Good morning

The headlines:

  1. A silly suggestion about TBTF* banks.

    Link: “outsource” them.

    My favourite part of Monday is reading all the guest blog opinion pieces that the bone-pickers wrote over the weekend. I mean, it’s not like there’s time during the week (see news item 3 below).

    And today’s highlight comes from the MD of an independent research firm, who reckons that the obvious solution to the current banking crisis is to “outsource” the large commercial banks to countries “whose taxpayers are willing to support the burden”. Because, like, “European and Asian governments remain committed to backstopping losses at their own too-big-to-fail banks”.


    Some reasons why this argument seems insane:

    a) prima facie.

    b) because foreign depositors have done so well by outsourcing their banking activities to Cyprus.

    c) this is all predicated on freedom of capital controls. Would you like a foreign country to have the ability to suspend the ability of Americans to transact in America?

    The answer to some of the above: there are over 7000 small-scale banks and finance providers that the average American (and American business) can use in place of the TBTF banks. And actually, the bulk of America’s finance industry is asset management – so they can do without the big banks.

    There may be a point here somewhere. But frankly, I think that arguing for a complete paradigm shift (involving multiple geographical and jursidictional relocations) is far more difficult that just imposing higher capital limits on the TBTF banks**.

    After all – if they’re going to argue that they’re vital institutions to American survival – then they should be subjected to the same constraints as those of the military and co. They can’t have it both ways.

    *TBTF = Too-Big-To-Fail

    **A link to Matt Levine on the topic of greater capital controls.

  2. Hewlett Packard.

    Link: A turnaround of Moonshot.

    HP’s new CEO is planning an announcement today via a webcast about their new awesome server (Moonshot) that she claims is “disruptive innovation”.

    I love the phrase “disruptive innovation”. It’s the holy grail of the tech world – a piece of machinery that completely alters the way we operate. Like the iPhone gave us the smartphone and the iPad gave us the tablet.

    HP’s Moonshot is meant to be the server that will change the way major media and social networking platforms operate. And honestly – that sounds like a good market for them to be in. After all – every day, I have more blogposts, photos, videos and podcasts that I want to upload into the cloud. And somewhere in that, there are a variety of data centres running giant server hubs of storage.

    That said – the big boys on those platforms are big enough to build their own servers; and their internal demand is likely high enough that they don’t need to worry about “economies of scale”. Still – it’s interesting to watch it all role out.

That’s all for now.

Have a good day.