IslamicFinance.de

According to a study by The Student Loan Report, over one-fifth of current university students with student loan debt indicated that they used their student loan money to invest in digital currency such as bitcoin. While school administrators may look down upon the practice of using borrowed funds for non-school expenses, Student Loan Report indicates that there are currently no rules against it. College students are able to use loans for "living expenses", a flexible category that covers a wide range of potential necessities. This sort of thing does not help the image of student borrowers, although it does strengthen the case for regulating cryptocurrencies far more strictly.

In Book I of Plato’s Republic, Socrates discusses the morality of repaying debts. Cephalus, a businessman living in the commercial Piraeus district, states the typical ethic that it is fair and just to pay back what one has borrowed or received. Socrates replies that it would not be just to return weapons to a man who has turned into a lunatic. Because of the consequences, paying back the debt would be the wrong thing to do. At issue is not the micro-economic morality of paying a debt, but how this act affects society. The morality of paying back all debts is not necessarily justice. It should not be surprising that modern financial elites are fighting back against democratic moves. It has all happened before – and so have revolts by debtors and other exploited victims of such 'economism'.

"The Age of Stagnation", the latest book by former banker and author Satyajit Das is now available. The book says that the world is entering a period of stagnation, the new mediocre. The end of growth and fragile, volatile economic conditions are now the sometimes silent background to all social and political debates. For individuals, this is about the destruction of human hopes and dreams. Authorities have been increasingly forced to resort to untested policies including QE forever and negative interest rates. It was an attempt to buy time, to let economies achieve a self-sustaining recovery, as they had done before. Unfortunately the policies have not succeeded.

Even though the struggle over Greece’s bailout has receded from the news, with many countries carrying large debt burdens, the need to restructure sovereign debts is not going away. But as Greece illustrates, the recent pattern has been to try to get blood from stones, and to be indifferent to the very real risk of turning fragile economies with weak governments into failed states (it must also be pointed out that Greece actually has gotten a lot of debt relief, but in the form of lowering of interest rates and extensions of maturities, but is being held to such unrealistic government budget and labor market “reform” targets as to virtually that the debt to GSP ratio will continue to worsen).

The recent IMF paper, Rethinking Financial Deepening: Stability and Growth in Emerging Markets, is focused on the impact of financial development on growth in emerging markets, but its authors clearly viewed the findings as germane to advanced economies. Their conclusion was that the growth benefits of financial deepening were positive only up to a certain point, and after that point, increased depth became a drag. But what is most surprising about the IMF paper is that the growth benefit of more complex and extensive banking systems topped out at a comparatively low level of size and sophistication.

In a remarkable and long-overdue change in attitude, institutional investors are starting to tell private equity titans that they think they don’t earn their outsized pay. As Oxford professor Ludovic Phalippou explained in a 2011 paper, the prototypical 2% management fee, 20% profit share structure is deceptive. Remember that that 2% fee starts ticking as soon as the investor makes his commitment to the fund. But no money has passed hands. The private equity fund isn’t managing any money at that time, just on the hunt for deals. It typically takes several years for all the funds to be invested. Phalippou estimates that the effective management fee level, as a percent of funds at work, is a mind-boggling 4%.