Vox Populi

By Steve Cinelli , CrowdFundBeat Sr. Editor, @stevecinelli
Earlier we wrote on the power of the crowd to determine the future of Greece via its referendum.  Well, it appears that the voice of the people has become clear, that economic self-detemination is fundamental.  Certainly the “no” vote is not a GREXIT guarantee, rather a possible new positioning to the idiocratic nature of the banking troika.   Yes, the IMF, ECB and EU have lent hundreds of billions to a failed economy, with even a further anemic outlook.  And true, they want their money repaid.   But the debate should and could be elevated into how funds have been deployed, via an archaic banking system which has done little to open private sector activity.   We can discuss pensions and public sector spending, which will forever be a drag on a future, but the requisite  risk aversion under a regulated banking apparatus, impacts not only Greece but many other Western economies.
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The fundamental nature and practice of commercial banking, with its leveraged capital structures, thin margins, use of government insured liabilities (i.e., deposits), and snowballing levels of regulation and compliance costs, may have exhausted its viability as a business model.   In the US and elsewhere, new methodologies of finance are taking shape in the shadows, where financing is provided outside the conventional banking system, funded with true risk capital, without the fall back of deposit insurance. Whittling away at profitable banking activities, the new players are not just taking a new approach given the dilatory nature of banking, but advantaging a business model that may have become obsolete.
Using the commercial banking industry as the predominant means to deploy capital into the private sector may have stood the test of time, but now there is a need for a shift and the recreation of a banking construct, particularly in markets not vibrant with venture capital and private equity.   Might Mario Draghi and others look to next generation capital formation and deployment as a vehicle for a better Greece, or Italy, or Spain or Portugal?    Imagine, crowdfunding, a somewhat nascent concept, becoming the necessary path forward for these challenged economies.

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