The Plebian

Pretty Economic Pictures for the Illiterate Masses

Hope Mongerin’ (Alternate Title: This Is Very Important to Me!)

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Progress is impossible without change, and those who cannot change their minds cannot change anything.  – George Bernard Shaw.

There are fundamental economic changes occurring around the world and whether or not that makes you want to ‘bury your head in the sand’ or ‘face the change head on’ is merely a choice that you must make.  At the heart of all feelings, rests fear and hope, everything else is but a manifestation of these core perspectives of thought.

So in lieu of fear-mongering and telling you to invest in shotguns, pork n’ beans and nuke shelters, I am going to do some financial hope-mongerin’.

Peer-to-Peer lending  (P2P) is likely a word you will be hearing a lot more of in the next few years. The internet has brought with it a sleu of innovative financial ideas that has the potential to revolutionize how the world lends money. For those who may be unfamiliar with the concept, imagine Facebook  acting as a banking interface, where lenders and borrowers can examine each other’s profiles and directly make contracts without all that corrupt and unecessary banking bureaucracy. 

You need $5000 dollars to purchase shelving for your retro-clothes store, or maybe $7000 dollars to consolidate debt that you racked up during a 5 month stint of unemployment, P2P lending can offer lower interest rates than the conventional brick and mortar institutions by creating a direct network between lender and borrower without needing to pay some middlemen a cut.

For lender’s, it is important to note that to be successful, the name of the game is diversification.  Loaning $10000 at 8.5% interest rates to a single borrowing is very risky and certainly ill-advised.  But investing in a portion of several loans can earn 8-12% returns, even in these times.  If you loaned a $100 bucks to purchase a fraction of a hundred loans, a few of these loans can default (default rates are generally lower than what most banks experience) and you can still earn positive returns even in times like these when most everyone’s 401Ks have tanked.

Online P2P portals has been around for three or four years now.  Some of the more prominent include, lendingclub.com, http://www.kiva.org/, http://www.prosper.com/ and several more.  It should also be noted the Virgin Media’s ecclectic billionare, Richard Branson, has put $75,000,000 towards the launch of Uncrunch America, a new and sleek looking P2P website that debuted last month.

So put on your creative hats, visit these websites and think of the possibilities.  Do you care about greening the world?  Then diversify your investments around lending towards people wanting to install solar on roofs or to expand their eco-friendly widget factory.  Is promoting education a passion for you?  Then you can help students pay for books/consolidate loans/and the like with just a small investment hundreds of times.

Imagine churches becoming actively involved in P2P lending, or universities, or even cities.  Direct person to person lending eliminates banking bureaucracy.  It is completely open and transparent, thus preventing corruption/exploitation and it brings people together.

Or you could just keep investing in credit default swaps and see how it works out for you 🙂  Thanks AIG!

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