Public policy should encourage banking to go back to its roots: financing commerce while supporting high yield…

The unbanked are unbanked because they have nothing to bank.  In a nation driven by capital formation and returns on capital, focusing on the unbanked seems like putting the horse before the carrot.  The American Treasury Department and the central bank should be focusing public policy on encouraging capital formation and generating high yield.  Nothing in the U.S. Constitution says that consumers should be encouraged to borrow or that banks should be obliged to lend to the consumer class.

Political responses such as the Community Reinvestment Act, the Dodd-Frank Act, or the creation of the Consumer Financial Protection Board cater to voters but overlook the need for encouraging the accumulation of capital goods necessary for driving the American economy.

More importantly, political responses mentioned above serve to incentivize consumers to enslave themselves to credit even while the last four decades have seen real wages go stagnant.  The political class on the left is quick to leave out consumers’ complicity in the financial downturn of 2007-2009 where consumers were encouraged to borrow against their shrinking means to repay.  Consumers do not need protection from banks.  We need our mindsets redirected in our approach to banking.

Each household needs to rebuild their capital buffer.  It is easier said than done especially in a transition period where the timeline for capital’s replacement of labor with automation and artificial intelligence is being sped up.  Not only is more work being done from home but businesses are determining whether the benefits of keeping employees at home outweigh the costs of bringing them back in-house.  A number of employers have been transparent with updating employees on their engagement with companies offering AI-driven resources that increase efficiency.  Larger companies are partnering with technology companies whose mission is to reduce the time employees spend on certain tasks.  These are threats to labor and income and in this environment not only is the consumer tasked with increasing household capital formation but with seeking additional or alternative opportunities that provide for increases in income, savings, and investment.

One way, in my opinion, to increase capital while deriving additional income is for public policy to encourage high yield on capital.  The consumer who flips her mindset from shopper to investor needs an environment where her savings can accumulate at a faster rate; where higher residuals can be reinvested into her principal holdings and create appreciation.  Public policy should support full employment of capital and maximum prices for capital. How does the US get there?

One way to get there is for banks to abandon their risk-based interest rate pricing model, where higher interest rates is the price that riskier customers must pay for borrowed funds.  Rather, banks should abandon consumer lending altogether.  Lending money to a consumer in a stagnant income, labor replaced by automation environment so that the consumer can build a deck, finish a basement, or send a kid to school is what I call low value enterprise lending where the loan is being applied to a consumer’s wage income versus residuals the asset provides.

Instead, interest rates should reflect the competition between borrowers seeking to demonstrate their enterprise ideas will provide the greatest returns to capital and equity.  High interest rates should not be charged because of a high risk of failure.  Rather, high rates should be charged because where the lender sees high returns to equity in the enterprise, the lender seeks to capture some of that value.

Banks, then, should abandon consumer lending and put energy and resources into commercial or merchant banking.  Consumer involvement in banking should be limited to establishing savings or investment accounts with banks or owning stocks in banks.

Again, the upside from this model for banks, a focus on lending to merchants that leverage real assets to make income.  The upside for the consumer is less borrowing and more investing thus greater capital formation.  Also, the consumer may learn how to plan purchases over a long term versus seeking the psychic value of getting something now and paying for it later.  For example, a consumer may put away cash over some determined period of time to purchase that new deck without having to burden themselves with debt.

Or, a consumer may seek out a group of private consumer lenders who are not connected to the banking system thus reducing the chances of shock to the system should a borrower renege on a loan.  They will be forced to rely on the courts, lawyers, and mediators for resolving any conflicts with private lenders.

 

 

The internet is noise blocking out the message that “Reflection Matters.” …

Instead of worrying about my clothes
I could be someone that nobody knows
I wish I never woke up this morning
Life was easy when it was boring” — Stewart Armstrong Copeland

Life was simpler and saner before the internet was democratized.  The mid-nineties saw the early ability to process payments online which was necessary for start ups like eBay and Amazon to host the sales of or move product.

But along with the internet’s commercialization came content creation, from earlier capability to use bulletin boards in the late 1980s and early 1990s to the publication of weblogs to today’s social media.  The internet no longer connects academic researchers but has become a medium for mass expression.

I find a lot of it to be useless noise, quite frankly.  Maybe I am just an old curmudgeon too caught up in my nerdiness.  Maybe I believe that in a world where we place an inordinate amount of emphasis on the physical and the sensational that maybe we could dedicate just a little more time to quiet reflection; to pursue knowledge that helps guide our ability to turn inward from time to time.

You would think that with all that has happened in the last six months that people would take a time out from the noise by turning off the television or ignoring social media so that we could use our observational skills and think through what we see around us; connect the dots somehow using our ability to draw our own conclusions and navigate according to any individual road maps we come up with.

Instead, we go external.  We look for our answers in the pronouncements of unqualified celebrities and salesmen posing as politicians and spiritual leaders.  And as these exogenous variables use social media and the internet to increase their influence, we find ourselves falling in lock step with their programming with all the noise dampening our cognitive abilities.

When it comes to its commercialization, the messaging I get from its “content creators” is that ratchetness matters.  Just visit Instagram and there is always someone twerking for dollars.  Yes, sex has always been a money maker.  All of us don’t want to be builders or garbage men.  For some participating in any variant of the skin trade may be fun, even fulfilling.  For others, it is a fast dollar in the survival game called life.

As opportunities shrink in the political economy, and as supply and demand in the skin trade increases, we will see more dollars floating down from the more affluent paying lower prices for the cheap, non-cerebral entertainment the internet has to offer.  Yes, it will only get worse and more outrageous.

The internet is noise blocking out the message that “Reflection Matters.”

 

 

How Information Communications Technology is Being Used During the Pandemic

Sponsored Content

 

A recent survey of smartphone users in 11 countries conducted by Ericsson shows that during the COVID-19 pandemic, consumers are finding information and communications technology (ICT) vital for coping with everyday life, particularly among career millennials, parents with kids at home, and people living in urban centers. The top tasks respondents said ICT helped them most with were child education, staying in touch with friends and family, and doing work (white-collar) from home. The reliance on ICT has contributed to an increase in mobile usage of about an hour more per day during COVID-19.

Share of smartphone users who consider ICT has helped them a lot with different tasks in their daily lives during the COVID-19 pandemic

Source: Ericsson

Internet Innovation Alliance to host a chat with FCC Chairman Ajit Pai

Sponsored content

 

IIA invites you to attend a webinar: “Lessons from the Pandemic: Chatting with the Chairman on the Past, Present & Future of Broadband” featuring a virtual fireside chat with FCC Chairman Ajit Pai and Bruce Mehlman, Founding IIA Chairman and former Assistant Secretary of Commerce for Tech Policy on Thursday, June 25th at 2:00 p.m. ET.

The coronavirus pandemic has highlighted the importance of broadband connectivity. Broadband is critical to ensuring that Americans can telework, participate in remote learning, benefit from telehealth, and much more. The digital divide has closed in recent years, with millions more consumers getting broadband access and infrastructure investment setting records. But that divide persists in some places, either because internet access isn’t available or because households have chosen not to subscribe. Closing the digital divide and ensuring that connectivity is maintained during the pandemic can require public-private partnerships, such as Congressional initiatives to increase broadband access and the Federal Communications Commission’s “Keep Americans Connected” Pledge, which has ensured that consumers won’t be cut off from service during the pandemic due to inability to pay a bill.

The Internet Innovation Alliance (IIA), a broad-based coalition supporting broadband availability and access for all Americans since 2004, invites you to take a closer look at the past, present and future of broadband during a discussion between FCC Chairman Ajit Pai and Bruce Mehlman, Founding Chairman of IIA and former Assistant Secretary of Commerce for Technology Policy. They will explore what the U.S. might have done differently as a nation in years past to have achieved universal broadband access today, and how we can fix the gaps now to get broadband to all Americans in time for the next crisis. Questions from the audience will be answered following the Q&A.

RSVPhttps://attendee.gotowebinar.com/register/1344500818330470927

Identifying the economic value within the African Diaspora and designing currency to transmit it …

Today while waiting for a haircut, a lovely young lady, who was waiting on her companion, asked me if I was a professor.  I was caught off guard by the question for it seemed almost prescient in nature.  I had been an adjunct professor back in Maryland, I told her.  She then asked if I had been on television. Again I informed her that I had made two appearances on a business news channel.  I expected the exchange to end there since her companion was finished with his haircut, but fortunately the conversation did not end there.  She proceeded to ask my opinion about the current state of the economy as it impacted black people.  I was happy to oblige since the topic was interesting and yes, when you get to engage a very attractive woman on the state of the political economy (underscore very attractive), you don’t pass it up.

The conversation turned to whether African Diaspora communities could use their own currency.  My answer was yes, but to get there we have to first identify a resource that could be used to generate an underlying value for the currency.  A true community is built on a resource the extraction, processing, and distribution of which leads to an industry that generates the income necessary for sustaining the communities members.

Second, there has to be a banking/financing resource in place to convert the assets of the underlying resource into loanable funds.

Right now we have very little of the above two components.  For example, Africans in America hold very little of its capital.  By some estimates, Africans in America hold approximately two percent of total capital in the United States. In addition, consider farm holdings by Africans in America.  Africans in America hold approximately two percent of all farms in the United States, according to the website ShoppeBlack.us.

Compounding the farmland problem is the lack of strong financial infrastructure through which not only lending can be accomplished but also trade in the securities that have underlying them black farm output.  There are approximately 45 black-owned farms located in 20 U.S. states.  There are, however, 14 black owned banks located in eleven states to support these farms.  It is a strong financial infrastructure that provides funding for land acquisition, seed, and new equipment and the current black owned facilities for lending are not enough.

Money is created when loaned funds for land acquisition, seed, and equipment are placed in a farmer’s checking account.  At this point black-owned banks could issue currency distributed by the Federal Reserve or create its own currency where a special currency is designed to be used by black farmers and any other industries related to or depending on black-owned farms including black-owned suppliers, black-owned restaurants, black-owned pharmacies and wellness stores, etc.

There is theory and there is application. With one to two trillion dollars in output, Africans in America could invest in more farmland while expanding their financial infrastructure in order to support lending, securitization of debt, and issuance of their own debt.  Where more land is not available, the next move may have to be the cultivation of intellectual capital and thus make greater inroads into the creative industry space.

On the other hand, Africans in America, rather than trying to replicate the existing model, may have to consider a completely new model for generating and trading currency, one where the resource is unique to and managed solely by Africans in America.

 

Will regulating social media benefit content providers in the African Diaspora?

Late last May, President Donald Trump stepped up his battle with social media by issuing an executive order intended to prevent the censure of political speech expressed on platforms such as Twitter and Facebook.  Mr Trump allegedly saw the last straw when Twitter showed the nerve to fact check the President by attaching a number of links to some of Mr Trump’s tweets.  He didn’t like that.

Mr Trump is not alone in his frustration with social media.  Other Republicans and conservatives have complained in recent years about what they deem as bias against conservative political viewpoints and alleged liberal political positions taken up by executives at the social media companies.

To combat the alleged bias, Mr Trump issued an executive order that would call for the Federal Communications Commission to issue rules that clarify portions of the Communications Decency Act of 1996 (47 USC 230).  The Act excludes Twitter, Facebook, and other interactive computer services from civil liability where they exercise good faith in removing and otherwise not accepting certain harmful content.  Taking censorship action beyond the scope of the “Good Samaritan” exceptions would paint them as publishers and cost them their protection from civil liability claims.

Specifically the Act reads as follows:

(c)Protection for “Good Samaritan” blocking and screening of offensive material

(1)Treatment of publisher or speaker

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.

(2)Civil liability. No provider or user of an interactive computer service shall be held liable on account of—

(A)
any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected; or

(B)

any action taken to enable or make available to information content providers or others the technical means to restrict access to material described in paragraph (1).[1]

Mr Trump would like rules that clarify the interaction between section (c)(1), exemption from treatment as a publisher, and section (c)(2), exemption from liability of a publisher, of the Communications Decency Act.  My issue is whether Mr Trump’s proposed path of action in any way hinders the ability of the African Diaspora community to exchange ideas and content for commercial purposes?

Maya Dollarhide defines social media as a:

” …. computer-based technology that facilitates the sharing of ideas, thoughts, and information through the building of virtual networks and communities. By design, social media is internet-based and gives users quick electronic communication of content. Content includes personal information, documents, videos, and photos. Users engage with social media via computer, tablet or smartphone via web-based software or web application, often utilizing it for messaging.”

A high percentage of adults within the African Diaspora use social media.  According to Pew Research, 69% of African American adults use at least one social media site compared to 73% of whites.  Whites and blacks appear on par when it comes to social media usage.

When it comes to commercial reasons for using social media, 29% of consumers use social media platforms to research or buy products and services.  Although the “social” or lately the “political” component of social media gets a lot of attention these days, there is a marketing component to social media where these networks allow for businesses to engage with their customers.  Social media provides a relatively lower cost alternative to traditional media marketing mechanisms.  A well done social media campaign can have information go “viral” about goods or services, and send this information instantaneously around the globe.

We have to be mindful that the drafting and implementation of rules to be used to keep social media companies in compliance with the Communications Decency Act may not come to pass depending on the outcome of this fall’s election.  Should Mr Trump lose in November, the Democratic victor will likely put in place a Democratic chairman and along with his or her Democratic colleagues squash the idea of going forward with any rules that give the impression that the Commission has entered the business as social media speech police.

Even if Mr Trump wins and a Republican majority remains in place at the Commission, I believe the Commission will craft very narrow rules in order to prevent any First Amendment violations.  More importantly, rules that keep social media companies from acting as editors benefit the global exchange of commercial information between members of the African Diaspora.

While I doubt that it is ever in the best interest of Facebook to edit or alter purely commercial communications, advertisements, etc. between an African American wholesaler in Atlanta, Georgia and potential retail distributors and/or end users in Accra,  Ghana, added protections that keep communications unimpeded cannot hurt.

The narrower the rules, the better it is for our self-interests.

 

 

 

Broadband networks remain resilient …

Sponsored content

 

USTelecom recently released updated data on broadband network traffic growth during the COVID-19 crisis. Elevated levels of traffic persist compared to the pre-crisis baseline, though overall network traffic decreased since its peak in mid-April. Since reaching a high of 27% over the pre-crisis baseline the week of April 16, the average traffic increase was between 10% and 13% from May 7 – June 11.

Even with the traffic increases, USTelecom members’ core network capacity remains fully capable. Interconnections between networks have remained uncongested, even during peak traffic periods, with an average of 61% to 74% of the total capacity of peering links available as a buffer.

Source: USTelecom

Of banks and the politics of coronavirus support …

Politics of banking

Earlier today, the chairman of the U.S. House of Representatives Select Sub-committee on the Coronavirus Crisis, James Clyburn, Democrat of South Carolina, sent a letter to Steven Mnuchin, Secretary of the United States Department of the Treasury, and Jovita Carranza, Administrator of the Small Business Administration, requesting that Treasury and the SBA take steps to ensure that $130 billion remaining under the Paycheck Protection Program and Health Care Enhancement Act (PPP) are allocated to businesses truly in need and that both agencies increase the level of transparency about the recipients of funds that have already been expended.

According to the letter sent by Chairman Clyburn, Congress is concerned that with no clear guidance issued by either the Treasury Department or the SBA, larger businesses that already had lending relationships with banks that distributed the funding, would be first in line for the lion share of funds.  It was partly due to this fear that Congress followed up the Coronavirus Aid, Relief and Economic Security Act (CARES Act) with the Paycheck Protection Program and Health Care Enhancement Act, which provided an additional $310 billion in funding and set aside $60 billion to be distributed by community lenders with a track record for lending money to smaller borrowers.

The political controversy surrounding the support program is spawned by Chairman Clyburn’s that banks release the names of all recipients of paycheck protection program funding.  Republicans apparently have not signed off on this request given the lack of Republican signatures on Chairman Clyburn’s letter.  In addition, Secretary Mnuchin has referred to the requested information as proprietary, a description that Chairman Clyburn does not agree with.

The issue appears more a political one than a market one.  Neither demand or supply for these funds are the result of economic interaction between the seeker of loanable funds and provider but more the result of government imposed shutdowns, and the resulting slowdown in the economy as social distancing and quarantines have reduced foot traffic in restaurants, stores, and automobile showrooms to a halt and in a number of cases has caused businesses to seek bankruptcy protection.

The big banks, including J.P. Morgan Chase, Bank of America, Truist, Citibank, and Wells Fargo have been called out by critics for hooking up larger businesses with more established relationships versus the mom and pop with ten employees on the verge of shut down.

But as Paul Miller of Miller & Co. LLP shared in a post on BloombergTax.com, there are alternative sources of funding for small businesses out there.  They include:

  • The Employee Retention Credit;
  • Local and state coronavirus resources (see http://www.fundera.com);
  • Crowd-funding;
  • Venture capital; and
  • Traditional lines of credit.

 

Elected officials should better promote information technology when addressing rural economies …

Information driven firms don’t require the standard top-down hierarchical structure. It has no need for administrative staff. It barely has need for a managerial staff. Each wage earner must become more of a self-sufficient information node, with each node given more or less equal weight by a reduced by still centralized management.

The new information infrastructure will look more like a distributed energy platform versus the standard step down energy platform. This means greater reduction in labor, a forecast that has been bouncing around for half a decade.

For elected officials promising more job opportunities in the rural space, they will have to reconcile this coming reality and either weave it into their economic opportunity narrative or look for a fall guy or gal for the coming doom in the labor markets.  The adjustment will not be easy for their constituents.  The voter/citizen has been under considerable stress due to work from home requirements, stay-in-place requirements, and reductions in workforce as government induced fall off in demand for services took hold of and wrecked certain business models.  As part of his promise to create jobs in rural America, apparent Democratic nominee Joe Biden has proposed a $20 billion rural broadband plan for deploying more advanced communications technology into rural America.  Mr Biden states that this funding will equal three times the amount of funding under the U.S. Department of Agriculture’s Community Connect Grant Program.  Under 7 CFR section 1739.1, the purpose of the program is:

“to provide financial assistance in the form of grants to eligible applicants that will provide, on a “community-oriented connectivity” basis, broadband service that fosters economic growth and delivers enhanced educational, health care, and public safety benefits. ”

Donald Trump’s broadband program doesn’t seem that definitive.  On his campaign website, the President notes as an accomplishment a 2018 program dedicating $50 billion to empower rural economies, 80% of those moneys going directly to state governors and the remaining amount going to selected states that apply for a rural performance grant.  Whether funds went to the governors or to select states applying for performance grants, the amounts promised by the President appear less than those promised by Mr Biden.  Currently, according to the Department of Agriculture’s website, the Community Connect Grant Program is closed.  Funding this program or another one like it would support the President’s rhetoric about increasing economic opportunities in rural areas.

The economic uncertainty surrounding the COVID-19 pandemic has fueled talk about people leaving the cities for urban areas.  Axios, citing polling results, reported that one-third of Americans are considering moving to less densely populated areas including rural areas.  Urban residents are more likely to consider a move versus suburban or rural residents.  If this finding were to materialize then there might be an uptick in demand for broadband services in these areas.

Supporting more broadband is a political win for either of these candidates.  Consumers should bear in mind that broadband roll-outs call for coordination between federal, state, and local government agencies and the policy desires of a president are not enough. Elected officials will need to put their money where their mouths are and ensure the funding of programs such as the Community Connect Grant Program and other similar programs.

 

 

In the coronavirus era, the information engineers will win …

Editorial

Most of us believe life is about accumulating cash, making enough coin to pay the bills, put the kids through school, take a vacation, and buy ourselves a couple toys.  You know.  Living our best life.  Seven hundred thousand Americans found out last month that a virus could cause havoc not only to one’s physical health but also to one’s financial health.  There will be less coin available to pay for that best life.

Americans are not coming to terms with the reality of nature; that nature is the ultimate arbiter of life on this planet.  It is why the call from political leaders in the United States and worldwide to wage war against a disease seems silly to me.  Nature always wins and I believe its victory will be manifested in how it helps change the nature of commerce and work.

How work changes will go beyond whether a bunch of lawyers, accountants, and call center operators can conduct business from home with their kids running around. (Fortunately, social distancing at home is easy for me. I have a teenager. They like staying away from their parents.)  Not only will we have to become overnight IT managers, we will have to adjust to two additional tasks: one, becoming database managers; and two, teaching our bosses’ algorithms how to read and navigate the databases we have been assigned to classify and build.

More and more professionals, from lawyers to accountants to doctors are becoming database managers.  They are being asked to go through thousands of documents, classify them, and tag them according to how relevant they are to resolving an issue of law, finance, or medical treatment.

By tagging the contents of these databases, these professionals are providing their bosses’ algorithms a template to follow; a path to build and travel on when they eventually take over more and more responsibility for mining these databases and their content.

Capital, always in fear of a vacuum, is always in search for yield.  It is  always in search of the information that increases returns on the coin.  The more efficient the search and the more robust and plentiful the information, the greater the yield.  For coin is the physical valuation of information.  The more information capital has for use, the greater the value of the coin.

But for the rest of us, for the non-capital or what I call the credit class, we will have to rethink our view of information.  Information is no longer just something told or facts learned.  It is not just news or knowledge.  It is an asset, something owned that has value.  Each household’s value going further into the 21st century will be judged on the quality, uniqueness, and value of the information that it sits on.  Households will have to spend more of their most valued currency, time, at least in the short to immediate run, accumulating that most important asset, information.

The virus has dis-aggregated Americans.  Americans sitting at home on their desk tops remotely connected to the central brain at their office will soon be called on to generate more energy in the form of information, relying on their own leased data resources and the databases they create.  Capital, demanding the reductions in the costs for information searches, will reward those households that can mine, package, and deliver information that provides capital with a list of opportunities for highest yield.

The information engineers will win for they will lead in buying that best life…