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From: berman@psuvax1.UUCP (Piotr Berman)
Newsgroups: net.politics.theory
Subject: Re: capitalism vs. democracy???
Message-ID: <1930@psuvax1.UUCP>
Date: Wed, 18-Dec-85 14:36:42 EST
Article-I.D.: psuvax1.1930
Posted: Wed Dec 18 14:36:42 1985
Date-Received: Fri, 20-Dec-85 03:47:11 EST
References: <286@frog.UUCP> <28200393@inmet.UUCP>
Organization: Pennsylvania State Univ.
Lines: 113

>
> >/* Written 12:45 pm  Dec 13, 1985 by berman@psuvax1 in inmet:net.politics.t */
> >
> >Power of banks: forcing people to do what they do not want to do.
> >Example: you want to borrow from us, you must deposit here (my
> >personal experience).
>
> Omigosh!  What a huge amount of power: to trade with you only
> on terms they find agreeable!  (Of course, YOU must also
> find the terms agreeable).  Oh woe!
>
Using your movie theater example: it is like if you were told that
you can watch "Rainbow bright" only if you also buy tickets for "Rocky XXX".
Of course, I was not forced to make a deal: one can walk or learn how
to repair old cars.  Still, I view many package deals as infringement
of my freedom, if there is no pure deal around.

> It's quite true that the banks have a power to deny you a loan, but
> they can't "force" you to do things you don't want to do unless at
> some point you agree to this, or, of course, if the government backs
> them up.
>
> >Imagine that there is no regulations.  Then you might have: you
> >want to borrow, deposit here, insure here, use us as a brocker.
> >Or worse: we do not like you, we will recommend everybody not
> >to borrow you.
>
> Such tactics work sometimes -- and sometimes not.  Would you like
> to know where it's used a lot around here?  Bless you Piotr!  The
> GOVERNMENT operates in this way: ..............................
>
Which just supports my claim that not only the GOVERNMENT has
the power.

> >Example two: you do not want a financial chaos, help us (and pay
> >taxes to do it).
>
> Oho!  A government goes to a bank and offers to pay more money back
> later in exchange for a quantity of money today.  The bank agrees.
> The government, likely through incompetence or lack of nerve, FAILS to
> meet the deadlines.
>
> In the world of individuals, (...)
>
> In EITHER case, the bank involved would be justified in  exercising
> whatever non-payment clause there was in your loan when you refused to
> pay.
>
You missed the point by a mile.  Bank can invoke a non-payment clause
against a country, but only to a point.  In 19 century the bank
would ask its government (US, France etc.) to size the customs of
the debtor country.  Nowadays, this is not practicable, so there
exists an intricate system in which the rich governments subsidize
the poor governments so that the latter can pay increased spreads
to banks.

> >Depriving you of an asset you use (like a house) may be quite a
> >punishment.  Unregulated power of banks could be very destructive.
>
> I suppose you'll find this tough to believe, but the ungrateful S.O.B.'s
> that run the movie theater nearby have just stopped showing a movie I
> liked.  Further, even when they were running it, they insisted I *pay*
> them when I saw it!  Oh the injustice! .....................
>
Remember the double feature example which I gave before.  Imagine
also that one company buys from the leading studios the franchise
to show their movies in, say, Cleveland.  Afterwards, whoeverer
in Cleveland wants to see a movie must either a. agree to their terms,
b. travel 30 miles.  This is exactly what I mean by concentration of
power.
Of all the bissnesses, banks can potentially wield the greatest power.
You as individual may do not feel it this way, but every kind of
bussiness needs credit.  Once there is a leverage, a dependance may
appear.
> Piotr, get it straight: you can  prevent any bank from gaining undue
> influence over you by making sure that a) You are willing and able to
> make the payments, and b) The other terms of the loan don't discommode you.
> and not taking the loan unless you are satisfied on counts a & b.
>
> I've no patience with Snidely Whiplash, but you rarely find Snidely Whiplash
> in the real world.
>
> It's a SHAME that folks sometimes can't make their interest payments, and
> it's also sad when nations can't.  But let's hear no moaning about the
> power the banks wield: it's power given to them by their borrowers,
> and if that degree of power is unjust, let's have a closer look at the
> borrowers, shall we?  It's not that the banks are complete nice-guys,
> or that any consequence of a credit shutoff is deserved (what about
> children born during a loan-induced boom who suffer during a collection-
> induced bust, for example?) but merely that the power stems not
> from the banks but from the borrowers.

The life is more complex than your down to earth example.
Consider:  John V. Decent deposits money in HugeBancorp.  The president
of HB is fed lavishly by president for life of Whereitis, gen. Bozo.
Wheritis receves a loan, 1 billion dollars (plus another 10 billion from
AnotherBankIntown, ZillionYenIncorp etc.).

7 years later (now we have seven lean years, following 7 fat ones).
Gen. Bozo is retired in St. Tropez, the former president of HB
similarly enjoys Boca Raton, the citizens of Whereitis learn that
they need an austerity program after years of depositing billions
in Swiss accounts of the most distinguished citizens, John V. Decent
learns that unless his government will help, his bank account will
go down the drain, the financial panic will drive interest rates
to the sky and his employer will bancrupt.  Now, is there a little
of a reap-off here?

In the unregulated past the above scenario differed:  John. V. Decent
actually was loosing his account and job.  And the reap-off was bigger.

Piotr Berman