Category Archives: Finance and Economics

Thomas Greco’s presentation at the Living the New Economy convergence, Oakland, CA, October 23, 2014

At the recent Living the New Economy convergence in Oakland, I was the first speaker on a panel that addressed the question of the Future of Value Exchange. Here it is below:

If you would like to download the slide deck of that presentation, you can get it here. I had only enough time to show the first 15 slides; the other were included for possible discussion.

You can also find some of my other presentations and interviews on my YouTube playlist.

You can find video recordings of several other sessions from Living the New Economy convergence here.

Bank monopoly being challenged by large corporate chains

A recent Bloomberg news item reports that some major retailers are dropping Apple Pay, not because they don’t like the new technology of smartphone payments, but because they have a plan of their own. Here is an excerpt:

“Objections to Apple Pay aren’t actually about convenience, reliability, or security—they are about a burgeoning war between a consortium of merchants, led by Walmart, and the credit card companies. Rite Aid, CVS, Walmart, Best Buy, and about 50 other retailers have been working on their own mobile payments system, called CurrentC. Unlike Apple Pay, which works in conjunction with Visa, MasterCard, and American Express, CurrentC cuts out the credit card networks altogether. The benefit to the merchants is clear: They would save the swipe fees they now pay to the credit card companies, which average about 2 percent of the cost of transactions.”

Read the full article here,

Mobile money transfers in Kenya help the poor and unbanked

M-Pesa, is a mobile-phone based money transfer service that was started up in Kenya 2007.  Since then it’s usage has grown by leaps and bounds. This recent article provides a thorough understanding of how it works and the benefits it provides: 10 Myths About M-PESA: 2014 Update.

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.