Chimerica: $ Dis-Ease rumbles on

To the joy of conspiracy theorists everywhere, the new “United Future World Currency” coin was presented at the recent G8 summit in Italy. So far though its just a piece of alloy metal but hey value is in the eye of the holder.

As usual it was the Russian President, Dimitry Medvedev, giving the $ a good roasting and moving the debate forward to the minting process. But really how far advanced is this process and how serious are they? More to the point what would a global currency unit look like?

To answer the first question is simple: I have no idea. At the political level it is mere grandstanding usually for the domestic audience. Sometimes it’s easy to forget that most politicians have little understanding of how the global financial system works (no different from anyone else!) but back in the offices of Treasuries and Central Banks it may be a different story.Though I was struck by the recent bizarre questioning of Bernanke over the issue of $ currency swaps with central banks. It’s a classic.

I do think though that the Eurasian block are serious about making this move. Each step is a step closer to creating a multipolar currency whether its based on the Special Drawing Rights (SDRs), a Commodity Backed Currency (CBC) or an Energy Backed Currency (EBCU). Even the Amero could be a consideration.

But the key outcome will be whether we move from a Fiat based system to a hard currency system. That would make a major change in the structure to the global system perhaps taking us back to Keynes’s suggestion, the Bancor. If we stay with a Fiat system then we simply exchange one piece of paper for another.A hard backed system would certainly restore some much needed reality to the meaning and value.

What’s clear is that the US has become a fiscal disaster and holders of paper issued by the US have said enough is enough: your paper is not “as good as gold“.

Wokai: Developing Microfinance in China

Wokai is starting to get some nice news coverage and the video below is a good introduction to what they are trying to achieve and how the  local microfinance partners actually work.

As the reporter notes China is not really regarded as a poor nation anymore. How could it be with over $2trln in reserves. But outside of the big cities it is a different stories. Access to finance in rural areas is difficult and state finance has been directed towards major projects and city development.

By creating a platform and helping local partners Wokai is actually laying the foundations for community based finance systems in China. This is a great mix of local and gloabl partnership and shows the power of the internet as a platform for building global networks without government interference.

The financial restrictions in China mean that loans through Wokai eventually become donations as the money cannot be repatriated out of the country (for now). However, it is tax deductible being a donation so you get a good bang for your buck.

Another bonus is the opening up of China to the outside world. Given that censorship is still heavy (many networking sites are often blocked) its great to be able to connect with the local population in an open business exchange. This can only help bring China closer to the international community and foster a greater connection between different people.

Aid Fade: Is the Aid model history?

Listening attentively to a paper on Aid and the Millenium Development Goals at the NZAE ’09, it occured to me that perhaps the traditional aid model should be completely ditched. I let that thought swirl for a few moments whilst i considered the ramifications and then came back to the idea with a simple vision.

Let peer to peer aid be the new model driven by people not governments.

Why are governments involved anyway? Well that’s not about aid really, its about influence…ok let’s be brutal it’s about money and power. Yes it’s all about politics: quid pro quo, backhanders and the rest of it. We’ll give you money and you help us out, vote for us at the UN or give us some nice contracts for whatever.

That’s the good bit. Now let’s see it in action. Up the government chain on one side and down the other. Hands out all the way up, across and down. Let’s not even go there. Of course some governments take this seriously and see aid as a genuine redistribution of national income but the model has been sorely abused over the years.

Even locally we had the Niue government telling the NZ PM that if it didn’t receive aid quickly it would turn to China instead. It doesn’t get more blatant than that. More and more aid has become a strategic tool in the foreign office of wealthy nations.

Francis Fukuyama recently reviewed two books on the subject both with similar themes but differing opinions: “The Challenge for Africa” by Wangari Maathai and “Dead Aid” by Dambisa Moyo. What I like most is that these are books coming from Africans themselves and women as well. It’s a refreshing change to Western University academics. It’s also an area of quite passionate debate. Here’s a great debate with Dambisa Moyo, Hernando de Soto, Paul Collier and Stephen Lewis on whether foreign aid does more harm than good.

Some issues are clear: corrupt governments and a weakened civil society; years on the western government welfare teat; trade barriers and resource depletion. The West carries the guilt and assuages it with cash even if its straight into the Swiss bank account of the latest tyrant.

So if governments are the problem why not remove them from the picture?

Well perhaps that is what will happen. Today the UK Conservatives unveiled a new policy on aid. As part of that they proposed a Gbp40m fund called “My Aid” which would allow the people to vote on their favourite aid project. Ok this all sounds a bit like the next reality show but for me it signals a subtle change in direction.

What if governments simply dropped their Aid budgets and gave that money back in either tax cuts or tax credits for giving? What would happen?

- Microfinance would take off.

- Giving platforms would widen and internationalise.

- There would be more targeted and personal involvement.

- Social Media would drive this (TwitterAid?).

- This would lead to grassroots build up and development of localised civil society.

- It may lead to an increase in giving as government moves out of the way.

- And maybe less celebrity nonsense as well!

Above all this p2p Aid model would be people driven and . as with microfinance, be very empowering. The aid infrastructure will still be necessary but that too may require some modification or restructuring. The Kiva and Wokai models will be very useful for this as will giving and donating platforms.

James Lovelock - Gaiaman: A Space Oddity

In his new book Lovelock, the father of Gaia theory, paints a somewhat hopeless picture for plant earth and all who travel on her broad back. Actually it’s not all doom and gloom but more and more it seems like our ability to prevent global heating is lessened day by day.

He sees an unstable system accentuating positive feedbacks. This amplification of feedbacks can send out misleading signals i.e. periods of cooling can be just as intense as the system ratchets up the power of an accelerating loop. This is similar to tipping points observed in fisheries when the catch hits all time highs one year with collapse the next….no fish left…look there’s loads…..crash. In this interview he leans towards a population collapse, a general die-off as the likely result of our earthly transgressions.

I think I’m with him on this. Having followed and tried to get involved in the climate debate for the last 10 years I have seen how hard it is to effect change and also that change needs to come at a global level AND from the supply side. All the tinkering in the world will not make a difference and perhaps we should just focus on adaptation instead.

At the same time he’s heading off into space, courtesy of Richard Branson who offered him a ride on spaceship Gaia. Hopefully he’ll be listening to Bowie as he takes off. For all you fans here’s the original video….sit back and take off

Aussiebank? Aussies looking at their version of Kiwibank

3 months a campaign was launched in the UK for a Post Bank to compete with high street lenders and provide a more democratic platform for banking. And now the Aussies are getting behind the same proposition. Dubbed the People’s Bank, it would be run through the network of Australia Post just as Kiwibank has done in New Zealand.

Initial reaction has been interesting with the government saying everything is fine and no need for any competition new competition or inquiry into the financial system for that matter. Well that’s what governments always say. In 5 years of corresponding with officials here in NZ I’ve never had a response that ever differs even when pointing out the finance company sector was going to collapse.

There has also been some commentary about not needing a government owned bank given the disasters of earlier years when many state owned banks collapsed. I enjoyed this quote from the Liberal Senator, George Brandis:

“In principle the opposition philosophically does not support government-owned enterprises unless there is a very clear case, for example, cases of market failure.”

Er yes.

Mostly the commentary has been at the fluffy level. Kiwibank has demonstrated that it is possible and can work well. I certainly have enjoyed their internet platform and found it way better than the big 4 banks. I like that government is backing it in terms of capital though it should be noted it operates as a stand alone SOE. Sam Knowles was quick to comment on the workability of the Kiwibank model in Australia.

So this is the opener in a debate that could take some time and hopefully focus on the real issues within the banking system namely who creates the credit.

Stay tuned.

Kiva: Stories from the Field - Education at any cost

Here is a moving story from our intrepid Kiva fellow in the Philippines, Sloane Berrent. It details the lengths to which people will go in order to be educated. The desire for education and the knowledge that it can lift people from impoverishment is clear and stark.

Within the story lies another imperative: the desire to give. Giving has become my passion whether it’s time, money or stuff. Yes reforming the global financial system is interesting but nothing will ever surpass the desire to perform service to others in a direct way. It’s our most universal law.

To raise $42 for a boat would take a few seconds these days. It’s that low cost, diversified approach that makes the web network so powerful.

These Stories from the Field are wonderful to read. People want connections, they want to see they are making a difference and they want it to be real.

Well it doesn’t get any more real than this.