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Phase out lending for profit. Tax at till and bank

Phase out lending for profit. Tax at till and bank

Lending for profit, if you follow basic economics, means the prices of everything people borrow for, is massively inflated. The market price is set by what it will bear. What it will bear is magnified hugely by mortgages. Let a much smaller limit on borrowing for profit, set some lower maximum interest rates for such borrowing (phased in), and in doing so, free the people - rents will be lower, houses cheaper, cars cheaper. For catch the 1% - tax for transactions, and for purchases. As a small business owner I pay proportionally much more tax than a megacorp. That's plain wrong. With a transactional tax, they'd pay more, and me less - even if they operated overseas to dodge taxes. And with a GST and transaction system, instead of a income and business tax system, people buying boats, and huge houses, would be paying for their wealth there - people would pay proportionate to the lifestyle they lead (obviously such a system would apply to everything, not just some goods and services). My system is more radical. Banks, investors, speculators, and loan outfits would all lose out (boohoo, lol) - but people would be vastly better off, on the whole. In fact all that money saved from artificially inflated housing prices due to fiat, could be spent in our economy, generating potentially globally standout GDP levels, and actual, on the ground, standards of living.

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    • James Turnbull
      commented 2016-12-12 17:02:49 +1300
      There was no cost of acquisition … maybe you deal in human trafficking and you’re applying your business terms outta context eh

      ;-)
    • Jamie Brahm
      commented 2016-12-09 19:34:55 +1300
      Well don’t forget to factor the cost of acquisition when negotiating your date :P
    • James Turnbull
      commented 2016-12-09 18:19:19 +1300
      Yeah … nah, thanks again but I’ll have to pass Jamie, i’m off to wash my hair … hot date and all that Bro !
    • Jamie Brahm
      commented 2016-12-09 17:56:57 +1300
      Not really sure what that means “first strike ad hominem attack”. You can insult people all you like, if you like, its the internet, it just doesn’t make your point. Logic does that. That is to say, you cannot use direct insults as a rebuttal. But if you insult me, but actually have a logically structured argument, that is compelling – I’d happily change my mind. I don’t think it exists, I think my a+b=c is pretty much undeniable, but life is a learning process and one can’t be right all the time.

      To do that make an actual rebuttal, you’d need to argue against the premises, or conclusion of my A+B=C argument, with either the self evident, or logically connected statements, like A + B =C (like my argument). As I outlined below. It should be able to be tied together very clearly, with a a+b+c format, and the specific conclusion or premise it relates to. The ties or connections between these elements, are what makes it a formal logical argument. Like math.

      You’d be most welcome to attempt that, but I understand if you do not wish to. Arguing on the internet isn’t a terribly productive activity. It’s not like anyones really listening to what you or I have to say. The internet in that fashion, is mostly the illusion of relevance. Just like civility is often also an illusion.
    • James Turnbull
      commented 2016-12-09 17:43:05 +1300
      I’d be interested to know what you considered to be a first strike ad hominem attack ?

      As I explained your attitude / tone determines the response from myself – you get back from me what you put out.

      I closed on a conciliatory note and beyond that I really don’t have any interest in continuing a nonsensical fiction based conversation with yourself.

      Best regards etc
    • Jamie Brahm
      commented 2016-12-09 15:29:08 +1300
      That’s the other tactic of those without the logical means to address the central logic, ad homs.

      The amount of deposit, is quite irrelevant, like all your other points, in a world with no mortgages, or a capped maximum amount of lending regardless of savings. These are side topics. They aren’t directly related to my central argument, which is far simpler than you have attempted to make it.

      Its extremely simple to address an a+b=c argument. You simply have to deny one of the premises using logic, or deny the conclusion, using logic. The logic for the rebuttal, should also follow A+B=C, or be self-evident. At no point did you say “this premise is wrong” because of “xyz”. You simply said “you are wrong in general. Then talk about interest rates and fiat money”. Which is a typical internet arguing tactic, for those that don’t get how logic constructs arguments. Logic requires you draw a line between things. That they are connected.

      My argument if you missed it, runs in a very simple a+b=C

      A) Price is set by what the market will bear. This is the simplest most fundamental rule of economics aka “supply versus demand”. If people are able to, and prepared to may more, the seller can charge more.

      B) Mortgages, and lending for profit, increases what the market is able to bear at the time of purchase for houses by many factors. Having access to hundreds of thousands of dollars of borrowing at time of purchase means the market can bear a lot more, and people are prepared to pay more.

      Therefor

      C) Lowering or eliminating borrowing for profit, will lower the market price of housing.

      This is why I started to want to talk in concrete examples, of actual people. Because in order to give an effective rebuttal of my argument, you have to, step by step, show one of these wrong. With the same sort of connected, follow on, logic the argument is constructed by.

      I tried to simplify this, and reduce it down further by asking “how would the market in auckland, where prices average 1 million dollars, bear 1 million dollars by not having any mortgages at the same price?”

      You can’t rebut the argument about Fruit are seasonal, price is set by supply therefore fruit price varies by season and importing constraints, by saying “pears are fruit that have wax in the peel” or “yes, but the inflation of the dollar” etc. It has to directly relate to the flow of the argument, and offer its own proof by logically connected statements.
    • James Turnbull
      commented 2016-12-09 14:41:11 +1300
      Hello again … yes, HAD realised your difficulty in dealing with logic, it formed abou98% of my decision leave the debate!

      I previously gave you Real Life Mortgage scenarios – you ignored those and replied with some irrelevant nonse using 10% deposits which are not the usual case nor unlikely to be for some time.

      Being brutally frank here, and without malice, there were times when I was wondering if your dealer had sold you some bad gear … but whatever, it’s of no concern, In ANY debate I’m looking for a win/win/win/win outcome you get something good, I get something good, the party gets something good and even the watchers (far more watch than post ) would get something good too!

      It’s interesting that we get to the end and find ourselves at least somewhat in agreement on something !

      ps AS you had not noticed I’ll tell you … only about half of that was to reply … the second part was opening the matter to others.

      And, for sure, if anything thinks I’m completely missing any points that Jamie tells me I’m happy to be set right on that front!

      TTFN
    • Jamie Brahm
      commented 2016-12-09 14:20:40 +1300
      That’s a long way of refusing to engage in simple real life examples, in a practical illustration, or indeed my ideas formed into simple questions – like how the market could actually bear the auckland average of million dollar houses, without mortgages.

      The negotiating point is an interesting tack. But it doesn’t change what people can actually afford, and that does seem a typical tactic of people who don’t like your argument, but can’t actually argue its central logic – to talk about everything peripheral to it, but not the actual argument. Such as fiat money, the cost of aquisition, quantitive easing, and negotiations influence on price. Etc etc. I see that sort of think a lot.

      Having studied logic, I always find it intellectually evasive. If someone says A + B = C, and thats their argument, the only legitimate counter arguments are ones that disprove or disagree with the premises, or the link between the premises, and the conclusion. But you very rarely see that. And my logic, in my argument was extremely simple. It was literally an A+B=C argument, and most arguments aren’t that simple. But no where did you engage in the premises, or the conclusion, by saying “no this assumption is incorrect, because of A+B=C”. In fact, I am quite positive you never addressed it at all, doing the typical internet arguing method, of tackling all the side issues, because of a lack of ability to actually tackle the central argument.

      The simple fact remains- less on average buying power, creates a lower on average price. That’s very simple and actually commonsense. You can’t get blood from a stone, as they say. If people can’t front the cash, whether saved, or borrowed, sellers can’t ask that price. People can’t pay what they don’t have access to. No matter how good the bargaining, or what the adjusted cost of taking out a loan is.

      Anyway, clearly, it’s time for you to jump out of the debate, instead of using bob and mary as a template for exchange. And that’s fine, but it also seems like we’ve wasted time. Oh well.

      I will agree that it does seem pointless, asking us what we think, after having already formulated the policy. I have to be honest though, I don’t think the opportunities party is going to do well. No doubt national will be ousted, probably replaced by a NZF/green/labour coalition, with a strong amount of peters.

      And even then, no one in politics has the guts to do what they probably all should know full well know what needs to be done. It’s a system, that itself needs change, not merely a change in parties – a change in how policy is made.

      In the meantime, we had kimdotcoms party. And several others. People still kept voting for the weak tea in blue and red. And winston has talked of binding referendums – but whats the bet, he gets in power, and does none of it.
    • James Turnbull
      commented 2016-12-09 13:28:40 +1300
      Hello Jamie,

      Thanks for the 3 replies and no thanks, I’ll decline your generous offer to try and explain it any further. I spent a longish period trying to remove all possible ambiguities, used the simplest language and using block caps only for appropriate emphasis / lingusitic stress, to highlight important (IMO) words or as acronyms having identifies their use with the words upon firt use.

      In an earlier post you referred to you own language as being ‘opaque’ (that which cannot be seen into or through) so I don’t know … perhaps you can’t see ‘outside’ either … in other words whatever I say, maybe you can’t or don’t want to see ? And that’s fine, we’re all entitled so I’ll minimally reply.

      3rd Post (top one of the three as they appear )
      YES … of course you are aware the lending has been going on, you made point earlier ‘as if it were going to be a new idea to me / today" … yet I thought I’d made plain that I referred to it BECAUSE you had mentioned it (and going further into that would surely lead to circular language induced vertigo) BUT it ‘appears’ that the points about fiat (faith based paper money systems) were completely lost on as you did not (and do not need to on my account ) address those now. In fact it’s the fiat system that’s the problem and ‘quantitive easing’ ( by that and many other names that has led to all the crashes I mentioned.

      2nd Post ( middle of three as they appear) I believe that I made that same point in reply to yours that talked about ‘optimal profit’ and pointed out the when selling ‘optimal profit’ means biggest profit and I also referred to negotiating skills as the bigger factor for the profit achieved regardless of market conditions. People tend to hire real estate agents (REA) and pay big commissions as they fear their own negotiating ability might lead to them settling for a less than best deal.

      3rd Post ( third of three as they appear below )
      Already explained use of block caps etc above . Others might also have identified that BC’s were also used by me to identify logic-linking words ( such as IF…. THENBUT …chains )

      eg IF you came round to my house THEN I would offer you a drink to be sociable. BUT if you didn’t want to do that THEN offering you a drink would be pointless"

      It might (or not) be plain to yourself or others that I’m not ‘averse to ideas’ at all. I’ll support that with the facts – on several threads (esp) I have openly invited feedback and criticism and in particular acknowledged the risks of (anyone including myself) getting hung up on an idea that appears to have merit and so failing thereafter to see potential pitfalls.

      So NO, none of your ideas affront me at all, nor even does the ‘tone’ of your writing. As with spoken conversations I match my tone approximately to the tone of the other person – if they’re making a joke I’ll respond playfully, as I do to all other ‘positive tones’ such as loud with loud and assertivelly when appropriate. Likewise, when it comes to apparently negative tones (as I picked up from your dismissive words and phrases such as reference to my ‘lack of understanding form five economics ) then, yes indeed I meet such aggressiveness with assertion and sarcasm (did you actually complete year five ? ) As I said, you came across as supercilious ( adjective – behaving or looking as though one thinks one is superior to others ) and I responded to obvious nonsense in like manner, without personal attack on your being ( until the tongue in cheek one there about ’YEAR 5’ as a cosmic device vs FIFTH FORM)

      Away from the specific of our own conversation Jamie et al - I don’t know how the policy was arrived at nor do I know who may / may been consulted in it’s formulation. For myself I joined prior to seeing any policy – an act of faith in GM’s intellect and ability for sure but FAR MORE because I believed that he genuinely has the interests of ALL Kiwi people at heart, not just the top 20% or the Top 1% as seen under Key. We need simple policies that ‘everyone can get behind … and Policy 1 is plainly divisive. And it’s being ravaged in the press for that, and also for the goal of ‘Not wanting to be a party that governs’ I’m disappointed by that as I have utter disdain for Petter Dunn and the other insignificant person who is the ACT party of one ( can’t recall the name, cant be bothered wast keystrokes to look it up)

      I see a strong passionate even vexatious debate here and wonder deeply ‘why was the debate at this level not taking place with so many members PRIOR to the policy. This ’looks like a situation in which I appear to have fallen for ’YOU give US YOUR support and THEN WE will tell YOU what you are supporting as policy. THAT is the elitist attitude that lost Clinton all credibility in the USA, it’s why Britain has left the EU and it’s why other countries in the EU are broke and debating their own exits from the bloc.

      With genuine respect, this feels like I bought something from Trademe that was ‘far from what what I expected based on the description’ and all I can do is place feedback with a redface when what I REALLY WANT is for GM and ( whoever ) to create an effective opposition party that could grow into a Government perhaps, But unless the (TM seller) were were willing to work towards a solution … well, a metaphorical red face and a vent doesnt produce any satisfaction eh?

      So … in closing ( yes I agree thank heavens) thanks to all who are taking part and asking some mint questions ,,, serious questions that in the main are being met with silence.

      Though of course we know that older people’s opinion don’t matter as they’ll cark it soon – … a ‘blunt remark’ that appeared elsewhere on the MBs !

      Sure I own my house, I paid off the mortgage early by hard work, astute planning and more than a few sacrifices.

      I think that makes me sensible , not old or irrelevant and I expect to have several more productive decades ahead of me yet!
    • Jamie Brahm
      commented 2016-12-09 13:01:57 +1300
      I really hope I can connect what you are bound to say in reply, with what I have said this time. Please, definately start with an example :) Show me how a mortgageless society would sustain an auckland housing market of average price 1 million, using bob and mary as average people. How supply and demand for housing wouldn’t change radically by reducing or eliminating the economic artificiality of borrowing for profit.
    • Jamie Brahm
      commented 2016-12-09 12:57:25 +1300
      I mean heck, if you killed the mortgage (made all new mortgages illegal), tomorrow, house prices would drop out of sheer market panic (people as you yourself said, selling before the price drops further, thus increasing supply on the supply vs demand axis), let alone what people can afford. Hence why it can’t be all at once.

      To actually argue, that people would all buy their houses at like 67 or 77, and that such a delay in actually living in the home, or owning it, wouldn’t lower demand. Well, I am not sure any reasonable person would do that. People are generally poor at saving to begin with. They often see mortgages as “enforced saving” or “saving under threat”. Hence the super investment scheme. Faced with the prospect of a lifetime of saving – a lifetime of fiscal discipline, for a small amount of actually living in a house – it’s common sense obvious much much less people would do that. If really anyone at all. Thus less demand. Thus lower prices.

      Remembering that the average house price in auckland is roughly a million – who’s actually going to be able to pay that, if there’s not mortgages? Much, much less people. If they can’t afford it, on average, prices will drop. You see house prices go up and down all the time, for exactly these supply versus demand reasons. It’s as I stated, fifth form economics. If the market won’t bear it, you can’t generally sell it, at that price anymore.

      And before you argue, having actually understood my idea, that this would destroy economies because builders would get paid less or whatever – the primary losers are banks, land investors and rich people. And less money on rent/mortgage, is more money in the hand – money people can spend. Free spending money above the cost of living stimulates markets, and means a higher GDP, and a higher standard of living. Bankers, land investors loosing out, and builders getting slightly less, is well worth life being wealthier for everyone, and having a more robust economy.

      Heck people could probably pay more taxes at that point, once the artificially high price of land has the wind taken out of it.
    • Jamie Brahm
      commented 2016-12-09 12:37:00 +1300
      Maybe you have some valid point. I’m not seeing it, but that doesn’t mean its not there. But like explaining anything, the easiest conveyance, is a practical real world example, a metaphor, or similar.

      So lets use bob, and mary as an example. Bob is 27, mary is 25 (People get married later these days). They are a young family that wants a home so they can house their new family, and invest in it for their future. However, in bob and marys world, there is no lending for profit (I think it’s more practical to set a cap, at least at first, but easier in the example to just say there is none).

      So bob and mary start saving. Over ten years they are able to cobble together 250,000 dollars. They are very representative of the average person – most people with combined incomes can save about that amount, before it starts to become too late for them to buy a family home and have their children benefit directly. They at this point have two kids, one 10, one 7.

      Even if they saved for thirty years, they would save only 750,000. At that point they would be using the home only to retire in, and would probably better benefit from investing that 750,000 for retirement income. Or at least if I had 750,000 at age 57, I would be putting it into something that generates profit – not bricks and mortar, that many retirees end up using for borrowing, or sell to cover retirement. That just seems obviously smarter to me, especially when the average age of death is 80. Thirteen years of a house, with lower income and a high likelyhood of needing to sell anyway – no thanks. I’d rather have the quite comfortable income that could produce, in addition to super, when invested.

      So, how does the market then sell almost entirely million dollar houses in auckland? How practically do you imagine this not massively driving down house prices due to what the market will bear?

      How would the market sell houses that are more than 250k, or mary and bob, and why would mary and bob want to buy such a house?
    • Jamie Brahm
      commented 2016-12-09 12:18:35 +1300
      Definately use your own real world example please, and keep it simple. Wild miscommunication is pointless.

      Show me, how in a world with zero borrowing for profit (just to use the extreme example), the market would still bear million dollar houses in auckland when virtually nobody actually has 1 million dollars saved, or in assets at the time they wish to own a house.

      Or show me, how everyone could continue selling million dollar houses, in that environment. How the supply demand curve would be defied, or how it remains unaffected by less available purchasing power. Whichever, but use a concrete, simple example, to illustrate whatever your point is.
    • Jamie Brahm
      commented 2016-12-09 12:13:08 +1300
      Our govt has been applying the boom or bust borrowing for a long time. And yeah of course that will fail, we’ve been living on credit cards essentially. Greece-like depression is not far off.

      But mostly people can cover their mortgages, albiet, in old age or pay insurance to cover the risks of not quite making it. They just don’t want to buy houses then. They want to buy them at a younger age, so they can actually enjoy the benefits of having a home. If they have less available cash including borrowed money, at the time they want a house, on average, then the prices will drop.

      I feel I am being repetitive, but there is definite miscommunication here. Hence why, we should talk about real world examples. Keep the exchange as simple as possible, to avoid this. Plus, what I am talking about is really simple. There’s no need to talk about the cost of aquisition, because no one wants to buy their family home at 77, they want to buy it, in their 20s or 30s, when they get married, have kids, so on – so the cost of aquisition doesn’t really come in to what the market will bear (which is kinda the point, lol).

      If there was no borrowing for profit at all, then what people had saved, at whatever age they still actually want to buy a house, would be what the market will bear. Obviously that age will not be 77. Nor will that sum of money be the average price of a house in auckland currently 1 million.
    • Jamie Brahm
      commented 2016-12-09 12:02:18 +1300
      I’m also aware lending for profit has occurred for thousands of years. Probably why some may consider this radical, they tend not to like thinking in ways, that counter how people have thought for a very long time.
    • Jamie Brahm
      commented 2016-12-09 11:57:12 +1300
      I’m sure you know what happens also, when everyone is trying to sell before the price drops further – the increased supply, drops the price in itself. That’s the reason this needs to be phased slowly, to stabilize those fluctuations.
    • Jamie Brahm
      commented 2016-12-09 11:53:33 +1300
      Wow, James, that’s heck of a post, lots of caps. Well lets see how you address the notion of “the market being able to bear more due to borrowing, at time of purchase, meaning higher prices for those items”.

      For some reason you bring the cost of aquisition into it, which doesn’t lower what the market will bear due to borrowing, it’s still higher than it would be without borrowing. So I don’t see the relevance.

      Ah, I see. Despite laying this out, in what I thought was clearer fashion, you obviously still don’t understand. In the next paragraph you are talking about actual cash, not borrowed cash. You seem to be both reading what I say, in a way that it isn’t written, and at the same time, sort of apply economic theory that doesn’t really practically mean anything in this argument. Heck you seem to have taken issue with my idea, before you even worried about getting the meaning I am trying to put across. Maybe the idea affronts you.

      You aren’t in banking or land investing by any chance?

      So lets state this whole thing ultrasimply -

      1) You have 50k. You can borrow, say 500k. You are the average person. This means the market can easily bear 550k for a house. Thus there won’t be many houses much above 550.

      2) You have 50k. You can borrow, say 800k. You are the average person. This means the market can easily bear 850k. This means there won’t be many houses much above 850.

      Please, if you respond to this reply, use the example. Use a real world example, like above. Don’t get lost in cost of aquisition and economic theory – just tell me how you think the real world examples, I have given, would supposedly not work.

      How someone who saves, say 50k, before they want to buy a house, would be able to pay 950k, if the bank was only allowed to lend 300k, without unrealistically waiting until they are nearly dead before buying a house, and everyone, or most of the market doing exactly that :P XD No-one is going to wait till their 77, and have saved 950k between two people, and then buy a house, for the few years between then, and the average age of death 80. That just won’t happen, and that should be obvious.

      So please, use a real world example. Make it simple. Don’t get lost in abstractions.
    • James Turnbull
      commented 2016-12-09 04:07:45 +1300
      Dear Jamie, I’m sorry that you seemed to have misunderstood form five economics and apparently english too ??? Congrats on acheiving excellence in supercilliousness and a merit in talking down to others.

      QUOTE YOU : Lending for profit, if you follow basic economics, means the PRICES of everything people borrow for, is massively inflated. END QUOTe /// and the BLOCK CAP were inserted by myself for emphasis on that one word)

      Sorry ,,, but that’s still nonsense especially from an apparently accomplished economist such as yourself. You seem to be saying that you do not understand that there is a BIG DIFFERENCE between THE PRICE of an article and THE COST OF ACQUISITION of the same article using credit ( borrowed money) . The CoA of the article is the price paid PLUS any FEES attached and the amount of INTEREST applied to the loan. Thats not even Form Five economics it’s a glance at a few words in a dictionary!

      You appear to further show your own confusion when you said

      QUOTE YOU : More money a person has and is willing to spend, the more any reasonable profiteer will charge. Banks lending out sums of up to millions, obviously changes that. END QUOTE

      Doubly nonsensical … but we’ll ignore your theory that such a thing as a ‘REASONABLE PROFITEER’ even exists .. the term itself is an oxymoron ( a contradiction of the words that make it )

      IF a person has more money (ie liquid cash or assets) THEN they are

      a) LESS likely to borrow anything – because they can pay for the item in cash AND in THAT case the COST OF ACQUISITION is the SAME as the PRICE ( some economists will argue there’s a loss of interest on the cash withdrawn if it were earning interest – but lets keep simple )

      b) IF they choose to borrow ( they might do so in order to maintain a ‘cash reserve’ – often called a safety net) THEN simply because they have the CASH or ASSETS to cover the loan their credit rating will be higher ( less perceived risk of default) AND they’ll get the best possible (lowest) interest rate from a ‘First Line’ ie respectable lender who wants this kind of business.

      The ‘Gold Standard’ for financing high value consumer goods ( Cars, Boats, Motorcycles, extensive foreign travel etc etc) might be seen in the customer who has good % equity in their home and a steady reliable income – such a person can obtain finance (borrow the money) at the same rate as his home mortgage. Even there though the PRICE and the COST OF ACQUISITION still differs but will not be so high as borrowing from the second or third tier ( also called subprime) lenders who chatge horrendous rates of interest knowing that many / most of their loans will never be repaid ( but again we’ll go no further in the interests of brevity and simplicity )

      And in the CASE of a BUSINESS Purchae I supported the explanation by showing you that the tax treatment of the item PRICE (aka Capital Cost) and the additional sums involved are treated differently by IRD ( and most countries have loosely similar taxation rules – some looser / some tighter and sometimes investment incentives apply but again … simpicity and brevity )

      Your middle post has me a tad curious Jamie – I don’t see HOW can you possibly claim to " be sure, the logic and basis in economics is sound" when you have just openly stated" it may have ramifications that you haven’t thought of "

      To answer your first, longer post ( third in list below) …. I’ve already explained above ‘How I got onto interest’ … to explain to you the difference between PRICE and COST OF ACQUISITION.

      1 ) Makes no sense because
      a) IF people ( prospective buyers) have less money THEN they make lower offers OR they abstain from buying at the time or else
      b) They do actually get to buy at lower prices because sellers observe that the value of offers coming in is falling and they probably want to be rid of the asset that’s declining in value before it falls further. That applies across the board … for examples sake – falling property prices, a glut of a particular model car on the market, poor reviews of products (inc things like holidays) in consumer magazines that leads to less demand / desirability, or even ‘run out models’ as the old model declines in value as soon as the new one is in the showroom )

      Optimal mean best or most favourable – so that can only mean biggest )profits are always achieved by the seller with the BEST NEGOTIATING SKILLS and that applies regardless as to whether the market is rising, falling or static and whether the product is in short or plentiful supply … perhaps you’ve heard about salespeople who could " sell sand to the Arabs ?" or maybe you’ve seen TV Infomercials for dubious junk where the voice always says " But wait, we’ve got a special deal for the viewers " and soon after their phones begin ringing … great sale / negotiating skills … literally people get talked into buying whatever but again back to simplicty n brevity!

      2) Yes indeed ‘Lending for profit means that people have money available to purchae things. It does NOT however mean that they have MORE MONEY at all. Usually the money is paid direct from lender to seller and the buyer acquires an ASSETT ( his car or whatever) and at the same he is burdened with a LIABILITY ( the debt amount borrowed ) The only way to have “more money” is by receiving payment for one’s labour or selling something at a profit ( overly simplified perhaps … brevity and simplicity )

      3) Current lending rules demand a 20% deposit for a personal home and a 40% deposit for an investment property . ( Yes, there are some 10% first time buyer incentive schemes but again brevity and simplicity OK )

      However the amount of money that any person can borrow (aka the amount a lender is prepared to lend) and the rate of interest and other terms demanded by the lender is more complex. Suppose a person on Job Seeker allowance receives a $200,000 inheritance. They look at that number and realising that 200,000 is 20% of 1,000,000 they head off to borrow $800,000 … they will never get that loan approved as their income is not going to meet the repayments.

      Across town Bob the Boss (manager of a thriving meatplant and earning 250,000 pa ) also received a $220,000 dollar and easily gets approved on $800,000 as his income can easily meet the repayments.

      No disrespect intended James … I’m not even going to talk to you about the fiat system and I can assure also that I;m well aware that lending has been taking place for thousands of years … long long before paper (fiat) money was ever thought of. It failed with the egyptians, romans, french, british, americans, greeks and germans … and it will always fail.

      The goal of fiat systems are ‘to smooth out the gaps between booms and busts’

      Booms and busts are just like tides – tide comes in we’ll call it a boom, tide goes out we’ll call it bust ?

      Now … did you ever hear of a King called Canute ?

      http://www.inspirationalstories.com/0/91.html

      The significance is the economist advisers told the King ’Do as we say … just give the order and the tides will obey"

      As you’ve seen on the billboards … Yeah right – TUI !

      Cheers Jamie … hope this has been helpful to you, all the best!
    • Jamie Brahm
      commented 2016-12-08 20:57:50 +1300
      Also, when I said everything, I believe I was referring to “everything that people borrow for”. Not everything period. Like say, entertainment units, appliances, cars, houses, holidays. All the big stuff. If that wasn’t clear, I apologize. More money a person has and is willing to spend, the more any reasonable profiteer will charge. Banks lending out sums of up to millions, obviously changes that.
    • Jamie Brahm
      commented 2016-12-08 20:50:15 +1300
      It’s fairly simple what I am talking about, maybe my language makes it opaque. It may have ramifications I haven’t thought of, and current houseowners or mortgagees might have misgivings about having been part of the former, less fair system, but I am pretty sure, the logic and basis in economics is sound. People can afford higher prices due to mortgages = house sellers can ask higher prices because the market will bear it. It’s probably going to get all sorts of interesting reactions, because getting rid of fiat, or reducing fiat, is something people only started talking about after the recession, it’s relatively new in peoples minds, as an idea. Money lending has been around a long time too.
    • Jamie Brahm
      commented 2016-12-08 20:44:28 +1300
      Hey James. No idea how you got onto interest but what I am talking about is not related to interest. That is a long post, and I’m sorry that it doesn’t relate to what I said. I guess I should have put it more clearly. It’s actually very simple 5th form economics.

      So,

      1) the price that is optimal for maximum profit, is set by supply versus demand. Or as others have put it the price is “what the market will bear”. That is to say, people can only buy things, at a price they have money to afford. If people don’t have that kind of money, people won’t sell it at that price

      2) Lending for profit, means that people have more money, to spend on the things they borrow for. This massively inflates “what the market will bear”.

      3) If people couldn’t, say get out a mortgage of say, 500,000, or 800,000, and couldn’t raise that amount of cash themselves, on average, on average, people couldn’t sell at that price.

      Or trying to put this really simply – houses would not be sold, at gigantic prices, if via mortgages people couldn’t access gigantic amounts of cash.

      As you can hopefully see at this point, this is very basic economic theory. Supply versus demand. Price setting. The sort thing people are taught in secondary school school. Without fiat, the market “could bear less”

      Of course you’d have to illegalize foreign investing as well. Hope that makes things clearer, and you can understand :)
    • James Turnbull
      commented 2016-12-08 18:10:33 +1300
      No, lending for profit does NOT mean ( following any known economic theory on THIS planet at least) that the prices of EVERYTHING that people borrow from will be massively inflated. That’s utter nonsense and I defy you to show evidence to support your claim.

      First of all it’s a very plain, and plainly demonstrated fact, is that the PRICE of an ITEM and the COST of any INTEREST incurred in acquiring the item are two separate and distinct components.

      This is easily seen when capital equipment is purchased – a portion / percentage of the Capital Cost is written down annually and an appropriate tax allowance duly made . However the cost of the INTEREST component is 100% tax allowable as a cost of doing business. ToP seem to regard ‘life’ as a business to be taxed BUT don;t want a person to have any write-downs against the COST of doing that business ( ordinary folk – we call it ‘living cost’ in non economic parlance )

      If a person or a business decide to delay a purchase until they have ‘savings’ then ‘the price is the price’ and there is no interest.

      In a FAIR MONEY MARKET then people with savings invest that money with a financial institution which acts a ‘rental agent’ between the borrower and lender and makes a profit from providing service. However financial institutions connive with Govts and are allowed to lend MULTIPLE TIMES over the sums deposited.

      But if you or I invest $1000 then with Govt approval a commercial bank can lend 28 to 36 times that sum . and while I the saver earn circa 2.8% they will charge 6% to 40% ( which is between in excess of 100% markup at 6% and over 1300% markup on their cost ie the interest paid to myself ) I get 2.7% and they get 1297.2% ie 5000 times my return. Imagine renting a house via an agent … the renter pays $1000pw and you’d get 20c . Not an exact comparator of course because th agent couldn’’t let out the same house more than once – but ‘money’ is no longer real, its just notional FIAT (

      This is one of the great scams and deceptions used by banks and governments over and again, eg GST @ 15% … is raised to say 17.5% Govt pushes the fiction that it’s a ‘2.5% increase’ but 2.5 is one SIXTH of fifteen and Govt GST revenue increased by 16.6% . They then claim a 16.6 increase in revenue to be indicative of a bouyant ecomon
      The Market price for ORDINARY goods and services is set by many factors, including the number of customers, the number of suppliers, cost of raw materials, availability vs rarity, desirability, ‘survival needs’. The price of bread and staples is not ‘magnified by mortgages’ as claimed here – people have to have food, drink and accomodation no matter what the mortgage rate is and in fact no matter what the mortgage rate % is the mortgage ends up unpaid or they don;t eat (or they don’t become unwell or die and the mortgage still does not get repaid ) In either case people with surplus cash end up owning those houses, rents rise … and the same spirals goes on
    • Jamie Brahm
      commented 2016-12-08 16:47:48 +1300
      Few spelling errors there, but hope it’s clear anyway. I’m sure plenty will find this idea radical, or even suggest that it will making housing less affordable. But think on it. Everyone in the country can live cheaper if the math of economics is restored to a more natural state. More money for everyone. More money spent in the economy, rather than locked up with banks, investors and housing. The problem isn’t just investors, it’s the effect of borrowing on economics. Of course this would result in a loss of equity for house owners. And it’s equity they have paid the graverobbing banks to get. That’s an issue I can’t quite work out, how to handle fairly. For the price of more money for everyone, forever more, it still seems very much worth it – but it would make sense to create some compensatory measure for those already knee deep in equity or debt – and probably it shouldn’t be the govt that pays for it, but those who are profiting.
    • Jamie Brahm
      posted about this on Facebook 2016-12-08 16:24:11 +1300
      How would you make New Zealand Fair Again?: Phase out lending for profit. Tax at till and bank
    • Jamie Brahm
      published this page in How would you make New Zealand Fair Again? 2016-12-08 16:23:43 +1300