Monthly Archives: November 2010

The dark side of micro-credit.

The flaws inherent in micro-lending are now becoming apparent. Recent articles in The New York Times (“Indian Microcredit Faces Collapse from Defaults”) and Good Business report the sad case of India where numerous borrowers, unable to repay are reported to have committed suicide.

Now it becomes all too obvious, Quoting from the Good Business report:

Merely offering credit to more people doesn’t lead to poverty alleviation. It is a service that the poor should have access to, just like the rest of us. But, it is not a game-changer; it is one tool in the poverty alleviation toolbox.

Micro-credit allows poor people to play the game, but that game is still rigged against the poor and in favor of the lender. Interest is still interest, and micro-credit lures the poor into the debt trap–equal opportunity to play a losing game. Yes, a few may win, just as a few win at the casino, but in the end the “house” wins at the expense of the clients. Poverty alleviation requires, first of all, a fair game, sharing both the rewards and the risks of an enterprise. Revenue sharing would be a better approach than interest (usury) on debt. — t.h.g.

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Who does Congress represent?

Congressional representatives are ordinary folks just like us, right? Their interests are the same as ours, are they not. The chart below compares the net financial worth of Congressional representatives with that of ordinary households. Read the full story here.

Quantitative Easing, the FED, and the Future of the Dollar

“Quantitative easing,” it sounds like something you might do over the toilet.

It’s an ironic but appropriate choice for a euphemistic expression designed to fool the people in the hope we will not realize what is really being done to us by the banking and political powers that be. “Quantitative easing” is monetary inflation, pure and simple. The dollar is being intentionally flushed down the toilet. Get rid of your dollar denominated savings and investments before their purchasing power shrinks to nil.

But lest we lose our sense of humor, here’s an amusing explanation that I picked up from the Lew Rockwell blog:

The International Commons Conference

The International Commons Conference held in Berlin, Germany, November 1 and 2, 2010 brought together 180 participants from 34 countries. The conference was sponsored by The Heinrich Böll Foundation and the Commons Strategies Group.

You can find a dossier of the conference highlights, including my six-minute speed presentation on Reclaiming the Credit Commons, here. There is also an ICC wiki, here.

For more information about the commons see the On The Commons website.

Another investgative report by Matt Taibbi in Rolling Stone

This Rolling Stone article by Matt Taibbi tells how:  Courts Helping Banks Screw Over Homeowners

Economics and the limits to growth

Here are some wise words from economist Herman Daly

Thermodynamic Roots of Economics

by Herman Daly

The first and second laws of thermodynamics should also be called the first and second laws of economics. Why? Because without them there would be no scarcity, and without scarcity, no economics. Consider the first law: if we could create useful energy and matter as we needed it, as well as destroy waste matter and energy as it got in our way, we would have superabundant sources and sinks, no depletion, no pollution, more of everything we want without having to find a place for stuff we don’t want. The first law rules out this direct abolition of scarcity. But consider the second law: even without creation and destruction of matter-energy, we might indirectly abolish scarcity if only we could use the same matter-energy over and over again for the same purposes — perfect recycling. But the second law rules that out. And if one thinks that time is the ultimate scarce resource, well, the entropy law is time’s irreversible arrow in the physical world. So it is that scarcity and economics have deep roots in the physical world, as well as deep psychic roots in our wants and desires.

Economists have paid much attention to the psychic roots of value (e.g., diminishing marginal utility), but not so much to the physical roots. Generally they have assumed that the biophysical world is so large relative to its economic subsystem that the physical constraints (the laws of thermodynamics and ecological interdependence) are not binding. But they are always binding to some degree and become very limiting as the scale of the economy becomes large relative to the containing biophysical system. Therefore attention to thermodynamic constraints on the economy, indeed to the entropic nature of the economic process, is now critical — as emphasized by Nicholas Georgescu-Roegen in his magisterial The Entropy Law and the Economic Process (1971).

Why has his profound contribution been so roundly ignored for forty years? Because as limits to economic growth become more binding, the economists who made their reputations by pushing economic growth as panacea become uncomfortable. Indeed, were basic growth limits recognized, very many very prestigious economists would be seen to have been very wrong about some very basic issues for a very long time. Important economists, like most people, resist being proved wrong. They even bolster their threatened prestige with such pretension as “the Sveriges Riksbank Prize in Economic Science in Memory of Alfred Nobel” — which by journalistic contraction becomes, “the Nobel Prize in Economics,” infringing on the prestige of a real science, like physics. Yet it is only by ignoring the most basic laws of physics that growth economics has endured. Honoring the worthy contributions of economists should not require such flummery.

I once asked Georgescu-Roegen why the “MIT-Harvard mafia” (his term) never cited his book. He replied with a Romanian proverb to the effect that, “in the house of the condemned one does not mention the prosecutor.”