| Subject: | [socialcredit] Re: [SPAM] Re: [socialcredit] Richard C. Cook: Monetary Crank | | Date: | Saturday, September 6, 2008 10:17:33 (+0200) | | From: | Per Almgren <almgren_per @.....com>
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| In reply to: | Message 5516 (written by william_b_ryan) |
To me it is evident that what causes problem in the economy is point 3
and the part of point 2 that is paid as interest to the savers.
Per Almgren
william_b_ryan@yahoo.com skrev:
> "It would be helpful if, for once, Stephen Zarlenga and Richard Cook (and, yes please, other members of this list) state specifically whether they do, or do not, agree with national bank-issued interest-free loans (administered by the banking system which may make an administration charge)..."
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> I am unclear what you mean by "administration charge," you've never really defined it that I have seen, but presumably, it is charged to the borrower.
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> At present there are three components of interest collected from the borrower: 1. The default premium that contributes to what is in effect an insurance fund to cover defaulted loans. This premium is rated by credit risk category, so that poorer risk borrowers pay more than better risk borrowers. Security pledged against loans is also a factor, which is why secured loans like mortgages have substantially lower interest rates than unsecured credit like credit cards. But across all loans the default premium is the largest component of interest collected; 2. The component that covers ordinary banking business expenses, including salaries and wages. This is the second largest component of interest collected; and 3. An amount to cover the banks' profit. This is the smallest component of interest collected.
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> I suppose that what you call "administrative expense' is equivalent to category 2 above which you will continue to charge to the borrower, so in this regard he will pay what he pays today.
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> You leave open who will pay the banks' profit, but we will assume for the moment that it is paid by the central bank as a fee to the private banks for initiating and administering the loans.
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> That leaves the default risk which does not go away in your proposed system. In the present system it is paid for in the form of a premium included in the borrower's interest payments rated by his personal credit risk, and whether or he he has pledged security.
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> You have not stated who will pay for this in your proposed system.
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> In the system of private enterprise generally the direct beneficiaries of goods and services pay for them rather than the more general community.
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> If the risk is absorbed by the central bank, then poor credit risk borrowers will pay exactly the same as good credit risk borrowers.
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> This doesn't seem fair, does it? And would not this distort the relationship between supply and demand for financial services?
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