How the City of London invented offshore banking

The article covers all that.

Warburg missed the freedom, and excitement, of the German markets in the 20s and 30s. So created an instrument, Eurobonds, in the 1960s to escape the carefully constructed international limitations of Bretton Woods. Add further desire to be outside the system from the US not being a neutral arbiter of the postwar international currency. That led to the inspiration for Eurobonds: the Eurodollar market.

Thus course was set on the race to the bottom. The US came off the Gold Standard, Bretton Woods was deconstructed and most national regulations that responded to the depression and war were repealed along the way.

That Warburg managed to get away with something so artificially constructed to evade laws is, to say the least, disappointing.

Yeah. Netting it down to the essence, the proposed explanation for the collapse of Bretton Woods seemed to be "USD inflation". Which is sure, plausible enough, I suppose.

Unfortunately they then threw up their hands, ignored everything we know about inflation in general or that inflationary period in specific, and come up with some weird story about how 70s stagflation was actually caused by South American dictators stashing money in Swiss bank accounts and then lending the money to the Italian government to build motorways.

A+ for imagination, but yeah, actually, the US just printed a ton of money. It's not a huge mystery!

> My understanding of the main argument put forth in the article is that capital controls are the answer to global inequality?

And yes, that was the other big weakness. Their argument for capital controls seems to mostly be "inequality was better when we had capital controls, so clearly capital controls caused lower inequality". There's no real attempt to outline a mechanism for this. There's an implication that capital controls allowed higher marginal taxes which in turn financed higher spending, but if you actually look at government spending, this is clearly nonsense. The UK has been spending between 35% and 45% of GDP on government since the 1950s, with no correlation between the start or end of Bretton Woods. Extremely high marginal tax rates may lead to good song lyrics, but they don't necessarily collect a lot of actual money.

You are right that the article did not mention a lot of important factors in bringing down Brenton Woods. The most important being the deficit spending of the US due to the vietnam war and the resulting inflationary pressure on the dollar. The second most important was England's delusional attempts to keep the pound expensive in relation to the other european currencies despite the fact that the french and german economies were clearly outperforming England. So you have a point there.

Regarding your last sentence, I think the point of the article is that capital controls perhaps acted to prevent a lot of the inequality that emerged after they were lifted.

There is no doubt that the years under bretton woods saw the fastest economic growth and improvement in living standards of average people in Western Europe and the US recorded in known history. Perhaps bretton woods was not the only thing to thank for that, but perhaps it had some influence.

It also cannot be denied that the lack of capital controls allows corrupt leaders to whisk large amounts of money away from countries in distress or in political turmoil.

Quite the contrary. They lose passaporting rights with Brexit

Not to mention all the EU nationals they employ

> special tax-heaven status as EU was moving toward more banking regulation.

"Tax haven" status has "nothing" to do with banks, it has to do with taxation rules and agreements. (Some banking rules could have an effect, but in general they don't. Bank secrecy is something that has gone out the window a couple of years now, so it's indifferent)

After Brexit, The City will lose passporting rights and It would lose a large portion of the EU market. Most of City banks are large multinational corporations that care very little about British politics. If anything Brexit was surprising for them as well.

City banks are already moving to EU. JP Morgan is moving to Dublin, Frankfurt, Warsaw, Luxemburg. Goldman is moving to Frankfurt and Paris.

EU will start applying pressure to move City jobs to the continent. Brexit will destroy City and London in long-term.

huh? London voted purely in favour of remain. And due to loss of financial passporting etc will have the largest negative fall-out.

Brexit has already been disastrous for The City, and it looks to become more so. It's practically the only thing that could unseat London as the premiere european finacial hub. Brexit is everything The City dreaded.

> They are by far the largest and most influential entity and one of the only few that are going to be better off after Brexit.

That is now what outside experts predict, nor is what the banks themselves are predicting, nor is it in line with how they are acting, nor is it matched by what has already taken place.

> staying in the EU would actually jeopardize their special tax-heaven status as EU was moving toward more banking regulation

First, I don't think you 100% understand what regulations are at issue here; there is no "special tax-heaven[sic] status".

But yes, there are rules changes coming that are designed to hamper The City and (not at all coincidentalyl) to push banks from London to Frankfurt. And inside the EU, the UK had some ability to lobby for tweaks to weaken or avoid these regulations. Outside they do not. This isn't a way for them to avoid this issue, this is a way to ensure that can't. For the bankers, Brexit is seen as an existential threat. Just look through the Brexit related headlines on, eg, Bloomberg. It's unmitigated doom, gloom, and panic.

From https://www.bloomberg.com/graphics/2017-brexit-bankers/:

> Frankfurt has emerged as the biggest winner in the fight for thousands of London-based jobs that will have to be relocated to new hubs inside the European Union after Brexit.

> Morgan Stanley, Citigroup Inc., Standard Chartered Plc and Nomura Holdings Inc have picked the German city for their EU headquarters to ensure continued access to the single market. Goldman Sachs Group Inc. and UBS Group AG are weighing a similar decision, said people familiar with the matter, asking not to be named because the plans aren’t public. HSBC Holdings Plc is the biggest non-French bank so far to opt for Paris, while Barclays Bank Plc has plumped for Dublin.

> London could lose 10,000 banking jobs and 20,000 roles in financial services as clients move 1.8 trillion euros ($2.1 trillion) of assets out of the U.K. on Brexit, according to think-tank Bruegel. The implications for the U.K. are substantial: finance and related professional services bring in some £190 billion ($248 billion) a year, representing 12 percent of the British economy.

Brexit is already gutting the UK financial sector, full stop.

The City was mostly for Remain. However, paradoxically, it is one of the sectors of the UK economy that will be least affected by it, as single market regulations don't cover services very broadly.

Note that UK financial regulations are usually more strict than EU ones (excepting some tax treatments).

who/what is the "The City"?

What mechanism do you think the banks used to persuade voters in the north and regions to vot leave, while themselves overwhelmingly voting remain, while also keeping this mechanism secret?

There was no secret conspiracy. It was a free vote.

Do you have anything to substantiate that? All banks were publicly against Brexit and, working myself in the City (and working on dealing with Brexit), I hardly know any banker who was pro Brexit. Banks are large organisations that can deal with the complexity of Brexit by setting up subsidaries and moving people, but this is perceived as a hassle and a distraction, not an opportunity.

As for EU banking regulations, I disagree, it is quite the opposite. The EU has many broken banking systems (like in Italy) which prevents them for going too harsh on banks. The UK regulator has systematically gold pleated every EU regulation, imposed harsher rules and regulatory ratios, and the UK ring-fencing is the only hard ringfencing I am aware of (along with Switzerland). Most other EU countries imposed symbolic ringfencing between retail and wholesale banking activities.

Polish immigration is what caused Brexit really.

Look at the distribution of votes. Unless the City managed to influence outlying areas while having no effect on its own neighbouring areas, I'd say it's more likely that it was for remain. Banks can be blamed for a lot, but not Brexit.

http://www.ox.ac.uk/news-and-events/oxford-and-brexit/brexit...

Interestingly, Bloomberg recently had a video segment on brexit and which financial institutions would win or lose. Unfortunately, since it was video I now cannot find the darned thing.

Anyways, it had several parts and in each part there was a representative of a group of institutions that talked about his/her opinion. The groups, as well as i can remember them, were "the city elders", the fintech startups, the money managers, the large international banks, and the insurance companies.

Pretty much all of them were strongly against brexit, except for the "city elders." The city elders were represented by an old man that was very pro brexit, explaining that he would welcome lighter regulation in order to offer more services.

So apparently there are people within the city that yearn for brexit because they want to break free of EU regulations and handle hot money like in the old days. I am not sure exactly who "the city elders" are, but apparently they exist and wish for brexit.

So it seems like there are different forces with different priorities within the city. And while most institutions that actually perform most of the economic activity from small startups to giant banks and insurance companies are against brexit, there lurk a bunch of scheming old men in a dark smoke filled room sipping port and licking their chops in happy anticipation of brexit (at least that is how i imagine them ).

But as to the question whether these "city elders" caused brexit itself, I am not sure. It seems that brexit was caused merely by a bunch of opportunist politicians trying to take advantage of the anti-immigrant backlash, and that they were searching for influence and votes rather than success at brexit.