$ Watch: BRICs get down to business in Yekaterinburg

Yekaterinburg could well be a name to remember much like Maastricht, Yalta, Bretton Woods and other places that carry major political history on the back of their relative obscurity. A few weeks ago the big 4 players, Brazil, Russia, China and India, met to in Yekaterinburg to discuss the vexed issue of the $, US assets and US global financial dominance.

As I’ve discussed before there is a major shift underway in the way the global market is structured. Not just in terms of currencies but also trade and influence. The BRICs have a powerful case to make: 40% of global currency reserves and almost half the world’s population (though Russia’s population is declining, a somewhat serious issue).

There is a strong feeling that the US has acted recklessly overt he last 30 years in flooding the world with $ and creating huge imbalances which have caused such chaos in global markets. So whilst there is always plenty of posturing and grandstanding, especially from the Russians, there is a real case for the US to answer:

- Global trade imbalances.

- Cowboy capitalism.

- Turbo boosted monetary expansion.

- Instability in global financial markets.

It’s also interesting that the meeting of the SCO (Shanghai Cooperation Organization) was held at the same tim and the US was not invited even though it wanted to attend. There is a strong argument that there is no real alternative to the $ but that doesn’t excuse the facts. One dominant currency has not helped create a stable system. It has simply allowed to issuer to experience huge profits from seigniorage and wield extraordinary political and economic power.

And can we really take the rating agencies seriously? They are all US based organisations. Ultimately whether the $ loses influence or not depends on the alternatives. I still believe a commodity backed currency is a likely development, given the nations involved.

At the same time the development of local currencies will help create a more stable and complex system. For now though expect more talk about a $ alternative and expect it to be driven by the BRIC crew starting with the upcoming G8 summit in Italy.

NZAE ’09: Looking Forward

I’m just back from 3 lovely days in Wellington (nice weather for a change!) at the NZ Association of Economists Conference. It had a good vibe and felt like there was a wider range of interesting papers than the last one I attended. The topics of interest for me are listed below (I will post in more detail once the papers have been uploaded to the NZAE website):

- Tax Reform: The perennial favourite, Capital Gains Tax, made some waves as did some more detailed examination of a possible Land Tax. This initially popped up 18 months ago as a floated idea and more recently was discussed at length over at Interest.co.nz.  The session on Tax Reform was sponsored by the Treasury so expect more debate on this in the near future.

- Aid and Development: There were a few papers on corruption and developmental outcomes which were worth following (though I haven’t seen anything to rival Paul Collier’s work). I especially enjoyed a paper on whether aid was helping to achieve the Millenium Development Goals. To me it was clear that whilst aid can make some contribution, targeted p2p actions such as microfinance and giving are more likely to have a lasting impact as they tunnel through the swathe of government and administration on both ends of the aid pipleline. Message to Government: Let people do the giving.

- Business and Innovation: It’s good to see economists looking at this topic since it’s of major importance to NZ. Again lack of capital and R+D incentives for business was a clear problem. We simply can’t compete with countries like Finland or Israel when all our capital is tied up in housing.

- Health: One good paper on “fat” taxes or food “subsidies”. It simply reinforced my position of taking a supply side approach. It’s hard to influence demand through pricing strategies when the underlying commodity (food) is experiencing huge swings in price. As with oil and carbon taxes, the prices movements in food prices will overwhelm any attempt to reduce demand by taking away GST for example (12.5%). Perhaps incentives like gift vouchers/cash in savings accounts will help focus (a bit like the idea to pay girls an annual stipend for each year they don’t get pregnant). We have to get our future health costs down somehow and creative solutions may be required. Time to call in the behavioral psychologists methinks.

- The Financial Crisis: Nice paper looking back at financial collapses over the last 200 years. Yes they happen with regularity…..whoa…yes we know that. The cycle goes back as far as records allow. Even the Bank of England was not immune from overstretching itself… a run on the Central Bank itself. Ooops. So my simple question is: When are we going to change the system?

Overall it was a good conference and a lot came out of it. For next year I can see more focus on the impact of microfinance and p2p activities, more focus on tax reform, more focus on the debt based financial system and hopefully we will have some more ideas to contribute ourselves.

Also good to see someone with a laptop on the go! Surely a first for the NZAE.

Wokai: Microfinance on the ground in China

Because of its closed monetary system, microfinance, using external funds, has been tricky to deliver into China. So you will notice Kiva does not offer loans there as yet. However, Wokai, which I featured a while ago, has started up and is making great progress in delivering finance to those who are unable to access it through traditional banking channels.

It’s always good to see footage from the field and here is a great video interview with Casey Wilson, the co-founder and CEO, shot by GrubbyLens. These personal stories help build the picture and make the connection more real.

Facebook for Farmers from grubbylens on Vimeo.

Intentional Money: Give, Lend or Buy

According to my colleague and friend, Branton Kenton-Dau , human beings are intentional devices. We are here for a purpose, a reason and our human form is a structure for expressing intention. I like that. Every time we act we are expressing something about ourselves even in the most nano way.

So when it comes to managing our money we are faced with the same questions: who am I and what is my intention?

It seems to me that we have 3 ways of using our money: Giving, Lending or Buying.

Giving is the simple act of directing one’s money to somone else with no expectation of financial return inclduing the original gift. But there is a clear intention that the gift should have some kind of impact. Simply this can be regarded as giving money to charity or a fundraising appeal. Your return is hopeful, that some positive outcome or impact will be achieved by way of your contribution. This is a powerful way of expressing your intention. Of course one can also give your time, goods and services for no financial return and this is a more hands on approach.

Lending, otherwise known as saving, is also a powerful tool. When you deposit your cash in the bank you are in effect lending to the bank. In legal terms you are an unsecured creditor of the bank. There is little intention here as we tend to see the process as the bank doing us a favour. But when it comes to peer to peer lending, microfinance or simply lending money directly to friends, the process takes on a deeper signifiance. There is a more direct energy involved and a desire to participate in an outcome. The personal connection to borrowers helps create this possibility. Another form of lending is to large business via corporate bonds. This is akin to saving in the bank except again there is a directness involved. A large business wants to raise $100m and I lend it $20,000. I’m a small piece of that but I’m essentialy helping to fund the business. But there is still some distance there as I’ve probably dealt through a boker or investment advisor. What I am keen to see is more peer to small business in developed countries. We’ve seen Kiva open up loans into the US now and soom we will see more acceptance in people lending larger sums to small businesses. Not so much microfinance as peer finance. What better way to create strong and trusted communities than people lending to businesses they buy from.

The third form of intentional money is the process of buying. This is two parts: buying for ownership in a business and buying for personal consumption. The latter is the world of ethical and values based purchasing. It’s a well developed market and I won’t got into that. But actually directing your money into businesses through ownership is another way to direct the flow of your financial intention. Whether it’s ethical investing at the macro level (buying into ethical funds) or at the micro level (investing in start ups that share your goals and values). The micro level is more interesting because the impact of your investment is greater. In the macro world of stock markets and large companies your investment is not so influential because of the way institutional investors control so much of the market.

We have many choices when it comes to dealing with our money. Each time we make a financial decision we have an opportunity to express our intention. Its a very powerful force. The more we align our choices with who we are, the more powerful our impact becomes. We become an efficient intentional system

As they say money talks.

Volunteering: Everyone should do it

You may not know it but this last week has been Volunteering Awareness Week in New Zealand. Here are some facts and figures to consider:

· New Zealand is a leading nation in contribution made by volunteers. A recent study of the New Zealand Non-profit sector estimated that volunteers make up 67 per cent of non-profit workforce equal to 133,799 full time positions, a higher proportion than in any of the other 40 world countries participating in the research project. This represents 6.4 per cent of economically active population.

· Non-profit institutions contributed 2.6 per cent to New Zealand’s gross domestic product (GDP) in 2004. When volunteer labour is included, non-profit institutions’ contribution to GDP increases from 2.6 percent to 4.9 percent.

· More than one million New Zealanders are actively involved in volunteer work. Statistics NZ estimated that in the year ended March 2004, there were 1,011,600 who volunteered for one or more of 97,000 non-profit organisations. This represented 31 percent of the population aged 12 and over.

· New Zealanders contribute 270 million hours of formal, unpaid work for non-profit organisations annually. The time given has been valued at almost $3.31 billion in the year ended March 2004.

· Volunteers contribute these millions of unpaid hours to human rights, faith communities, health, education, sports and recreation, social services, arts and culture, emergency services, the environment and conservation, animal welfare, and community support and development.

· When reporting on unpaid activities undertaken in the 4 weeks prior to the 2006 NZ Census:

- 460,143 people (14.56%) aged 15 years and over looked after a child who did not live in their household

- 258,708 people (8.13%) aged 15 years and over helped someone who was ill or had a disability, and did not live in their household

- 437,241 people (13.84%) aged 15 years and over were involved in other helping or voluntary work for or through an organisation, group or marae

· Some community and voluntary organisations report shortages of volunteers, but others have waiting lists and have more potential volunteers than they need. The underlying reason for either of these situations is often how the organisation manages its overall volunteer programme from recruitment through orientation and training to support and manage the volunteers. In addition, the issue might be a supply and demand one - volunteering hasn’t declined but demand has gone up, and many people prefer ‘project-type’ volunteering over long-term commitments.

· There is an ongoing research into various aspects of volunteering in New Zealand. An inventory of existing NZ research is available at www.volunteeringnz.org.nz/resources/research.php and www.ocvs.govt.nz/work-programme/volunteering-research.html.

Those statistics make impressive reading. It’s clear the social fabric of the country would be seriously impaired without the contribution of this army of volunteers. So why volunteer?

Why not is the obvious answer. For me though it’s about making a contribution and performing a service to your community. You can think of it as giving back something or simply being grateful for what you have in your life and projecting that gratitude out into the world.

And it’s free. All you give is your time. It keeps your feet on the ground, teaches you humility and opens your eyes to people and situations you may not come across in your daily life. All in all its a fabulous thing to do.

I’ve been a volunteer for a 3 years now and am involved in 3 different organisations. I’ll tell you a bit about them because I simply want to promote them and hope that maybe someone out there will find that it spurs them on to get involved.

I’ve been a Budget Service Advisor for Christchurch Budget Services for a few years now. It’s a debt counselling service focused on helping people understand basic budgeting and how to navigate their way out of the debt trap and take a responsible approach to managing their financial position. i’ve met some interesting people and hopefully helped them on their way to a better position for themselves. Sometimes i’ve felt like a personal counsellor as well as often money issues can reveal personal problems. You don’t have to be an expert in money issues as full training is provided. What i like about it is there is often a very concrete outcome and i love taking financial and lending organisations to task! I’ve yet to meet anyone who isn’t serious about paying off their debts. But boy I wish i’d been around before they started!!

Nearly a year ago I joined up with PILLARS, an organisation dedicated to improving the lives of children who have parents in prison. They match volunteers with these children for a year’s worth of mentoring in the hope that it will have a positive impact. It really does. It’s a proactive approach to ended the cycle of criminalty and making sure these children are not lost and forgotten by adults when their parents disappear for no fault of the child’s. It’s been anincredible experience getting to know a young boy who has come from a very difficult family situation. The role is to spend 2-6 hours a fortnight with your mentee basically hanging out and doing stuff and be able to commit for a year. We’ve done all sorts over the last year: biking, climbing, mini-golf, walking, playing in the park, reading in the library, wandering around town visiting the various sites. It takes time getting to know a child who is often naturally wary of strangers but the rewards come later. Again all it takes is a bit of your time and a belief that all children deserve a decent crack. It’s a wonderful organisation to be involved in and lots of training is provided with courses throughout the year.

This year I decided to volunteer at Refugee Services and help a family resettle in Christchurch. Each year the UN resettles thousands of refugees in third party countries, where there is no hope of return to one’s homeland and the country they are currently in will not take them permanently. New Zealand takes about 750 a year of these “quota refugees” and helps them settle into their new life. There is a very thorough training program to prepare you for the job ahead. It’s a 6 month commitmnet but usually it’s the first 4 weeks that are full on and then it settles down. You work in teams and all undertake different tasks such as dealing with WINZ (that’s me!), housing, education, health, english language and general hospitality. My team has been helping a Bhutanese family settle in. It’s been a marvellous experience and has really stretched me at times. The families arrive almost as a clean slate and hurriedly must put a new life together. Yet they are so keen, hopeful and desperate to start a normal life, get jobs and contribute. They are immensely grateful for the help New Zealand has provided. As a volunteer it’s a chance to make a real difference and also experience a new culture and have your eyes opened to the lives that some people live through no fault of their own. Globally the refugee community numbers over 11m people……people who have been forcibly displaced from their homes and in many cases will never go back.

It makes me feel very humble and very grateful for the comfortable life I have. I think that’s what volunteering really does. It makes you appreciate what you have; it connects you with your fellow man; it teaches you new skills and it takes you out of your comfort zone.

As the proverb states; ” You must give in order to receive”.

So what’s stopping you?

New Zealand: Small Business crying out for Microfinance

Following on from the news about Kiva moving into the US small business market, fleet footed Ben Kepes calls us to action in New Zealand.

Small businesses in NZ have seen no relief from high interest rates in the recent lowering of rates here. At the same time credit is hard to come by and many business owners have resorted to credit cards to keep their businesses going.

This is a troublesome state of affairs given its the productive economy that has to earn the dollars to pay back the humungous debt necklace hanging around the necks of Kiwis.

So what’s the state of play with microfinance at the moment? Well Kiva is going great guns. It’s really tapped into people’s desire to help and be generous in giving but created this new joy of creating and empowering change for people. It connects people together and that personal touch pulls the punters in.

The more tradtional p2p lending services are not finding life so easy. Charis Palmer reports here on recent developments citing problems for Prosper in the US and some success for Zopa in the UK. Locally Peermint has fallen by the wayside, Nexx hasn’t really got going and Lending Hub has joined a busy Australian market.

So there’s no shortage of platforms but it’s proving harder than expected to deliver the business. But there seems to be no platform for small businesses to secure funding. This is certainly an opportunity as there is certainly a strong and established market on the borrowing side with appropriate forms of due diligence available.

The major stumbling block for p2p start ups has been compliance with various regulatory authorities. However there may be ways around this and with politicians supportive of the small business sector the time may have come for a serious attempt to create what would be a mini-corporate bond market funded by the retail investement market direct.

Now that sounds like a major step forward in building a more productive economy.