Dominica Passport | Caribbean Recipes | Dominica Photos | Classified Ads | Search Jobs | Advertise here!

Experience Dominica – The Nature Island: Dominica Vacations | Exotic Vacations | Honeymoon Destination

Dominica weekly is a personal weblog about the nature island of Dominica.


Photo via politicaljib.com

Editor’s note:This post was guest blogged by Dan Tanner of dan-ruth-tanner.com

In the USA, politics is only window-dressing. That is because, unlike in Europe, each political party is associated with only one economic system: capitalism. The only difference between the Republicans (the party of Greed) and Democrats (the party of Envy) is who should principally benefit from that economic system. Greed says it should be the wealthy and corporations, Envy says it should be organized labor (and lately, the middle class). Both Greed and Envy would throw a boon to the poor; Greed would call for private charity to handle it and Envy would use government largesse.

In the USA, we have a strange system that provides great governmental stability but at the price of inflexibility. Because Congressional terms are 2 years (staggered among equal thirds of the membership) in the House of Representatives and 6 years in the Senate (also staggered among the membership) and separately by electoral – not popular – vote every 4 years for President, it is impossible to turn government over entirely to one party in a single election, and nearly impossible to do so even in the span of two or more elections. Moreover, the doctrine of 3 co-equal branches of government (Legislative, Administrative, and Judicial) means that we have nothing like a no-confidence process, and the impeachment process is cumbersome and rarely used, and some argue, not correct to settle purely political questions. (Impeachment may be political in nature, but carries no criminal sanctions but only removal from office and is supposed to be used only for “high crimes and misdemeanors”.)

But stable one-party rule inevitably leads at least to excess and usually also to corruption. Under capitalism, the Greed party always rejects regulation, allowing robber-barons to get rich quickly and easily in a wild-west atmosphere. But unregulated capitalism does not work – it carries with the seeds of its own destruction through pursuit of greed.

Historically, every time the Greed party has been in power for a long time, it builds a house of cards based on speculation that nears collapse and the Envy party must come to power and – as is its wont – implement some regulation. In the process, it rescues capitalism. Franklin D. Roosevelt did that in 1932 after unregulated stock markets crashed and unregulated banks failed. We have as FDR’s legacy a Security Exchange Commission (SEC) and a Federal Deposit Insurance Corporation (FDIC) to regulate, respectively, the stock market and banks. The Greed party thinks it reviles FDR, but the communists hate him far more because he rescued capitalism from the collapse that that Karl Marx called “the dialectic”.

After the Envy party runs its course in power and looses its luster because of inevitable corruption, etc, the US electorate, fickle as ever, swings back to put Greed back into power. Under Reagan (Greed party) banks and thrift institutions (savings and loans, mutual savings banks) were lumped together and deregulated. The result was disaster that should have easily been predictable: the S&L scandal erupted because the thrifts had to compete with commercial banks, but could do so with government insured funds!

To this day, deregulated thrifts no longer offer long-term (30-year) fixed-rate mortgage loans. No commercial company in the USA does, because 30-years is far too long a term to lock in an interest rate. So, during the Regan administration, Freddy Mac and Fannie Mae were created by government to buy mortgage loans for 30-year terms. This was an historic change. When my wife and I bought our house on a 30-year fixed-term mortgage we went to the local savings bank and that is where we got our mortgage. Sixteen years later when we paid it off (we were thrifty and made accelerated payments on the principal) we went to see the same loan officer at the same desk at the same savings bank to do it. That is no longer possible. When you get a 30-year fixed-term mortgage (or, nowadays nearly any other type of mortgage) you go through a broker who places the loan with a bank or a mortgage company or God knows who, and that loan is quickly sold. It is sold as part of a “bag” of mortgage-backed securities.

This whole apparatus operates outside of any regulation. The game quickly became to issue bad loans and quickly pass them on – inside a bag that defies inspection – to the next sucker up the line.

Now history must make a turn. The Envy party – which favors regulated markets – must come to power to correct the excesses allowed during Greed’s turn.

Will this happen? Can it happen? I wonder. I fear that there is enough racism in the US to enable Greed to cling to power.

Capitalism is a lousy system, but it is probably still the best economic system that mankind can devise. And it can work if properly regulated (but even regulators can be come corrupt; we’re all only human). And democracy is a lousy system but also probably the best we can come up with. But democracy requires a fair, intelligent and informed electorate (not one that will simply favor the party whose VP candidate has a hot body – but remember that women voted for the “cute” JFK), and the US democracy has been thoroughly given over to the donor class. Anyone elected to office lets the lobbyists write legislation while he or she spends all of his or her time doing nothing but raising enough money to run for reelection. The donor class prefers it that way because it allows only them to determine the electorate’s choices, and often as not, to totally own those who gain elected office. This is true of both Envy and Greed party officeholders.

If the electorate comes to its senses and grasps what’s at stake – saving capitalism, which will surely collapse if the present Greed policies continue, it will elect Envy this time around, both for the Presidency and with enough of a majority in Congress to make governing possible. In 2006 it came to its senses (Iraq was the issue), but could only elect an Envy majority that was so slim that only stalemate between President and Congress (and due to rules, often even between the parties in Congress itself), not real governing, was possible.

The joker in the deck is the power of the Military-Industrial Complex. Usually Greed does not want to control the MIC and Envy wants to but can’t, because the MIC not only enriches the wealthy and large corporations but also provides a huge slice of employment in virtually every congressional district.

I won’t be voting. That’s because I live in Massachusetts. It is a foregone conclusion that Envy will win the electors and that the electorate will return all of the Envy incumbents (many running unopposed) to Congress.

Instead I will observe – fearfully. First that racism will cause Envy (which historically needs to win) to lose. If Greed wins, things get worse. And even if Envy should manage to win, the patient may be too sick to save.

Share this Dominica article with your friends:

Facebook Twitter Google Buzz Google Bookmarks Digg Reddit delicious Technorati Slashdot Yahoo My Web

Tagged with: , , , , , , ,

Related Post

Recently, I had a lengthy conservation with a good friend of mine who had a ton of basic personal finance questions contained within. I thought it might be interesting to start an irregular “Your Money 101″ series to answer and explain some of his questions.

Most Dominicans see banks as being a place where you save your money or where you get open a checking account or where you can get loans, but a lot of people often don’t understand the big picture of how a bank functions. Let’s walk through it in simple (baby) steps so that you can understand why a bank exists.

First of all remember, a bank is a just like any other business: it strives to make as much money as possible. They make money by simply moving money around; keep that in mind as we go through the different services that a bank provides.

Most people the first service that they become familiar with in terms of a bank is a savings account. At first glance, a savings account is a situation in which you give a bank your money for a period of time, withdraw it whenever you like, and depending on how long leave it there it earns a small amount of money for you. What actually happens, though, is that a savings account is actually a loan, except this time you’re the lender. It’s no different than any other loan, except it’s really flexible: you can lend as much as you want to the bank and get that loan paid back whenever you’d like. Because of this flexibility, though, the interest you make on this loan is pretty low.

Likewise a checking account, at most banks, is no different than a savings account: you’re lending the bank your money, but with a checking account, they pay your interest with services (dealing with the checks you write, etc.) instead of interest.

The other major area that people think of when they consider a bank is loans: they lend money to people for buying a home, car, and other things.

So how does a bank make money? For starters, they take the money you loan them and earn a pretty strong return with it, then give you a part of that return in the form of interest. So, each dollar you put into your account with the bank makes them a little bit of money.

Let’s say, for example, that the bank has a savings account with a 1.5% rate of return, which is likely better than most banks in Dominica. They take the money from your account (and a lot of other savings accounts) and use all of that money to buy (for example) a treasury note, which is guaranteed returns about 5%.

Even better, let’s say that someone else comes into the bank and wants to borrow some money to start up a small business. The bank offers to lend them the money for the car at 7% return, so they take that money from the accounts at the bank and give it to the borrower. Then, the borrower pays back that money plus the interest, of which they pass on 1.5% to you, keeping 5.5% for them.

On top of that, banks today make a lot of money from fees. You get charged when you use the wrong ATM, when you overdraft a check, interest on your credit card(s) balance and so on. Each of these activities only costs the bank a few cents to handle, but it costs you a few dollars.

To summarize it, a bank works by paying people small amounts to lend their money, then lending that money onto others for larger amounts. They manage that whole process, and then keep the difference between the large amount (interest on loans) and small amount (interest from a savings account).

Share this Dominica article with your friends:

Facebook Twitter Google Buzz Google Bookmarks Digg Reddit delicious Technorati Slashdot Yahoo My Web

Tagged with: , , , , , , ,

Related Post

counting_money.jpg

This post was guest blogged by Dan Tanner of dan-ruth-tanner.com

Here in America, where everyone has credit cards and automatic teller machines (ATMs) and the Internet make banking and purchasing a 24-hour/7-day-per-week proposition, people are supposed to be somewhat sophisticated, or at least not completely naïve, financially. But that is not the case, and as a result our economy is in crisis, not just from the cost of the war in Iraq and Bush’s deficit spending and the imbalance of trade, but also because people consistently make bad choices against their own self interest. The home finance market meltdown is but one example. Sure, everyone in the picture – borrowers, lenders, brokers, bankers, traders, bond insurers, and even politicians – share in the blame, but none of it could have happened if the borrowers had exercised common sense in the first place.

Dominicans can learn from the miserable American example. My wife Ruth and I have weathered hard economic times and avoided these pitfalls. Both of had parents who were tempered by world wars and the Great Depression, and passed on to lessons that we heeded and which I’ll now share. Remember these three rules:

  • 1.Know the difference between what you want and what you need.
  • 2.Be patient.
  • 3.Nothing is free.

I’ll illustrate these rules by giving examples:

Know the difference between what you want and what you need. My mother had an older brother and one younger. My older uncle did well in business and would make loans to his younger brothers and sisters if they needed money. He would always ask what the money was being borrowed for. It had always been for some real need; a rent payment, to pay a doctor, etc. Payback of the loans was always a matter of honor. A payment might be missed, but that was infrequent.

It was never stated, but well understood, that if for some reason a loan could not be paid back, my older uncle would not be putting his younger relatives and their families out on the street – he was not like a bank. One day his youngest brother asked for a loan and when asked what it would be for, he replied that he wanted to buy a TV set. My older uncle refused him the loan, telling his young brother that he did not need a TV set, he merely wanted one. Too often, people can’t make that distinction, and then they can’t wait for what they want, leading to the second rule.

(more…)

Share this Dominica article with your friends:

Facebook Twitter Google Buzz Google Bookmarks Digg Reddit delicious Technorati Slashdot Yahoo My Web

Tagged with: , , , , , , ,

Related Post




Business Key Top Sites