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[–]worm 1 insightful - 2 fun1 insightful - 1 fun2 insightful - 2 fun -  (9 children)

Let's think about this for a moment. What is an overly-high interest rate? In the first place, if someone is willing to borrow even at such extortionate rates, then it would seem to me that the rates were not too high at all. If the rates were truly too high, then you would not have found anyone willing to borrow. The mere fact that people are still willing to take out loans, even at rates that you deem "too high", suggests that they would prefer to live with the interest and the results of their spending than without it.

But let's go back to the question you were responding to. When I asked you whether you assumed that people are forced to take loans, you answered that housing and education demand that people take loans. Let's assume for the moment that this is true.

If you were to prevent lending at reasonable, market rates of interest, then what I foresee is a collapse of lending to all but the most reliable of creditors. In other words, only those who already have considerable money and a stable income would be able to borrow money to fund the purchases of these "necessities" you have identified.

Maybe it would be a good way to force a population to spend within its means. It might even be a good way to prevent credit bubbles, for all I know. But I doubt that these are problems you set out to solve.

[–]magnora7 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (8 children)

Maybe it would be a good way to force a population to spend within its means. It might even be a good way to prevent credit bubbles, for all I know.

Yes of course it would.

But it's also a way to collapse the existing economy, and make literally millions of people instantly homeless. And stifle growth in the long-term.

So after the terrible transition period, it would probably work. But people would just start borrowing again, because who can turn down cheap/free money? The temptation is too great.

[–]worm 1 insightful - 2 fun1 insightful - 1 fun2 insightful - 2 fun -  (7 children)

And knowing all of that, you would still support a ban on usury? For that matter, you have not given any definition on what you would consider an overly-high interest rate to begin with. Would your definition perhaps be softened now that you've actually thought about what it would entail?

[–]magnora7 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (6 children)

There's already a ban on usury, I'd just advocate bringing the max interest rate allowed down gradually over time. I wouldn't just pull the rug out from under the existing system, it would have a 50-year wind-down plan if I were in control. And small interest rates would still be allowed.

[–][deleted] 3 insightful - 1 fun3 insightful - 0 fun4 insightful - 1 fun -  (4 children)

should have 4% or around there be max interest for all loans

I get that bankers need something for overhead but they don't need to be getting rich off this idea. Let them be middle class guys, make like 80k a year max.

[–]worm 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (1 child)

Let's imagine that we imposed a maximum rate as you suggest. What do you suppose would happen to the people who are too poor or unreliable or otherwise have a black mark against their records which indicate that it is unwise to lend them money at a low rate?

Such people would now be unable to obtain any legal loans at all, as it would not be a sound decision to give cheap credit to people who may not be able to repay them. An implementation of a cap on interest in fact harms the most vulnerable people and will only lead to the creation of shadow banking systems.

As I have repeatedly said, there is no reason why you should have usury laws at all. It seems to me that the only possible justification for such laws is to assume that borrowers are too foolish to understand the implications of their borrowing to begin with.

[–][deleted] 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (0 children)

if poor, get to work. shouldn't need loans

end fed reserve, nationalize it, put out low interest loans for those who apply with a plan and deserve it

[–]magnora7 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (1 child)

Yeah, especially when the loans are essentially government-backed anyway if they fail. (Aka Too big to fail bailouts). That really takes the risk out of the equation for the insurance companies. So the high interest rates seem especially inhumane.

[–][deleted] 2 insightful - 2 fun2 insightful - 1 fun3 insightful - 2 fun -  (0 children)

yeah after the bailouts for the rich we need to get off the high horse bootstraps capitalism bs, either socialism for no one, or for all

[–]worm 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (0 children)

I'll assume that your citation of current laws (though I have no idea which jurisdiction you are in, and thus have no idea what those laws actually look like) means that you approve of the current definition of usury in some unnamed jurisdiction. But this is a rather lazy answer, isn't it? I don't see why the fact that we have such laws should necessarily mean such laws are wise laws.

The fact of the matter is that if interest rates were not high enough to offset the risk of lending, you would find fewer willing creditors and wind up with less credit. I would argue that the abolition of usury laws would in fact free up credit to those who need it the most, those who are otherwise too risky for creditors to willingly lend to.

You seem to be of the opinion that there are two types of lending: good lending, and bad lending. Good lending is good because the interest rates are low enough that they don't infringe upon the law. Bad lending is bad because the interest rates are too high. But such a simplistic definition inherently disregards the reason why people borrow in the first place; if someone borrows money, then regardless of the interest rates, the reason they are doing so is because they would prefer to have less money now rather than more money later, and it seems to me to be a perfectly fair goal to make this an available option to as many people as possible.