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Please allow me to share my experiences with you. When I was 18, I had not yet capitalized on any of my talents, and I worked at a Starbucks. I took out a loan
by readme 12y ago
Please allow me to share my experiences with you. When I was 18, I had not yet capitalized on any of my talents, and I worked at a Starbucks.
I took out a loan on a car, with a 27%+ interest rate. I grew up in a poor family and I didn't really know any better at the time. That is, I knew, but I had not yet developed the /discretion/ to act on that knowledge with sound judgement. So, I signed for the car.
Approx 2.5 years later I defaulted on the car. Truly, 100% my fault, of course. 3 years later I finally paid off the car, but that's only after I got a decent few gigs developing mobile apps. So, for a lot of my life I worked way more than I should have just to pay the upkeep on this car, because full coverage insurance is pretty high when you're young. Fast forward a few years and I haven't missed a payment in 3 years and I have an amex. So yeah, I learned from some mistakes. But did it have to be that way? Do I want it to be that way for future generations? No, that's what HUMAN PROGRESS is for.
I'm in the Army now. There's a law that protects servicemembers. Pretty much whatever debts you have when you join the military must have interest reduced to 6% or less. Also, if you look at a lot of state laws, the limit on interest rates before the loans are considered usury is around 6%... This is because of the general attitude amongst people that servicemembers should be treated well. Geez, wouldn't it be nice if everyone was exploited less?
It's a pretty safe bet to say that, anyone loaning someone money at an interest rate above 20% is basically robbing that person blind.
To posit that the other party is morally responsible for his own choices, and not the lender, is certainly correct. Caveat emptor is very common knowledge by now. The real question though is: is it for the greater good that we do this? Does offering predatory loans to inexperienced buyers who have not yet developed a strong enough will or learned enough about personal finance serve a higher purpose, beyond making oneself rich? Is making oneself rich, the ultimate goal in life, or is there something more important than that?
Sure, it's the buyers fault for purchasing. That doesn't make you a good person if you're that predatory lender, or the guy who invested in those bonds. It makes you someone who willfully exploited another human being's ignorance or inexperience for their own personal gain. Which in my book, makes you a pretty despicable person.
So I don't think we should take away the freedom of buyers to choose what they want. I think we should take away the freedom of sellers to behave in ways that is obviously not conducive to human progress and prosperity.
- nationcrafting 12y agoI understand your sentiment. Really. However, let's look at the bigger picture to see if we can spot any unintended consequences of the policy you hint at. Interest is the price of money. Quite literally, it is the price that a person pays for buying access to a commodity called money now, rather than some time in the future. It is the price that another person is paid for selling access to their commodity called money. What you're essentially advocating is price intervention in a market. You're essentially advocating that the supplier of this commodity should give their commodity away at a lower price than the natural price arrived at by the market. The control of prices in just about any commodity is generally a precursor to a complete disappearance of that commodity on the market. Price controls on food are the best way to ensure food will stop being produced, leading to empty supermarket shelves, famines, riots, etc. Soviet Russia had a tight hand on prices during the 20s and 30s, which resulted in mass famines killing millions of people. A similar story is now unfolding itself in Venezuela. Whether you approve of the moral outlook or not isn't the point, it is a mistake to let a moral outlook, any moral outlook, dictate the price of a commodity. Price isn't just what you pay for something, it is a signal to the market of the relative scarcity of that product, and the necessity for the producers in the market to make more of it. That signal is essential for efficient markets, i.e. for markets to supply what we all demand. Think of the aggregate of all prices in the markets for all commodities as the neural signals that are fired off through your brain to enable it to function. Of course, that information is spread out over millions of market participants, but it is in aggregate much more accurate than any small committee dictating prices could ever model, whether they have the right moral reasons to do so or not.
- eli_gottlieb 12y agoYou know, a lot of people genuinely believe in simply reducing the reach of finance. Usury laws are only a means. The ends are to make it possible to carry out economic life without debt for most of society, and to reduce the ability of the financial industry to generate virtual/paper debts that the real economy cannot pay.
- readme 12y agoPrice control of commodities is not the same thing as controlling the interest rate on loans. No one is going to starve if they can't buy a car that is out of their budget. They will simply end up having to do something more practical, like getting a used car, riding a bike, or taking public transportation.