Slide 1

A number of articles and blogs have raised the question of settlement of the unfunded DB pension liabilities of UK eurocrats. Many have observed that these are generous and have reported the complex and changing formulae by which member contributions are determined. Under the existing arrangements pensions are paid when due from the EU general budget. The liabilities are jointly guaranteed by the EU member states

Many have, correctly, noted that the problem reduces to the determination of the discount rate to be applied to these liabilities. However, before getting to that, there is a precursor; the scheme may be unfunded but there is the not so small matter of all the contributions already paid by and on behalf of scheme members. What was the application of those funds; where are they now? It is not at all obvious that member state participation in the EU general budget and the pension scheme liabilities match or reconcile.

The idea of using some discount rate to value these liabilities contains an implicit assumption, that these liabilities will remain with the scheme, in Europe. In that circumstance, the EU needs to be content that the sum paid is sufficient to earn the further returns necessary to meet these pensions when due. In commercial, private sector terms this is equivalent to the pricing of a bulk annuity buy-out. The terms under which these liabilities were generated are no longer relevant (for a fuller discussion of private sector DB funding issues, see:

The scope for dispute over the calibration of the discount rate is obvious. However, there is a simple solution which obviates the need for any discount rate: repatriate the liabilities and have the UK pay them when due, alongside the many other unfunded purely domestic civil service pensions.

There would be a difference in the covenant associated with these pensions if transferred; they would now be full faith and credit of the UK rather than jointly guaranteed by all the members states, but that difference is marginal in extreme. I do not believe that any member would choose to withhold their consent, if that really is needed, on such flimsy security grounds

This should appeal to the avid Brexiteers (of which I am not one) as it would lower that apparent cost of the Brexit process. Certainly, it would lower the amount of the ultimate cash payment to the EU, the Brexit bill. It would also mean that the Treasury and OBR could then value them as is their wont.

Image result for brexit free template

Published: Thursday, 09 November 2017 12:12

(Or how myths and legends can grow in under 10 years)



Cryptocurrencies are a recent global financial and technological phenomenon, one that has emerged in the last 10 years. Yet the folklore of cryptocurrencies has grown as quickly as the origination and dissemination of the number of currencies themselves. Folklore is no longer circumscribed as being chronologically old or obsolete. Those, who study folklore, analyse and evaluate “the traditional artefacts of a social group and how they are transmitted.”

The myths and legends around the development and use of crypto-currencies have grown as quickly as their adoption. The myths and legends have added to the mystique or even magical properties of what, under the laws of most jurisdictions, are no more than tokens which are accepted by some communities within the jurisdiction as a means of storing and exchanging value.


What are crypto currencies and how do they work?

Before observing some of the myths and legends surrounding crypto currencies, it be helpful to explain in more detail the principles and operational workings of crypto- currencies.  A cryptocurrency is a digital asset, that is an asset stored electronically, designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of “the currency”. Crypto currencies are decentralised. Decentralised crypto currency is produced by the entire crypto currency system collectively. The rate of production is defined and publicised when the system is created. By contrast centralized banking and economic systems such as the UK through the Bank of England or in the USA through the Federal Reserve, other sovereign jurisdiction boards or governments, control the supply of currency by printing units of “fiat money” or demanding additions to digital banking ledgers. In case of decentralized crypto currency, companies or governments cannot produce new units.  To date they not provided backing for other firms, banks or corporate entities, which hold assets valued measured in it. The underlying technical system, upon which decentralized crypto currencies are based, was created by the group or individual known as ”Satoshi Sakamoto” of Bitcoin fame.

Over a thousand crypto currency specifications exist. Most of them have similar characteristics to the first fully implemented decentralised crypto currency, “Bitcoin.” Within crypto currency systems the financial integrity and balance of its records (“ledger”) is maintained by a community of mutually distrustful parties, affectionately termed “miners.” Holders and users of crypto currencies use their computers to help validate and timestamp transactions, which they adding to the ledger in accordance with a particular time stamping scheme. Miners have a financial incentive to maintain the security of a crypto currency ledger.

Most crypto currencies are designed to gradually decrease production of currency. They place an ultimate cap on the total amount of currency that will ever be in circulation, mimicking precious metals. Compared with fiat currencies held by financial institutions or kept as cash on hand, crypto currencies can be more difficult for seizure by law enforcement authorities. This difficulty is derived from using cryptographic technologies.


Why has the folklore of crypto currencies developed so quickly?

Many themes which resonate in Folklore are present in the development of cryptocurrencies:

The mystery surrounding the source or inventor

The creator of the first cryptocurrency is known as “Satoshi Sakamoto.” The real identity or identities remains a mystery. Whether the inventor was Japanese as the name suggests or not is again remains unverified. Such behaviour is unusual in contemporary business world where people like to stake their claim to successful inventions. Sightings have been made allegedly of the inventors. The shadows hide the identity of the inventor and contribute to the mystique and mystery of the invention.


Ex nihlo nihil fit

This expression from classical philosophy describes the concept that substance and value has to be derived from material. Cryptocurrencies are derived from the production of a cryptographic formula. The first principles of Nature are that “nothing is brought forth by any supernatural power out of naught” according to the Roman Philosopher, Lucretius, who proceeded to state that:

For if things are created out of nothing, any breed  

Could be born from any other; nothing would require seed.

The creation of crypto currencies add to their mystique because they not a form of natural creation.

Parallels with Alchemy

Alchemy was an ancient practice which sought to turn base metals into gold by transforming the material characteristics of base metal into something of value. The ancient practice was seen as a cross between scientific study and charlatanism. Practitioners conducted their experiments in secret and maintained records of their experimental work in cyphers and cryptic symbolism. Legislative prohibition accompanied by criminal sanctions and disapproval by Christian Churches contributed to the aura of secrecy and shadowy practices. While miners of crypto currency do not practice in shady places, the security, energy and cryptography used in creation of crypto currencies do borrow from the science of Alchemy.   

The symbolism of tokens in folklore

Crypto currencies are “electronic tokens” are classified as such currently by most legal jurisdictions. Like many tokens in folklore, crypto currencies can bring luck, fame and fortune through the value they are perceived to bring to the owner. Tokens are symbols. Symbols can bring good luck. They are designed to enhance the holder's mind-set. In turn they produce enhanced life experiences. Good luck symbols for business are a subtle way to bring attention back into focus. Contemplating the symbolic meaning of an object that traditionally represents good luck is one way to help focus on the glittering prize.

The Chinese have a custom of giving red envelopes of money (Hung Bao), during the Chinese New Year and at weddings. Symbols of wealth and luck usually decorate the outside of the red money packages. Red envelopes are used for Chinese lucky money as the Chinese consider red the colour of luck and happiness. Red envelopes sold for the use of Hung Bao have Chinese symbols of luck and happiness on the outside. These envelopes are very elegant and fancy with embossed gold designs on a rich red background.  Hung Bao given in red envelopes is considered to work against evil.

The role of communities

Folklore is a vibrant element of life and behaviour as well as cultural heritage. Beliefs, customs and expressions link the past to the present and help the understanding of our specific communities and cultures, as well as our shared humanity. Far from being static or an ageing genre, it remains relevant by adapting to new circumstances, with the 'Folk' (people), and the 'lore' (stories) continually informing and influencing each other. Cryptocurrencies bring together communities of interest. Principally the communities share value in the form of the means of exchange within a closed group of people anonymously in most instances. Some of those communities share social and economic values in their attitude to “fiat money.”

The velocity of communication through social media

Technological communication is transforming folklore. The myths and mysteries of crypto currencies have spread very rapidly through technological communication rather than word of mouth or the traditional written word. Communication of the technical and business developments of crypto currencies has been disseminated through social media. Social media has hastened the velocity and diversity of the communication of news over the past decade. Some of the news has been described as “fake news” or “fake information”, which embellishes and colours basic dissemination of facts, as happens when people relate their experiences.