Tag Archives: Banking reform

Democratizing the digital

BOOK REVIEW

The Egyptians: A Radical History of Egypt’s Unfinished Revolution, Author: Jack Shenker.
Hope in the Dark, Author: Rebecca Solnit.
Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy, Author: Cathy O’Neil.

By Jack Shenker – Digital technologies are changing politics as we know it, but not because of some inherent or immutable characteristic that stands apart from the world in which they were created. Instead, these technologies have helped an underlying condition, namely growing discontent at marketization – the privatizing of ever more goods, services and social interactions, and the ideologies that justify that process – to find meaningful expression in the formal political arena. The result has been successive electoral shockwaves that have shattered long-held certainties and splintered the political spectrum.

Ironically, digital technologies are capable of playing this role precisely because in reality their own development and logic owes so much to market forces. Behind the advertising copy, Apple, Amazon and the other tech giants share far more with the Enclosure Acts of the Tudor period than they do with the common land those acts so violently eroded. Facebook, Twitter and co are simultaneously creatures of a neoliberal orthodoxy and engines of its crisis.

But contained within this irony is a kernel of hope: not only that such technologies are not necessarily antithetical to the sort of politics we should be fighting for – a sort that places the ideals of Tahrir above those of the Egypt it stood against – but also that they could yet play a vital role in rejuvenating them.

Our struggle must be to find new ways to harness digital technologies to a stronger, more robust and inclusionary democracy: one that relies neither on thin forms of representation nor the false comforts of rule-by-plebiscite. more>

From A Casino Economy To A New Golden Age

By Steve Denning, Carlota Pérez – To simplify and summarize: there have been five technological revolutions over the last 240 years.

What’s interesting for us today is that the historical record reveals a regular pattern in the diffusion process. It takes place in two halves. First, we have the rise of the new technology that occurs during the decline of the previous revolution. It’s like the 1980s, when we had inflation with the old technologies, which were yielding decreasing returns, while the information technology companies were growing fast with steadily increasing returns (and decreasing prices).

That first half is the installation period of the new technology, which leads to and ends with one or more bubble prosperities –as in the late 1990s and mid-2000s– when the financial sector and the casino economy take over.

Then the bubble or bubbles burst and we have a recession, as we have now, that might last anywhere from 2 years to 13 years or more.

Now in 2017, we are in the middle of another turning point, as in the 1930s, and we could have a period of sustained global prosperity if appropriate action is taken. more>

Failure of ideas and not failure of political Establishment

By Harilla Goga – It is well known that the free individual with his thoughts and his actions, certainly in the frame of the legal system being in his service, is in the center of the democratic system. But, this individual, in fact, looks like “a consumer” of the democratic system goods. As such, he can keep his position as receiver, rejecter or protester depending on the “quality and quantity” of these goods.

Furthermore, this attitude is manifested towards elites/political establishment of the country concerned, but he generally cares a little or not at all about theories/ideas that politics are based on.

In economic terms, this lack of new ideas and theories is the “consumer’s” most sensitive subject, for example: The current economic and financial system is set based on very old theories which stress the maximum profit for business through tight competition and bankruptcy; The trade and free movement of capital system, that have unified markets and removed barriers, bringing benefits, common developments and new technologies throughout the world, but causing economic and social damages and environmental challenges in all regions of the world. States, governments and International organizations are addressing these challenges, but their programs and politics (leftists and rightists, or independents/new movements), are still fed by theories and ideas over than 100 or 200 years earlier. more>

Free Money: The Surprising Effects of a Basic Income Supplied by Government

By Issie Lapowsky – A legislated basic income is in the realm of fantasy at the moment. Even among its proponents there is almost no agreement about the fundamentals, starting with how much money would be an optimal basic income.

Ioana Marinescu, a professor at the University of Pennsylvania’s School of Social Policy and Practice, who researches basic income, says that research on the Alaska fund is enlightening, but not dispositive. “We know $2,000 a year makes a real difference to many people,” Marinescu says. “But would something lower still make a difference? We don’t know.”

As with any program, there are infinite opportunities for abuse and bad decisionmaking.

One illuminating New York Times article illustrated how the men and women who scrub toilets and do other low-skilled work for companies like Apple are hired from contracting companies which set the terms of their employment. Those workers are cut off from the benefits and upward mobility that the company’s engineers and marketers enjoy. Because the workers are contractors, the big tech companies feel no pressure to raise their wages, and aren’t responsible for offering health-care coverage.

Looked at in this light, the tech-led efforts to push a basic income can appear hypocritical. more>

Economic Growth Is No Longer Enough

By Manuel Muñiz – Macroeconomic data from the world’s advanced economies can be mystifying when viewed in isolation. But when analyzed collectively, the data reveal a troubling truth: without changes to how wealth is generated and distributed, the political convulsions that have swept the world in recent years will only intensify.

Most of the wealth created since the 2008 crisis has gone to the rich.

Employment, too, seems to be performing in anomalous ways. For example, most employment growth has been in high-skill or low-skill occupations, hollowing out the middle. Many of the people who once comprised the Western middle class are now part of the middle-lower and lower classes, and live more economically precarious lives than ever before.

The fundamental consequence of this is that wages are no longer performing the central re-distributive role they have played for decades. Simply put, gains in capital productivity are not being translated into higher median incomes, a breach of the social contract on which liberal economies rest.

The debate about solutions has only just begun. Reducing economic inequality will require reforms of education and taxation, with the tax burden shifting decisively from labor to capital. more>

Post-Capitalist Entrepreneurship: Basic Income, Blockchain Cities, and Local Currencies

BOOK REVIEW

Post-Capitalist Entrepreneurship: Startups for the 99%, Author: Boyd Cohen.

By Boyd Cohen – We are in the very early days of what blockchain can mean for cities. Obviously, the smart cities movement with a strong focus on the Internet of Things (IoTs), big and open data, and sensor technology will likely benefit from the growth of blockchain solutions. But perhaps more interesting is to reflect on how blockchain could be used to support social inclusion and a post-capitalist economy.

Aside from its potentially transformative potential in local cryptocurrencies, blockchain may also support many other important changes to life and government in cities. The blockchain may support alternative forms of sharing economy that challenge platform capitalism.

Take Arcade City as an example. Arcade City is a blockchain-enabled (with ethereum) organization aimed at taking on Uber first, and other platform capitalists later. It is a peer-to-peer app, founded in Austin, Texas, in 2016, which aids people seeking a ride with drivers of passenger vehicles. Unlike in Uber’s model, Arcadian drivers are able to charge their own fees and process transactions directly with their passengers. Since its launch, rides have been facilitated in other cities in the United States, Europe, and Africa. Arcade City has launched their own initial coin offering in 2016, to create Arcade Tokens which can be used for payments with the app.

I suspect in the future, we will witness cities embracing everything from local digital currencies, three-tiered maker communities (in the home, in the neighborhoods via fab labs, and city-level flexible manufacturing production), some form of basic income (perhaps tied to civic contributions), hopefully affordable housing for all through community land trusts and other housing innovations (e.g., Vancouver’s in-fill housing), blockchain-enabled distributed sharing platforms that compete with, or maybe even replace, platform capitalists, entrepreneurial and maker education in all schools. more>

Money And Credit: Paradigm Shift Is Overdue, Part I

By John M. Balder – All of us were taught in Economics 101 that central banks determine the money supply by using their high-powered (base) money and the multiplier. Both of these concepts should be tossed in the trash can. These notions are in error, as both the BOE and the Federal Reserve have recognized. In fact, central banks passively accommodate bank demand for reserves (as doing otherwise could prove disruptive to financial stability).

The influence central banks exert over money and credit creation is achieved via their control of short-term interest rates, and not via quantitative restrictions.

A quick aside here, I have always been curious as to why economists tend to focus so exclusively on the real economy, while choosing to ignore the financial system entirely. Similarly, my work in banking regulation in the early 1990s indicated that most regulators tended to ignore macroeconomic variables.

Is this a case of “where you stand on an issue is often a function of where you sit?” As one who participated in both endeavors, I have perpetually felt a need to connect macro with finance. This may be happening more today than it was 10 or 20 years ago, but it still has a long way to go. more>

It’s Time to Rewrite the Rules of Our Economy

By Tim O’Reilly – Business leaders making decisions to outsource jobs to low-wage countries or to replace workers with machines, or politicians who insist that it is “the market” that makes them unable to require companies to pay a living wage, rely on the defense that they are only following the laws of economics. But the things economists study are not natural phenomena like the laws of motion uncovered by Kepler and Newton.

The political convulsions we’ve seen in the United Kingdom and in the United States are a testament to the difficulties we face. We are heading into a very risky time. Rising global inequality is triggering a political backlash that could lead to profound destabilization of both society and the economy. The problem is that in our free market economy, we found a way to make society as a whole far richer, but the benefits are unevenly distributed. Some people are far better off, while others are worse off.

Why do we have lower taxes on capital when it is so abundant that much of it is sitting on the sidelines rather than being put to work in our economy?

Why do we tax labor income more highly when one of the problems in our economy is lack of aggregate consumer demand because ordinary people don’t have money in their pockets? more> https://goo.gl/2DioyZ

When Wall Street Owns Main Street — Literally

BOOK REVIEW

Makers & Takers: How Wall Street Destroyed Main Street, Author: Rana Foroohar.

By Rana Foroohar – Made up primarily of San Bernardino and Riverside counties, the Inland Empire was at the heart of the subprime mortgage crisis and has yet to fully recover.

In the early 2000s, predatory lenders flocked to the area, offering dicey deals to the largely minority and lower-middle-class white populations who, unable to afford housing on the coast, still craved the American Dream of homeownership. It ended, as it did in so many neighborhoods and cities across America, in tears and massive foreclosures, turning entire cities into ghost towns of derelict properties.

Private equity funds like Blackstone are giant financial institutions that operate largely outside the scrutiny of governmental regulation, since they are officially designated “nonbanks” or “shadow banks”—never mind that many of them are bigger than the better-known institutions that are subject to regulation.

Most people rightly associate private equity with offshore bank accounts (remember Mitt Romney and Bain Capital?), big corporate buyouts in which formerly healthy firms are loaded up with debt and stripped of their assets, mass layoffs, and an utter lack of transparency in their financial dealings.

But these days, the big news about private equity is that it is at the heart of the country’s housing rebound.

Private equity investors have become the single largest group of buyers in the residential housing market, purchasing $20 billion worth of steeply discounted properties between 2012 and 2014 alone and reaping huge rewards as housing prices have slowly risen from their troughs. more> https://goo.gl/P6fcNA

The flaws a Nobel Prize-winning economist wants you to know about yourself

BOOK REVIEW

Nudge: Improving Decisions about Health, Wealth and Happiness, Authors: Richard Thaler and Cass Sunstein.

By Eshe Nelson – Sorry to say it, but you’re not perfect. We like to believe that we are smart, rational creatures, always acting in our best interests. In fact, dominant economic theory these days often makes that assumption.

What was left of this illusion was further dismantled by the The Royal Swedish Academy of Sciences, who awarded the Nobel prize in economics to Richard Thaler, an American economist at the University of Chicago, for his pioneering work in behavioral economics, which examines humanity’s flaws—namely, why we don’t make rational economic decisions.

People can make bad economic choices based on something Thaler dubbed the “endowment effect,” which is the theory that people value things more highly when they own them. In other words, you’d ask for more money for selling something that you own than what you would be willing to pay to buy the same thing.

People experience the negative feeling of loss more strongly than they feel the positive sense of a gain of the same size. This is also impact by anchoring: If you are selling an item, your reference point is most likely to be the price you paid for something. Even if the value of that item is now demonstrably worth less, you are anchored to the purchase price, in part because you want to avoid that sense of loss.

This can lead to pain in financial markets, in particular. more> https://goo.gl/eR1B2B