Crowd financing is not banking4 min read . Updated: 06 Oct 2015, 09:44 PM IST
A large part of the problem of financing development is not the absence of cash, but an inability to mobilize it
I have lived through enough financial cycles to be wary of the claims made of financial innovation. It is likely that there has been little financial innovation since grain futures contracts were struck several thousand years ago in the Indus Valley. Most of what passes for innovation is just a new way of doing the very old thing of adding more debt and less down payment, reserve or equity to traditional borrowing or lending contracts. The more opaque the additional leverage, the more the bankers charge, the more the leverage is raised to excess and the more likely it ends up in financial boom and bust. I am equally suspicious of the claims of new technology in finance: M-Pesa is real but Bitcoin is a scam. The computer revolutionaries think they have found a way to liberate money from banks because like all teenagers, they think they know everything. They think they know that banks only push money around expensively in creaking computer systems. They do not know that money is created by banks and that global anti-money laundering rules mean that existing money is no longer anonymous, removing Bitcoin’s remaining reason to be.