Читать книгу Christian Economics - Dale Anthony Pivarunas - Страница 10

Money, like other goods, is bought and sold. The price of money is called interest, though there are also other prices such as late fees, over-limit fees, special handling fees, etc. The price of money like all other goods and services can be unjust. There can be unfairly high interest rates and monetary fees, excessive interest rates and monetary fees within captive markets, and extreme shifts in interest rates and monetary fees—all of which negatively impact the economy.

Banks and other financial institutions borrow money from people, from other banks, and from other financial institutions. This price that the bank or other financial institution pays for money represents its cost, similar to the cost that a distributor pays for the goods that it sells. The bank or financial institution then sells the money that it has bought at a higher price generating a profit. The difference between the cost of money that the bank pays and the price that it sells the money for is called its gross profit. After subtracting its operating expenses, its marketing expenses, its general expenses and its administrative expenses; the remainder is called net profit. Subtracting taxes from net profit gives what is income for the bank or financial institution. Banks and financial institutions are corporations which currently have the sole goal of profit maximization within the context of current amoral capitalistic economic theories. Could banks and other corporations seek a maximum profit within the constraints of a Christian economics system where business actions are moral and subject to Christian principles? Certainly! Obviously, the profits would be maximized subject to moral and Christian constraints and would be less than the profits realized without any moral constraints whatsoever.

The price of money (interest) must be fair to both buyer and seller. The price of money (interest) must be the balance point between benefits to the buyer and benefits to the seller. In order for the price of money to be fair, it needs to be set within the context of all the costs and expenses within an individual’s budget. Interest cannot be so high that it reduces an individual’s ability to pay other necessary expenses. Nor can interest be extended out over such a long time that the individual is prevented from being able to retire.

The cost of money to a bank over the last 10 years, that is the price that a bank pays for money, has varied between zero and 2 percent, with the current price being approximately 1 percent. The current interest rates that consumers are paying for money that they are buying from banks and other financial institutions range from 4 to 600 percent. Mortgage rates range from 4 to 8 percent. Auto loans, furniture loans, and household goods loans range from 4 to 18 percent. Credit card loan rates range from 12 to 36 percent. Personal loan rates range from 20 to 600 hundred percent. All of these rates do not include the additional price of money associated with late fees, over-limit fees, loan origination fees, special handling fees, etc.

The financial institutions are paying 1 percent for money that they are buying and then turning around and selling that money for 6 percent, 12 percent, 24 percent, 36 percent, and even 600 percent. Since banks and financial institutions operate with little expenses and overhead, the profit margin that they are realizing is immense. Many consumers are being financially crushed by these exceedingly high and unfair interest rates and enslaved by the terms of the unjust contracts that they are coerced into. Consider the rapid growth and prevalence of payday loans stores, title loan stores and personal loan stores. 25% of the people in the US have negative or zero wealth, that is, their liabilities (what they owe) exceed their assets (what they own). 25% of the US population equals approximately 79 million people. These 79 million people struggle financially. And millions of these people are prey to the unjust interest rates of payday loans stores, title loan stores and personal loan stores. Many credit card interest rates are also unjust. In fact, it is doubtful whether any interest rate in excess of 12 percent can be justified as moral and certainly not in conformance with Christian principles. Many home owners are now trapped in mortgage contracts with high interest rates and are not able to refinance because of the restrictions by the banks. In fact, the vast majority of people who have had their homes repossessed lost their homes because the banks would not allow modifications to their loans?

Why are most interest rates and loan contracts unfair? Most interest rates and contracts are unfair because there is no balance between the benefits to the consumer and the benefits to the financial institutions. The economy thrives on consumption ; the consumption of the 315 million people comprising the working class and not the consumption of the minority capitalist class. Anything that constrains or limits the ability of the working class to buy homes, buy cars, buy furniture, buy appliances, buy food, buy healthcare, buy an education, or buy any other goods and services constrains, limits and reduces the activity of and the growth of the economy. If the constraints on the working classes’ ability to consume are great enough (as they are today), then there is minimal growth in the economy.

Most people think that inflation, an aggregation of price changes, can be controlled by the Federal Reserve System controlling the price of money to its member banks. That is not true. Only by government oversight and management can prices and inflation be controlled. Price management and interest rate management are first of all the responsibility of the owners of the businesses and banks. They have an obligation to the other members of the US economy not to set prices which are unjust and harmful to the economy. Of course, while most people will act responsibly, there are always people who will not. That is why the various levels of government through consumer protection agencies and the court systems need to oversee pricing and interest rates and correct unjustly high, unjustly low and extremely volatile prices and interest rates including the interest rates of the Federal Reserve Corporation. The various interest rates of the FED must have limits and sudden and extreme changes must be controlled.

Banks, mortgage companies and all other financial institutions also pursue a strategy of price maximization within virtually all markets through the deceptive practice of pseudo-risk. Banks, mortgage companies, and financial institutions use pseudo-risk to increase the interest rate or price of money both on new loans as well as existing loans? While there is a correct notion of risk which can be used as a basis for charging a slightly higher rate of interest, the current practice of assessing risk is unjust because it exaggerates risk for the sole purpose of charging a higher rate of interest, and in many cases a significantly higher rate of interest. Again, while objectively unjust, the individuals engaged in this practice or scam (for all practical purposes, it is a scam) do not consider it unjust since current economic theories hold that business practices and actions are amoral, that is, they are neither right nor wrong. But is should be clear that these practices are both unjust and un-Christian (contrary to Christian principles).

The current means of assessing risk is based on the credit ratings of the major credit bureaus and there are serious problems both with the scoring process and the credit bureaus themselves. There are four major national credit bureaus in the United States that allegedly measure a person’s credit worthiness: Equifax, Experian, and Trans Union and Innovis. These organizations are for-profit businesses that have a most significant effect on the ability of a person to borrow money and the interest rate that a person will be charged. In fact, these organizations have an almost absolute authority in deciding who will and who will not receive financing and at what rate since virtually every financial institution will make their decision to lend money, at what rate and when to raise interest rates all based on a person’s credit score from one of these credit bureaus. Clearly, these organizations are extremely powerful from a business point of view since they enable a financial organization to avoid potentially risky borrowers and also to increase profits by maximizing interest rates, loan fees and late fees.

These credit bureaus receive the vast majority of their revenues from financial institutions. Obviously, the biggest financial institutions are the largest customers for the credit bureaus. The credit bureaus want to make their customers happy. And the big financial institutions want to maximize profits. Financial institutions have been able to significantly increase profits by charging an excessively high rate of interest to a borrower because of the borrower’s credit score and through the tactic of raising the interest rate on an existing loan simply because a person’s credit score has changed.

While the process of evaluating a person’s credit worthiness can be objective and statistical, it is not. The basis used by the credit bureaus for assessing and changing a person’s credit score is mostly subjective heuristics or rules that they have developed to suit their goals. Of course, the primary goal of the credit bureaus is maximization of profits and since their profits come from financial institutions their strategy is to please the financial institutions by providing credit scores that maximize profits for the financial institutions. Credit scores can and should be based strictly on statistics. However, the credit bureaus do not want to rely on statistics to rate a person’s ability to pay since that would reduce the interest rates that their customers, the big financial institutions, can charge. And they want to keep their customers happy.

Credit scores should be statistically based and calculated by organizations that have no profit motive. A credit bureau must be independent and objective, fair and impartial. For-profit credit bureaus are neither independent nor objective nor fair nor impartial since they are in business to make a profit and they make their money from the financial institutions. They are clearly biased in favor of Big Finance. The only way to achieve independent, objective, fair and impartial credit ratings is to have the government take over the task of determining a person’s credit worthiness. For-profit organizations should not be allowed to provide credit ratings. These biased credit bureaus are also partially responsible for the current economic crisis since they have enabled Big Finance to raise interest rates and finance fees to the point where millions of people are severely constrained financially. Severely constrained consumers cannot consume.

Credit scores are meant to indicate a person’s credit-worthiness or ability to pay off a current or a new loan. A person’s ability to make payments on loans is based on both controllable and uncontrollable factors and these factors may be very temporary or extend for a longer period of time. A true credit score will estimate the risk to the finance company regarding the probability that a person will totally default on a loan. Total default means never, ever paying back the loan. If a person is unable to temporarily make payments on a loan because of unemployment, under-employment or illness that does not mean that they are in default. Unfortunately, finance companies are very quick to declare a person in default even though in fact they are not. Credit scores attempt to predict the future and there are many, many variables that need to be considered when estimating a person’s ability to pay. However, the credit bureaus do not take all variables into consideration.

If a person loses their job, it can take anywhere from four to nine months before they are able to gain comparable employment assuming a relatively stable economy. During this time the person is not able to pay all their bills. It should be clear that this period of unemployment and inability to pay bills is only temporary. However, finance companies do not care. They assume that the person’s inability to pay their bills is permanent. This is also the case for the credit bureaus. While it would make most sense to allow the unemployed person a deferment in their financial obligations, finance companies have no mercy whatsoever; they are only concerned about profits. As soon as the person pays late, they assess a late fee. If a person pays late two or three times, the finance company will significantly increase the interest rate. If the person fails to make payments for three or four months, the finance company begins a harassment program where they call the person dozens of times a day from eight o’clock in the morning to nine o’clock at night seven days a week. And since the person is unemployed and not able to pay, there is nothing that they can do. The finance company will only pursue the person for a month or two before they consider them in default. By that time the amount that the person has borrowed has increased significantly into the debt owed to the finance company.

Consider a person who has a credit card with a $1000 limit who has temporarily lost their job. Because of late fees, over-limit fees and excessively high interest rates (32%), the $1000 that they borrowed has doubled into a debt of $2,111.32 within 11 months. And even after the finance company declares the debt in default and totally ruins the person’s credit, they sell the debt to a collection company which ruthlessly and relentlessly pursues the individual even to court in order to collect the debt more than half of which is interest and fees. Even if the person obtains employment in month 11, it is too late. The wheels of Big Finance have moved and crushed the person. This must also be viewed within the context of multiple accounts all of which could double the person’s debt obligations. And now the person who became unemployed through no fault of their own and has struggled financially through eleven months of unemployment is faced with almost insurmountable debt and a dismal credit score.

Month	Late Fee	Over-Limit Fee	Interest	Total Price for Money	Total Price as Percent
1	$30.00	$30.00	$28.27	$88.27	105.9%
2	$30.00	$30.00	$30.62	$90.62	108.7%
3	$30.00	$30.00	$33.04	$93.04	111.6%
4	$30.00	$30.00	$35.52	$95.52	114.6%
5	$30.00	$30.00	$38.07	$98.07	117.7%
6	$30.00	$30.00	$40.68	$100.68	120.8%
7	$30.00	$30.00	$43.37	$103.37	124.0%
8	$30.00	$30.00	$46.12	$106.12	127.3%
9	$30.00	$30.00	$48.95	$108.95	130.7%
10	$30.00	$30.00	$51.86	$111.86	134.2%
11	$30.00	$30.00	$54.84	$114.84	137.8%

This unfortunate person is now severely constrained financially even though he or she is now employed. Once they begin to make payments, they still have to pay over-limit fees in addition to the excessively high interest rates and that situation will continue for years. Also, they are now labeled by the credit bureaus as unworthy of any credit, they cannot consolidate their debt and they struggle if they can to pay all their debt most of which is interest and fees. And this scarlet letter of ‘unworthy of credit’ remains with them for the next seven years. Unfortunately, the government does not step in to help these unfortunate individuals, tens of millions of them and their families. But these severely financially constrained families have a significant effect on the economy. They cannot buy the goods and services which they need and want because they do not have any money left over after paying all their debt. This situation applies to the majority of the unemployed, the under-employed, those without health insurance who have experienced a major illness and many of those who have gone through divorce—tens upon tens of millions of individuals and families. And the aggregate effect of their significantly constrained consumption undermines the stability of the economy.

Virtually all credit scores are affected adversely by late payments. However, late payments do not indicate a failure to pay or even the potential for default. In other words, there is no risk associated with late payments. People who pay late obviously have a problem with their cash flow, not with their ability or intention to pay. Credit scores must distinguish between default and late payments. It does happen that a person gets a few months behind in making his or her payments. The credit card company cancels the account and sells the loan to a collection agency. The person subsequently pays the loan in full but his or her credit report shows a default from the over-zealous credit company who pre-maturely declared the account uncollectible. Credit scores are also based on the number of times a credit check is run. There is no basis for lowering a person’s credit score because of the number of credit checks done.

Credit bureaus also unjustly penalize spouses, children and others who have been given a secondary credit card on another person’s account. For example, an individual has a credit card account and wants to allow his or her daughter or son to have a credit card on this account. This card is actually a convenience card since the parent would typically allow their daughter or son to use their card. The credit account is solely the responsibility of the parent and the credit was based entirely on the parent’s creditworthiness. If the parent’s credit score decreases, the credit agencies will also decrease the credit score for the daughter or son who has the convenience card even though the daughter or son has nothing to do with the account. This makes absolutely no sense other than to the financial institution from which the son or daughter may go to some day in order to take out a loan or credit card on their own creditworthiness. This is a most unjust practice.

Credit scores are also based on past bankruptcies, foreclosures (even though there is no repossession), collections, tax liens, and periods of unemployment. These supposedly negative factors can be considered for up to seven or more years. That means that a person who has recovered financially and has paid all of his or her debts, is treated like a financial convict even though they have not defaulted on their obligations and have only paid late. Is this just? No! Is this good for the individual? No! Is this good for economy? No, because the individual is constrained financially from buying the goods and services that he or she needs and which the economy needs for stability and growth. However, this is good for financial corporations, since they can charge much higher interest rates based on these incorrect credit scores.

Finance companies use these inaccurate credit scores to increase interest rates even in the case when the poor credit score was the result of late payments to another finance company. In the event that the poor credit score was the result of late payments, there is no risk to the lender and no basis for raising the interest rate. A person with poor cash flow, who is punished by the various finance companies with higher interest rates, will experience even greater cash flow problems. Many situations of loan defaults are the direct result of these policies of increasing interest rates to the point where the borrower is ruined financially. These unfair practices need to be immediately eliminated by the government. Again, the only way to achieve independent, objective, fair and impartial credit ratings is to have the government take over the task of determining a person’s credit worthiness.

Late fees, over-limit fees, and over-draft fees represent other prices of money that are unjust and very detrimental to the economy. These are relatively recent schemes by Big Finance to maximize profits. If a person makes a payment late or after the due date, the interest is calculated up to the actual payment date. In other words, the finance company is already charging a person for paying late. Depending on the amount owed and interest rate, late fees can represent a doubling of the interest or price one is paying for borrowing money. While a late fee is a price one has to pay for the use of money just as interest is, financial institutions use the expression ‘late fee’ to avoid any possible legal restriction on the rate of interest. Over-limit fees are another price of money that is totally arbitrary. In general, a person should not be able to exceed their credit limit since the limit is monitored through electronic transactions. In the vast majority of cases a person who has reached their credit limit can exceed it when interest accrues or a late fee is assessed. Again, there is no just or moral reason to charge an over-limit fee. Often times a person is charged both a late fee and an over-limit fee. This is especially true when a person is unemployed, under-employed, not working due to health reasons or going through or having gone through a divorce. In such cases late fees, over-limit fees and interest can amount to over 100%.

The average household has over $16,000 in credit card debt. Besides bank credit cards, there are retail credit cards from clothing stores, retail credit cards from gasoline companies, credit cards from schools; almost every business wants to sell a person a credit card. The expression ‘finance company’ applies not just to corporations that engage in just finance but also to retail corporations, airlines corporations, academic institutions, and others. The basic strategy of these financial institutions is to create perpetual annuities. They want a steady, continuous stream of money coming in from debtors who will pay for the rest of their lives. From the borrower’s point of view, this is financial slavery with no opportunity of ever escaping. What is most alarming about this is the fact that this applies to the majority of the population—over fifty percent of the population. And the impact on the economy is obvious. With more than fifty percent of the population enslaved by ruthless financial institutions, these people have little to no discretionary income. They cannot buy more goods and services which they want and need because they cannot afford to. And the economy is driven by this consumption.

Amount Borrowed	Interest Rate	Term (years)	Total Amount Paid	Total Interest	Monthly Interest
$2,500	18%	10	$5,406	$2,906	$24.21
$2,500	22%	10	$6,201	$3,7011	$30.84
$2,500	24%	10	$6,614	$4,114	$34.29
$2,500	26%	10	$7,037	$4,537	$37.81
$2,500	30%	10	$7,909	$5,409	$45.07
$2,500	32%	10	$8,355	$5,855	$48.79
$5,000	18%	10	$10,811	$5,811	$48.43
$5,000	22%	10	$12,402	$7,402	$61.68
$5,000	24%	10	$13,229	$8,22	$68.57
$5,000	26%	10	$14,075	$9,075	$75.62
$5,000	30%	10	$15,817	$10,817	$90.14
$5,000	32%	10	$16,710	$11,710	$97.59
$10,000	18%	10	$21,622	$11,622	$96.85
$10,000	22%	10	$24,804	$14,804	$123.36
$10,000	24%	10	$26,458	$16,458	$137.15
$10,000	26%	10	$28,150	$18,150	$151.25
$10,000	30%	10	$31,634	$21,634	$180.28
$10,000	32%	10	$33,421	$23,421	$195.17
$12,500	18%	10	$27,028	$14,528	$121.06
$12,500	22%	10	$31,005	$18,505	$154.20
$12,500	24%	10	$33,072	$20,572	$171.43
$12,500	26%	10	$35,187	$22,687	$189.06
$12,500	30%	10	$39,543	$27,043	$225.36
$12,500	32%	10	$41,776	$29,276	$243.96
$15,000	18%	10	$32,433	$17,433	$145.28
$15,000	22%	10	$37,205	$22,205	$185.05
$15,000	24%	10	$39,687	$24,687	$205.72
$15,000	26%	10	$42,224	$27,224	$226.87
$15,000	30%	10	$47,451	$32,451	$270.43
$15,000	32%	10	$50,131	$35,131	$292.76

The prices of goods, services and money are totally out of control. Pricing needs to be fair. Radical capitalist economics ignores the principle that pricing should be fair and instead holds that prices (from the view point of the business) should be maximized. Common are the phrases ‘let the buyer beware’ and ‘whatever the market will bear’, both of which underscore the capitalist view on pricing. However, the economy consists of both buyers and sellers, and economic stability is based on the proper balance between buyer benefits and seller benefits. Fairness to both buyer and seller is essential and critical for an ordered and just economy.

There are no moral constraints on prices because people in business follow the current amoral economic theories. There are no market constraints on prices, because consumers have no influence on prices. There are virtually no controls on businesses especially big corporations. Even the laws and the courts favor the seller over the buyer. Businesses can charge whatever price they want and the consumer is forced to pay it. False is the proposition that the consumer does not have to buy. The consumer has to eat, the consumer has to have heat in the winter, the consumer has to have electricity, the consumer has to go to work, the consumer has to seek healthcare when they are sick or injured.

Consumers are at the mercy of Big Business and Big Finance, yet Big Business and Big Finance are merciless. The economy is out of order and out of balance because of these prices. Is there not someone or something that can bring prices back into control? Is there not someone or something that can bring fairness and justice to prices? Is there not someone or something that can save the majority of Americans from financial hardship and perhaps a hundred million Americans from financial ruin because of these prices?

If Christians applied Christian principles to their business lives and helped modify the strategies and policies of the businesses that they own or work for in such a way that justice and morality is factored into every business decision and action, then most of the prices of goods, services and money would become just and fair. Unfortunately, not all people will accept the principle of just and moral business practices. So, besides Christians bringing Christian principles to business, it is necessary for the government to oversee prices. The government needs to help the economy realize it’s objective of satisfying the needs and desires of all people for the basic necessities in life through price oversight and price management. The majority of people have no problem with police officers. The majority of people have no problem with traffic signals or traffic laws. The majority of people have no problems with laws which regulate people’s extreme and unsafe behavior. The majority of people have no problem with government oversight of the practice of medicine, law, electrical work, plumbing, etc. The government controls how fast a person can drive, how much alcohol a person can consume, and how much a truck can weigh. The vast majority of people, the 315 million working class people, would have no problem with government oversight and management of prices. Obviously, the wealthy minority would do all in their power to prevent this from happening. In spite of the denial by the wealthy minority, government oversight and management of prices is good and essential for a balanced, equitable, and growing economy which benefits all Americans.

Balance and justice need to be restored to the economy, and Christians are probably the only ones capable of bringing this about through the practice of Christian economics. Christians should no longer compromise their principles and follow the current amoral economic theories which are the causes of the current economic and political crises. Christians need to be Christians in their public lives; their economic, business and political lives.