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Jerome a Paris:
eer-to-peer finance does not work because nobody can do the requisite risk analysis.

Peer to Peer finance strictly refers to direct investment in a productive asset by an investor without a bank as middleman, and if it works with a bank as middleman it is also capable of working directly. But clearly whether the business model is or is not intermediated is not your point.

So lets forget "Peer to Peer". It's the concept of what I refer to as unitisation which is the issue here, I think.

Are you thinking of financing development of productive assets?

Or are you thinking of long term financing of developed productive assets?

Or are you thinking of a hybrid where long term finance is raised to finance development and stays in place?

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Mar 23rd, 2009 at 06:52:52 PM EST
[ Parent ]
is that you can't break down an investment into a thousand small bits that can be financed separately. You have to have the whole package in one go. The coordination role of putting that package in place is what banks do.

Whether they keep the risk to themselves, share it with a few similar banks on the syndication market (ie a bank loan), or sell it widely via a securitisation (ie a captial market instrument) is largely irrelevant.

What matters is that critical role of putting all the money on the table in one go at one single time. That's the value of banks. Nothing else.

Your unitisation is a fine way to share out financial assets, but it cannot help to create them. That's the job of bankers. One which will never disappear.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Mar 24th, 2009 at 12:57:49 PM EST
[ Parent ]
I have always said that banking as a service is necessary and creates value. It is credit intermediation that is IMHO not only sub-optimal but also redundant.

Jerome a Paris:

What matters is that critical role of putting all the money on the table in one go at one single time. That's the value of banks. Nothing else.

I agree: but money is a means to an end.

It's not the money churning out electricity and getting it to Joe Sixpack, it's the turbine and infrastructure - and everything which went into it - for which fiat credit = money was created and exchanged over the period of construction and implementation.

If the land is leased for a share of production, then no fiat money is needed - ever - for land purchase or use.

If the turbine is leased for a share of production, then you don't need money to buy the turbine either, and maybe the investors in the turbine-maker might be more interested (the way things are going) in streams of energy rather than streams of fiat money?

ie the turbime maker evolves to a service provider as well.

If - as I believe is possible - we are able to "monetise" energy then your valuable role as an investment banker will still remain the same, except that you will not be looking at projects in terms of the "cost of money" in quite the same way, since the input cost of renewable energy and energy efficiency savings is zero.

You will instead be looking at viability directly in terms of energy invested against energy produced; the likely exchange value of the production over time; and the risks that the project will be concluded on time within its budget, and so on.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Mar 24th, 2009 at 01:46:01 PM EST
[ Parent ]

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