Thirsty Rock

In many so called Third World countries, informal businesses thrive. Hernando De Soto and his team note in The Mystery of Capital: Why Capitalism Thrives in the West and Fails Everywhere Else that an estimated four billion people across the globe operate within the extralegal sector. Most researchers, including De Soto, have shown that this sector contributes significantly to Third World GNP yet the sector exists outside the law and is generally beyond the reach of banks. In the numbers game, where banks have failed dismally, mobile telephone operators have flourished. Annual increase in mobile phone uptake in developing countries and former Communist states have consistently exceeded projections. According to the International Telecommunications Union , of the 1.2 billion mobile phone users worldwide, 45% live in developing countries - a natural habitat of the extralegal. New and improved specifications such as Mobile Information Device Profile (MIDP) and Connected Limited Devi...

To avoid expensive overseas calls many people in the developing countries rely on callback systems (invented in 1990 by Argentine/Spanish entrepreneur Martin Varsavsky ). Here is how it works. A call is placed to a toll free number, followed by a PIN code unique to each subscriber. Within seconds of the subscriber hanging up a computer calls back to accept the desired destination number. Trans border calls set up using callback systems are far cheaper than the rates charged by local phone companies since callback calls originate from low tariff networks in the West (notably America). Understandably this practice incenses telephone monopolies and the governments that support them. Large chunks of income is lost by operators along with depressed tax collected. One way to stifle callback systems is to blacklist and block calls to known toll free numbers. In some countries legal action is an option available to the operator and is a deterrent for those contemplating use of call back ne...

Last week The Fed briefly rattled stock markets with an unexpected inter-meeting rate cut. A full 75 basis point adjustment. Rumors suggest that a precipitous drop in global stock markets forced the Fed's hand. It has come to pass that the actions of one Jerome Kerviel, a rogue trader in Paris who committed the bank Societe Generale to a 50 billion Euro position, may have unnerved the Fed. In an effort to unwind Jerome's trades Societe Generale triggered widespread investor flight from the markets. By reducing the rate, a mere week before the scheduled Federal Open Market Committee meeting, did the Fed react to events at Societe Generale ? The Financial Times wrote "The question being asked now by some in the markets is: was the Fed duped into a clumsy and panicked move by the clean up operation for Jerome Kerviel's mammoth losses from the French bank?". If that is the case and with what we know now, this is surely to embarrass Ben Bernanke. In any case, the ...

2007 has turned out to be a difficult year for anyone involved with subprime mortgage lending and most should be relieved that this Annus Horribilis is coming to a close. Seventy billion dollars in write-downs was announced in the first two weeks of December, all related to so called NINJA loans (No Income, No Job, No Asset). Experts expect more losses before the situation normalizes late into 2008. This week the Federal Reserve Bank plans to auction some USD 40 billion in an effort to lubricate credit markets. Earlier attempts involving several hundred billions of dollars failed to move markets. Some doubt that the puny auction is sufficient to steady a 12.7 trillion dollar industry. It would appear that credit markets have taken on a life of their own, completely outside the Fed's province. Will 2008 be an Annus Mirabilis ? Perhaps not. The current turmoil must play itself out before banks recover from a collective position of distrust.

There are many pretenders to the VoIP (Voice over Internet Protocol) throne. Skype is way ahead of the competition and has many a phone company worried sick. With an estimated 70 million users globally, Skype certainly punches above its weight. Users around the world enjoy free computer-to-computer calls over the internet while fixed-line phone companies look on helplessly. However Skype has failed to threaten the mobile telecommunications arena because of the non-standard (usually closed) operating systems embedded in mobile phones. In addition, Skype works best on broadband (high speed) internet connections such as Wi-Fi, a feature found only on the more expensive hand sets. The mobile phone market has largely been spared the onslaught from cheap VoIP calls. Until Fring showed up. What is Fring? This is what it says on the Fring website: Fring ‘s mobile VoIP application enables you to make voice calls, chat and check out who’s online before dialing (real-time presence), no ma...

Trade between Africa and China has grown exponentially in the last decade breaching USD 40 billion in 2004. Most of this growth is fueled by commodity exports to China including oil and minerals. It helps that the Chinese government throws in the odd gift; a huge football stadium in Tanzania and a USD 150 million office complex for the African Union in Ethiopia are some of the recent signs of the benevolence of the People's Republic of China. Unlike financial aid from the West which is often laden with strings and is increasingly considered intrusive by most African governments, Chinese investments are unconditional. These investments are almost always targeted at infrastructure development. Compared with the seemingly endless workshops, seminars and consultancy services preferred by donors from the West, Chinese help brings meaningful relief to local communities and could be the reason why Chinese engagement is highly sought after in Africa. As a bonus, the Chinese do not tag ...

Investopedia defines money as "A commodity or asset, such as gold, an officially issued currency, coin or paper note, that can be legally exchanged for something equivalent, such as goods or services". Joe Plummer offers a more interesting definition: Fiat money is inherently worthless paper, backed by absolutely nothing, and because so, government must force people to accept it via legal tender laws. The last twelve months has seen the world's favourite fiat money, the United States Dollar, resemble more closely Joe Plummer's description of money. Oil exporters have taken note. Kuwait has quietly removed the dollar peg. It is rumored (and one-year forward contracts support this rumour) that Saudi Arabia is on course to unhinge the Riyal from the dollar hook. President Mahmoud Ahmadinejad couldn't agree more with Plummer. "They get our oil and give us a worthless piece of paper... the dollar has no economic value" complained the Iranian leader at th...