Borrowing your way into slavery

In the United Kingdom people are still living in denial about the extent of the deficit. It is clear from attitudes that many people think that the best way to get the nation out o recession is to spend money that we have not got. They ignore the fact that you can only spend what you have not got by borrowing money. You can only borrow from those you are prepared to lend to you.

There are plenty of companies prepared to lend money but the rates at which they are prepared to lend are “interesting”.

When I first studied law I Iearned that the there was a rule of law that the courts would not enforce a rate of interest on a loan that was “unconsciousable”. Sometimes if a rate of interest was too high they would not enforce the loan at all. The courts would not set a fixed rate of interest that was too high, because they recognised that economic circumstances change. In the nineteen sixties generally 30% per annum was thought by courts to be usurious and they would not enforce the loan at all. At this time bank rate was about 4%.

But there is always money to be made by lending money at rates which are unfair and oppressive and where there is money to be made if governments are not firm and careful, they will bend under the pressure of those who can make money by lending at such rates. Gradually the laws for the protection of the public against usurious loan were whittled done until they were eventually written off the statute books entirely.

Today there are, in the United Kingdom, many businesses that lend money at rates of interest from which the public should be protected but which the government fails to protect the public. You can borrow £50 from a company at an interest rate of 819.12% provided you repay the £50 by your next payday. That is if you have an excellent credit rating. If you have a good rating you will pay 1,410.33%, and if you are average you will pay 2,222.46% per annum.

Now these are scandalous rates of interest. They shame those that charge them and they shame the government that permits them. However they illustrate just how a poor person, in quick need of money perhaps for food or essentials, not wanting to steal, can end up working not for himself but for the money lenders. Paying over 2000% on a short term loan condemns the borrower to something close to indentured slavery to the lender.

That is how a free market in lending operates. The borrower has his needs or perceived needs and the lender exploits this. The lender ends up very rich and the borrower ends up very poor. The borrower cannot see this clearly when he starts his borrowing but his descent into poverty and slavery is almost inevitable.

So it is with nations. In the United Kingdom our perceived “needs”, which include paying people not to work, giving people an option to receive money from society without giving anything back to society, needs to require a free heath service much of which we cannot afford, weapons and wars that we cannot afford and similar indulgences.

If the United Kingdom fails to recognise that it should not borrow money but should repay its debts, there will be plenty of institutions in the market ready to lend money at such rates of interest that the United Kingdom will become the indentured slaves of the lenders.

4 Responses

  1. I too was amazed when I saw an advert on TV for such rapid short term loans, sickeningly exploitive interest rates; I actually thought I’d misread the print!

    I have a feeling and hope, that the new coalition government have a different approach to borrowing money, already they have gone out on a limb to make the extra spending cuts they deemed necessary.

    When the new government discovered a letter left by the labours Liam Byrne, claiming all the money had gone; this confirmed how badly our country has been managed by people claiming to be responsible adults.
    I’d actually go so far as to call them crooks, responsible for putting our country in jeopardy!

    Hopefully Cameron and Co will review and outlaw such socially irresponsible lending outfits, who, like vultures, circle over the struggling and needy in search of prey!

    Respect and Peace!

  2. I am less optimistic than you, Adam. This is a Tory-led Govt., afterall. The best we can hope for is that the LibDems clip their wings to prevent them going even further. But pressures are such that I wouldn’t hold my breathe.

    With base rates at just 0.5%, and saving rates not much higher, retail banks are making a killing lending in this market. But then they need to recapitalise… or so we’re told.

    And that’s what gets me about this matrix: my savings are being eaten by inflation because rates are so low. The businesses I spend my money with are handing it straight back to banks to service interest on their borrowings – all roads lead back to the banks and there’s nothing we can do; they can’t lose.

    Slavery is alive and kicking.

  3. Every time we walk on childerick we slowly become like the slaves we think that owe us a living on the ridiculous, if we opened our eyes to what is slowly taking us apart instead of looking into the consumerisms that are tatooed heavily inside out eyelids we would be so much better off.

    Doing things for ourselves instead of asking others is the only long tern insurance policy on a local based echonomy as we need, if we continue on our present path we will most assuredly become our own slaves.

  4. Say no more, have a laught and then think about what the message is telling us.

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