Mostly we get lies, spin and obfuscation from central bankers, politicians and bureaucrats. But every once in a while, one of these people accidentally wanders into the truth.
IMF Director Kristalina Georgieva did just that during a recent panel discussion hosted by CNBC. She conceded that central banks globally “printed too much money and didn’t think of unintended consequences.”
I think we are not paying sufficient attention to the law of unintended consequences. We take decisions with an objective in mind and rarely think through what may happen that is not our objective. And then we wrestle with the impact of it.
“Take any decision that is a massive decision, like the decision that we need to spend to support the economy. At that time, we did recognize that maybe too much money in circulation and too few goods, but didn’t really quite think through the consequence in a way that upfront would have informed better what we do.”
How this economic brain trust missed failed to consider that injecting trillions into the economy would cause prices to rise is a bit of a head-scratcher. This is economics 101. Expanding the money supply pushes prices higher than they otherwise would be. I knew this would happen. Peter Schiff knew this would happen. Heck, you probably knew this would happen. But the people charged with running the global economy didn’t?
These people are either wildly incompetent, or they are lying to you.
The International Monetary Fund (IMF) has published the results of research conducted into how lenders are likely to be doing their business in the future, and what new information and personal data these companies plan to start asking from borrowers in order to determine their credit score.
The biggest takeaway is the seemingly inevitable shift from merely accessing credit information to also incorporating people’s online behavior into the process of deciding whether to lend them money necessary, for example, to buy a house.
Compared to the way the system now works in most countries – these changes, which are expected to be coming soon, look fairly invasive privacy-wise, and with no “vision” of proper safeguards. Banks and others will go as far as to access personal browsing and shopping history. This would be done by allowing automated systems, powered by algorithms, to harvest the data and turn it into credit reports.
With more services than ever collecting your data, it’s easy to start asking why anyone should care about most of it. This is why. Because people start having ideas like this.
In a new blog post for the International Monetary Fund, four researchers presented their findings from a working paper that examines the current relationship between finance and tech as well as its potential future. Gazing into their crystal ball, the researchers see the possibility of using the data from your browsing, search, and purchase history to create a more accurate mechanism for determining the credit rating of an individual or business. They believe that this approach could result in greater lending to borrowers who would potentially be denied by traditional financial institutions.
At its heart, the paper is trying to wrestle with the dawning notion that the institutional banking system is facing a serious threat from tech companies like Google, Facebook, and Apple. The researchers identify two key areas in which this is true: Tech companies have greater access to soft-information, and messaging platforms can take the place of the physical locations that banks rely on for meeting with customers.