Debt – In the Long Run

Yesterday I wrote about the changing role of banks in tax evasion. At one time banks across the world facilitated tax evasion, but are now by the enactment of new laws becoming key players in preventing tax evasion. “Let me issue and control a nation’s money and I care not who writes the laws” Mayer Amschel Rothschild is said to have stated. It may have taken three hundred years but the politicians elected to enact laws, may have now understood that governments must not let bankers either issue or control a nation’s money.

So much of a nation’s money in modern times is spent by governments from taxes levied on the electorate and from borrowing from bankers who in turn borrow from the electorate.

When bankers lend money to governments they require simply two things; they require an interest charge or rate on the loan, which they can partially share with those who lent the bankers the money (bankers never use money of their own) and they require the loan to be repaid.

When governments borrow money from bankers they require the money to spend on projects to benefit their electorate, in the hope of being re-elected when the dreaded election next comes.

Obviously, in these kinds of transactions some of the money lent and borrowed sticks to the hands through which the money passes; this is inevitable and they amount that sticks depends on the stickiness of the hands of those handling the money.

As with all commercial transactions there is an element of risk. The borrower may be unable to repay the loan, which will then be extended in term, effectively forcing the electorate to mortgage the future of their descendants, who may not in any way benefit from the projects for which the loan was raised, especially as many of such projects are either transient or merely debt consolidation.

In the long run those who make the laws have power, more power than those who control currency. In the long run, those who borrow money have to use it wisely otherwise they enslave themselves in debt. In the long run those who elect the lawmakers get few opportunities to change their minds and must suffer the policies enacted by the lawmakers. In the long run, as someone remarked, we are all dead, but failed to remark our good legacies and bad legacies will live for a long  time beyond us.

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