On Wed, 08 Oct 2008, Keith Hudson <[EMAIL PROTECTED]> wrote: >Hi Pete, > >To answer your question, variable interest rates of a universal >currency could occur just as they do now within a national currency. A >country with a central bank interest rate of, say, 4% p.a. can also >have a spectrum of other interest rates operating within it (even up to >1,000% p.a. -- as is the case of Fidelity small loans in this country >at present) according to the credit-worthiness of the borrower and the >uses to which the loan is put. > >Thus a traditional building society in this country requires evidence >of a mortgagee's income and the deeds of the house being mortgaged -- >the latter not only as collateral but as persuasive evidence of the use >to which the loan is being put. At the other extreme, a loan shark (the >local representative of a much larger firm such as Fidelity in this >country) charging, say, 30-50% interest per week, dealing with a >borrower with little or no collateral, constantly updates his much >flimsier evidence. He usually lives in the same area as the borrower >and visits the borrower every week (usually on payday or, more usually >today, benefits day) to collect repayment. > >It's up to the lender to ensure that he has the evidence of >credit-worthiness and borrower's intention and has a continuing level >of supervision that the loan is being carried out according to stated >intention. However, since the rise of securitized mortgages and credit >derivatives, contact with the original borrower or lender respectively >may be any number of indirect steps away. The collateral follows >through legally with the paper documents, but the value of the >collateral becomes vaguer each time the paperwork is bought and sold -- >rather like the game of Chinese Whispers.
What you are describing here is simply the protocols of a single universal lending regime. What I am talking about is more lenient lending terms for economically depressed areas, which is the opposite of the effect which results from the regime you describe here - depressed areas are preceived as higher risk, so they face _higher_ lending rates than boom regions, under a universal system. What is required to prevent enhancing economic hardship for depressed areas is a regional overall adjustment to the lending regime: all the computations you describe would still hold sway, to allow appropriate pro-rating of interest rates based on relative risk, but all this would be based on a less onerous base rate, reflecting the depressed economic climate of the region. I have never seen this concept applied within a single currency. With a separate regional currency, the effects on relative value computed by the bean counters manifest as a change in the exchange rate of the regional currency, but at least within the region its currency (with its own interest rate structure) allows a continuation of much more vigourous economic activity than would be possible facing the lending regime of a broader currency based mainly in more affluent and booming regions. -Pete _______________________________________________ Futurework mailing list [email protected] https://lists.uwaterloo.ca/mailman/listinfo/futurework
