Day: 3 November 2023

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AI could lead to the next financial crash!

AI created stock market crash

There is some evidence that AI could create the next financial crisis, according to some experts and regulators.

AI scenarios

AI could increase the complexity and opacity of financial markets, making it harder to monitor and prevent systemic risks. For example, AI could enable new forms of market manipulation, fraud, or cyberattacks that could destabilize the financial system.

AI could create feedback loops or cascading effects that could amplify shocks and cause contagion across different sectors and regions. For example, AI could trigger flash crashes or sudden liquidity shortages that could spread rapidly and disrupt market functioning.

AI could create new sources of concentration and interdependence that could increase the vulnerability of the financial system. For example, AI could create a reliance on a few dominant data providers, platforms, or models that could fail or malfunction.

AI bots could take control of a stock trading platform or worse a stock exchange.

These are some of the possible scenarios that AI could create the next financial crisis. However, there are many potential benefits and opportunities that AI could bring to the financial sector, such as enhancing efficiency and innovation and even enhancing easier access and personal financial control for millions of investors and savers.

AI could cause a stock market crash
AI could lead to the next financial crash! It could also enhance personal financial control.

As always, it is important to balance the risks and rewards of AI and to develop appropriate regulatory frameworks and ethical standards to ensure its safe and responsible use.

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Sam Bankman-Fried, the Crypto King found guilty of FTX fraud

Guilty of fraud

Sam Bankman-Fried, founder of the world’s biggest cryptocurrency exchange, has been found guilty of fraud and money laundering at the end of a month-long trial in New York.

He was accused of lying to investors and customers and stealing billions of dollars from FTX, which went bankrupt in November 2022. He now faces up to 115 years in prison. The jury delivered its verdict after less than five hours of deliberations. His sentencing has been set for 28th March 2024.

Month long trial

The verdict was delivered after a month-long trial that saw three of his former associates, including his ex-girlfriend, testify against him as part of a plea deal. They revealed that Bankman-Fried used customer deposits from FTX to fund his other company, Alameda Research, as well as to buy property and make political donations. He denied the charges and claimed that he acted in good faith and made mistakes due to being overwhelmed by the rapid growth of his businesses.

It concludes a dramatic fall from grace for the 31-year-old former billionaire and one of the most public faces of the crypto industry.

The case has been seen as a major blow to the crypto industry, which has been struggling to recover from the market crash and regulatory scrutiny that followed the FTX collapse. Bankman-Fried was once one of the most prominent and influential figures in the sector, known for his philanthropy and crypto industry innovation. 

His downfall has been described as the industry’s greatest cautionary tale.

Verdict

‘Sam Bankman-Fried perpetrated one of the biggest financial frauds in American history – a multibillion-dollar scheme designed to make him the king of crypto’, U.S. attorney Damian Williams said in a statement after the verdict. ‘This case has always been about lying, cheating and stealing, and we have no patience for it’.

Sam Bankman-Fried, founder of the world’s biggest cryptocurrency exchange, has been found guilty of fraud and money laundering at the end of a month-long trial in New York.

Prosecutors had accused Bankman-Fried of lying to investors and lenders and stealing billions of dollars from cryptocurrency exchange FTX, helping to precipitate its collapse. They charged him with seven counts of fraud and money laundering.

He had pleaded not guilty to all the charges, maintaining that, while he had made mistakes, he had acted in good faith.

After the verdict Bankman-Fried’s lawyer Mark Cohen said: ‘We respect the jury’s decision. But we are very disappointed with the result’.

Mr Bankman-Fried reportedly maintains his innocence and will continue to vigorously fight the charges against him.

He now faces up to 115 years in prison.

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UK holds interest rate at 5.25%

Bank of England

The Bank of England (BoE) announced its latest interest rate decision on Thursday, 2nd November 2023 to hold the bank rate at 5.25%.

The Bank of England’s (BoE) Monetary Policy Committee (MPC) voted by a majority of 5-4 to maintain Bank Rate at 5.25%, the highest level in 15 years. However, four members preferred to increase the bank rate, to 5.5%. 

The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes by £100 billion over the next twelve months, to a total of £658 billion.

The BoE’s decision was influenced by the weak economic outlook, the high inflation rate, and the uncertainty surrounding the Covid-19 pandemic and the Brexit saga. 

The BoE said that the UK economy was likely to contract by 0.5% in Q3 2023, and that underlying growth in the second half of 2023 was also likely to be weaker than expected. The BoE also warned that there was a 50% chance of a recession in the next year (50/50). I think even I could guess with odds at 50/50.

2% target inflation to be hit by Q2 2025

The BoE also said that inflation, which was 6.7% in September 2023, was expected to peak at around 7% in Q4 2023, before falling back to the 2% target by 2025 Q2. The BoE said that the inflation spike was largely driven by temporary factors, such as higher energy and food prices, and that it would not respond to it.

The Bank of England was behind the curve calling it transitory. Can we trust any future forecasts?

The BoE’s decision was in line with the market expectations, as most analysts and investors had predicted that the BoE would keep rates on hold.