Category Archives: Economics

Unleashing Economic Growth

Kickstarer.  SeedInvest.  GoFundMe.

Let’s ask ourselves why crowdsourcing exists.

Answer: Because of regulations against normal people raising capital to bring new products to market is restricted if you simply want to see shares of your new enterprise; you need high net worth individuals to invest privately.

As demonstrated by Bain Capital’s retirement accounts, private equity can be extremely valuable; restricting this to already-high net worth individuals inherently concentrates wealth further.  If we allowed normal individuals to invest in private enterprises, some of that wealth could be spread around.

The argument that high net worth rules exist to protect investors is absolute bullshit.  Having a high net worth says absolutely nothing about your ability to choose future investments and not be defrauded.  Speaking of fraud, which is presumably what these private investment regulations tries to prevent, we already have laws making fraud illegal.  There is no sense in restricting investment further when fraud protection already exists in the form of other laws.

Let’s remove the hindrance to commerce that Reg. D and allow any individual to own private shares of a company.  General solicitation should be allowed to firms of all size.  Some people will lose money, some people will make out fantastically.  Worried about fraud so much?  Stick to publicly-traded companies and traditional investments, but do not make that choice for me.

Considering how FUBAR the publicly traded markets are at this point, I’d like to see normal investors like myself be given the option to choose how to invest in smaller, local enterprises.

Welcome to the Unsecured Credit Bubble

Can we admit we’re in an unsecured credit bubble yet?

Here’s a shot of all of the offers I received over the week of New Year’s in the mail. This is a fairly typical week:

  • Amex – Year of Amazon Prime + $20,000 points
  • Citi – 0% on Balance Transfers & Purchases for 15 months
  • GM BuyPower Card: 0% APR on purchases for 12 months
  • Discover: 0% APR for 18 months on Balance Transfers or $0 Balance Transfer fee

Granted, I have pretty good credit – a score of around the mid-700s.  But I receive non-stop offers for credit despite having nearly as much unsecured credit available to me as my annual salary; more than half of the credit required to pay off more than half of my house.  And I still get additional offers!

Even someone I know who had to deal with collections agencies in the last 5 years (including balance write-offs) receives multiple credit card offers each week as well.  I think we’re witnessing the peak of the unsecured credit bubble.  It is complete insanity.

Used responsibly, however, I’ll gladly take money from someone offering me an effectively free short-term loan (“I’ll gladly pay you tomorrow for a hamburger today.”).  But ultimately, one has to be responsible with their use of credit and make sure there is a payment plan setup to pay off the balances before the begin accruing interest; typically American’s aren’t very good at this part of things, which is what the credit card companies are banking on.

However, if too many Americans take these offers and take them too far, we could see an implosion of consumer credit as these offers expire (especially if rates have risen 18 months from now).  It could get REALLY ugly for the American consumer that drives ~70% of the U.S. economy in about 2 years from now.  Perhaps I’ll start looking into buying some puts on credit card and financial companies 2-ish years out…