Archive for May 12th, 2016

European govts issue long term bonds to capture gains from ultra low interest rates…

May 12, 2016

Ireland issued 100 year bond followed by France and Spain issuing 50 year ones.

More interestingly, Spain issues a bond minus a govt:

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The Committee to Save the World…

May 12, 2016

James Kwak of Baseline Scenario Blog points to this once famous and now highly infamous article. It built this hype over a committee comprising Alan Greenspan, Robert Rubin and Larry Summers which could save the economic world from catastrophe. It was written in 1999 and in a classic turnaround of fortunes same committee is now being blamed for the crisis of 2008.

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Peer to peer lending: Old wine in a new bottle..

May 12, 2016

If one gets an idea to write on, he/she should write/blog about it immediately. Else, someone will write about it soon. This is one such article.

There has been a lot of noise about this word P2P  (peer to peer) in financial world recently. What was essentially a term used in tech industry for sharing music, movies etc pioneered by likes of Napster, has come to hit the world of banking/finance.

What does P2P banking mean? Like in tech world, where a person creates a music file and shares it with others via a tech platform, same is the case with P2P banking as well. Some person with funds lends it to others via a tech platform as well. Important to note the role of individuals here. Unlike a music firm or a banking company this time the distribution of music/funds done by individuals. Just like tech made it easier for people to share music, same tech helping to make it easier for people to lend funds.

Sounds exciting? Yes it does but we know what happened with all these P2P music/video platforms. Eventually, the big firms lobbied to throw these guys out of business. One could expect banks to retaliate in similar fashion as well in future.

But the point is even deeper than this. P2P banking is hardly anything new. It is perhaps the oldest form of banking when people lent funds to others as there were hardly any organised form like a bank of today. In India, there were several such forms of P2P banking which British together called as indigenous banks. Within these indigenous banks, there were nidhis, chit funds etc which were nothing but P2P forms of lending. Group of persons came together to lend funds to each other minus all the tech of today. Infact, the tech then was trust, social networks, peer pressure etc.

This is what Mr Rajwade also says in this article:

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