Category Archives: Finance and Economics

Living the New Economy. Thomas H. Greco to speak at October conference

Living the New Economy is a major event slated for Oakland, California October 23-26.

LNE Oakland is designed to be different from any event you’ve attended before. Drawing inspiration from hackathons, conferences, networking events, festivals, and jams, the result is a unique event that has components of each. More than a conference, this is a convergence.

The first two days will be provide opportunities for you to “hear about thriving New Economy projects, identify gaps and opportunities, and find out how you can plug into the New Economy on a personal level.” During the second two days the New Economy principles will be explored and “participants will collaborate in teams to develop a business idea, program, art project, or anything that supports the transition to a New Economy.”

I am one of several speakers who will be presenting at the conference. Program and other details can be found at the conference website.

Get tickets NOW to receive substantial early bird discounts available until August 15. Register and get tickets here.

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Phone-to-phone payments already bringing massive changes to Kenya

Try to imagine what your life would be like if you had no bank account, no credit or debit cards, and no cash, and on top of that, you lived in a country where poverty, crime, and corruption were rampant. I’ve never been there, but by many reports Kenya is just such a place. How do people cope?

As in other places, like India and Thailand, that I have visited, it seems that the majority of people in Kenya are micro-entrepreneurs who eke out a living by producing and selling products or services of some sort. And, like everywhere else, having a means for exchanging those goods and services and “paying” each other is crucial to survival.

Ultimately, as private currencies and moneyless exchange mechanism proliferate, we all will have numerous payment options.  The Bangla-Pesa project operating near Mombasa is one such model that is now being replicated in Nairobi and other parts of Kenya. But even technologies that only provide new ways of paying with national currencies are proving to be beneficial in many ways.

Kenya’s Safaricom company has led the world in implementing phone-to-phone payments with the M-pesa. All it takes is a text message from the buyer’s phone to the seller’s phone to make a payment. Almost everyone in Kenya has access to mobile phone service and they may draw cash from their accounts at any of the 45,000 independent agents scattered around the country.

A recent Business Week article documents the ubiquity of this payment mechanism and its positive effects in such diverse areas as security, renewable energy, crowdfunding, and economic development . You can read it here: Ten Days in Kenya With No Cash, Only a Phone.

When mobile phone payment systems include complementary currency options, the beneficial effects will be multiplied manifold. — t.h.g.

How do central banks control interest rates?

Question: How do central banks control interest rates?

Answer: By creating counterfeit money.

Of course, they will never admit that. They see their “purchases” of debt instruments, mainly those of governments, as being legitimate. But such purchases violate sound monetary principles, and even their legality is questionable.

The obvious question that must be asked is “Where do central banks get the money with which to buy those debt instruments?” The answer is, they do not “get” the money, they create it–by fiat. This is  their celebrated “quantitative easing,” which is actually currency inflation. The new “high powered money” thus created puts new “reserves” into the banking system, which banks use to multiply their own purchases of government bonds and other assets.

Without this “monetization” of debts by the banking system, newly offered debt instruments, like government bonds, would have to offer higher rates of interest to attract buyers from the general public.

Interest rates on the ever-increasing amounts of sovereign debts can only be kept low by this sort of central bank intervention. As I put it, central banks are the “buyers of last resort” for bonds that cannot be sold at artificially low rates of interest. The chart below show just how desperate the situation has become since the financial crisis of 2008.

Interest Rate Elephant In The Room

 

Initially, however,  in the case of the Fed, the purchases were of “junk” that the banks had created during the real estate bubble. That was the bailout that saved the banks but put the squeeze on people through foreclosures, layoffs, and loss of income on their savings.

As shown in this chart and others I posted previously, all he major central banks are doing the same thing, so foreign exchange rates are not too adversely affected–yet. But keep your eye on Brazil, Russia, India, China, and other countries that show signs that they may not be willing to play along./ t.h.g.

Revolutionary aid project set to spread in Kenya

On the heels of the successful Bangla-Pesa community currency project, the NGO, Koru Kenya has been asked by the government to create similar programs in other poor neighborhoods around Nairobi and Mumbasa. Unfortunately, no significant funding is being provided by the government, so private contributions are being solicited through a Crowdfunding campaign at Indiegogo: Fight Poverty in Africa by Redefining Community Development.

This is a revolutionary approach to aid, one that empowers people to sustainably provide for their own needs. I strongly endorse this project and encourage all to make a financial contribution. Even small amounts can make a big difference. –t.h.g.

Income (and wealth) inequality becoming a political issue

At long last, income inequality is becoming a mainstream political issue, thanks in large part to New York Times columnist Paul Krugman and Thomas Piketty, an obscure professor at the Paris School of Economics.

The English translation of Picketty’s new book Capital in the Twenty-First Centuryhas become a political bombshell especially since Krugman’s review of it appeared in New York Review of Books. Titled, Why We’re in a New Gilded Age, the review highlights Picketty’s research findings and political agenda.

As Krugman describes it, “The big idea of Capital in the Twenty-First Century is that we haven’t just gone back to nineteenth-century levels of income inequality, we’re also on a path back to ‘patrimonial capitalism,’ in which the commanding heights of the economy are controlled not by talented individuals but by family dynasties.” And in assessing the book, he calls it “a tour de force of economic modeling, an approach that integrates the analysis of economic growth with that of the distribution of income and wealth. This is a book that will change both the way we think about society and the way we do economics.”

Krugman concludes his review with this statement: “Piketty ends Capital in the Twenty-First Century with a call to arms—a call, in particular, for wealth taxes, global if possible, to restrain the growing power of inherited wealth. It’s easy to be cynical about the prospects for anything of the kind. But surely Piketty’s masterly diagnosis of where we are and where we’re heading makes such a thing considerably more likely. So Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.”

Now, Krugman has upped the ante with his April 24 editorial The Pikkety Panic, arguing that “..what’s really new about “Capital” is the way it demolishes that most cherished of conservative myths, the insistence that we’re living in a meritocracy in which great wealth is earned and deserved.” Krugman presents evidence to suggest that “conservatives are terrified” and in a panic to try to refute Pikkety’s inevitable conclusions, but failing to find substantive arguments, they have fallen back on name calling. If you can’t refute the facts, then try to discredit the source.

Summing up, Krugman says,

“Now, the fact that apologists for America’s oligarchs are evidently at a loss for coherent arguments doesn’t mean that they are on the run politically. Money still talks — indeed, thanks in part to the Roberts court, it talks louder than ever. Still, ideas matter too, shaping both how we talk about society and, eventually, what we do. And the Piketty panic shows that the right has run out of ideas.”

If that isn’t enough to make the political pot boil over, another newly published academic study, Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens finds that “economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.”

Of course, most activists and even ordinary people have known all that, but now that academia has taken notice and begun to present solid scientific evidence, the pressure on politicians to acknowledge these conditions and act on them will build more quickly.

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Qoin launches B2B exchange

Community Currencies in Action (CCIA) has announced the launch of TradeQoin , a business-to-business trade exchange in the Netherlands.

As their website describes it, “TradeQoin is a trading network for SME entrepreneurs to do business with each other and pay with their own digital form of payment: the TradeQoin. Entrepreneurs can use TradeQoin to purchase and sell quality products and services. By selling products and/or services the entrepreneur can earn TradeQoin. These can then be spent on making purchases within the network, which reduces Euro expenditure.”

The video below features members describing the benefits of the exchange.

http://youtu.be/7VuIpFO7zZM

You can read more about it here, http://communitycurrenciesinaction.eu/sme-tradenetwork/

 

Free Community Capital Toolkit

The Business Alliance for Local Living Economies (BALLE) is offering a Community Capital Toolkit that can be downloaded free of charge from the BALLE website.

In case you’re not familiar with BALLE, here is a brief description of the BALLE vision and mission from their website:

Within a generation, we envision a global system of human-scale, interconnected local economies that function in harmony with local ecosystems to meet the basic needs of all people, support just and democratic societies, and foster joyful community life.

At the Business Alliance for Local Living Economies, BALLE [bawl-EE], our work is focused on creating real prosperity by connecting leaders, spreading solutions that work, and driving investment toward local economies.

BALLE equips entrepreneurs with tools and strategies for local success, and we provide the national forum for the most visionary local economy leaders and funders to connect, build their capacity and innovate. …more…

Toolkit includes: The 20-page Guide to Community Capital
Seven FREE past webinar recordings
Access to a community capital library of resources

You can download it here.