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Thinking about virus, monetizing public debt

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A Holy Grail of policymaking since the end of the 1970s high-inflation era has been to stop turning public debt into interest-free money. In emerging economies like India, where the idea made a late entry, this dogma is threatening to get in the way of mounting a robust response to the coronavirus.

The reluctance to surrender hard-won victories is understandable. Swapping the debt associated with grand anti-poverty programs with cheap-to-print currency used to have an irresistible sway. The belief that only an Odysseus-like central banker can avoid being seduced by the politicians’ siren song and steer the nation to price stability wasn’t an easy sell.

But as overseas capital and international trade became more important than foreign aid, the yearning for permanent low inflation won out. In 1997, the Indian government gave up its power to get any number of its treasury bills bought by the central bank, restricting itself to a temporary overdraft. For financing, it had to go to the bond market.

In 2015, the bank moved to inflation targeting, raising hopes that the rupee would one day be used and held internationally, giving India a durably lower cost of capital. That was then. Now, workers are stranded without jobs or pay. Firms are failing, lenders are piling up bad credit, and state governments are running out of funds. It’s crucial to secure financing for at least 13% of gross domestic product in federal and state deficits. That’s a $342 billion shortfall.

The government is unlikely to lean on the Reserve Bank of India for funding until at least September, the Business Standard reported Tuesday. Yet with foreign investors fleeing emerging markets, pretending that funds could materialize in the bond market is delusional. C. Rangarajan, the RBI governor who signed the 1997 agreement to end back-door monetization of public debt, believes its return may be inevitable.The right way to bring it back is by the front entrance. Stealth operations, like the RBI propping up a sovereign bond auction by asking dealers to buy on its behalf, according to a news report by Cogencis, are pointless subterfuge. It’s time the authority openly bought notes from the government by printing new money.

More than a grand vision, the bold approach needs details, which the middle managers in the finance ministry and RBI need to fill in. For a start, Prime Minister Narendra Modi’s government should sell stakes in every company that’s on the block for privatization—as well as some that aren’t—to a special purpose vehicle run by, say, the National Investment and Infrastructure Fund Ltd, which has demonstrated fund-raising clout with global investors. The SPV will finance the purchase by issuing sovereign-backed debt. When market conditions improve, it will sell its stakes and redeem the bonds.

Whatever is raised should be deployed in an infrastructure plan that has health at its centrepiece. This will boost construction and create jobs. Subsidized loans should be made available, but only to businesses that keep at least as many people on their payrolls as they had in February and make suppliers’ invoices available on a bill-discounting platform so vendors can get paid. It’s the workers and small and mid-size enterprises that are getting hammered by large companies passing on the pain of dislocation. In some private firms, such as airlines, the government will have to infuse equity.

It’s time to establish credibility with action, and not by observing institutional niceties. Excessive virtue-signaling by Japan serves as a cautionary tale. After its 1980s asset bubble burst, the monetary authority got tangled up in unconventional policies. Yet, the Bank of Japan bound itself to a “bank note rule,” vowing not to own more government bonds than could be repurchased by the private sector with the currency in circulation. It took governor Haruhiko Kuroda’s April 2013 bazooka to demolish the illusion that the BOJ was providing a temporary shelter for public debt—not swapping it with money forever.

India’s central bank also needs to think beyond cutting interest rates and flooding banks with liquidity. In McKinsey & Co.’s estimates, gross domestic product this year is on track to shrink by 2% to 3%. Deeper declines aren’t ruled out. The jobless rate is estimated to be near 23%. With no risk of inflation except perhaps in some food items, there’s no need to be coy about monetizing deficits. Being smart will do.

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Letter: Vote for Kiesha Preston | Letters

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The residents of Roanoke, Virginia, need to get out of the box of voting based on party affiliation. It’s time to vote for the best candidate to do the job.

Kiesha Preston is running as an independent and is the best choice for Roanoke City Council. When she was only three years old, she was troubled because a local Kroger store removed the kiddie carts. She asked me how to get them back so she could shop beside me. I told her to go to the manager and she did. She stated her case, and a few weeks later those kiddie carts were back in the store.

Kiesha also has presented a bill to Congress that was approved. The Virginia Domestic Violence Victims Protection Act prevents domestic violence victims from not being able to rent an apartment because of bad credit as a result of their abuser ruining their credit.

These are but two examples of Kiesha’s tenacity and getting results. We need people on council who have no agenda and are truly willing to work for the least of us.

Kiesha is not intimidated by those in power and will hold her own to help those who cannot help themselves. This is why she is the right person to get the job done.

Please do not be discouraged because you are tired of the same old same old where parties are concerned. You have another choice so please vote for Kiesha Preston. She has been working tirelessly on behalf of the people without being elected to an official office. Just imagine what she can do once she is officially on City Council.

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This One Credit Card Will Get You the Most Cash Back Right Now

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Let’s admit it, choosing the right credit card can be a stressful process. There are so many variables to consider—from annuals fees to credit score requirement—not to mention the various rewards and benefits each card offers, and how those align with your lifestyle and spending habits. Then there are those hidden fees and interest rates you have to reckon with. In other words, it takes a lot of work to make a truly informed decision when it comes to choosing a credit card that’s right for you. Perhaps a good cash back program is high on your credit card priority list because, well, who doesn’t like some extra money in their pocket?

To help you decide on the credit card that is going to get you the most cash back, the experts at personal finance site WalletHub compared more than 1,500 current credit card offers. From that large pool, they narrowed down the field to the cards that offer cash back rewards, comparing those offers based on initial bonuses, rewards earnings rates, annual fees, and more. From that analysis, here are the best credit cards that will get you the most cash back right now. And for more money matters, check out This Is the State Where Your Money Is Worth the Least.

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Alliant Cashback Visa Signature Credit Card

Best for: Cash back on all purchases

Cash-back rate: 2.5 percent

Annual fee: $0.00 for the first year; $99.00 after that

What kind of credit you need to get one: Excellent

Learn more about the Alliant Cashback Visa Signature credit card here.

If you are worried about having buyer’s remorse after choosing a credit card, put that into perspective by checking out What You’re More Likely to Regret Than Anything Else You Do.

7

Discover It

Best for: People with bad credit

Cash-back rate: 1-2 percent

Annual fee: $0.00

What kind of credit you need to get one: Bad

Learn more about the Discover It credit card here.

6

U.S. Bank Cash+ Visa Signature Card

Best for: Cash bonus for good credit ($200.00)

Cash-back rate: 1-5 percent

Annual fee: $0.00

What kind of credit you need to get one: Good

Learn more about the U.S. Bank Cash+ Visa Signature Card here.

And to make sure you have money to pay off those monthly bills, avoid The Biggest Career Mistake You’ll Ever Make, According to Experts.

5

Chase Freedom Unlimited

Best for: No APR on purchases

Cash-back rate: 1.5-5 percent

Annual fee: $0.00

What kind of credit you need to get one: Good

Learn more about the Chase Freedom Unlimited credit card here.

And for more things that will help you and your family stay on the right financial track, check out The No. 1 Sign You Shouldn’t Buy That House, According to Realtors.

4

Capital One QuicksilverOne Cash Rewards Credit Card

Best for: People with limited-to-fair credit and looking for low annual fee

Cash-back rate: 1.5 percent

Annual fee: $39.00

What kind of credit you need to get one: Fair

Learn more about Capital One QuicksilverOne Cash Rewards Credit Card here.

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Citi Double Cash Card—18 month BT offer

Best for: Flat-rate rewards

Cash-back rate: 2 percent

Annual fee: $0.00

What kind of credit you need to get one: Excellent

Learn more about the Citi Double Cash Card here.

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Capital One Savor Cash Rewards Credit Card

Best for: Dining and entertainment

Cash-back rate: 1-4 percent

Annual fee: $95.00

What kind of credit you need to get one: Good

Learn more about the Capital One Savor Cash Rewards Credit Card here.

1

Blue Cash Preferred Card from American Express

Best for: Most cash back overall

Cash-back rate: 1-6 percent

Annual fee: $0.00 for the first year; $95.00 after that

What kind of credit you need to get one: Good

Learn more about Blue Cash Preferred Card from American Express here.

And for more helpful information delivered to your inbox, sign up for our daily newsletter.

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Possible Raises Series B and Moves Fully Remote | State

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SEATLLE, Oct. 20, 2020 /PRNewswire/ — Possible raises $11 million in new equity funding to expand the team and to provide additional products for its customers. Union Square Ventures led the round, with participation from existing investors Canvas Ventures, Unlock Venture Partners, Columbia Pacific Advisors, Union Bay Partners, Tom Williams, and FJ Labs. The company has also secured $80 million in new debt financing from Park Cities Advisors.

Furthermore, the company is now fully remote and recently onboarded software engineers from across the US and the globe. Possible is committed to distributed work and actively recruiting for a number of other remote roles.

Possible provides friendly access to capital and a simple way to build credit for people who otherwise would get a payday loan or get hit with a bank overdraft fee. The company uses real-time financial data, rather than a credit score, to qualify customers and provide funds instantly through its iTunes and Android apps. Unlike payday loans or overdraft fees, Possible loans are paid back in small installments over multiple pay periods to allow customers to catch their breath. By reporting on-time payments to the credit bureaus, Possible enables its customers to build credit history and eventually qualify for cheaper, longer term financial products. On average, customers with low credit scores see their scores increase by 70 points within 4 months.

Tony Huang, Possible’s CEO explains, “So many people who live paycheck to paycheck can’t afford to build credit history. We’re helping them do it for the first time while providing them with a friendlier and more affordable small-dollar loan.”

Since launching in June 2018, Possible’s given out loans to hundreds of thousands of customers, helping meet short-term cash needs while building credit history or establishing credit for the first time. These customers, often with bad credit or no credit history, are underserved by traditional banks. Possible fills that gap and provides financial access to those who need it most while giving them the means to climb their way out.

Gillian Munson, Partner at Union Square Ventures, explains the thesis behind their new investment, “Through tech innovation, data-driven insights, and a focus on the customer, Possible is well on its way to winning the hearts and minds of both consumers and regulators alike, and building a trusted brand that endures.”

A 2019 Experian study shows 34.8% of consumers are subprime and can’t access money when they need it. They pay $106 billion in punitive fees each year to the existing financial system for short-term credit products. These consumers are trapped in predatory debt cycles of payday loans and overdraft fees without the means to rebuild their credit or improve their financial health. While there has been a number of new tech-enabled products in this space, most lead to similar debt cycles and don’t address the harder issue of improving long-term financial health. That’s where Possible comes in.

Since the company is now fully remote, Possible is actively hiring talent across the globe. Tyler, Possible’s CTO, explains, “Being fully distributed allows us to access the talent pool of the entire world. Our success so far is a reflection of the quality of our people, and we believe hiring globally will allow us to find exceptional people to join us in achieving our mission.”

About Possible

Possible is a fintech company based in Seattle, Washington. The company provides a friendlier and easier way for customers to access capital while also building credit history and improving long-term financial health.

About Union Square Ventures

Union Square Ventures is a thesis-driven venture capital firm based in New York City. USV manages over $1 billion in capital across seven funds and focuses investments in portfolio companies with the potential to transform important markets.

About Park Cities Advisors LLC

Park Cities Advisors LLC (“PCA”) is a privately held, SEC-registered alternative credit manager based in Dallas, Texas. PCA is focused on private lending across the specialty finance and FinTech sectors and provides debt capital to companies across a variety of industries through asset-based financing transactions.

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