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Be Proud of Your Interest Rate

By: Paxton Sawyer

Copyright©  2010

All Rights Reserved 

There is one fundamental flaw in the economic system that, if corrected, could cure many of the ills of the system of capitalism. The flaw is in how interest rates are charged. The wealthier should pay high interest rates. Those least able to afford the basics of life should have the lowest interest rates so that they can become more financially sound and secure.

Those of you who are proud of your possessions really like to brag on them. How big your house is. How many houses you own. Have many cars you have. How big your boat is. There are even those who congratulate themselves on the number of commercial jets they own for their personal use.

But these folks have no pride in paying high interest rates.

Think about this. If the wealthiest and most credit worthy paid the highest interest rates, then more money would be available for the poorest and the highest credit risk borrowers. If the poorer among us had the ability, with guidance from financial experts, sometimes known as bankers, to borrow money for houses and transportation, for lower interest rates on credit cards and lower interests on personal loans, then many of the poorer among us will move from being poor to having assets. From being unable to acquire wealth and possessions to becoming able to see the benefits of their labor. These people will then have more incentive to work, to work hard and to build their own financial security.

It has long been known and proven that human beings respond to being rewarded. If there is no reward, there is no reason for people to try. Imagine that it is your lot in life to perform manual labor. There is nothing wrong with manual labor. All labor, no matter how menial you may consider it, is necessary and should be honored. There is no honor in living off you neighbors or in living off the taxes taken from your neighbors. But any contribution made by anyone to this society deserves our respect and our appreciation.

Your job is now to be a ditch digger. You are paid minimum wage and you may get a three percent raise each year. But you will remain a ditch digger. You cannot buy a home, no matter how modest, because no one will give you a loan that you can afford. You can’t afford a car that runs. You can’t buy good furniture or good food.

But, what would happen if you could get a loan for a house at two percent? Or a loan for a good car at two percent? You could buy a house or a car. You would have a reason to be proud of your house or your car. You got them by working for them and your work provides you the means to afford them.

It should be clear that those who have no history of dealing with budgets and money should be taught and directed by financial experts. It is my opinion that most high school students would get much more use from a course in budgeting than they do from memorizing Shakespeare. Those who are going to college may need Shakespeare. Most kids need to learn to read, to write, to add, to subtract and how to budget and a trade. College may be available to more kids but we need more good tradesmen, craftsmen and technicians than we do college graduates.

On the other side, let’s say you own a house worth five million dollars and you want to buy a modest beach front retreat for four million dollars. Why should you get the four percent loan while the ditch digger can’t get a loan for a modest, little house for fifteen or twenty percent? While your job may be worth more money and you may get paid more, your need for a decent house is no greater than the ditch diggers.

Here is how I think things should work. Interest rates should increase with your ability to repay the loan. The money generated by the higher interest income to the financial institutions would then be used to guarantee the loans made at low interest rates to those least able to repay.

That is actually fair.

To each according to his need. From each according to their ability to pay. You don’t need a government to collect taxes by force of law to distribute money. It can be done with a change in how things work.

So, you rich folks, stop bragging about what you have. Start bragging about how high an interest rate you pay. Be proud and really make a difference in our country and in the lives of your fellow human beings.







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Paxton Sawyer
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