High finance in a market free of Government Regulation

Nov 27 2009.

This strip kind of calls for a comparison to above prime mortgages and recent fiscal problems.

Some have said the cause of our modern troubles is a reduction of government control over lending institutions.

I assumed it was because the banks thought that gaining houses and having people deeply in dept to them was good and simply failed to see the damage over proliferation of what was essentially a sucker loan would to the economy.

Though even with the assumption that house values would always rise, I can barely imagine most people being able to pay back the remaining 200k of the original 500k loan in their working life time and still pay rent in something that isn't a single bedroom in a crack house with a shared kitchen and bath.

Anyway, unregulated loans to good people wanting a start in life and the looming specter of human greed.

Lets let the more educated thinkers have at it.

Pawn shops are only regulated by the government to prevent them from selling stolen property.

Banks, though, are required to have collateral before they make a loan because they are official government-licensed check kiters. The reason for this state of affairs is so that we can have as much money in circulation at a given time as the economy can support; the previous scheme, sticking to precious metal coinage, meant a shortage of money, restricting economic activity. Since lots of factories and shipyards is what wins wars, we have central banks in every country today.

The other alternative is government issued fiat money. This isn't working too well in Zimbabwe. But even when a government is being careful and conscientious, as with the Assignats in France, or the Continental Currency in the United States, people just don't trust governments to print money - for good reason.

So, while the current banking system is perhaps a monstrosity, and not something that follows Libertarian principles, it was designed as a way of harnessing the ability of the free market to do certain things much better than the government could.

It wasn't just home mortgages.  My problems began when my original credit card company was bought by another.  My wife and I each had accounts with this company and I had an account with a second company and she with a third company.  The new company sent me a letter that  my account would be changed from a fixed rate to a variable rate.  I was given the option of closing the account without penalty and paying it off at my original interest and payment rate.  A few days later, I received a letter stating I had received the original letter by mistake and there would be no changes to my account.  Ninety days later my interest rate tippled and the payment doubled.  I attempted to talk to the company and explained that we could not make payments under the new conditions and  asked why  they would not abide by their original agreement and letters.  I was told I had been sent the second letter by mistake and they did not have to abide by the letter.  Additionally, I was no longer eligible to close the account without penalty.  If  I closed the account at this point,  the interest rate would go to the penalty rate plus the prime rate.  That they had the right to change the conditions of my contract at any time to what ever conditions they desired.   I tried to negotiate a lower rate and payments due to hardship and they would not even talk to me.  Shortly thereafter interest rates in our other accounts were affected.  WE had never missed a payment, yet our interest rates in all four accounts soon exceeded thirty percent.    We tried a consolidation company which got our original interest rates reinstated and  we were making the payments.   We made the payments for eight months, until my wife and I lost hours and pay.  To date we have lost approximately twenty-five percent of our income and could no longer make the payments.  Those payments would have taken eight years to pay off our original debt and we would have paid double the original debt. Under the new conditions, again we could not  get our interest or payments modified.  Top it off, our credit rating rating would have still been in the toilet during the eight years of the program and for seven years after.  Since they would not deal with us, we switched to a debt settlement company.  Within thirty days the amounts we had paid down on the accounts were wiped out with interest rates over thirty percent and penalties.  Paying the settlement  company about half the amount of our alleged debt, the settlement company estimates we will settle our combined credit company alleged debt within four years and our credit report will be clear.  In the mean time, the feds have given the creditors a bailout due to the status of our accounts (so they have already received payment for our debts).  The company with two of the accounts, was bought by a third company which is seeking to overturn our contract with the settlement company and reinstate the original contracts with thirty percent plus of interest and penalties.... meaning my wife and I would be in debt to them for the rest of our lives.  Can you say slavery....  The second creditor is also trying the same thing and the third creditor has settled.   To make life really interesting my wife has asthma and contracted H1N1 which turned into double pneumonia (pneumonia in each lung).  Fourteen days in the hospital with twelve days in intensive care.  I'm waiting for the insurance company to settle with the hospital.  We have lost more than two months of her income and if it wasn't for family I would not have been able to pay more than part of our bills.  We will have two other debs payoff in February and March 2010.  If the hospital and doctors will not work with me on the remaining debt, I'll have no choice but to try and file for bankruptcy.

Government regulations permitted these abuses, where we bear the onus of being a dishonorable criminal for not paying our "just debts."   Additionally , even though we are represented by the settlement company and are making payments into an escrow and service account, we can still be sued by the credit companies for what ever amount they decide to claim.

My wife and I had been paying these credit accounts in full and without problem.  When the housing market started coming apart, the credit companies invested in it tried to gouge us to compensate for their bad investments and losses.  Additional government regulation have forced increased costs for health care.  As a result my company has steadily reduced health insurance benefits.  My wife's company doesn't even offer medical insurance.  As a result, I have doctor and hospital bills I would not have had to deal with two years ago.

With the Capping Trade Bill, Health Care Reform, the Copenhagen Accord and the U.N. Small Arms Treaty we could be living in the opening chapters of the "Probability Broach" or the closing chapters of "Unintended Consequences" very soon.  

Gold and silver coinage did not lead to "restriction of money" in any honest sense. It did prevent the dishonest creation of faith-based "money" out of thin air. This troubled governments and their numerous corporate welfare-queen beneficiaries, since it is difficult to raise enough taxes to fund their extravagant schemes.

The century before the creation of the Federal Reserve System, the American economy grew at a fantastic rate. Until about 1971, we were still  nominally on the gold standard ( Central banks could redeem paper for gold, but citizens could not ). You can see two noticeable inflection points in the CPI graph - one in 1933 when FDR made it illegal for citizens to own gold, and one in 1971 when Nixon closed the gold window.

People underestimate how much economic growth happened before 1971. Sure, computers and big-screen TVs are wonderful - but we saw the rise from "third world" standards to "world industrial power." Wood and coal heating were replaced by natural gas and electricity; telephone usage became nearly universal; hot and cold running water became widespread. In short, vast changes came to America on a gold-based economy.

We do not need faith-based paper currency. We need  a stable, honest, dependable currency, free from government manipulation. Under those conditions, the government will shrink, and the economy will prosper.

It is no accident that "thrift" and "thrive" share the same etymological roots.
 

Nicely put Terry.  The entire banking system in the United States is a fraud against the American taxpayer.  The central bank (aka the "Federal Reserve" ) prints up paper currency with no backing and then charges us the taxpayer interest on it.  If Ron Paul can ram thru his audit of the Fed Reserve it will put a death sentence to it and not one second too soon.

Well legally requiring people be paid in an intentionally inflationary  currency  does mandate the worker to immediately spend what he has just earned, as it will never be as valuable as it is right now.

While this is good for the economy it is has negative impact in a mans hope of self-betterment.

We can only hope.  The Federal Reserve is a private company with a monopoly.  Without accountability or transparency, government stupidity on display.  The government "Tool" with the potential of destroying the government.

Finance problems stem from government market interference.  This interference via government spending and taxes.  Current regulations and taxes limit the market.  This limited and regulated market secures the government's control of the the individual.  While anyone may take-part in the market, only major players who support the powers that be receive protection in the form of "Rotary Socialism".  These players developed a private language, rules and regulations which shape the market to to their desired goals.

Smith has had quite a bit to say about free market banking and monetary standards in his books.  

I grew up knowing I would not succeed at everything I tried.  People need to be able to fail.  Learn from their mistakes and try again.  Repeating the process as often as necessary, until they reach their goal.  When the government stops the process, protecting us from ourselves, they destroy initiative.  Destroy initiative and self-destructive behavior accelerates.  Alcohol and Drug  Abuse become epidemic with their attendant problems.  Sound like anything we've seen in the news recently?

Gold and silver coinage did not lead to "restriction of money" in any honest sense. It did prevent the dishonest creation of faith-based "money" out of thin air. This troubled governments and their numerous corporate welfare-queen beneficiaries, since it is difficult to raise enough taxes to fund their extravagant schemes.

This in no way contradicts or rebuts my previous post. Gold and silver did restrict the amount of money available relative to keeping all the country's factories continuously running at full output - in order to make ships and tanks and airplanes in huge numbers in order to keep up with the country next door. Honesty, as far as whether the extra money being summoned into existence was "real" or not, had nothing to do with it. (Something like the old joke about the fur coat...)

It can indeed be presumed that while bank-created money allows all forms of wealth (land, factories, and so on) in the nation, rather than just one specific form of wealth (gold) to back the currency, a gold-based currency doesn't really cause "restriction of money" because the value of gold can rise, and Fort Knox never did have a 100% deposit requirement. One can have a currency whose value is measured against gold without it being exclusively backed by gold - and, indeed, countries had banking systems for centuries before they started abandoning the gold standard.

Banknotes, at one time, actually used to be printed by banks.

While this is good for the economy it is has negative impact in a mans hope of self-betterment.

 That's the main reason that we have the income tax.  Remember, it's not for the generation of wealth for the government like nearly everyone thinks that it is.  It's about control.  If the world's reserve currency is the American dollar then if the government needs money why don't they just print a little more money and not charge the American people any income tax?  The real reason is an additional layer of bureaucracy.  They can impose more easily their will and it's always easier to impose your will on someone without money or with very little because that limits their options to do something about it.  A Warren Buffet can always sell his U.S. stock,  get an economic citizenship from Dominica or St. Kitts and move there and renounce his citizenship so he doesn't have to pay any more American taxes.  Joe Sixpack who only earns 60 grand a year with a wife, two kids and a 300 grand morgage doesn't have that many options if they get fed up with what the government is doing.

While this is good for the economy it is has negative impact in a mans hope of self-betterment.

 That's the main reason that we have the income tax.  Remember, it's not for the generation of wealth for the government like nearly everyone thinks that it is.  It's about control.

lol, I'm Canadian.  It is deeply obvious from here that it's really a method of control and information gathering.

However I don't think the American version are quite as lenient to the little guy.

lol, I'm Canadian.  It is deeply obvious from here that it's really a method of control and information gathering.

However I don't think the American version are quite as lenient to the little guy.

O. D.  What are you refering to when you say that the government isn't quite as lenient as to the little guy?  I thought I made it pretty clear that if your rich or have some connections that you have some options but if your a poor smuck then you have few or no options.  I don't get your comment.

That's the main reason that we have the income tax.  Remember, it's not for the generation of wealth for the government like nearly everyone thinks that it is.  It's about control.  If the world's reserve currency is the American dollar then if the government needs money why don't they just print a little more money and not charge the American people any income tax?

The minute they start pulling that trick, the United States dollar stops being the world's reserve currency. And, indeed, starts being "not worth a Continental".

Oh, sure, you can lower the interest rate to increase the money supply a little - but if you start directly issuing new fiat money as a way of raising money, basically the trust on which your currency rests evaporates. (There are limited exceptions: for example, the issuing of United States Notes... but the danger in this kind of activity is high.)

Yes, taxation is for the purpose of grabbing money for the government to spend on things, because it's the safest way of doing that.

lol, I'm Canadian.  It is deeply obvious from here that it's really a method of control and information gathering.

However I don't think the American version are quite as lenient to the little guy.

O. D.  What are you refering to when you say that the government isn't quite as lenient as to the little guy?  I thought I made it pretty clear that if your rich or have some connections that you have some options but if your a poor smuck then you have few or no options.  I don't get your comment.

I mean lenient on the cash gouge. 

The socialist aspects of government tend to favor one particular group above others, usually divided by income.  Like in the 50's I think the US favored the middle class and since has slowly moved to favoring the upper class.

Canada right now favors the lower class.

Thats what I see anyway.

Government always favors whoever controls the government, and that is nearly always the upper class, either up-front or behind-the-scenes. When more generous bennies are offered to the lower classes, it isn't a matter of "favoring" them so much as a more progressive philosophy of livestock management.

lol, I'm Canadian.  It is deeply obvious from here that it's really a method of control and information gathering.

However I don't think the American version are quite as lenient to the little guy.

O. D.  What are you refering to when you say that the government isn't quite as lenient as to the little guy?  I thought I made it pretty clear that if your rich or have some connections that you have some options but if your a poor smuck then you have few or no options.  I don't get your comment.

I mean lenient on the cash gouge.  

The socialist aspects of government tend to favor one particular group above others, usually divided by income.  Like in the 50's I think the US favored the middle class and since has slowly moved to favoring the upper class.

Canada right now favors the lower class.

Thats what I see anyway.

Interesting comment, but I'm not sure that I agree with it.  If your right then why does the upper most 5% of Americans pay a disproportional amount of tax dollars to the government while the lowest 30% economically pay almost nothing?  If you were correct, wouldn't it be the other way around?
  I believe that it proves my eariler comment.  As far as the government wishes goes the best situation for them is to have as many people as possible in the lower middle class bracket.  They will all have to pay taxes that way and they don't have enough money to get themselves out of the situation by moving to another country and starting over.  I would also add that pretty much everything that the government has done economically over the last 30 years or so has been to nudge the people towards that goal.