Sustainable Banking Industry

The greatest challenge in any form of government is finding sustainability. This is especially challenging in democracies. We have an an electorate growing ever more complicated, and comprising in part:

• Individuals acting in their own best interests.
• Religions representing different moral ideologies.
• Corporations representing the interests of their investors.
• The actions of the government itself, in seeking to maintain and expand its own control. This includes influential political parties.

All of these actors are working within environmental constraints, responding to the actions of others, and are most often comprised of individuals acting upon several of these influences in concert. Clearly, sustainability under the force of these tides is a near impossibility.

Our empire is in decline. There are many reasons for this. We were the only superpower left standing after WWII, there was a time not long ago when China and India barely even registered on our economic radar, and the scale of military, government, insurance, regulation, and debts both private and public have grown to the point where they consume the fruits of our labor and leave us the pits.

Some of these problems are beyond our control, and indeed shouldn’t even be considered problems. In the spirit of embracing the advance of humanity over that of nationalism, we should welcome China and India to the stage. There is no reason they need to fail in order for us to succeed, and we’ve proven many times in the past and present that suppressing nations only leads to military dictatorship.

Those interested in sustaining the status quo have been pulling the puppet strings of politics in order to convince us that what we need to do to save ourselves is to feed them. They’ve convinced us that by giving large amounts of taxpayer money to the largest and most inept banks, so that they may loan it back to us at interest, we will save ourselves money. They’ve convinced us that by getting rid of people’s old cars, we get them to buy new cars, thus providing jobs. This is the classic broken window fallacy, that in order to save the economy, we should all go out and throw a rock through our neighbor’s  window. Think of all the people we could employ making new windows! Now they want us to believe that the best way to save small business is to make small business loans more available, as if more debt is what small business needs to succeed.

There are times when the best ideas are the ones that sound the worst on the surface, A friend sent me this video from The Renegade Economist the other day, and I must admit I’m fascinated by the concept:

As horrible and unfair an idea as it may seem to reward those who have gotten into excess debt by cancelling their debts, I think the fallout from such a plan could very well leave us in a much more sustainable society. The first round of this is the toughest, both from the perspective of fairness, and in coming up with the money. Lets assume that the government simply prints money and pays off all debts acquired before the passing of the bill. This would create a massive devaluation of the dollar, which would be bad, right?

Can we agree that the recent success of Chinese industry can be attributed to their pegging of their currency below the dollar in order to get us to buy their goods and outsource to their industry? If we can say that their success is due to them devaluing their currency, then why do we insist that doing the same would ruin ours? It would level the playing field and herald the return of manufacturing.

If everyone knew their debts would disappear every four years, wouldn’t they just rack up uncontrollable debt again? Assume now that the government says up front that they won’t be paying the debts in the future, just cancelling them, why would the credit industry loan anyone money in the first place? They would cease to exist, and give up their jobs breaking windows in favor of something more useful. There would be no more housing booms or busts, as housing prices would never adjust beyond people’s ability to buy them outright. This would also serve to remove the divide we are currently seeing between tangible assets and fiat wealth.

I’m not at all certain I support this action, and I have no illusions about the likelihood of it even making it to vote, but I’d be interested in your thoughts.