Today’s reckoning is all about peers. Peer-to-peer lending…peer-to-peer investing…peer-to-peer sharing…and peer-to-peer killing.
But first, we follow the money…or lack thereof…
Your editor returned to the troubled eurozone today after a short stint in Scandinavia. We were in the quaint Norwegian oil town of Stavanger, there to attend a wedding. (The bride and the groom, clad in Victorian era garmentry, made the photographers’ — and attendees’ — roles a pleasure.)
The wealth is palpable in Norway. It’s in das autos on the streets…in guaranteed five-weeks annual paid vacation…in one year maternity leave, which can be split between husband and wife (the husband must take six weeks). The social programs are extensive…and costly. But Norway can afford her expensive habits, at least for now.
Down on the continent, things aren’t so rosy. Here in France, workers hang up their tools — mostly corkscrews and tortoiseshell bifocals, as far as we can tell — after 35 hours per week. Faced with toppy budget numbers and fattening welfare obligations, the newly elected socialist president, Francois Hollande, chose to address the nation’s official retirement age…but cutting it!
Is it any wonder Europe’s finances are such a mess? Crippling deficits are met with promises not to earn more, spend less and save the difference…but precisely the opposite. The media touts Hollande’s “pro-growth” agenda. They must be referring to the budget gap, which will surely expand in step with state interference into the economy. And there will be few near-term obstacles for Hollande. His Socialist Party now holds sway over almost all of the nation’s political institutions: The presidency, National Assembly, the Senate and all but one of the 22 regions and most local government.
Hollande’s finance minister, Pierre Moscovici, has pledged to meet his fiscal targets “without austerity.” Which is a bit like saying his citizens may eat their famous cake…and have it too!
Ain’t gonna happen, in other words. Moscovici’s plan for success rests on the same junk theory prestidigitation you’d expect from a career politician. He promises a vast array of tax hikes on all the usual suspects and in all the usual places — a stiffer wealth tax, penalties for companies, oil firms, financial transactions and inheritance. There’s talk of a dividend tax too…and a new top rate of income tax of 75% on incomes over €1M.
Where do these people get this stuff? Where’s the imagination? Don’t they have any originality? At least they could come up with a new stupid idea. Prosperity from spending? C’mon! At least Paul Krugman has his aliens theory…taking uncommon nonsense to a whole new level, even for a prize-winning economist.
That’s the problem with the state, Fellow Reckoner. It doesn’t have to be dynamic, responsive, keen to the market’s moves and tides, wishes and demands. No wonder its greasy tentacles (politicians) come up with such boneheaded ideas as a “common, mandatory currency,” one spread across dozens of countries and hundreds of millions of individuals. Whoever thought they were smart enough to respond to all the individual hopes, fears, demands and dreams of these people obviously had no intention of ever listening anyway…
In more ways than one, the state is its own worst enemy. Wherever it erects a barrier, it incentivizes an entrepreneur to profit from the workaround. Take, for example, the various peer-to-peer markets sprouting up all over the Internet in response to the state’s draconian regulations in almost every sector of the market.
The rental market provides one example. Everywhere you go, there exist regulations on how and to whom an individual homeowner may let his or her “own” property. Oftentimes, subletting is even more strictly regulated (for the owner’s “own good,” of course.) Real estate companies and rental agencies everywhere are required to comply with government-approved licensing, employee training and all manner of non-helpful intrusions into their marketspace. Then there are the less obvious obstacles. Employees must have “X” amount of time off, be paid “Y” wage, etc., etc., etc. What was once a simple and private renter-to-rentee contract soon became, with the state’s involvement, an endless nightmare involving myriad forms, applications, fees, graft and all the usual “trickle-up…to the state” economics.
Enter peer-to-peer rental sites. There is plenty of competition in this market — just as you’d expect — but this editor prefers airbnb.com (from which he receives no compensation/commission).
Airbnb.com is a site that, for a small fee, matches renter with rentee. Users browse through hundreds of thousands of listings to find a place that is right for their next vacation, from igloos to tree houses, houseboats to Parisian penthouses. Often times, these listings come in at a fraction of the price of comparable hotels…and users get the added privilege of living “like a local,” rather than in a generic room nearby the standard tourist traps. Users can choose to search by location, price, type of pad, available amenities etc.
Similarly, people can list their own space at a price of their choosing. Maybe it’s a rental house or apartment…or a spare room in their primary residence. (In free markets, users decide what they’re comfortable with…not state legislators.) Then, hosts can sit back and watch the market work. They’ll know within a couple of days if the price they set is too high or too low. How? The market will tell them, with either a bombardment of applications…or the sound of crickets.
Like similar sites, Airbnb.com works on the strength and size of its market participants. Members (joining is free) are invited to review each guest/host after their stay. In this way, users can judge for themselves where they want to stay and/or to whom they wish to rent. Testimonials are posted publicly and, consequently, people tend work on the value of their reputation, mindful that there’s a built-in incentive to treat other’s property with respect.
Since inception back in mid-2008, Airbnb.com has grown exponentially, going from one room booked through the site per day in 2008 to one room booked every two seconds this year. And just this month the company reached the 10-million-rooms-booked milestone. There are currently 55,000 spaces listed in the US, 105,000 in Europe, 20,000 in Latin America…and plenty more throughout Asia, Africa and Australia. And tonight, 1,200 people will be staying in accommodation that they booked through Airbnb.com …including your Paris-residing editor.
There’s something wonderfully satisfying about voluntary transactions, something pure and peaceful about knowing two people can come together, without force or coercion, and work for their own and each other’s benefit simultaneously.
Joel Bowmanfor The Daily Reckoning
Joel Bowman is managing editor of The Daily Reckoning. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world.
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Sounds great in theory, just like Craig’s List. I wonder how many borders have turned-out to be serial killers, maniacs, child molesters or terrorists. Before I rent my spare bedroom to any of them, I want the TSA running security pat downs in my garage for me. Background checks, X-rays, baggage inspections…,, I want the whole treatment for my “guests”. And if it means the government must spend millions to help insure my little operation generates $3,000 a year in revenue without any ner-do-wells, well so be it. It’s not my money, what do I care how the government wastes??
Watt u Fear shall come apon u! With ur “Negative Karma!” This is what we’ve bcome,afraid of the people,places,& things round us,an even our own shadow? BOO! A bunch of Wussy’s,shame on us!!! U have nothin 2 fear except the Boggie Man,inside ur own Head! Fear it-self! *S* PS i guess we can thank the Media 4 creating the Fear Factor,in all of us who have lost our B@ll$!
my neighbor’s ex-wife earned $17645 the previous month. she is making an income on the computer and got a $434200 home. All she did was get lucky and apply the information explained on this website http://get-url.com/
I first heard about Airbnb through Joel’s column. After doing my DD, I listed my spare room. It took some time but eventually I had some paying guests, all lovely people. With some good reviews I hope the coming summer season will see a higher turnover. (I am not on a high volume tourist location).
Also I have just spent 2 months travelling solo in Sth America,where I stayed with Airbnb hosts at many of my destinations. I met some lovely people, experienced different lifestyles, had local contact, and saved quite a bit on hotels. I’m a fan of the system. Thanks Joel for drawing my attention to it.
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