Notes of Note from John F. Ince

Archive for September, 2010

“The poor are much poorer than they used to be.”

In 2009�6.3% of people in the USA suffered severe poverty, that is lived in households with income less than half the poverty line. This is the highest severe poverty rate on record.

That means that over 19 million people in the USA live in households with income less than half the poverty line (severe poverty implies income significantly less than $ 11,000 per year for a family of four).

It’s worth remarking that in 1993, after 12 years of beneficent Republican administrations under Ronald Reagan and George H.W. Bush, the percentage of families living in extreme poverty had risen to 6.2%, almost as high as it is today. Then there’s a steady decline from 1993 to 2000 to 4.5% in Bill Clinton’s last year in the White House, but the trend is reversed again under George W. Bush, and continues to worsen.

More than 19 million Americans were living in extreme poverty in 2009, and it’s hard to believe that the number isn’t growing right now, as extended unemployment benefits are exhausted for more and more Americans every day, and long-term unemployment continues to exceed all previous records.

In July, 44.9% of this country’s unemployed workers had been unemployed for over six months, nearly 20 percentage points above the high of all prior recessions, which was 26.0%, set in the summer of 1983.

via OpEdNews – Article: “The poor are much poorer than they used to be.”.

via “The poor are much poorer than they used to be.”.

via “The poor are much poorer than they used to be.”.

Zuckerberg: “There’s Just Going to be One Currency that People Use” on Facebook Apps

Facebook is sending the clearest message yet that it intends to implement its own virtual currency, Credits, in a way that could be mandatory. This confirms months of speculation we’ve been hearing from developers. Because Facebook takes a 30% fee on Credits purchases, the decision could negatively impact the virtual goods revenue streams of some developers now — at least in the short term. If Facebook’s plan works like it intends, spending will eventually increase and developers will benefit.

At its f8 developer conference this week, company chief executive Mark Zuckerberg told Bloomberg that “‘there’s just going to be one currency that people use’ on all apps.” Later that day, Facebook’s Deb Liu was presenting about Facebook’s Credits plans, and she was asked if Facebook would continue to allow people to use third-party virtual currency services like Social Gold. She replied: “It’s still too early to tell, Credits is still in beta.”

Together with Zuckerberg’s statement, that sounds like it could be simply “no.” Another possibility is that third party virtual currency services can continue to exist, but will just be much less used than Credits, at least partially due to incentives Facebook will give to developers who use Credits – like free marketing.

To be clear, Facebook is also looking to work with third party payment companies for Credits. Liu said that these can include anyone from mobile payment providers to game cards to bank payment systems to reward cards, and it plans to get “100 to 200″ of them as options for purchasing Credits. The company already works with Zong for mobile payments and PayPal for web payments, and accepts credit cards directly. It partnered with Peanut Labs (via RockYou) and Trialpay last week to begin testing advertising offers that can be taken in exchange for Credits, and we wouldn’t be surprised to see it work with more companies there.

via Zuckerberg: “There’s Just Going to be One Currency that People Use” on Facebook Apps.

Facebook’s Virtual Currency Push Hints at Micro-Payments Battle | forexride.com

Facebook is making a play to become the dominant player in virtual currency — the funny money you use to everything from digital magazines to Farmville turnips. It’s already a billion-dollar business in which Facebook, the world’s largest social network, will face stiff competition from other behemoths like Apple, Google and PayPal.

Facebook already has a big advantage over those companies: a virtual currency, Facebook Credits, that works across different apps rather than being tied to one specific app or another.

Virtual currencies are a promising way to sell because users buy them in pre-paid chunks, rather than plunking down a credit card for each individual purchase, which increases transaction costs. Skype credits are a classic example: Users don’t add just enough credits for each call, as they did with payphones; they re-up periodically with payments of or so.

Right now, most virtual goods are acquired within games, but music, movies, and other forms of content could follow suit, increasing the stakes in the race to reduce the friction affecting in-app transactions.

Sales of virtual goods are projected to reach .6 billion this year in the United States alone, according to an Inside Network report. About half of that will be spent on social games, and the majority of that in Facebook games such as Farmville.

Facebook claims 30 percent of revenue when people buy these credits — the same cut Apple and Google slice off when users buy virtual goods within their apps — but is already the number one app across all smartphone platforms according to Nielsen.

via Facebook’s Virtual Currency Push Hints at Micro-Payments Battle | forexride.com.

New Rules on Bank Capital – Clive Crook – Business – The Atlantic

The proposed new ratios strike a compromise between countries (including the US and Britain) that wanted tougher rules and others (notably Germany) that pressed for less stringency. The current minimum ratio of common equity to risk-adjusted bank assets is just 2 per cent – a figure that, with hindsight, should be viewed as laughable. This is to rise to 7 per cent under the new rules, including a proposed buffer of 2-3 per cent. When capital falls below the buffer zone, banks would have to curb pay and/or dividends.

A recent paper by Samuel Hanson, Anil Kashyap and Jeremy Stein underlines a crucial point: to be any use, the regulatory minimum capital ratio in good times must substantially exceed the market-imposed standard in bad times: “Thus if the market-based standard for equity-to-assets in bad times is 8 per cent, and we want banks to be able to absorb losses on the order of, say, 4 per cent without pressure to shrink, then the regulatory minimum for equity-to-assets in good times would have to be at least 12 per cent.” The authors add that 4 per cent is a conservative estimate – cumulative credit losses at US banks between 2007 and 2010 were roughly 7 per cent of assets.

Banks have been emphasising the costs of even modestly higher capital ratios. They have a point but they exaggerate. Estimates by the Bank for International Settlements and others suggest that the penalty in higher lending costs and lower economic growth would be small, and outweighed by the benefit of fewer crashes.

via New Rules on Bank Capital – Clive Crook – Business – The Atlantic.

Aggregated Angel Investment for Social Impact | Blog | NextBillion.net | Development through Enterprise

Given the chance, who wouldn’t want to be an angel?  This term for investors who go in at the seed stage of new ventures makes doing so sound like a bucolic pastime. Marrying this with the opportunity to be instrumental in starting a world-changing, disruptively-innovating social enterprise sounds even better.

But there are few things that are heard more frequently among people trying to start that very enterprise, especially those working on the ground serving base of the pyramid segments, than that angel impact investment is nearly impossible to locate, let alone access.

And on the flip side, to be fair to potential investors, early stage social venture investment can be incredibly difficult.  Unlike tech angels who turn around to fund new web companies after their own goes big, at this stage (and Echoing Green Fellows start cranking out IPO’s) many impact-oriented angels are new to the type of business they are hoping to invest in.  Even if they are familiar with a sector like mobile phones or agriculture, they are certainly new to many of the hybrid value chains that social ventures exist within, or in the case of global development, new to a particular market segment or geography.

via Announcing Toniic: Aggregated Angel Investment for Social Impact | Blog | NextBillion.net | Development through Enterprise.

Iraq Posting Massive Surplus Thanks To U.S. Taxpayers

Even as the United States has been borrowing trillions to pursue its wars in the Middle East, the government of Iraq has posted a tidy surplus, according to a new Government Accountability Office report.

The report makes a direct link between U.S. government spending — including $642 billion on U.S. military operations there and $24 billion for training and equipping the Iraqi security forces — and Iraq’s cumulative surplus of $52.1 billion through the end of 2009.

For comparison purposes, Iraq’s annual gross domestic product is $65.8 billion. Meanwhile, the U.S. national debt has soared from $6.4 trillion to $13.4 trillion since former president George W. Bush invaded Iraq and decided to borrow the money for wars and slash taxes.

The GAO report concludes with an understated recommendation that “Congress may wish to consider Iraq’s available financial resources” when reviewing future funding requests to support the Iraqi security forces.

The report notes that the Obama administration is currently requesting $2 billion in additional U.S. funding in its fiscal year 2011 budget request to support the training and equipping of Iraq’s military and police.

via Iraq Posting Massive Surplus Thanks To U.S. Taxpayers.

Arianna Huffington: Obama Insists He Made “The Right Decisions” on the Economy — The Struggling Middle Class Begs to Differ

The Who Could Have Known mindset is at the very heart of the failure of our political system to address our mounting problems. I devote a whole section to it in Third World America. It’s been the official response of choice to virtually every fiasco of the last decade: Iraq, Katrina, the housing crash, the foreclosure crisis, the BP spill, etc, etc.

As I write in the book:

When you look at the elements that were crucial to the creation of each of these debacles of the past decade, it’s amazing how much they all have in common. And not just in how they began but in how they ended: with those responsible being amazed at what happened, because… who could have known? Well, I’m amazed at the amazement, because each of these disasters was entirely predictable. And, indeed, every one of them was predicted. But those who rang the alarm bells were aggressively ignored, and we let those responsible get away with the ‘Who Could Have Known?’ excuse.

via Arianna Huffington: Obama Insists He Made “The Right Decisions” on the Economy — The Struggling Middle Class Begs to Differ.