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Near Zero Interest Rates

I was recently interviewed for the New York Times article 0.2% Interest? You Bet We’ll Complain.

Fed board governor Sarah Bloom Raskin said in prepared remarks:

[M]any households are benefiting from the low level of interest rates […] [H]ouseholds have been able to refinance their mortgages into lower-rate loans, freeing up income for other uses.

My take on mortgage refinancing:

She blithely assumes that everyone who could refinance their mortgages at current interest rates has done so. She ignores effects of credit scoring and outrageous fees banks are charging for those refinancings.

The more general point:

We are rapidly approaching a situation where Congress and the administration are unwilling to confront bankers on the need of thoroughgoing reform of everything involving household finance and credit reporting/credit scoring because it would cost the bankers money to do so. Our policy makers do need to think about what we are transferring to the banks. Why is the public obligated to provide them with all those subsidies?


  1. "She ignores effects of credit scoring and outrageous fees banks are charging for those refinancings." Ya think? My credit score should be higher than 720 top 10% in income and top 4% in wealth. Home equity at 75%. 0 bankruptcies, 0 defaults, on time payments, etc. Total debt service as a % of disp. inc, which includes only a mtg, at 7%. I was denied refinancing even with income verification, etc. Before the year is out I am changing banks from BofA to BBT even though they don't have a branch in my town and paying off the mtg. I am fed up.

  2. The Fed board governor seems to be assuming that everyone is a borrower and no one is a saver. So "low interest rates" are automatically a good thing.

    Perhaps in her mental universe (where loans are from credit bubble finance – not REAL SAVINGS) this is true. However, in the real world, a policy that undermines real savings (for example a policy of artificially low interest rates) will lead to terrible consequences.

    1. Real saving invests in a particular means of production integrated into a particular productive organization producing particular goods hoping to satisfy particular consumers who are free not to consume the produce. The only "interest rate" is the necessarily risky yield of this real investment.

  3. An interest rate is what a borrower agrees to pay a saver (or the representative of a saver).

    The money lent out may be spent on consumption (i.e. there may be no investment for a particular loan) or on investment – and the investment may not come off.

    In Islamic law one gets paid a percentage of the profits of an investment – but that is NOT "interest" and "lending money" in Western terms.

    Interest rates are determined by the time preferences of savers and borrowers.

    Risk is indeed a factor (but not the only one) and the profit a borrower thinks they will make on an investment may be factor also (if the loan is for investment).

  4. Extending credit only to fuel the borrower's consumption seems riskier still. If the borrower already has valuable productive means, why does he need to borrow to consume? If has no valuable means and acquires none through credit, but only borrows to consume, how does his creditor expect to be repaid?

  5. A preference for future consumption is not the only, or even the primary, determinant of interest rates; however, insofar as a preference for future consumption is decisive, historically low interest rates at this time seem completely reasonable to me. Never before in human history have so many sought so much future consumption (so many years of retirement) from so few (relatively).

    In Japan and much of Europe, the labor force expected to produce the future consumption for a ballooning population of would be retirees is not only shrinking relative to the population of would be retirees, it's actually shrinking in absolute terms, even while the population of would be retirees balloons. China's population is not far behind. The U.S. labor force will not soon contract in absolute terms, if employment growth returns, but it will grow relative to the population of would be retirees, who consume in retirement by extending credit to the remaining laborers.

    Why would markets not lower interest rates under the circumstances, even reaching rates below zero? What would prevent this incredible shrinking labor force from demanding a very low price for credit?

  6. Unless there is credit-money expansion (i.e. a boom bust event in the making), interest rates are determined by the preference for some people to have more money in future than they have now.

    For this desire they are prepared to give up the money now (and risk losing it) in the hope of having more money (because of the interest).

    People who borrow money may be borrowing it for investment or for consumption. Investments may or may not pay off. And people who borrow money for consumption (sadly most borrowers these days) may or may not be able to pay their loans from future income (in the case of government borrowing the future income is taxation).

    As for reducing interest rates below zero – why would people give up their hard earned savings to actually have LESS money in the future?

    They would be better off not lending out the money at all (then lending it for no interest).

  7. … interest rates are determined by the preference for some people to have more money in future than they have now.

    Interest rates are determined by the supply of and demand for credit. "More money in the future" describes the motivation for extending credit only superficially.

    I extend you credit because I want your business. I want you to purchase my goods rather than someone else's goods. If you do not purchase my goods because you lack sufficient money currently, I may extend you credit. By extending you credit, I agree to accept money in the future in lieu of money today, but I don't necessarily want more money in the future as much as I want your business today.

    If I will not extend you credit, competitors who will extend you credit get your business. If the market is full of creditworthy borrowers without sufficient money currently to purchase what they require, refusing to extend credit drives me out of business, even if no one ever wants to earn more money in the future than he earns today.

    When borrowing fuels investment, demand for credit could have more to do with a desire to earn more money in the future, since investors borrow to purchase productive means hoping to produce goods and exchange these goods for money in the future; however, "more money in the future" is often misleading in this context as well.

    As a producer seeking credit, I may only desire to deliver different goods in the future, not more goods for more money but different goods earning the same quantity of money I earn currently. If I do not invest in this way, I lose my business to producers who do respond to changing market demands.

    … prepared to give up the money now (and risk losing it) in the hope of having more money (because of the interest).

    Extending credit does not simply give up money now for money in the future. Credit exchanges any valuable good for money in the future. When I extend you credit on a car, I agree to accept money in the future for your possession of the car today. I do so to earn your business today, not simply to earn more money in the future by charging interest. Interest serves many purposes. The purpose you describe is not the most consequential.

    As for reducing interest rates below zero – why would people give up their hard earned savings to actually have LESS money in the future?

    Because they want valuable goods in the future and don't expect to produce these goods in the future yourself.

    While you produce valuable goods yourself, you don't need savings, because you have your own produce to exchange for other goods (first for money and soon after for other goods). When you do not produce yourself, you need savings to consume.

    If you value future consumption over current consumption, you may exchange less consumption in the future for more consumption today. For example, you may exchange two widgets that you produce today for one widget produced by someone else ten years from now. That's a negative interest rate. You accept this bargain, because you either cannot or will not produce the widget yourself in the future, and you do not find prospective producers willing to accept a lower price for their future produce.

    They would be better off not lending out the money at all (then lending it for no interest).

    No. If they want the future consumption without future production, they must pay the market price, even if the price is higher than they prefer. A buyer always prefers a lower price.

    Imagine a world with ten sixty year olds and five sixteen year olds. The sixty year olds own everything except the labor of the sixteen year olds. In this scenario, negative interest rates are inevitable without vast coercion. We're rapidly approaching this sort of market. Japan is already there. Denying this reality cannot change it.

  8. The thread was about lending people money.

    You have changed the subject to letting people have goods now if they promise to pay (and pay extra) later.

    This is a dishonest dodge on your part.

  9. Extending credit as described is the business of free banking (with "fractional reserves"), and free banking of this sort is the subject of this web site. You're the contrarian here, not me. You want to change the subject, not me. Anyone discussing a subject that you wish not to discuss is not therefore "dishonest". Impugning my motives this way is the dodge.

    When I extend you credit, your obligation to repay me over time (my right to receive income from you over time) is itself a valuable asset that may be negotiable. The obligation is as valuable as you are creditworthy. A record of this obligation (your promissory note) differs little from the title to a house or any other certificate of a right or obligation, including a warehouse receipt for gold.

    If people accept your note from me in trade, only to exchange it later for another good, then it is money, because "money" describes anything that people accept this way. In this scenario, "lending money" describes the act of creating money. The money is not backed by nothing. It is backed by the creditworthiness of a borrower, often by specified collateral other than the borrower's labor, like the title to a house or a car or another valuable good.

    "Extra" is your word and another dodge. What an individual promises to pay later involves the specific terms of specific contracts in specific bargains. No general law of free commerce implies that the value of goods returned later must exceed the value of goods obtained currently.

    When an economy generally grows, a "zero interest bound" seems reasonable, but we're approaching a different sort of economic climate, unprecedented in modern history, in which the property accumulating labor force stagnates or contracts while the population of property divesting retirees rapidly grows. Japan is already there. We can discuss this reality and its consequences or not, but denying it doesn't change it.

  10. Lending money is lending money.

    Letting people have goods and hopeing they will pay you later (plus a mark up for late payment) is another business.

    A baker saying "you can have the loaf of bread now – you can pay me for it tomorrow" does not make the baker a money lending (i.e. a banker).

    By the way a money lender (his own money or the money of other savings) is all an honest banker is.

    Japan is a Central Bank dominated credit bubble joke.

    Like most places.

    This is exactly the "reality" that free market people are AGAINST.

    In a free market loans are from REAL SAVINGS.

    And people do not lend out their hard owned savings without hope of return.

    So "zero interest rates" are only favoured by collectivists, as they can only be "achieved" by interventionism.

    Still this situation will soon break down.

    2013 will see the start of the breakdown.

    1. Extending credit is not letting people have goods and hoping they pay you later with a mark up for late payment. Extending credit is exchanging a good now for another good later. The good you agree to accept later may be more or less valuable, in terms of current market value, than the good you surrender now.

      A baker saying, "you can have the loaf of bread now – you can pay me for it tomorrow", may outsource his credit accounting to a business specializing in this accounting service. A bank is a business specializing in this service. Specialization and trade is the source of profit in a free market.

      Japan is a society in which the labor force is shrinking while the population of would be retirees is growing. It is, isn't it? Denying reality doesn't change it.

      Real savings are real means of production held by individuals expeecting future productivity. Holding money is not real savings unless the money is title to a real means of production. If you want a real yield on a real investment, you must hold a real means of production. Money is not a means of production per se. It is an accounting device. If you want to hold a real means of production, you typically exchange money for the means of production.

      If you lend out your hard earned savings, by extending credit on the real means of production to which you hold title, you earn the free market yield, unless some state imposes a higher yield. I don't want a state imposing a higher yield. I don't want a state selling entitlement to tax revenue, and I don't want a state imposing a legal tender over the terms of contract.

      Zero interest rates and lower rates are favored by every individual seeking credit, because individuals seeking credit favor the lowest interest rate they can find in a free, competitive credit market. If the supply of credit is large, compared with the demand, the interest rate will be low, even negative. Creditors desiring a higher rate must appeal to a state commanding a rate higher than the free market provides, and that's exactly what they're doing now. In the demographic transition, these higher rates are the state imposed, collectivist rates, imposed by states representing the interests of relatively influential baby boomers.

      I'm a "baby boomer" myself, albeit a late boomer, born in 1962, but I'm also a father. I have three children in college now who face the incredible rent pressures imposed by my generation through the state, and I've decided to think in terms of their interests rather than my own. They will live long after I am nothing. They will then be the only remnant of me. Putting their interest before mine is acting in my own human self-interest. I am the quintessential Misean here. You seem more like someone without children.

  11. A money lender lends out SAVINGS (their own and/or other people's savings).

    Interest rates are determined (in a free market) by the time preferences of savers and borrowers.

    An honest banker is a money lender – and nothing more.

    Letting people have goods (such as a loaf of bread) in return for a promise to pay the next day (or whatever) is not banking. Whether or not the customer promises to pay more money the next day than he would have paid had he had the cash on him when he went to buy the loaf of bread.

  12. I hear you and I understand you – only too well, including those parts of your position that you normally choose to hide. Although your recent comment that you wished to rob and murder land owners (sorry – that you did not care if other people robbed and murdered landowners) showed what you are to any observer.

    However, hearing you and understanding you does not mean agreeing with you.

    I reject your anti private property collectivist philosophy with every ounce of my spirit, and will fight against you and your kind till my last breath.

    As for money lending – i.e. honest banking.

    If one wishes to lend money, one must first have money to lend. Either one's own money (one's own savings), or the savings that others have entrusted to the money lender to lend out.

    Letting people have goods in return for the promise of future payment is not the same thing as money lending.

    All this you know perfectly well. Your own words on money lending (banking) are a pretense. A pretense to cover your collectivist agenda.

    I have met your kind before – collectivists who call themselves libertarians, and quote (out of context) libertarian writers.

    The great issue in politial economy and in political philosophy, is private property in the means of production, distribution and exchange.

    In a free economy such things as land are owned by private individuals or organizations. And lending is from REAL SAVINGS – hence the need for RATES OF INTEREST to attract the savings.

    When one meets the enemy it does not matter if you call themselves socialists, (anti property) anarchists, or (now) "left libertarians".

    The Red Flaggers and the Black Flaggers use the same methods (indeed often march together), and have the same basic aim.

    The destruction of what is left of civil society.

    1. You know of me only what I write here, so your claim that I "normally wish to hide" something is nonsense. Anything I wish to hide here is something that you don't know.

      Someday, you might learn to distinguish sarcasm from literal assertions. You might also learn to think beyond your own narrow ideology, rather than reflexively dismissing every contrary view as "dishonest". You might, but I reply to your posts to present a counterpoint to your way of thinking, not to change it. Accusations of "dishonesty" and similar attacks on my character go in one ear and out the other. You may waste words this way if you please, of course.

      If one wishes to lend money, one must first have money to lend.

      Here, you simply assume that what you call "money" is what everyone else calls "money", presumably because you can imagine no other "money" and would force everyone to use only your "money" if you could.

      Again (and again and again), I may extend you credit on a house that I have built. I may exchange title to the house for your note promising to pay me for the house in installments over time. You may promise to pay me in gold or silver or corn or milk or anything else we agree to use as a standard of value, even other notes secured by other houses. I may also accept multiple notes, each promising part of the standard you promise later to obtain and deliver to me. This transaction involves no coercion between you and me, and I don't understand why anyone calls it "dishonest".

      Your promissory notes entitle me to payments from you. The notes are valuable to me for this reason; otherwise, I don't exchange the house for them. The same notes can also be valuable to my neighbor for the same reason. My neighbor may freely exchange goods he holds currently for the same promises payments, and he may accept the notes in trade expecting another neighbor to accept them in trade similarly. I don't understand any "dishonesty" in this transaction either.

      In this scenario, because my neighbors and I use these notes as a medium of exchange, the notes are money by definition, but this money does not exist before an extension of credit occurs. Contracting for credit creates the money, but the notes are not backed by nothing, because the house is collateral. If you default on your obligation, you forfeit title to the house, and holders of the notes may claim any equity in the house that you have not yet acquired.

      Money of this kind seems completely honest and useful to me, so it requires no hidden agenda.

  13. Martin you were not being sarcasic.

    You made a mistake – you dropped the "libertarian" mask and showed your true face.

    As for money lending (honest banking).

    I repeat what I (and many others) have often said before.

    If you want to lend out money you must first have money to lend – either your own savings, or savings that other people have entrusted to you.

    Interest rates (in a free economy – not a credit bubble farce) are determined by the time preferences of savers and borrowers.

    Letting people have goods in return for promises of future payment is NOT money lending (it is not banking – honest or otherwise).

    Of course if most borrowing is for consumption (such as buying houses and apartments) rather than real investment, then there is trouble in store for the economy (i.e. all those savers and borrowers – as the exchanges between real people are all an "economy" really is).

    And even real investments (to produce goods and services better) can also go wrong.

    There is always a risk of losing one's money when one makes a loan (in a free economy anyway) and interest rates (in a free economy – i.e. in civil society) take account of this.

    However, real investments in producing goods and services better are unlikely to go wrong on mass – UNLESS there is a credit-money expansion messing up economic signals (thus leading to "malinvestment", a distorted capital structure).

    Credit-money expansion can also lead to a false perception of prosperity that can lead people borrowing to finance consumption (such as buying houses and apartments) that they can not really afford.

    This also "ends in tears".

    The point at issue is whether credit-money expansion (that causes the above problems – and others) is caused only by Central Banking (the Federal Reserve and its kin around the world) or whether the central monetary evil (credit-money expansion) can occur without there being any Central Banking at all.

    Such things as the crash of 1907 would seem to indicate that the latter position (that credit bubble monetary expansion can occur without any Central Bank) is correct.

    However, such people as George Selgin would point out that the National Banking Acts were hardly "free banking".

    And, also, that bankers were operating under the assumption that if they really got into trouble government would allow a "suspension of cash payments" (and other CONTRACT BREAKING) in order to "save the economy".

    The argument being if bankers knew that governnent was not going to rip up the rules of contract (and so on) they would not act in such a reckless way (moral hazard).

    So the defenders of Fractional Reserve Banking (when the "fraction" of money lent out is greater than ten tenths) do have an argument – against the position of people like myself (i.e. the position that all loans must be from real savings).

    It is just that the argument of the FRB supporters has nothing to do with the "arguments" you present Martin.

    This is not surprising, as their political and moral agenda is totally different from your not-so-hidden one.

    People such as George Selgin and Walker Todd are not collectivists – and you are.

    1. Your presumption of telepathy is telling.

      Anyone may read the post and reach his own conclusion. I didn't even threaten title holders in the post, despite your assertion. On the contrary, I identified myself with title holders before saying that my children may kill title holders (including me) for all I care, i.e. I will not indoctrinate them otherwise. Every generation evaluates the bounds of forcible propriety, established by states, for itself, and when the bounds are unbearable, a man may resist the force with his own force.

      Enough of that. If you want to make this discussion a battle between good and evil, casting me in the evil role, go ahead. I can't stop you.

  14. It is worth remembering that buying a house or apartment to live in is not investment – it is consumption.

    One is buying a nice thing (like a new suit), one is not (generally speaking) using the house to produce new goods. Building a house is a very different thing from building a factory or a mine.

    Of course even turning business loans into securities is dangerious – as it risks undermining basic understanding of the investments the enterpises are making. Will these investments help produce good more cheaply? Or bring new goods (which people want to buy) to market? Will the investments generate income from which the loans (the bonds) be repaid?

    However, turning home loans into securities and selling them around the world, breaks the link between lender and borrower.

    No more is a lender making a judgment over whether the borrower will be able to afford to pay back his or her home loan.

    Why should the lender even care about this? If the lender is taking the loan and putting it with many other loans and selling it (as securities).

    Not a matter of being wise after the event – as warnings about treating mortgages as if they were something else, were so common on Wall Street (going right back to the 19th century) that they became proverbs.

    How did the United States get into current (and future – for the whole thing will fall apart from 2013, as Jim Rogers and many others have pointed out)situation?

    Thomas Sowell's "Housing: Boom and Bust" is a good guide to the specific government interventions that created the housing bubble.

    But Thomas Woods' "Meltdown" is better for the central point – that the credit-money expansion (backed AGAIN AND AGAIN by Alan Greenspan's Federal Reserve)is the key.

    If the credit money expansion had not come out in the housing market (if there had been no Fannie Mae and Freddie Mac, and no "Community Reinvestment" Acts, and other absurdities) the credit-money expansion would have come out somewhere else.

    And the captital structure of the economy would still have been wreaked.

    The preset policy of propping up the creidit-money bubble (by increasingly desperate means) will lead to economic breakdown.

    It is no longer even a question of (as we used to say) "we know what will happen – but we do not know WHEN".

    Because we now know when things will start to fall apart – 2013.

    Then the collectivists will get their chance to "fundemenally transform" (i.e. destroy) civil society, and replace it with "social justice" (i.e. collectivism).

    And we get to shoot right back at them – in an effort to restore civil society (restore Western Civilization).

    But the plans of the enemy are far better laid than those of our side.

    God help us.

    1. A house, like most assets, is both consumption and investment simultaneously. It is investment, because a man with a house is more productive than a man living on the street. It is consumption, because a man typically buys more house than he needs to be optimally productive.

      But the extent of investment vs. consumption is not the relevant point. A banknote backed by title to a house is hardly backed by nothing. The total value of residential real estate in the U.S. is roughly $20 trillion. The value of all the gold in Ft. Knox is roughly one half of one percent of this figure, and the value of all the gold on Earth above ground is roughly twenty percent.

  15. Buying a house to live in is NOT an investment. Buying rather than renting, or buying a bigger house rather than living in a smaller house does NOT not make someone more productive. A house is not a factory or a mine.

    There was a time when a lot of production was at home (hand weavers and so on), but this time has passed – and even then a weaver was no less productive in a house they rented than in a house that they owned.

    Nor are "bank notes" (I think you mean Federal Reserve notes – after all even you would not pretend that "mortgage backed securities" are anything other than worthless junk, this has been proved again and again in American history) "backed by titles to houses". In reality Dollars are backed by NOTHING – it is an entirely FIAT currency.

    Fiat = government order. It has nothing to do with house prices – either real or the bubble prices that exist in the United States. Alsob the same houses can hardly belong to the government and to private owners – at the same time.

    When the French Revolutionaries claimed that their fiat currency was "backed by all the land and property in France" what they really meant was "is backed by nothing" – and so it proved.

    However, even if the loans (the credit bubble loans that were NOT from real savings) went for investment (which they largely did NOT) it would not make a vital difference.

    As the late 1920s showed even a credit-money expansion that goes into industrial investment causes a boom-bust. This was also shown in other boom-busts going all the way back to bust of 1819 (and, in other nations, long before this).

    The central problem is the credit-money expansion – not where it goes.

    However, Ben Strong of the New York Federal Reserve, and Irving Fisher of Yale were sincere in their error.

    They had no intention to undermine civil society – they were just mistaken, profoundly mistaken.

  16. The concept of property is not the creation of the state. Nor is the principle something that each generation can rightly change in arbitrary fashion.

    Nor does getting rid of a government invalidate private property in land or other such – see Edmund Burke's "Appeal from the New Whigs to the Old…"

    Nor is a person owning landed property somehow using aggressive force – to which a man who regards it as "unbearable" may rightly respond to with force.

    Robbery and murder is robbery and murder.

    And no amount of dishonest doubletalk can change that.

    The idea that poverty is caused by wealth is a lie.

    And even it was not a lie, poverty gives no excuse (none whatever) for robbery and murder.

    As for collectivists who pretend to be libertarians….

    Such "false flag" tactics are hardly new.

  17. On the point about Fort Knox.

    If there actually is a lot of gold at Fort Knox (and various Congressmen who have asked for a formal audit with independent observers have got rather odd replies – but leave that aside) then the Dollar is still NOT "backed" by it.

    After all if someone presents a Federal Reserve note they are NOT given a set anount of gold by the government.

    Of course the government could divide the amount of gold it owns by the amount of Federal Reserve Dollars that have been printed (leaving aside the credit bubble of "broad money" – which is soon to collapse anyway) and formally declare that the Dollar was worth this X (very small) amount of gold.

    Then when a paper Dollar was submitted to the government the set amount of gold would be handed over (and the paper Dollar would, of course, be destroyed in order to maintain a nonfraud based system).

    However, the above has NOT been done.

    So to talk of the Dollar being "backed" by any commodity or resource is false.

    The Dollar (like the Pound) is a FIAT currency – and that is all it is.

    As for the credit bubble antics of "broad money" – bank credit…..

    The Federal Reserve (like other Central Banks) is engaged in desperate activity to try and maintain this credit-bubble.

    Without this collectivist interventionism (interventionism on a truly vast scale) the credit bubble "financial system" would have already collapsed.

    And it will collapse anyway. The vast interventionism will just have made everything worse in the end.

    Still it has produced a fake stock market boomlet (and so on).

    Which has allowed certain connected people to protect their personal positions.

    It may also help the reelection of Barack Obama.

    By the way – Barack does not believe in the long term nature of the "economic recovery". If he did he (and the Centre for American Progress and….) would not be drawing up plans for Emergency government – the destruction of what is left of Constitutional limits upon the government (both the Federal government and international "governance" international "government" being "paranoid").

    Barack expects exactly the same economic collapse in 2013 (and onwards) that free market people do.

    The difference is (as I, and many others, have often pointed out) that the plans of the collectivists (both in the United States and around the world) are far more advanced than any counter plans by pro freedom people.

    The tactical position is very bad.

  18. Benjamin Anderson in "Economics and the Public Welfare" (1946). Reminds us that that it was once known on Wall Street that the "First Principle of Commercial Banking" was to know "the difference between a bill of exchange and a mortgage".

    That is why (for example) the "Bank of the United States" (the name was picked in order to decieve immigrants into thinking it was a government backed institution) could not be saved – because its "assets" were actually worthless junk (i.e. the reason it was not saved was not antisemitism – as Milton Friedman, who had nothing to do with the actual case, later claimed).

    It is worth remembering that Ben Anderson was a moderate (a man enaged in, and supportive of, the fractional reserve banking system his whole life)- he was not a hardcore "loans must be from real savings only" person like me.

    Once even Chase National Bank people (like Anderson) understood that "mortgage backed securities" (and other such) were not something that could be correctly considered dependable assets.

    "But Paul, the Alan Greenspan credit-money wave would just have come out somewhere else – and still smashed…"

    Yes – but it would have been less harmful for the basic reputation of Wall Street (and other financial areas).

    All the expensive college boy education of the new people did not even include basic sayings that had been common knowledge on Wall Street (and elsewhere) almost a century before.

  19. Banks need to be more open when they lend money out for houses and cars. They have to stop predatory lending because some fail to pay money back. The bank must have rules in place to prevent from foreclosing on loans. They should start lending more money out for start-ups or small businesses. They must punish the bankers for improper mortgage lending.

  20. Banks are open when they lend money for X it is the customer (who says he is borrowing money for X and then spends the money on something else) who is sometimes not open.

    If someone borrows money to buy a house and does not pay it back, that person SHOULD lose the house.

    Talk of "improper mortgage lending" rings hollow when banks used to be denounced for NOT lending out money to people who were unlikely to pay it back (that was denounced as "discrimination").

    Banks should lend out more money to small business start ups….

    More money from where?

    From real savings?

    Or from the credit money bubble?

    And why should banks NOT lend money to start ups?

    The only reason for not lending money to a start up is a belief the business venture is going to fail – and the money will not be repaid.

    So what is really being said is "banks should lend money to business ventures that are going to fail".

    Back to "affordable housing policy" type thinking.

    Clearly Thomas Sowell ("Housing: Boom and Bust") and Thomas Woods ("Meltdown") were wasting their time, at least regarding some members of the public.

    Members of the public who persist in thinking that banks should be like a Fairy Good Mother. Who creates gifts (money) by magic, and does not care about being paid back.

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