In just the past few years, Peer-to-Peer (P2P) Lending has exploded from a potentially disruptive lending niche to a major segment of consumer borrowing responsible for a whopping $5B of loans in 2014, driven in large part by investor willingness to fund the loans given demand for fixed income alternatives that provide better yields in today’s low-interest-rate environment. Yet the reality is that P2P lending isn’t just about investment opportunities – for many, it’s a key source of borrowing potential, especially for those with healthy credit scores but limited borrowing collateral, and can be helpful to consolidate and refinance existing credit card and other debts at lower interest rates. In this “Financial Advisor’s Guide To Peer-To-Peer Borrowing”, we discuss the mechanics of how borrowing via Peer-to-Peer Lending actually works, the rules and requirements, the costs and the caveats, and the situations in which financial advisors should consider exploring a P2P loan as a financial planning strategy for clients to manage the liability side of their balance sheet!
We explore the potential effects of managers’ greed and altruism on their behaviors and firm outcomes. Greed represents extreme self-interest whereas altruism reflects concern for others. We argue that managerial greed leads to a focus on short-term decisions and short-term firm performance. Alternatively, managerial altruism normally produces a focus on longer term decisions and long-term firm performance. Managerial greed is also more likely to produce wrongdoing, whereas managerial altruism produces greater corporate citizenship behaviors. Managerial greed is likely to lead to turnover for non-performance–related reasons whereas managerial altruism is more likely to produce managerial turnover for performance reasons. Overall, we conclude that measured self-interest keeps managers focused on the firm’s goals and measured altruism helps the firm to build and maintain strong human and social capital. The extremes of either greed or altruism likely will harm firm performance. Thus, balance between managerial self-interest and managerial altruism leads to the greatest success.
Trust in others’ honesty is a key component of the long-term performance of firms, industries, and even whole countries. However, in recent years, numerous scandals involving fraud have undermined confidence in the financial industry. Contemporary commentators have attributed these scandals to the financial sector’s business culture, but no scientific evidence supports this claim. Here we show that employees of a large, international bank behave, on average, honestly in a control condition. However, when their professional identity as bank employees is rendered salient, a significant proportion of them become dishonest. This effect is specific to bank employees because control experiments with employees from other industries and with students show that they do not become more dishonest when their professional identity or bank-related items are rendered salient. Our results thus suggest that the prevailing business culture in the banking industry weakens and undermines the honesty norm, implying that measures to re-establish an honest culture are very important.
Few would dispute that sovereign defaults entail significant economic costs, including, most notably, important output losses. However, most of the evidence supporting this conventional wisdom, based on annual observations, suffers from serious measurement and identification problems. To address these drawbacks, we examine the impact of default on growth by looking at quarterly data for emerging economies. We find that, contrary to what is typically assumed, output contractions precede defaults. Moreover, we find that the trough of the contraction coincides with the quarter of default, and that output starts to grow thereafter, indicating that default episode seems to mark the beginning of the economic recovery rather than a further decline. This suggests that, whatever negative effects a default may have on output, those effects result from anticipation of a default rather than the default itself.
Read also: The Costs of Sovereign Defaults
Under the rubric of ‘financial inclusion’, lending to the poor –in both the global North and global South –has become a highly lucrative and rapidly expanding industry since the 1990s. A key inquiry of this book is what is ‘the financial’ in which the poor are asked to join. Instead of embracing the mainstream position that financial inclusion is a natural, inevitable and mutually beneficial arrangement, Debtfare States and the Poverty Industry suggests that the structural violence inherent to neoliberalism and credit-led accumulation have created and normalized a reality in which the working poor can no longer afford to live without expensive credit. The book further transcends economic treatments of credit and debt by revealing how the poverty industry is inextricably linked to the social power of money, the paradoxes in credit-led accumulation, and ‘debtfarism’. The latter refers to rhetorical and regulatory forms of governance that mediate and facilitate the expansion of the poverty industry and the reliance of the poor on credit to augment/replace their wages. Through a historically grounded analysis, the author examines various dimensions of the poverty industry ranging from the credit card, payday loan, and student loan industries in the United States to micro-lending and low-income housing finance industries in Mexico. Providing a much-needed theorization of the politics of debt, Debtfare States and the Poverty Industry has wider implications of the increasing dependence of the poor on consumer credit across the globe.
This paper aims to describe the social studies of credit developed in France over the past dozen years. We argue that this French sociology of credit, mostly centered on France, can be useful for researchers analyzing other countries, with other institutional particularities, because it proposes a specific method and a specific way to raise questions: credit is mostly understood as a result of social interactions embedded in organizational and legal structures. French researchers also deeply analyze the consequences of the organization of the credit market for inequalities, social stratification, and people’s life experiences. The first part of the paper focuses on works that have examined credit as a social test, looking at the institutional, technical, and social frameworks of money lending. Then, credit is understood as a sociological experiment: how is it integrated into household economies? How do people use forms of credit? Finally, the third part concentrates on credit failure, when a bank loan becomes a debt. This aspect is mostly framed in French sociology as “over-indebtedness,” which is an administrative and a social category. Throughout the paper, we address credit as both a relationship and a practice. This approach is heuristic, as we seek to demonstrate, because it enables us to show that credit is a social and political issue.
Conservatives have succeeded in casting government spending as useless profligacy that has made their economy worse, centering the policy debate in the wake of the financial crisis on draconian budget cuts. Americans and Europeans are told that they need to live in an age of austerity since they have all lived beyond their means and now need to tighten their belts. This view conveniently forgets where all that debt came from. Not from an orgy of government spending, but as the direct result of bailing out, recapitalizing, and adding liquidity to the broken banking system. Through these actions private debt was rechristened as government debt while those responsible for generating it walked away scot free, placing the blame on the state, and the burden on the taxpayer. That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget. The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea. First of all, it doesn’t work. As the past two years of trying and countless other historical examples show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it simultaneously: all that happens is a shrinking economy. Second, it relies upon those who didn’t make the mess to clean it up, which is always bad politics. Third, it rests upon a tenuous and thin body of evidence and argumentation that acts more to prop up dead economic ideas and preserve astonishingly skewed income and wealth distributions than to restore prosperity for all. In Austerity: The History of a Dangerous Idea, Blyth demolishes the conventional wisdom, marshaling an army of facts to demand that we recognize austerity for what it is, and what it costs us.
In a nutshell, three big and inter-related changes are under way. China’s appetite for US Treasury bonds, a cornerstone of the global economy for more than a decade, is waning. Beijing is ramping up its overseas development agenda to boost financial returns and serve key geopolitical interests. The promotion of the renminbi as an international currency is gradually liberating Beijing from the dollar zone, providing it with more latitude to open up to foreign portfolio investment flows.
Great powers rise and fall on the tide of history, but we lack the analytical tools to be able to map power transitions with any degree of confidence while they are actually occurring. The process of transition is not always peaceful and linear, but often jagged with friction. As the old and new powers cross each other on the way down and up, they create potential zones of tension that may lead to armed conflict through different pathways. A declining power may fail to recognize or refuse to accept its fading economic dominance, military might and diplomatic clout, persist in expecting and demanding respect due to its former status, and try to make the rising power pay for the perceived lack of respect. Conversely the rising but not yet fully risen power may exaggerate the scale and pace of its declining rival’s fall or its own ascent and provoke a premature confrontation.
Can a country be a democracy if its government only responds to the preferences of the rich? In an ideal democracy, all citizens should have equal influence on government policy–but as this book demonstrates, America’s policymakers respond almost exclusively to the preferences of the economically advantaged. Affluence and Influence definitively explores how political inequality in the United States has evolved over the last several decades and how this growing disparity has been shaped by interest groups, parties, and elections. With sharp analysis and an impressive range of data, Martin Gilens looks at thousands of proposed policy changes, and the degree of support for each among poor, middle-class, and affluent Americans. His findings are staggering: when preferences of low- or middle-income Americans diverge from those of the affluent, there is virtually no relationship between policy outcomes and the desires of less advantaged groups. In contrast, affluent Americans’ preferences exhibit a substantial relationship with policy outcomes whether their preferences are shared by lower-income groups or not. Gilens shows that representational inequality is spread widely across different policy domains and time periods. Yet Gilens also shows that under specific circumstances the preferences of the middle class and, to a lesser extent, the poor, do seem to matter. In particular, impending elections–especially presidential elections–and an even partisan division in Congress mitigate representational inequality and boost responsiveness to the preferences of the broader public. At a time when economic and political inequality in the United States only continues to rise, Affluence and Influence raises important questions about whether American democracy is truly responding to the needs of all its citizens.