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I'll mostly use it to write haikus. I'll also flag up interesting pieces related to social & environmental finance innovation, financial activism, alternative financial systems, and international development.

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Financial Zones of London: How to get good coffee in Berkeley Square, Mayfair

There’s a troubling question in my mind whenever I’m in Berkeley Square: It’s the mystery of why I can’t find any good coffee here. It’s mysterious precisely because this square is the centre of the world’s largest concentration of hedge funds, and that kind of means the average person walking here commands a salary larger than…well, everyone else in the whole world. So where’s the good coffee?

BERKELEY SQUARE, MAYFAIR

Have you ever wondered what a hedge fund is? I mean, I can tell you that a hedge fund is a company registered in the Cayman Islands, and that people around the world put money into it, and then it uses that money as collateral to borrow a bunch more money, and uses that to bet on various things like company shares, commodities, bonds, and derivatives…

But does that really tell you what a hedge fund is? To know what a hedge fund is, you should try run your hand over the golden plaques on the doors around Berkeley Square. The names seem unfamiliar, but this is a ring of fire, and these companies are sorcerers channeling enormous circuits of cash. The old facades hide computer networks sending orders to transact in every market on the globe. In fact, I’d give you 2:1 odds that there’s someone in that inconspicuous building over there that’s about to execute a trade that will affect the value of Russian mining companies in Siberia.

But where’s my good coffee? I know where it is. Lansdowne House, 57 Berkeley Square, houses one of the world’s largest private equity companies – The Carlyle Group on floor 3. Those guys must have good coffee. Have you ever wondered what a private equity company is? I mean, I can tell you that a private equity company runs private equity funds, registered in the Cayman Islands, and that people around the world put money into those funds, and then those funds use that money as collateral to borrow a bunch more money, and use that to buy and sell companies.

But would that really tell you what a private equity company is? To know what a private equity company is, put on a heavy Russian accent, walk in and tell the Carlyle Group that you’ve got an ailing Siberian mining business that needs restructuring – they’ll take you to their meeting room and give you good coffee.

LANSDOWNE HOUSE, COFFEE SHOP FLOOR 3

Then you can head back to Green Park tube via Berkeley Street. You’ll pass Glencore. It’s Swiss, and it’s one of the world’s largest privately owned companies. The UK office is by the Sainsbury’s on the corner. They’re huge in the global commodity scene, and they’re only about to get bigger, with a gargantuan IPO* planned. They’ve historically not been too transparent, and, word on the street is that commodities can be a dirty business at times, with all that Siberian mining. This area looks posh, but it’s not – it’s all cowboys, assassins, and oligarchs.

*(refers to initial public offering: selling shares of ownership to raise money)

Fun things to do in London’s Financial heartland No.1: Going on Exchange

Last week I took a London-based NGO to the London Metal Exchange. We’re kind of concerned about some issues around commodity speculation, so thought it would be worth a visit. To be fair, I sometimes go with my friend Harry just for fun, because it’s such a darn unique curiosity. If you ever want to do it, go to the LME website, fill in the booking form and send it to them.

Why would you want to go there? Because it’s the largest global exchange in industrial metals, and that makes it an interesting node in the matrix of global trade. It mostly deals with metal derivatives (futures and options contracts for future delivery of metal), but trade in physical metals for immediate delivery also occurs. I spoke to a trader outside when he was having a smoke, and he said that if you deal in the physical ‘spot’ contracts, you’ll have metal waiting for you in a warehouse within two days.

The real choice is what metal you want. There’s no useless precious metal here, it’s all useful base metals, the physical underpinnings of global industrialisation and urbanisation. Most important is copper, used in electronics and construction. Its price is a key proxy for world economic growth, especially of developing countries. Chilean mines are the largest suppliers, and Chinese companies are the largest consumers. We churn through some 50 000 tonnes of this stuff each day.

Second up is aluminum, used for cars and construction and tin foil. Then there’s zinc, mostly used for galvanising steel for the auto and construction industries. Nickel gets used in the creation of stainless steel, and batteries for hybrid cars. Normal car batteries get made out of lead, half of which is mined in China. Rechargeable batteries for mobile phones get made with cobalt, mostly produced in the Democratic Republic of the Congo, but then shipped to China. Other metals include tin, dominated by only four producing countries – China, Indonesia, Peru and Malaysia – and molybdenum, a rare earth used in steel alloys.

Every metal on the exchange is pretty much dominated by China in terms of global consumption, and, frequently, production. It thus seems something of a historical anachronism that the exchange is in London rather than Shanghai. Then again, it’s an open question about how much of the LME trade is actually related to physical metals for real-world use, and how much is purely related to the speculative activities of London-based investors.

So let’s say a hedge fund decides that things in the DRC aren’t looking favourable. They phone their local broker at the office, and request to purchase 100 cobalt futures. The broker at the office phones his floor broker on the exchange, who gives the order to the clerk. The clerk gives the order to a guy sitting on a plush red leather couch in the ring. This is the ring dealer. The ring dealer casually shouts that they want to buy 100 cobalt futures. Some other ring dealer, carrying a different order, casually agrees to sell. Deal done. The clerk relays the info back, and the phone rings at the hedge fund office, telling them that the trade is done. They now own 100 tonnes of cobalt, in a roundabout way, through the derivative.

And this kind of thing goes on all day, and the prices set in the process become the ‘official’ price of cobalt around the world, used as a benchmark for producers and users to set their own prices.

For the most excitement, you probably want to go for the ‘kerb trading’ sessions, the afternoon free-for-all where they shout at each other. The earlier sessions are kind of boring and the ring dealers just sit around and don’t seem that interested in setting the global price of metal. Keep a look out while you’re there for moments of intrigue: See if you can spot JP Morgan trying to corner the copper market.

Goodbye Really Free School

It’s with sadness that I discover the Really Free School has shut down. It was one of the most original responses to education cuts, a band of misfits occupying buildings to host voluntary lecture programmes, taking a grand piano with them wherever they went.

Back in February I joined forces with Corporate Watch, in presenting a primer on the financial crisis at the school. It took place in an old mansion in Bloomsbury Square, in an upper-floor room with a projector. I had a double-sided A5 page of notes. On the one side was written ‘Credit; Ownership; Currency; Commodities; Derivatives’. On the other side was written “Commercial banks, investment banks, interdealer brokers; Institutional investors, hedge funds, private equity”. I started by holding it up and saying, “On this side is all the stuff the financial sector deals with, and on this other side, is all the people that deal with it.”

That’s not entirely accurate, but I’m a believer in establishing simple frameworks around complicated topics. It at least allows listeners to feel in control, rather than the panic brought on when someone raps about abstract evils and twisted theories. In the audience was a zonked-out cat called Andy – he’d worked for a hedge fund, and subsequently progressed into a life of squatting and community work. People think that’s strange, but I don’t think so at all: The hedge-fund hounds are often individuals on the borderline, interesting people with crazy ideas. We got chatting afterwards about financial activism, a fascinating topic I'll develop on in later blog posts.

I went back to the school several times. I took notes at a workshop on internet security. I watched a film about a feminist revolution. I saw a lady called Barb Jacobson give a talk about alternative monetary systems. I arrived for a session on setting up a ‘Timebank’, but nobody pitched up to give it. I attended an amazing poetry session, got drunk and recited my favourite haiku: “Oh avocado, how tasty you are to me, all green and mushy.”

There was some stuff of questionable quality. Like part 3 of that film Zeitgeist, utterly shite. And then there was the talk by a guy who’d written a paper on tax havens. He spoke endlessly about critical theory, rather than tax havens, and used words like ‘aporia’ and ‘bios’. At some point I lost it and had to leave.

But, when push comes to shove, that was the real beauty of the Really Free School. If you wanted to contribute, you really were free to do so, and if you wanted to leave, you could. The real question is whether it ever had the internal impetus to keep going. Perhaps it needed a more directed education programme, a process of strategically commissioning talks rather than relying on organic volunteering. The idea of a travelling school materialising in old buildings is catchy, but you need substance to complete it.

G-20 Demonstrations: Two Years On

On Thursday the Guardian reported on a High Court ruling, holding that the Metropolitan Police were unlawful in ‘kettling’ protesters during the G-20 demonstrations in April 2009.

Two years ago, I took this photo. It was some three hours after the police line came like a running of the riot bulls down Bishopsgate, randomly trampling flower-children in a startling display of the arbitrary powers of the state. The bulldozing was sanctioned for some official reason not quite understood by anyone present, especially considering they’d chosen to target the hippies rather than the anarchists, but apparently it was necessary, for some reason, unknown to anyone present. Note the Financial Times in the foreground. There was an article in it by Martin Wolf entitled ‘The urgency of now: Why tomorrow’s G-20 summit will fail to deal with the big challenges.” It made for interesting reading while the police deployed their state-of-the-art kettling strategy.

This guy in the photo was employed as a wall of silence, but I chatted to him, and he made thoughtful comments like “I am not authorised to answer questions on the situation.” I took a piss under a big metal door, kind of an attempt to have my say in the face of this deprivation of voice. A high-spirited dude with overalls came over with his hand in the air. “Hey man,” he shouted, “high five, you came disguised as a banker!” We slapped hands, and I said, “Actually I’m a derivatives broker”. He froze on the spot. “Oh right, I’ve got a friend who’s an accountant.” I had to laugh at the suggestion that there was some similarity between an accountant and a broker. “Really, accountants are not nearly as bad as derivatives brokers man. Accountants can only really distort numbers, whereas we can distort entire markets.” He stood there uncomfortably, but I suppose it’s not usual to have this kind of conversation at a rally united by an apparent stand against the excesses of financial capitalism.

I guess the whole kettling strategy was a massive success. By inciting anger that didn’t originally exist, the police forces justified their presence in a self-fulfilling feedback loop. It was a loop that got unstable though, and one that jeopardised their ability to extricate themselves from the situation. They were on the verge of losing the psychological edge and spontaneous forms of coherent rebellion were starting to emerge. Nothing brings out the ‘fuck you’ in people like arbitrary power, and sooner or later, people get together and override it. At that point, bringing in the snapping dogs only makes people angrier.

So, after six hours, they let us out. Some of the cops looked as if they were about to cry. I walked past one of the guys and said, “Thanks man, you did a good job tonight.” He almost choked. “Thank you, that’s the nicest thing anyone has said to me all day.”

He did do a good job, but it was a job in the service of an utterly pointless attempt to stifle a necessary part of the workings of a democratic society. Good to see that the high court has recognised that.

Introduction

In 2008 I embarked on an unusual experiment in gonzo urban anthropology. I left the world of radical left-wing academia, and went to London with two goals in mind. Goal one: To break into the financial sector at the heart of one of the most powerful centres of the global economy and to see first-hand how it worked, to learn by doing, not by reading. Goal two: To shatter the complacent intellectual comfort zone I’d found myself in, and to learn to move in and out of different worlds like a chameleon. It was an exercise in critical thought, backed by real action.

ADVANCED TIE SKILLZ

That’s how I found myself on the 36th floor of the Lehman Brothers offices in Canary Wharf, four weeks before the company collapsed, and how I found myself in the subsequent financial crisis, trying to pitch esoteric inflation derivatives, property derivatives, and longevity derivatives, aboard a mad raft with an oddball crew of old rogues and young rats, fighting against the odds to stay afloat. It’s a pretty interesting story, and I hope to tell it some time.

In the mean time, I’m completely broke, in a room in Brixton, with a pile of business cards and a stack of ideas, most of which don’t add up. Sometimes I help unusual people to get to grips with conceptually challenging things, like what the financial system might be. I look at how financial concepts might be channeled creatively, through the fledgling world of social and environmental finance, and consider why all this might matter in issues of social and environmental justice.

Sometimes I look at bizarre curiosities, like new currencies and new units of time, Islamic finance, Hawala systems and financial crime. I delve into the way the financial sector tries to reconcile our views of the future in the present.

Sometimes I hang out with people who call themselves anarchists, but who are mostly just concerned about a world they perceive as offering them nothing but bland complacency and treadmill materialism. They hack conventions and set up bases in old abandoned buildings, but are still daunted by the seemingly intractable, impenetrable and arcane financial structures around them. I urge them to try engage more, to spend less time throwing rocks at things, and more time subverting their own preconceptions. They look at me weirdly, but I think there’s a lot to be said for a new activist philosophy.

I play a lot of guitar. I once busked on the New York Underground. I have a pricing model on my hardrive that can tell you what rate to charge for a bet on how long people live for. I lifted it from an investment bank, and one day, when I learn to use it, I'm going to create a rock 'n roll financial opera.

I once went to a fancy university, got an MPhil in Development Studies, wrote some papers. Sometimes I hang out with development people and talk trade policy, agricultural subsidies, and NGOs. Other times I hang out with finance peeps, and talk about things like sugar and carbon.