CHANGING AMERICA'S MIND
Chapter 1 - Part9
The Insatiable Demand that Became an Addiction
Note: If you are just arriving to this blog, please start with the Introduction.
The book is being published sequentially as it is written.
The promise of Wall Street and the financial markets for double digit returns and beyond is one of the factors that seems to have fostered an insatiable demand by Big Money for ever higher returns. Perhaps the other major factor was described by Thomas Geoghegan, in the April 2009 Harper Magazine article entitled, “Infinite Debt” as the legalization of usury. He describes how the previous state usury laws limiting the interests that banks and other lending institutions could charge were overturned by a 1978 Supreme Court ruling in the Marquette National Bank vs. First of Omaha Service Corp. In this ruling, the court said that Minnesota could not enforce its usury law against a credit card issued by a Nebraska bank. The National Banking Act of 1864, it said, allowed banks to lend at interest rates set by the state where the bank is chartered, not where the loan is made.
In effect, this opened the doors to higher and higher rates leading up to the 30% rates now charged on credit cards and the much higher rates assessed by payday loan type companies. State after state repealed or loosened their typical limit of 9% in an effort to keep their banks competitive. (I will discuss this further in Chapter 3.) With this change, the Big Money began shifting out of manufacturing and other productive investments and into the financial sector, with its higher rates of return. This, I suggest, was the dope on which the markets got hooked, creating an insatiable demand for more – no matter the costs.
What Can Be Done?
As I said earlier, I do not believe in extensive regulations that attempt to bring such predatory practices under control. Big Money will simply recruit and provide incentives for fresh young minds to devise new games of “keep away.” It is impossible to create enough regulations to stop this theft and it would require far too many people to police them.
Instead, as I have implied throughout this chapter, I believe that the answers lie in an overhaul of tax policy. There, it is possible to find relatively simple, high leverage and lasting solutions. These will be further developed in the next chapter.
Your comments and thoughts are valuable in this discussion. Please forward the posts to friends who may be interested.
Chapter Two begins in the next installment.
Larry
Changing America's Mind is on Facebook - "Like" it and recommend it to your friends - Thanks!
Subscribe to:
Post Comments (Atom)
I've really enjoyed my reading, here. I didn't realize I knew so much about economics, in general, until I read what you've written AND that there were so many specific things I didn't know about the contemporary economic situation. Capitalism - yes, I understand it. You mean there are different KINDS of capitalism? No, wasn't aware of that. Finance capitalism? I agree that taxing may be the best way to counter/control the situation but I doubt that will ever happen given the money those who would be reigned in by such taxes would pour into preventing that.
ReplyDeleteHave you read Adam Smith's "A Theory of Moral Sentiments" (the prequel to "The Wealth of Nations")? I've read both several times but the second depends on the assumptions of the first in order to turn out as Smith envisioned. Without morals, there's still plenty of wealth but it doesn't belong to nations.
Once economics began to separate from it's root in ethics, we began down the path to what Hannah Arendt asserts - all of our values have become exchange values. And, it seems to me no more likely that we will ever be able to reattach ethics to economics than we can reattach a decapitated head to the body from which it was cut off. We can go through the motions and even make it look pretty good, but it will never again function as it should. Taxation is like the surgery to reattach the head. I don't know of a better idea - because I no longer think we're heading for a cliff. I suspect we've already run over the edge and have been enjoying the feeling of flying. Perhaps only recently has it dawned on us that the ground is fast approaching. Obviously, of course, it's too late to strap on a parachute. Maybe the only thing possible now is for someone on the ground to soften the fall? I'm not sure what would fit into that part of the analogy but hopefully your writing is heading for some a solution that has more potential for being attempted.
Keep up the great work. I'm absolutely enthralled and learning a TON!
Donna