Originally published at: https://boingboing.net/2023/10/11/tom-the-dancing-bug-counter-earth-inflation.html
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Yeah, that was my reaction, too. I suppose all good political satire these days is of the “ha, ha, sob” variety by the very nature of our reality…
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Sometimes it’s just sob, sob, though…
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Wonkette tabs was on a tear today. Read this article earlier in which the author makes a very compelling argument that truly low unemployment (as opposed to low unemployment created by a suppressed labor market, ie. people not even able to find realistic jobs) has most dramatically had a positive impact on BIPOC communities and driven the Black unemployment rate to an unprecedented low.
Another cool analysis is that the bottom tenth percentile saw a 5% increase in relative wealth while the top tenth saw a mirror decrease, thereby marginally reducing overall income inequality.
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I’ve often wondered why raising interest rates is a flat rate across the board. For example, why not have a sliding scale based on amount borrowed? (ie, if you want to buy a $250k house, it’s 4%, but if you want to borrow $250 million, it’s 12%)
I assume there MUST be more reason than “the rich people borrow large amounts and they don’t want that!” but I would love someone with more economics background to explain it
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… of course it’s the other way around
Why do financial institutions charge higher interest rates on poor people?
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You’d have to regulate those rates.
In an unregulated market, the very wealthy have many options to borrow. If bank A charges too high an interest rate, bank B may undercut. They’ll compete for the business. Since the very wealthy have a reasonable chance of paying back the debt, you’re more likely to lend larger amounts at lower interest, because even low interest rates on millions of dollars will still be a substantial return.
In an unregulated market, those without much wealth don’t have bargaining power. The amounts being financed are low, the risk for non-payment is high, so banks don’t really need to compete that much for your business. They may fluctuate rates a little bit to make up for volume, but the consumer is much more in a “take it or leave it” position.
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Thank you. That explains a lot.
What, in your opinion, would be the downside to having such lending regulation in place? Would they just take their business elsewhere (ie, banks outside the country)? Something else?
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The idea that “we can’t do X because that will be bad for the economy” relies on the belief that the health of the economy is more important than the health of the people themselves.
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You’re welcome!
The trick is that banks are for profit corporations, and often publicly traded, so at least in the US, there’s the requirement to maximize profit for the shareholders.
The rich can afford to shop around, so if a US bank is required to have high rates on multi-million loans, the wealthy can shop around to find the best deal. They can afford a lot of option. From the viewpoint of a corporation that exists to generate profits, that would be a disaster, because they can’t compete in any meaningful way. (And really, if someone at that wealth level can’t afford to shop around and agrees to 12% on a multi-million dollar loan, how sure are you that you’ll ever see a cent of that paid?)
Those with less wealth still carry higher risk of non-payment, so banks aren’t going to want to lend that much if they’re required to offer lower rates. On the high road, they’ll finance lower amounts because that’s safer, but it still generates less profit. So a more likely scenario is they’ll get risky and finance a ton of loans and figure that they’ll get bailed out when it explodes.
I’m in the US, and we should never have allowed monopolies or de-regulation. It’s been a disaster for everyone who isn’t already super-wealthy.
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Mainly the wealthy have broader access to financing. So, instead of one $2.5 million loan, they would get ten $250k loans.
A second problem is that the interest goes to the bank, which goes to the shareholders, who are those self same rich people, so that money would come back to them, and wouldn’t circulate in the greater economy.
IMHO a better solution would be a graduated luxury tax on homes, cars, etc. so, in addition to the .04% property tax for the local school district, there could be an additional 2% tax on properties valued above, say, $500K that goes to the state/federal government used to pay for social services.
There is less of an incentive to buy five half million dollar properties instead of one $2.5 million property, and the rich can certainly afford to pay that additional tax. Sure they’d try to figure a way around it, and have the money to do so, but this method would put more money back into the economy instead of hoarding it in properties, stocks, gold, etc.
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That’s a good idea (tax). I assume it becomes hard to implement because while the Federal Reserve has large discretionary powers to set bank rates, it is a helluva lot harder to set new luxury tax rates, especially since the very ones about to get hit hard by such (rich people) are also the same people voting on it (congress).
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(Interesting flick for sci-fiers.)
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Vimes Boots all the way down, friend.
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If it’s made more expensive for them to move money to foreign banks and the rates aren’t terribly different in the US, there are other perks/benefits companies can use to attract customers. The excessive pursuit of profit is problematic [cough Wells Fargo cough]. The part of the trick that needs to die in a fire is that if they fail, they’ve got a safety net:
If the government can be used to bail them out, then they can take a higher level of regulation as a consequence. Clearly, based on 2008, the aftermath, and this year’s debacles, banks are in need of improved oversight and restrictions. What pisses the rest of us off is that the degree of protection and bailouts offered to the wealthy is not even close to what is offered to the working class or those living in poverty. If the government dares to offer us anything, the pro-business/conservative forces in the public and the private sectors all lose their collective shit. Why?
Well, they’ve figured out how to monetize making/keeping people sick, pushing them into poverty, and criminalizing being too poor to afford taxes/fines/housing without debt that can’t be repaid…so that tracks. 
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Due to thinking in a different language I thought of another Earth inflation at first.
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Yacht Money
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The wealthy don’t always even borrow against real property. If they borrow money using their stock holdings as collateral, they can tap in to money that’s not available to common folks.
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