Author Archives: thomasfranklythinking

The Presumption of Guilt and Banking

Over one and a half billion unbanked globally, most of them poor, undocumented, minority and innocent. That last adjective is important, because the exclusionary nature of our existing financial system is no accident. It is a direct consequence of a system built on a presumption of guilt. 

This presumption of guilt is a minor nuisance for the affluent, but an existential threat to the underprivileged. It’s one reason why poor neighbourhoods feature more pseudo-financial services like check cashers than bank branches, even in rich countries. Laws and regulations make it too hard or expensive for banks to serve these communities. Money that’s issued by a government must play by its rules, however overbearing or unfair they might be.

From FT Alphaville: Providing security services capable of supporting a stable monetary system has always been a dirty and carbon intensive business, argues Omid Malekan.

The purpose of all things: to create loans for banks or other investment groups.

All of that contributes to Rosenberg’s theory that the art world today has one major purpose—to create loans for banks or other investment groups: “The profit now is in lending money for people to buy things. Art is now an investment vehicle.”

August 8, 2021 Sunday links

  1. The three-or-four-hours rule for getting creative work done – exactly what it says
  2. The Tigray conflict began last November, as the world’s attention was focused on the US presidential election; In late June, the TPLF took control of Mekelle, the capital of Tigray; its forces have since pushed east into neighbouring Afar and south into Amhara, where Lalibela is located.
  3. Grinling Gibbons

July 28, 2021 Tuesday links

  1. 37 Comparisons Of The Sizes Of Prehistoric Animal Ancestors And Their Modern Relatives (From MR)
  2. Walter Sickert’s Brighton Pierrots (1915) Tate: “Closer to home, Tate Britain is organising a career survey of the British artist Walter Sickert (28 April-18 September 2022). The exhibition of this painters’ painter (and possibly the greatest British painter since J.M.W. Turner) will look at his relationship with contemporaries such as Edgar Degas and, much like the Frenchman, how the rise of photography affected the composition of his paintings.” – The Art Newspaper
  3. The Constant Gardeners consists of four robot arms each weighing more than a tonne that have been repurposed to gently rake and draw in a bed of basalt and granite gravel. The installation was inspired by traditional Japanese Zen gardening and seen as a way to counter the perception of robots as threatening and inelegant, according to the Jason Bruges Studio, which added: “By programming the robots to perform the role of Zen gardeners, we hope to challenge these notions by displaying the machines in a contemplative, graceful context.”” – The Art Newspaper

July 22, 2021 Thursday links

  1. Intraday Timing of General Collateral Repo Markets (Liberty Street Economics): Specifics, Specifics, Specifics! Love the human details this layers on to a niche-ier technical market mechanism.
  2. Three Things I Think I Think – Learning From Bad Inflation Takes (pragcap): Good points about the need for MMT crowd to acknowledge that demand side is probably at least part of the composition of inflation; QE simply shifts composition of money-like assets in real economy, not quantity; and the measures that monetary policy attempts to impact are mainly determined by fundamentals at the primary level, with the fed’s secondary market operations having only marginal effects.
  3. Linus and Lucy: with the Jerry Granelli Trio (youtube): Jerry Granelli was drummer of the Vince Guaraldi Trio and recently died. “People heard the heart in it. Honestly, I turned left creatively with my career after that and never thought about it for a while; jazz musicians are sometimes not as open as they may seem when it comes to people having hits or things crossing over—everybody gets all uppity. But then I matured enough to realize that it went way beyond music. It was the first entry point to jazz for a lot of people. And now that I’ve got my credentials as an artist, I’m proud and delighted to be a part of it.”

Independence from What?

Independence from What? (Just Money). This is a really cool piece.

discuss more fundamental constitutional questions of how we can make central banks more democratic internally and at once more independent, by redefining independence as not against democracy but rather against the executive and financial markets.

Delegating Money Power

Does delegation increase efficiency or simply avoid responsibility to handle things democratically?

…I wonder whether debates over the institutional design of central banks hinge more than we commonly think on prior debates about the nature of money and what we might call “money power”, as well as the specific role of private banks in money creation.” vs administrative law theory.

The power to make money, and the power to decide who gets to make money, is one of the most awesome powers of the modern world. A central bank tasked with managing the amount of credit in a system in which most credit is, in fact, created by private banks faces a peculiar set of constraints that make it uniquely vulnerable to elaborate forms of more or less overt blackmailing. This poses challenges that are distinct from other administrative powers, and the resulting questions concerning the banking system as a provider of credit seem to point us instead toward the political theory of, what Chiara Cordelli has recently called, the privatized state.

Constitutions and Democracy

“If our concern is with better decisions and more just distributive outcomes, why not organize central banks more democratically internally by, for example, ensuring that various segments of society—not least labor alongside capital—are equally represented?”

“we can place central banks on a more democratic footings that would operate independently from the rest of the existing political system. This holds open the promise that central banking can be at once more democratic and yet independent.”

Independence from Finance

But is it possible to reconceptualize independence itself? Instead of assuming that the primary source of interference against which central banks have to be insulated consists in elected officials or the public at large, there are a number of obvious forces that are just as possibly distortive and corruptive, if not more so.

Bourdain, banking, chamas, class, liberalism, and localism

A book club I am in recently read Kitchen Confidential. The memoir is a lot of fun if you liked the tone of Anthony Bourdain’s shows, but there are also a bunch of passages that are sort of cringe (though to be fair he is pretty self-aware of and acknowledges most of these moments). One such acknowledged moment involves him carrying around a katana in college. But one unacknowledged moment is the following passage:

Many of the Spanish- speaking members of the crew took part in an unusual ‘banking’ scheme where each week all the members of a large group would sign over all their paychecks to one guy. The recipient was selected on a rotating basis, and the way it worked, I gathered, was that for about two months or so everybody squeaked by, doing their best to make do without a check, spending little . . . until the day it was their turn, at which point they came into thousands of dollars and could spend like drunken sailors. This practice made no sense to me. It also required an extraordinary amount of trust in one’s fellow cooks. I did not share my comrades’ confidence that Luis, for instance, wouldn’t skip town on a drunk after getting his big payday, and leave the others in the lurch. I held on to my meager paycheck. I had no time to spend it anyway.

Anthony Bourdain’s Kitchen Confidential

When I read this, his interpretation struck me as likely underinformed but I could not quite say why.

After reading this interview about “chamas” in Kenya I now see why! The above is a form of mutual credit, a concept I didn’t know much about.

[Chamas are] groups that started in the 80s, when Kenya was really in a cash crunch. They started off as women’s savings groups, but now they’re open to men as well. There are social bonds – family, church, work. They already know and trust each other. They meet up, and they have something called the ‘merry-go-round’ system. They all pay into a fund, and each time, one of the members takes the whole fund. So it’s a micro saving and micro lending scheme.

Wikipedia says that “Some sources have estimated that one in three Kenyans is a chama member.”

The interviewee explains what is really being provided here: “Yes – we’re just liquidity providers. We just come in and say ‘here – trade!’” (my emphasis). “Just” is doing a disservice in that sentence. Creating formal financial liquidity out of informal communal trust is pretty cool, Bourdain’s mistrust of his crew aside!

This all reminded me of a quote I liked from a recent Interfluidity post on Liberalism and class:

The right to live as, where, and among communities one chooses is only valuable to the degree that it is practical and ethical for a person to exercise that right. Among the affluent, the costs of uprooting oneself from where one happens to start to some other community of ones own choosing are tolerable, both to the uprooter and the community left behind, because affluent people rely upon portable financial capital and impersonal markets for most of their requirements. In less affluent communities, people’s wealth and insurance against adversity are bound up in very personal relationships, which get destroyed rather than transported when a person “abandons” her roots. Professional class Americans follow their careers around the country, relocating between liberal cities and college town with remarkable ease, paying expensively for new child care in each. Working class Americans are much more likely to rely on family to render child-rearing manageable and consistent with their jobs. Among the affluent, elderly parents can be left “on their own”, because deliveries can be paid for, rides can be hired, if necessary more intensive, personal help can be paid for. The downscale elderly rely much more upon unremunerated help from children and church, upon the goodwill of particular human beings. When people upon whom they rely leave, they simply become poorer. For the person who might choose to leave, this cost they might impose pits liberal “rights” against very visceral obligations. A person who has faced that dilemma, and chooses to stay, might understandably view the kind of people who make the opposite choice as selfish.

This points towards a weird tension in attempts to bridge between formal and informal finance. As mutual credit networks formally capitalize social capital that previously wasn’t legible to markets, they simultaneously reduce some “liberal” values like the right to exit (that is geographically move) when one wants, something that people comfortably situated in the formal sector take for granted. Once you are on the community credit merry-go-round, it is hard to get off.


Chamas and community credit seem cool. Some of the above links indicate this stuff works and it also has a certain “farm-to-table locally sourced” appeal. But I wonder if the downside of only being able to receive certain financial services by coordinating with your community comes at a cost. And does that suggest a need for different approaches to financial inclusion.

The transformation of informal social relations into formal financial liquidity creates easily measured monetary value. But how do you measure the cost of being reliant on and responsible to your neighbors for financial services that are normally provided by boring impersonal financial services companies?

Obviously there is a certain charm to a community banking itself. But there is also a certain charm to being able to pick up and leave a place if you want. I genuinely am not sure which of those points of view is more charming. And I don’t think a spreadsheet could ever shoot out the answer to this political question.


So of course Bourdain wouldn’t join his crew’s unusual ‘banking’ scheme. He sat squarely in the formal financial system and would not want the social obligations that come with being part of a chama.

The appeal of community credit is understandable but formal, impersonal financial relationships that can be easily settled can be nice too (see Graeber, Debt, and The Venmo Generation).

Maybe in addition to mutual credit networks that formalize social capital, we need institutions that allow people to separate that capital from social relationships and onramp into the formal sector.

And to be fair, maybe we could use some institutions that help people comfortably in the formal sector deformalize parts of their financial lives. I suspect there are plenty of people who might be interested in finding ways to partially organize their financial lives in a more communal manner. A bit less financial efficiency in exchange for a more locally, communally oriented financial product might be a welcomed trade.

Maybe someday one in three Americans will be involved in a chama. Maybe someday someone like Bourdain would jump at the opportunity to get into the community’s unusual ‘banking’ scheme.

Other notes:

Note 1: On a less “they used AI to recreate his voice!” note, while watching the trailer for the new doc, I liked the ending audio/visual montage with Brian Eno’s “The Big Ship.” Looks like Bourdain was a big Brian Eno fan:

Neville, who won an Academy Award for “20 Feet from Stardom,” his 2013 documentary about backup singers, says it was also Bourdain’s “punk rock attitude about everything” that drew him to explore his life.

“He had the best taste in movies, in books and music,” Neville said. So as the director combed through footage to use in his film, he jotted down every time Bourdain mentioned a song and created a 19-hour playlist.

“It’s all of Tony’s music,” he added. “And it’s Brian Eno and Iggy Pop and Johnny Thunders — it’s all these songs from his whole life, and I gave that to everybody that worked on the film to listen to and the songs on the film come out of that playlist. So the music was another way of getting inside his head.”

Note 2: Just putting it here as a reminder for when it happens… Chamas for Robinhood seems like it could be rocket fuel for meme finance / WSB investing. Your turn to spend the merry-go-round fund, @TheRoaringKitty.

Tradeoffs: formal / informal

Arnold Kling recently gave a brief overview on how the formal and informal sectors of finance relate to each other.

We can think of financial institutions as lying on a continuum somewhere between informal and formal. At the formal end of the spectrum, institutions are adjacent to the government. At the informal end of the spectrum, institutions are adjacent to criminal activity…

In short, institutions that are distinct from the formal sector can reach customers that the formal sector will not serve. Informal institutions can compete away some of the excess profits of the formal sector. But an advanced economy still depends heavily on the formal sector. The benefits provided by letting the informal sector expand should be weighed against the costs of undermining the formal sector.

As the informal sector displaces the formal sector, unexpected outcomes occur. New regulatory responses are created and the game starts over.

July 19, 2021 Monday links

  1. Saul Bass: The Art Of The Title Sequence (youtube, from Ted Gioia): The video has two examples including Catch Me If You Can
  2. Even God Would Get Fired as an Active Investor – stay. in. the. game (if God is your money manager)
  3. We Don’t Sell Saddles Here: Slack’s pre-product launch internal memo | “test & iterate vs scale & optimize” — During first pair, provide people what they want and communicate that to them. | Slack was selling an innovation that would change human behavior. Acme Saddle Company sells horseback riding, not saddles.

Veb account on inflation and how measurement is politics

Veb account essay on inflation being socially situated aggregate measure used to make the complex pricing decisions of millions of people legible to policy makers. Makes a great point about how thinking inducitvely about this stuff is both more accurate (cus this stuff differs across quantities, places, and time) and more useful politically. Some quotes below but worth reading the whole very readable thing:

inflation: Oren Cass and Jacques Derrida as Harold Bloom wlog

The basic thesis today is that the specification of alternative consumption baskets for measuring inflation is a good historical/narrative/rhetorical method, and should be taken up as such by folks with policy in view. “Inflation” is always only ever deeply socially situated, and mostly works as a point of social and political contestation. Rather than fighting over which is the capital-T True account of inflation, we should instead build out a profusion of accounts of inflation all originating from different constituencies with clear and justifiable methodological choices. From there, we can maybe start to triangulate towards what’s going on in the economy in the discourse.

The title is a little goofy, and a play on a core idea in the work of Harold Bloom: that the only interpretation of a poem is another poem. Unlike Derrida, Bloom says that this dynamic is only true for “Strong Poets” (something meant to be read as Famous White Bigwigs, the kinds of people David Foster Wallace would deem important). In Derrida, the only interpretation of anything is another interpretation, bonus points if you can take apart another interpretation and use its bits for yours. It only matters where it comes from insofar as that fact of origin is an unavoidable aspect of the interpretation itself. The argument I’m trying to make today maybe comes close to “the only way to beat a model is with another model,” but I’m using literary figures to make sure everyone understands that I’m trying to situate things within rhetorical rather than predictive space. Ultimately, the interpretation of a measurement of inflation is only ever going to be a different measurement of inflation.

The problem is – as everyone clever has been pointing out since the beginning of the pandemic, and really back to the 1930s – there’s no “final” measurement of inflation that meaningfully holds for all people in all locations. Pretty much everyone buys different things in different amounts every year. Worse, things are usually priced differently in different places!

The idea that the only valid levels of analysis are the individual and the full aggregate is a little silly to me….

At the same time, working bottom-up helps inoculate against the idea that the optimal response to inflation is the curtailment of demand. If the price of housing is rising somewhere, the best answer is probably to build more housing, not make everyone so poor that they can’t afford to keep bidding the price up.