How does money leading work, by the book? (biblical references, math)

How does money leading work, by the book?

Mature content advisory: biblical references, math, infrequent coarse language.

The calculations in this post were performed in Python on SUSE Linux.
If my numbers are wrong, blame Guido.

Unfair and debilitating debt is a bad thing; most people agree, even without reading ancient texts.

By the Torah, there is a Jubilee year, every 50th year.  On the 50th year, all debt is cancelled, among other pleasant things.  This leads to jubilation, “A feeling of great happiness and triumph.”  The Jubilee is not respected by many people, as far as I can tell.  I’m not religious, but I can see it’s a good thing.

Anyway, from my reading about debt, I wrote this panacea in five easy dot-points:

  • Cancel all excess debt. The max. total repayment is 4x the principal: “doubled and redoubled”.
  • Outlaw usurious interest rates. 2.8% is the max. for compound interest, 6% for simple interest.
  • At every ISO turn of the century, and at every half-century, there is a Jubilee. All debt is cancelled.
  • If lenders continue to charge usurious interest, after a warning, only the principal is repaid.
  • It would also be nice to allocate land fairly, pass it down, and avoid home loans. We may dream.

I worked out the percentages, so that a debt cannot quite quadruple over the 50 years from one Jubilee to the next. For compound interest, pow(4, 1.0 / 50) - 1 gives us the 2.8% limit. For simple interest, 3.0/50 gives us the 6% limit. That is the only novel bit in my post, the rest is by the book. Thank-you Python, for your assistance.

Regardless of religion, I hope you can agree: it would be nice to limit how badly the banks, other usurers, and corrupt governments can fuck over everyone else. It would be nice to cut the syphons of blood, from the workers and the nations, to the money-lenders. The most obese usurers can have a disability pension.

“Hey Mr. Candidate, I’ll pay you $1 million to help your campaign – no strings attached!  When you’re in office, please remember your favourite creditor.  A few billion, to help our nation.  Pay me back later!”

“Hey Old Woman, I’ll buy your house for top dollar!  Your kids can be rich.”

“Hey Young Man, I’ll give you a house.  Don’t pay now, pay later!  Just two-figure interest rates!”

The prohibition on buying and selling land, it really makes sense.  If you keep homes in the extended family, and have a sensible number of kids, you don’t have to spend 30 years working for the bank.

As a man of little faith, I’ll be surprised if we could legislate this stuff in a secular country.
People tend to reject, what they don’t accept.

It’s only 2012. The creditors still have 37.5 years to get their money back, so it’s no great trouble for them.

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One Response to How does money leading work, by the book? (biblical references, math)

  1. KevinL says:

    I think you have the wrong end of the problem, though. Interest rates on debt are related (or should be related) to interest rates on deposits – I remember when you could get 15% interest on deposits, and home loans ran around 17%. That in itself is not a problem – it probably indicates the currency is devaluing compared to real world goods and services (inflation), but that’s not _necessarily_ a bad thing, so long as your wages are travelling along at the same speed (simplistically speaking). From a business point of view, the ability to borrow money is absolutely essential – it’s exceedingly difficult to run any decent sized business without access to a line of credit of some sort, so debt in and of itself is again not a bad thing.

    Where you run into trouble though, is the split between real production and speculation. I highly recommend reading “Extreme Money” (http://www.amazon.com/Extreme-Money-Masters-Universe-Cult/dp/0132790076) for a good run-down of where the last GFC came from and why it’s likely to come around again. One of the interesting things to come from that is how adept people in the trading rooms are at sidestepping restrictions – so you introduce Jubilee, and (while we’re using religious examples) something akin to the Jewish handling of chametz over passover will likely kick in (sell it, buy it back). Or other more interesting schemes, I’m sure.

    So, your first and second points are strongly tied to the behaviour of the currency at any point in time (which is tied to the country’s trading position, and more recently to the sorts of shennanigans we see from speculators, and is very difficult to “legislate” a solution to without destroying your ability as a country (and as a company within that country) to access debt needed to keep things rolling on. Your third point would certainly be gamed (and most debt is much shorter term than 40 years anyway – I suspect you’re really only thinking about mortgages, which are unusual and only a very small part of total trades, under normal circumstances). Your fourth is really an outcrop of the others – penalty clauses, if you will.

    The last invokes the word “fair”, which makes it somewhat, um, imprecise 😉 But, in theory you can already pass your home down, minus anything you owe on it, already. So long as it’s not worth more than about $5M, it won’t even get taxed, is my understanding. If you’re saying that death should cancel debts, then I think there’d be a lot of retirees living off loans against their capital that would be very upset to see those loans dry up due to excessive risk. If you’re saying there’s some other barrier to passing your house on, it needs to be stated. Bear in mind also, a significant number of Australians got in on speculation on property, and if they lost money because they gambled, my sympathy (at least) is limited.

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