Where the recession will stop | 76 comments (76 topical, editorial, 0 hidden)

"> the sale of NEW homes which indeed had been artificially inflated"

I don't know much about counting GDP, but if this is counted in the GDP directly then there is a fake GDP. In urban areas, at least 50% of home price is land value and that is not an output of production.

by kjr63 on Wed Mar 4th, 2009 at 02:42:04 PM EST
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Re: Measuring GDP (none / 1)

kjr63:

I don't know much about counting GDP, but if this is counted in the GDP directly then there is a fake GDP. In urban areas, at least 50% of home price is land value and that is not an output of production.

What we have seen is that rentiers have captured - through privileges such as private property over land and knowledge, and the privilege of limitation of liability - the use value of these Commons.

The anthropocentric assumption of conventional economics - that only Labour is "productive" - is complete, totally self-serving, bollocks.

But this assumption allows the privileged to justify keeping - their privileges untaxed - the undeserved rents they extract from the productive sector through the "finance capital" legal claims of Equity and Debt we take as a given.

The remorseless mathematics of compound interest combines with the iron grip of private property rights over Commons to give the result starkly illustrated in the chart. ie a transfer of value from Labour to Capital.

This is, and throughout recorded history, always has been unsustainable, as Michael Hudson in particular has documented so eloquently. The result has been cycles, firstly of Debt Jubilee, and more recently of booms and busts.

But This Time It's Different, I think, as migeru touched upon upthread.

Greenspan and the rest of the greedy bastard cheerleaders have fucked it up so absolutely, thoroughly and irretrievably, that conventional solutions of playing around with the quantity of financial claims either by Default and Depression or Printing and Inflation just will not cut it.

My take is that the direct instantaneous connections of the Internet will cometo to the rescue. It is in fact possible to change the quality of financial claims by removing the repayment date and thereby creating simple new forms of quasi-Equity, within a new property relationship of Co-ownership between financiers and users of finance.

Moreover, I don't think that there is anything - short of nuclear war - that can actually now stop this emergent process of transition from an intermediated Market 2.0 to a disintermediated Market 3.0

I believe we are about to enter an era of

Peer to Peer Finance

Within a very short time the financial world will be a very different place.

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

by ChrisCook (cojockathotmaildotcom) on Wed Mar 4th, 2009 at 03:48:20 PM EST
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Re: Measuring GDP (none / 1)

Holy shit Chris! I'm gonna sleep on that one before commenting. Whatever it is, it DOES look sexy.

by vladimir on Wed Mar 4th, 2009 at 03:55:29 PM EST
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Re: Measuring GDP (none / 0)

vladimir:

Whatever it is, it DOES look sexy

LOL. That's a first, then!

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

by ChrisCook (cojockathotmaildotcom) on Wed Mar 4th, 2009 at 08:39:27 PM EST
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Re: Measuring GDP (none / 0)

Chris, if your talking about disintermediation through MIFID driven MLTFs - I agree, although it's only partial disintermediation in that the stock markets are being cut out - but investors and issuers still go through buy side & sell side players.

On the retail end, P2P banking isn't a new concept. Zopa has been on that one in the UK and California for about 10 years now with no major breakthrough. In fact, although demand for credit was healthy, they've got major problems raising capital from retail lenders. I probably wouldn't be long on this type of initiative.

by vladimir on Thu Mar 5th, 2009 at 04:46:57 AM EST
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Re: Measuring GDP (none / 0)

Zopa doesn't do P2P banking. They are more like a P2P Credit Union, but unlike a Credit Union, they don't implicitly guarantee that the borrowers' credit is good.

All they do is move existing money around - Peer to Peer investment, maybe.

They launched in the UK in 2005, and I went to meet them about a year later when they said they were planning their US move.

Zopa - Wikipedia, the free encyclopedia

Zopa launched in the US in partnership with six Credit Unions on December 4, 2007 but it closed to new business due to the US Government bailout of financial institutions on October 8, 2008.

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

by ChrisCook (cojockathotmaildotcom) on Thu Mar 5th, 2009 at 06:06:04 AM EST
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Re: Measuring GDP (none / 0)

They don't guarantee that a borrower's credit is good, but they DO sell insurance coverage to the lender... and in fact it's their major revenue source.

by vladimir on Thu Mar 5th, 2009 at 06:18:36 AM EST
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Re: Measuring GDP (none / 0)

How we make our money

Zopa charges borrowers a fee of £118.50 and lenders a 1% annual service fee. And that's it. There are no hidden charges, no additional costs, no sneaky clauses.

What Zopa say is this

Zopa blog - Banning PPI sales at credit point of sale is good for consumers

Interesting news today from the Competition Commission re PPI sales. We used to sell this product but stopped for 2 reasons:
1) we hardly sold any, probably because we simply made it available, with no real sales effort. That's not to say we didn't describe it properly but we didn't push it, or even worse leave the borrower with the impression it would mean they would be more likely to be granted a loan if they bought it. Sellers are really really not supposed to do this but I question how they get (or should I say used to get) such high conversion rates without doing so;
2) we discovered that the level of claims made by the borrowers under the policies we did sell was tiny, so we didn't consider the policy offered value for money.

ie they used to sell PPI (but not much), which is in fact insurance sold to the borrower, not the lender, but of course in a P2P model should protect the lender, too.

But according to them, they stopped selling it for reasons given.

Where do you get your info re Zopa's revenue sources from? They've moved on their business model a bit, I suspect.

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

by ChrisCook (cojockathotmaildotcom) on Thu Mar 5th, 2009 at 06:53:24 AM EST
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I got it from Richard Duvall over dinner - March 2006, 7 months before he passed away.

by vladimir on Thu Mar 5th, 2009 at 07:11:04 AM EST
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Ok, that figures.

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

by ChrisCook (cojockathotmaildotcom) on Thu Mar 5th, 2009 at 07:29:43 AM EST
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Re: Measuring GDP (none / 0)

Btw it was James Alexander and a couple of others I met.

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

by ChrisCook (cojockathotmaildotcom) on Thu Mar 5th, 2009 at 07:34:13 AM EST
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Re: Measuring GDP (none / 0)

Never met James. But I do know that they spent 9 very difficult months looking for & closing the first round of financing.