Pete, At 14:26 08/10/2008 -0700, you wrote:
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
I appreciate your concern about economically distressed regions and, of course, the sort of universal currency that I think ought to be (and will be) brought into existence sooner or later, will do nothing for these specifically. But, if anybody's, this is a government's job not a bank's. And even governments can do little when a region loses its former prosperity. For example, in this country both Tory and Labour governments have been trying all sorts of ways for the past 50 years to help northern England but to no avail. There is still a large disparity in incomes between north and south and, in fact, it has been growing rather than declining in the last ten years of a Labour government. Despite much cheaper costs of living, and land and property costs in the north which ought to help entrepreneurs set up new businesses, the more talented of the young decide to go down south.
Keith Keith Keith Hudson, 6 Upper Camden Place, Bath BA1 5HX (044 1225 311636 or 312622)
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