Notes of Note from John F. Ince

Archive for March, 2012

Lawrence Goodman: Demand for U.S. Debt Is Not Limitless – WSJ.com

The conventional wisdom that nearly infinite demand exists for U.S. Treasury debt is flawed and especially dangerous at a time of record U.S. sovereign debt issuance.

The recently released Federal Reserve Flow of Funds report for all of 2011 reveals that Federal Reserve purchases of Treasury debt mask reduced demand for U.S. sovereign obligations. Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis. This not only creates the false appearance of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.

Still, the outdated notion of never-ending buyers for U.S. debt is perpetuated by many. For instance, in recent testimony before the Senate Budget Committee, former Federal Reserve Board Vice Chairman Alan Blinder said, “If you look at the markets, they’re practically falling over themselves to lend money to the federal government.” Sadly, that’s no longer accurate.

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It is true that the U.S. government has never been more dependent on financial markets to pay its bills. The net issuance of Treasury securities is now a whopping 8.6% of gross domestic product (GDP) on average per annum—more than double its pre-crisis historical peak. The net issuance of Treasury securities to cover budget deficits has typically been a mere 0.6% to 3.9% of GDP on average for each decade dating back to the 1950s.

But in recent years foreigners and the U.S. private sector have grown less willing to fund the U.S. government. As the nearby chart shows, foreign purchases of U.S. Treasury debt plunged to 1.9% of GDP in 2011 from nearly 6% of GDP in 2009. Similarly, the U.S. private sector—namely banks, mutual funds, corporations and individuals—have reduced their purchases of U.S. government debt to a scant 0.9% of GDP in 2011 from a peak of more than 6% in 2009.

The Fed is in effect subsidizing U.S. government spending and borrowing via expansion of its balance sheet and massive purchases of Treasury bonds. This keeps Treasury interest rates abnormally low, camouflaging the true size of the budget deficit. Similarly, the Fed is providing preferential credit to the U.S. government and covering a rapidly widening gap between Treasury’s need to borrow and a more limited willingness among market participants to supply Treasury with credit.

via Lawrence Goodman: Demand for U.S. Debt Is Not Limitless – WSJ.com.

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Rethinking Global Problem Solving: Don Tapscott

Today, microfinance has created a parallel banking system that has displaced much of the traditional banking and lending structures in the developing world. The aggregate results, notably 100 million customers with a repayment rate in the high 90 percent, have proven that a networked, and largely self-organized, system of peer-to-peer lending can not only work, it provides a sustainable way to lift millions of people out of poverty.So now imagine a world where new global networks were created to match the scope of the new economic, environmental and security challenges. But rather than model them on a bloated and inefficient UN-type model, we modeled them on Kiva — with vast networks of people and ideas united with the full complement of skills and resources needed to translate good ideas into action.There are movements like the Alliance for Climate Change which attempt to educate, mobilize and change the policy of governments and global institutions. There are broader networks around multiple issues like Ushahidi — the web site that was initially established to map reports of violence in Kenya after the post-election fallout of 2008, and evolved into a global network to enable people to share information and organize for change.There are more formal networked institutions such as the World Economic Forum or the Clinton Global Network that address a wide variety of issues but who unlike formal state-based institutions are self organizing and act as meta-networks attempting to help other networks succeed.

via Don Tapscott: Kony 2012: Rethinking Global Problem Solving.

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How Much is Apple Really Worth?

Online Platforms Link Impact Investors and Triple Bottom Line Companies – The Network: Ciscos Technology News Site

0Email2ShareViews 428FEATUREOnline Platforms Link Impact Investors and Triple Bottom Line CompaniesSocial stock exchanges and match-making services aim to address a gap in a growing market.By Anne FieldView All Contributing WritersMarch 12 , 2012On the one hand, theres a burgeoning interest in a brand-new asset class. Called impact investing, it focuses on for-profit companies with a social mission. Enterprises from J.P. Morgan Chase to the Rockefeller Foundation , which estimate the market could grow to as much as $1 trillion over the next 10 years, have been trying to develop the area for several years now. And, by some accounts, there are thousands of so-called double- and- triple- bottom- line companies–businesses with a financial, social and /or environmental mission – – in operation worldwide.On the other, however, matching impact investors with social enterprises – – another term for these companies – – is another matter entirely. There have been few effective platforms for linking up the two sides. Social enterprises include anything from companies selling wind farm technology to organizations providing micro-finance to villagers in India.That is, until now. Recently, a growing number of efforts, from London to Singapore to New York, have sprung up to address that gap, many incorporating online systems into their platforms. “Its social technology for social change,” says Adam Spence, founder of the Social Venture Exchange SVX, a Toronto-based platform aiming to launch later this year. “Technology is the enabler.”For the moment, most of the activity is taking the form of online matchmaking services. Take SVX. It links via an online platform accredited investors with Ontario-based social enterprises of anywhere from $100,000-$25 million in revenues looking to raise $25,000-$10 million. To be included on the exchange, interested companies first have to go through an exhaustive vetting process thats largely done off-line to make sure theyre not only viable enterprises, but also are the real McCoy, that is, companies with a serious social mission at their core. Then, theyre listed on the platform, with the relevant information of interest to potential investors. After that, it functions much like any online dating service, according to Spence, with prospective investors reading over company profiles and then contacting them. Ultimately, transactions are conducted off-line.Thats only the beginning, according to Spence. With backing from TMX Group, which runs the Toronto Stock Exchange, among others, he aims ultimately to create a fully regulated public social stock market for Ontario for retail investors that would be conducted online. Getting to that point will take some time, according to Spence, due to both the technological complexity and the regulatory hurdles that need to be met. Whats more, for now, most social enterprises are small. For a real public stock exchange to have legs, there needs to be a critical mass of companies large enough to be listed.

via Online Platforms Link Impact Investors and Triple Bottom Line Companies – The Network: Ciscos Technology News Site.

Greece develops cashless, Euro-free currency in tight economy | The Raw Story

In recent weeks, Theodoros Mavridis has bought fresh eggs, tsipourou (the local brandy: beware), fruit, olives, olive oil, jam, and soap. He has also had some legal advice, and enjoyed the services of an accountant to help fill in his tax return.

None of it has cost him a euro, because he had previously done a spot of electrical work – repairing a TV, sorting out a dodgy light – for some of the 800-odd members of a fast-growing exchange network in the port town of Volos, midway between Athens and Thessaloniki.

In return for his expert labour, Mavridis received a number of Local Alternative Units (known as tems in Greek) in his online network account. In return for the eggs, olive oil, tax advice and the rest, he transferred tems into other people’s accounts.

“It’s an easier, more direct way of exchanging goods and services,” said Bernhardt Koppold, a German-born homeopathist and acupuncturist in Volos who is an active member of the network. “It’s also a way of showing practical solidarity – of building relationships.”

He had just treated Maria McCarthy, an English teacher who has lived and worked in the town for 20 years. The consultation was her first tem transaction, and she used one of the vouchers available for people who haven’t yet, or can’t, set up an online account.

“I already exchange directly with a couple of families, mainly English teaching for babysitting, and this is a great way to extend that,” said McCarthy. “This is still young, but it’s growing very quickly. Plainly, the more you use it the more useful to you it gets.”

Tems has been up and running for barely 18 months, said Maria Choupis, one of its founder members. Prompted by ever more swingeing salary cuts and tax increases, she reckons there are now around 15 such networks active around Greece, and more planned. “They are as much social structures as economic ones,” she said. “They foster intimacy and mutual support.”

via Greece develops cashless, Euro-free currency in tight economy | The Raw Story.

No Card Needed: PayPal Here Is Powered By Mobile Payment Startup Card.io | TechCrunch

PayPal today unveiled its new global payment platform for small and medium-sized businesses, PayPal Here. It brings the veteran payments solution into local stores with a new mobile app-card reader solution to rival Square. Rolling out to merchants today, it features a triangular card-reader, or dongle, that merchants can use to swipe cards of all varieties to start accepting mobile payments on-the-go — but all users need is their phones, via a startup named Card.io.The startup, which unveiled its own consumer-facing app back in January, allows merchants to make the payment process as frictionless as possible. Available for both iPhone and Android, it provides mobile app developers a way to let consumers make purchases simply by holding the credit card up to the phone’s camera. As the company announced today on its blog, its new partnership with PayPal allows merchants to accept credit cards without readers or extra hardware: “Merchants can immediately begin accepting credit cards with nothing but a phone … We’re excited to be working with PayPal and we hope that this partnership will improve mobile commerce for both consumers and merchants.”

via No Card Needed: PayPal Here Is Powered By Mobile Payment Startup Card.io | TechCrunch.