Wednesday, April 04, 2007

We All Help Banks Make Fortunes

I place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared. To preserve our independence, we must not let our rulers load us with perpetual debt.
- Thomas Jefferson, third US president, architect and author (1743-1826)

Why does a government incur huge public debt? When several successive sets of elected representatives choose to keep taxes low instead of investing in infrastructure such as roads, sewers and water purification, one set eventually must bear the burden of raising enormous amounts of money to bring these up to standard before disaster strikes. That is always done by borrowing.

War require large debts to be accumulated, especially in modern times when weaponry and stealth investigation have reached such sophistication that both winners and losers of war take decades to recover financially. Banks rack up unbelievable profits while the public foots every bill, both principal and interest.

Occupying another country is so costly that it cripples the occupying country while inflicting limited damage on the country being occupied. The Society Union finally collapsed from the weight of its own debt when it could no longer sustain the fortunes it was paying to neighbours that were pro-USSR. Occupying Afghanistan proved the undoing of the old union because the Afghans refused to submit and continued to fight indefinitely.

The continually rising tax burden relating to hiring more police and judges, building more courts and prisons and incarcerating previously inconceivable numbers of offenders hobbles honest citizens who know little about how this could be largely avoided by changing the education system to provide what children need instead of what industry wants.

Jefferson's warning means little today. We tend to elect representatives who will spend the most, who borrow the most, but who promise to reduce taxes at election time. Most of us content ourselves with the excuses our governments offer us for why they couldn't reduce taxes and why their enormous borrowings were needed. Until the next election when they once again promise to reduce our taxes and we believe them again.

Yet can we blame our governments for accumulating huge public debt that must be paid from taxes when our amount of personal debt (through credit) has reached unprecedented levels? Many of us pay twice the cost of a home or vehicle because we must pay so much interest on our debt. Today's fifty year mortgages, for example, mean that the borrower will be in debt for a lifetime.

Forced saving through debt payment costs much more than voluntary payment by personal savings and investments. It's a simple lesson that the lending institutions don't want us to learn.

Bill Allin
Turning It Around: Causes and Cures for Today's Epidemic Social Problems, striving to make the most important lessons easy to understand.
Learn more at http://billallin.com

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