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Monday, January 10, 2005

Comments

Dave

sort of, but not really.

credit cards are debt, not equity instruments. while they may securitize some aspects of small biz & individuals, they don't provide a general framework for long-term future economic performance. also, they don't typically work for aggregate structures.

as to natural resources, i'm not familiar with any significant securitization framework for them as yet... altho the Kyoto protocol and various carbon trading scenarios are attempted proxies.

if others are more familiar with any alternative sources for this info, please provide links.

w

Securitization for natural resources, small businesses, and individuals (vis a vis credit cards) have already been done synthetically and in a cash flow structure.

Dave McClure

well it would be grand if i had this all worked out already, but in fact figuring it out is kind of the whole point of writing this stuff. that said, there are numerous examples of other alternative forms of securitization for equities, bonds, real estate, and more recently derivatives of these.

if you're looking for basic definitions and explanations, check the Wikipedia definition of securitization.

re: environmental commons -- yes, a required first step would likely be to define ownership rights for ocean resources. whether it becomse 'private' property is a more involved discussion, however i'm simply outlining the theory here. securitization typically requires an owner, albeit it could be on behalf of a group or gov't.

re: securitization for people and/or small biz -- this doesn't have to occur at the individual level, although that's perhaps possible. broadly speaking, the securitization would be based on some form of financial asset and/or future revenue stream. one possibility could be retainer on a % of future earnings (see www.myrichuncle.com), or based on a secured interest in real estate or other assets (not unlike a home loan). most likely however, the securitized asset would be against a group, and an actual dividend or revenue stream might not be required (for example, many equities don't have a dividend, although some do).

and the "if this made sense wouldn't people already be doing it" straw-man is a bit short-sighted. most of modern fnancial securitization efforts have occurred only in the last 30-100 years, and the industry is still just getting started. there is plenty of room for further innovation. the venture capital industry is perhaps only 30-40 years old, and modern derivatives are only 20-25 years old. just because it hasn't happened yet doesn't mean it can't be done or doesn't make sense.

Mike

I wandered into this post last night while researching a paper. I'm glad to see creative thinking on the subject of reducing poverty and disease, but I think you need to give some examples and explain what you mean by securitization.

For the environmental "commons" you mentioned like the ocean: Is this making the ocean private property as some environmentalists have suggested?

If this is extended to people, what does the corporation or investor get in return? Future profits from the individuals? How is this not indentured servitude or slavery? Obviously this is not what you mean, but your concept confuses me.

If it is just a future pool of consumers, the investment timeframe is too long and direct payoff is too uncertain for the corporations you want to invest in these people or the corporations would already be doing this. No?

I just wanted to comment because I was trying to figure out the idea and haven't been quite able to grasp it.

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