Looks like Paul Krugman has competition in the area of hairbrain “progressive” ideas. Bangladeshi economist, Muhammad Yunus, is insisting that guaranteed credit for everyone should be a “human right”. Hmmm, what could possibly go wrong with this idea, if implemented?!
Turns out we don’t need to look very far into history to find out. This article and this one too are well worth a read. Here’s an excerpt from the former:
The story of Boiana and of Palivelupa is that of a good idea gone drastically wrong, devastating the lives of millions of desperately poor people, threatening a banking crisis and revealing the dark side of India’s economic growth. Pioneered in Bangladesh in the late 1970s, microfinance involves granting small loans that no conventional bank would give to the very poor, allowing them to launch small-scale economic ventures. Around 30 million households in India have received £4bn in such loans over the past 15 years.
In recent months, however, the industry has been thrown into crisis as it has become clear that a significant number of borrowers – between a tenth and a third, depending on the estimate – cannot afford to repay their loans.
Ah, socialism, how warm and fuzzy.
The U.S. housing crisis is a case in point. The government pressured lenders to extend mortgages to underprivileged groups with very little down. Many lenders then dumped this toxic sludge on the secondary market provided by Freddie Mac and Fannie Mae.
Fortunately the housing crisis had no significant ramifications, and the U.S. economy is now peachy keen.
Yay! We like free stuff!
What rabbit said.
Residents of the First World, however, have a chance of paying off their debts.
When McDonalds wants to give away coffee for a week that’s a promotion to planned to grow their business. It would not work out well if they offered instead give away the $.75 retail price in cash to those same customers.
OTish: Best book I have read on the 2008 meltdown: The Big Short by Michael Lewis. eye opening stuff.
Bah! Small unsecured loans to financially weak
lenders? Works perfectly well – if the Mafia does it.
High interest rates and strict enforcement of repayment are the keys to profitability.
“You cannot legislate the poor into freedom by legislating the industrious out of it. You don’t multiply wealth by dividing it. Government cannot give anything to anybody that it doesn’t first take from somebody else. Whenever somebody receives something without working for it, somebody else has to work for it without receiving. The worst thing that can happen to a nation is for half of the people to get the idea they don’t have to work because somebody else will work for them, and the other half to get the idea that it does no good to work because they don’t get to enjoy the fruits of their labor.”
Adrian Rogers
This is essentially what will happen giving credit to those that have neither the means or intent to repay it. For every action there will be an equal and opposite reaction.
Make that
“Bah! Small unsecured loans to financially weak
borrowers? Works perfectly well – if the Mafia does it.
High interest rates and strict enforcement of repayment are the keys to profitability.”
I am guessing more like 2/3 won’t get repaid. Hard to believe the 1/10 to 1/3 numbers.
A chicken in every pot.
Home ownership a basic human right.
What can go wrong?
It is such an important right that babies in the US receive $40,000 of debt at birth.
Nothing like asking for the results without doing the work.
It’s to promote the idea of “Global Governance” — the new “avante garde” political theory being taught by the Left in Universities around the world. In other words, Nations shouldn’t be sovereign anymore — they need a single monolithic UNELECTED global government, run by Marxist elites, in order to solve the world’s problems. Even at the “goat-herder” level — at one fell global swoop. It’s simple 2 plus 2 math to them: “Allow us to rule the world and we will bring you instantaneous utopia!”
A new generation of pseudo-intellectuals who don’t have a clue about the world around them: “Ipads by day and Wii’s by night” is the extent of their experience — none of them has ever herded a goat. The CBC regularly parades the Third World global governance “experts” in front of the cameras — and I think Georgy Strombolombolops is their official CBC ambassador at large.
The same people who think they can bring the entire Middle East to accept democracy after hundreds of years despotism if “all the kids have cell phones”.
Borne of the same people who claimed 20 years ago that Africa would break the shackles of poverty “if we supply goatherders with computers”.
Borne of the same people who claimed back in the 70’s that if we provide advanced agro-tech to the Third World, “starvation will disappear”. They called it the “Green Revolution”, and it ended in massive deforestation, flooding, destruction of delicate tropical topsoils, drought and starvation in many places.
Borne of the same people who claimed that Russia had become a free democracy because “McDonald’s and Pizza Hut are in Moscow now!”
And finally, the same people who thought that Barack Obama would be propelled to world-wide fame and chosen as the first “Global Governor”, not only solving the problems of the world but even controlling the climate!
I would normally invoke “Orwell” at this point, but the cliché is overused.
It can work, just like the ARM could have worked – if you keep it to a small population. But then you have to determine who “deserves it” – and the whole thing becomes an ugly mess.
And the “microbanking” crisis? It’s really just a reflection of the much larger banking crisis that nearly threw us into worldwide depression a couple years ago.
BTW, the root cause of that economic crisis wasn’t bankers like Bernie Madoff — greedy opportunists like Madoff were the effect. The root cause was a SOCIAL PROGRAM much like the Third World “microloans” PROGRAM, but writ large. Unsecured loans to the poor in the U.S. housing market caused the collapse, and the lack of accountability provided greedy opportunists like Madoff to “play dice” with the market.
Lousy filter!!!
I believe Muhammad Yunus has done a lot of good in the world; providing people with the capital to start small businesses. But cr*dit a “human right”? Oh Lord. I guess that means that being horribly in ever-increasing d*bt because you’re an irresponsible d-bag to whom no sane person would ever have lent a dime is a “human right” too. That follows.
Generally linking to/quoting Monty Python should be punishable by death, but obviously not when I do it. This bit is highly relevant and has the added extra bonus of being really offensive to the Scots.
Okay, I figured out the trigger words.
Another basic human right? — _____
That’s right, ______.
Hoo-eee.
Micro-loans done right help the poor to get out of poverty and rewards hard work. The more succesful ones use a local group to review the proposal, knowing failures to repay will reduce the pot eventually to zero, so there is incentive to support proposals that will succeed. a slight failure rate is expected, and a small amount to cover failures up to a certain limit can keep the pot up. this method is still way cheaper than shovelling aid towards them.