Friday, August 23, 2013

Doing Business

I’m back. Thanks to my son Political Sphere for contributing with a three-part discussion (Part I, Part II, Part III) on the connection between the law and morality, proving you can’t have one without the other.
During our recent travel, when Mr. Spherical Model and I arrived at our destination, a close relative picked us up at the airport to drive us to Mr. Spherical Model’s mother’s home. We had an interesting conversation in the car (that, in hindsight, I wish I’d recorded so I’d have better details for you). Our driver—I’ll call him Bill—is an entrepreneur, working these past several years on a product related to banking and bank cards.  He started this conversation with, “I’ll never do business in America again.” He’s pursuing alternatives: India, France, Great Britain, Japan, Korea….
He started in America. But this administration’s roadblocks are daunting. They just spent two years working with various US banks, with the banks going through the process of figuring out how to use this product while complying with myriad, endless regulations. Some of these come from the Dodd-Frank legislation, which has expanded in size day-by-day with additional rules—about 15 million words worth. (I found an interesting infographic here.) So, it took banks and their legal and compliance staffs two years to study the product. And as they were nearing a positive decision, suddenly the rules changed yet again. And rather than just trust that all would be well, the banks said they’d have to start the process over based on the new rules. In the meantime, overseas banks are very interested and a lot less limited by spools and spools of government red tape.
This reminds me of something I learned in a college government class concerning the rule of law. One of the basic requirements of law is that it is knowable to those who are subject to it. What we have now is tyranny by bureaucracy, with almost no way to comply completely to arbitrary, everchanging hidden details.
Bill had another example of government interference doing the opposite of helping. Someone he knows in the finance world has a business in which he provides an alternative to high-interest payday loans, using reloadable no-carried-balance credit-type cards. He screens those who use it and makes a specific contract with them. The customers temporarily draw a certain amount of unsecured credit on the card, with the promise to pay back that amount by a set short-term date. If the amount is paid according to the contract, there is no interest charge. If the amount hits the deadline, there is a prompt reminder sent to the customer, who is given till the end of the next business day to get the money paid without any penalty or interest charged. If the payment isn’t made, the relatively high interest rate of 18% kicks in, which is not higher than many payday loans, and only applies if the debt isn’t paid as contracted. And unlike payday loans, there’s no 20% (or whatever) transaction fee. So, for someone who needs short-term credit until known income arrives, this is a much better deal. If the customer defaults, he can no longer reload the card, and the business could write off the loss, so it was minimal risk and a much appreciated service that brought return business and connections for other services the business offered.
But the government didn’t like the idea that a “credit card” could charge 18% interest. So they made a rule that shut down the product altogether. So now, if someone has need of short-term credit, they are subject to the high transaction fee as well as the just-as-high-or-higher interest rate of a payday loan (with the risk of doubling the interest rate if you’re late). So, thanks again for government interference that does exactly the opposite of protecting the consumer.
Is government regulation ever helpful? It’s a question worth considering. The idea that government cares enough to protect us from ourselves is downright frightening, considering their pattern of unintended consequences. I have more to say on government regulation, but I think I’ll save it for a whole separate post.
So, back to the conversation with Bill. He went on about the Federal Reserve. Bill was surprised to learn that I actually knew the Federal Reserve Bank was neither a federal organization nor a bank. Bill said 99% of Americans are clueless. They look at the name and assume it's some sort of federal agency, and maybe a supreme top-of-the-hierarchy bank that holds the country's money. Actually it's a consortium of individuals who set themselves up to control the nation’s money supply, and works in conjunction with similar consortia worldwide. Sort of a sophisticated collaboration of mob bosses. 
Have I mentioned that 1913 was a very bad year? Happy Centennial of the worst year in America’s history! Federal income tax started that year. The Constitution was amended to allow for direct election of senators, eliminating representation for state government interests. President Woodrow Wilson was in the process of implementing “progressive” ideology that would undermine constitutional principles. And the Federal Reserve started that year as well. The story is told in a book called The Creature from Jekyll Island, by G. Edward Griffin. It sounds like an old horror B-movie, but it's actually a different kind of nightmare-inducer. Jekyll Island, along the coast of Georgia, is where the founders of the Federal Reserve met and set in motion their plans.
I’ve been aware of the book for a while, and it’s been on my to-read list. But Bill had a copy he let us borrow during the visit. The book is hefty, but it’s set up so you can do a digest version. Every chapter has a chapter heading of what’s coming, and ends with a one-page summary. If you’ve only got a short time, you can get the gist of what happened by reading headings and summaries, which you can probably do in about an hour.
I’m afraid I have to warn that this book will make your heart heavy. Things are not as our Constitution's founders put in place for our eternal benefit. But if you value truth and knowledge, you probably ought to buck up and digest what you can of this information.

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