant in Medieval Europe, talks about the “specie point” at which it became cheaper to transport bullion than to buy a bill of exchange! And while bills of exchange boosted the money supply for commerce, they did not replace bullion, as sooner or later imbalances would need to be settled and so the wagon trains of gold and silver would rumble between trading centres.

The colossal ransom paid for Richard had some considerable consequences. The impact on Austria remains to this day. Leopold used part of the ransom to found the city of Wiener Neustadt, but more importantly the Austrian mint was founded in 1194 to make coins from the silver handed over as Richard’s ransom. This had an impact across central Europe as other rulers began to centralise their coinage too and local currencies began to vanish. Henry VI also created a new silver coinage in Sicily.

The impact back in England was also long lasting. Throughout this period, the Jewish community in England were called upon to extend huge loans to the Crown to add to the ransom. This had a terrible consequence, because in order to provide these loans they had to call in their loans to other people — minor aristocrats, farmers, business people and so on — which caused great resentment. In March 1194 a conference of Jewish financiers was organised in Northampton and representatives from major cities attended, other than (for example) York and Bury St. Edmunds, since the Jews there had be slaughtered in the pogroms of 1190. (These were widespread. Paul Johnson’s A History of the Jews, for example, tells how “all the Jews who were found in their own houses in Norwich were slaughtered”.) The purpose of the 1194 conference was to work out how much more the Jews could contribute to the ransom, as indeed they were called on to do. Under Richard, there had been an inquiry into the pogroms and Christian-Jewish financial supervision committees created. David says these were partly an early attempt at banking regulation and partly to protect the Jewish community in return for its considerable contributions to the ransom. Christopher Dyer explores this further in Making a Living in the Middle Ages—The People of Britain 850-1520, saying that the Jews were the Crown’s mechanism for indirectly taxing landowners. The heavy taxes imposed on the Jewish community were passed on in interest rates, so that the common borrowers would blame the Jews rather than government spending for their reduced circumstances. Having come to England after the Norman conquest as moneychangers and bullion dealers, England’s Jews were reduced by a combination of taxation and murder until they were eventually expelled in 1290.

A side effect of the silver exodus form England was that while local currencies circulated to substitute for the missing pennies for a while, the money literally ran out. After all, a quarter of England’s coinage had vanished (which David calls a “deflationary shock that England needed”), but somehow commerce continued. Spufford reminds us that “Only in the short run did political, or occasionally religious, actions have greater effects than trade balances on the large-scale movement of silver and gold, coined and uncoined”. It is an astonishing testament to England’s wealth and administration that the very, very high level of taxation necessary to pay that (literally) King’s Ransom could be imposed and collected, yet in the long run the economy survived and grew. I’ll be thinking about that when I finish at hmrc.gov.uk in a couple of days time and press “Submit” yet again.�

These are personal opinions and should not be misunderstood as representing the opinions of�
Consult Hyperion or any of its clients or suppliers

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.