Wednesday, March 14, 2012
I assume you keep coming back because you have come to appreciate my out-of-the-box thinking. This evening I stood in the kitchen, mop in hand, on hold with the telephone banking people when I got to thinking about alternative financing arrangements. By alternative, I mean using something other than a major financial institution. I am also excluding from consideration the prospect of hitting your parents up for money.
Someone won the Nobel Peace Prize not too long ago with the idea of microfinance: providing small business loans to farmers (primarily women) in India. When I say small business loan, I mean, like $30 to buy a goat. The overhead on just processing these loans must outweigh the possible return, so there was no practical way for someone to procure a goat on credit without hitting up relatives for cash before microfinance came along. Incidentally, if you want to participate in this market, there are organizations into which you can invest money to provide these loans. But I'm not here to promote this sort of social justice. Someone's already been there, done that, got the Nobel Prize.
Do they have a tee-shirt for that, I wonder?
Anyways, there's still lots of room for improvement in the world of alternative finance. Take organized crime, for example. No, not those loan sharks. I'm talking about the kind that meet you in a pizzeria. Here's the thing: Who takes these loans out? The desperate. Why are they so desperate? Because things have been going really crap for them. The problem is, improvement is not likely on the horizon for these people. The penalty for defaulting on these loans is, I dunno, a lead pipe on the shins? That's what the movies have lead me to believe anyways. Sure, it makes reneging very unpalatable, but maybe for some of these desperate clients, it was out of their hands, and in any event, it's probably harder to get money out of someone in traction. Maybe some of these clients find themselves in a particularly low point in life because The Man keeps treating them like a door mat. Maybe their work supervisor has been withholding overtime pay. Maybe the phone company has been screwing them over. Whatever the case, maybe the client would be very happy to pay the usurious loan rate, if only they could get things turned around.
Maybe it's not the defaulting client who needs a visit from Rocco "The Hammer". Just imagine the potential of a fully mobilized mafia, out in the world and bettering society one thinly-veiled threat at a time. The mob gets that sleazebag manager straightened out so the client can afford to pay back his loan, you also make life better for all his co-workers who, perhaps by staying away from the racetrack, were just getting by. Thus, the economy improves overall. I call it the trickle-up theory.
In all seriousness, the trickle up theory is no more absurd than the trickle-down theory, based on another Nobel Prize winning idea some years back.
Maybe it's not the defaulting client who needs a visit from Rocco "The Hammer". Just imagine the potential of a fully mobilized mafia, out in the world and bettering society one thinly-veiled threat at a time. The mob gets that sleazebag manager straightened out so the client can afford to pay back his loan, you also make life better for all his co-workers who, perhaps by staying away from the racetrack, were just getting by. Thus, the economy improves overall. I call it the trickle-up theory.
In all seriousness, the trickle up theory is no more absurd than the trickle-down theory, based on another Nobel Prize winning idea some years back.
Nominations for next year's Nobel Prize (Peace or Economics: your choice) closed in February, but that gives us 11 full months to realize the dream!
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