Monday, March 23, 2009

Status quo or Revolution or Reform or?


Originally Posted by "This Charming Man"

A "proper" reformist demand would be to demand a true public bank. But social-democracy does not do this. Therefore, all illusions about the social-democrats constituting "workers' parties" or even "reformists" are proven to be just that.

Am I, Mike Morin:

A. A Reformer
B. A Revolutionary
C. Both
D. Something Else, please categorize me

If I am a "reformer" then I am an "improper" reformer by Charming Man's definition. Let me tell you why:

A "bank" by definition is owned by investors, who attract depositors, and make money by lending to anyone with collateral and by making investments of any sort that the bankers think will be profitable. All Bankers' decisions are motivated by the objective to maximize profits for the investors. The Board of Directors and any referenda are controlled by a one dollar/one vote of the investors (as differentiated from depositors) scheme.

A savings bank is owned by the depositors. They make money by making loans, I'm not sure (I don't think so) if they are allowed to make investments. IN THEORY, the depositors govern the operations of the savings bank, but whatever "democracy" or pretense to democracy that they have is predicated on a one dollar/one vote arrangement.A credit union is owned by the depositors. They make money by making loans.

In theory, they are a one person/one vote economic democracy. I am considering, and am eligible to run for the Board of Directors of my credit union.

The dominant paradigm in Capitalist financial business operations uses something called the discount rate which assumes that money will be worth less (eventually worthless) in the future, thus creating a necessity to extract profits exceeding a "hurdle" rate leading to unfair and unwise exploitation of workers, borrowers, and natural resources, and to rampant inflation.

The use of credit is not a good business or personal practice.

In business, it should be discouraged because creditors have first claims on net revenues and hold liens on real property and capital assets. It causes inflation and cut-throat behavior because businesses often "leverage" their businesses. Leveraging a business is the process of taking a loan with the expectation that the business can get a return on the borrowed funds that exceeds the interest rate of the loan. The US Federal Government (and maybe States too, I don't remember) subsidizes the lending institutions by allowing businesses, for tax purposes, to write off interest payments as expenses. Leveraging, by raising the "hurdle rate", the desired return on investment, makes it necessary for businesses to exploit labor and natural resources by minimizing pay and maximizing volume of use and throughput. That is, exploiting people and resources even more than they do when the raison d'etre of the Capitalist business is to maximize profits and standard of living for their owners/investors, not optimize quality of life, equity, humanity, and sustainability for all people.

For "consumers", the use of credit is unwise because the system is set up to extract profits from interest thus assuring that when consumers use credit that they are losing money relative to inflation. Certainly the current foreclosure crisis in the USA is ample evidence of the inflation and the unfairness and unhealthiness of the mortgage lien process.

There are at least two lessons to be learned for the crisis in the mortgaged housing sector.

Again, the Federal Government subsidizes the lenders by allowing the borrower to write off interest payments as a personal expense.

Secondly, the UNREPORTED inflation that has been so outrageous in the housing sector in the last generation is because of the widening wealth and income gap between owners and workers.

Ideally, credit should only be used as a last resort, much more preferably not at all. We should replace all aspects of the extant financial system with an Equity Union. In some ways, a mutual insurance company is similar to an equity union. However, because such companies are required to realize profits in order to compete for "policy holders" (really investors), the companies that comprise the portfolios of the mutual insurance firms cannot be not-for-profit, can not be mutual organizations themselves.

In a not-for profit Equity Union financial services system based on principles of mutuality working in concert with ethical, wise, knowledgeable, and intelligent community, inter-community, inter-regional, and worldwide planning would serve the needs of the people.

In local and inter-community equity unions, equity sharing would be the modus operandi. People with funds being held in credit unions would have the option of investing in primarily worker owned community betterment projects based on the principles of quality of life, equity (which means ownership, and also means equality), humanity, and sustainability (which means there will be an economy and natural resources for the youth and the children, and for generations to come). If the inflation spiral can be removed (and the cost of real and capital assets brought back to earth), then indigent and poor workers could hope to increase their equity holdings and quality of life assets and equity investors could hope to get their money back.

Some endeavors, beyond poor workers enrichment, would be not-for-profit. That is, profits made beyond a pre-determined return to the poor workers, would be re-invested in more such worker/community betterment hybrid businesses (preferably cooperatives). Equity investments in community businesses could not be sold to others, but could be bought back at par value (the price of the share of the stock when it was invested). Such would be discouraged, and disallowed if it was a low-income/low wealth equity investor who may or may not (what do the soviets think?) if they were allowed to collect (limited) personal dividends.

Other endeavors, such as most, if not all, health care entities would be non-profit.

Poor communities, perhaps, could set up (501)(c)(3) community equity funds to which more wealthy individuals could give a tax deductible contribution.

That's assuming you all want to keep any government, at all...

I am not a Capitalist. I am a worker.

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