Wednesday, August 27, 2014

Bringing Credit to the Poor

So what happens when you have a false premise:
 “There are lots of people who need access to credit in South Africa to improve their quality of life.”
And you add a definition of credit that is actually fraud, but in capitalism legal?
Kirkinis, 54, co-founded African Bank Investments Ltd. in 1999 and built it into the country’s largest maker of loans not backed by collateral.
Asset-less based loans, loaning air, not money.  And, loan out credit at... wait for it...
Styling himself a visionary for lending to South Africans ignored or deemed too risky by conventional banks, Kirkinis fueled profits making loans at annual interest rates as high as 60 percent.
Help poor people by lending air at 60% of putative value?  Well, as usual,
Holders of ordinary shares, preference shares and subordinated debt may lose everything, while senior debtholders stand to lose 10 cents on the rand.
What people need is property rights protected, and make predatory practices like "asset-free" financing not state protected.  Credit can be a good thing, but not when a bank is lending it.  Vendor financing at no interest is very common, and good.

He got greedy... you can make much more over longer time periods if you make interest rates "only" say 5 or 6%.  The income on 60% interest you can afford to be "independent" and flashy.  For a short while.  He has advanced financed degrees.  Did he not learn this?  Or maybe he did.

As a side note, the government bought the bad debt and will now collect from the people in arrears.  So the government will continue the abuse instead of letting the people who were making money off this abuse simply lose.

This is how it works:  Ponzi scheme is criminal, Ponzi tries it goes to prison.  The the state sets up its own ponzi scheme, social security.  Gambling is illegal.  People go to jail for running lotto games.  Then the state sets up its own lotto games.    Marijuana is illegal.  People go to jail for trading marijuana.  then the states get involved in marijuana.

Potheads rejoice when marijuana is legalized.  We need none of these things legalized, just de-criminalized.  A huge difference.  Legalized, the state forms a monopoly and the damage itself is advanced plus a black market grows due to state monopoly.  (A pothead I know says state ganja is $700/oz and street is $200/oz. )  Decriminalized competition minimizes the harm.

This fellow could charge the poor 60% because he had a state charter, usury was legalized.

No country lets its bankers lose.  Capitalism might end.

Feel free to forward this by email to three of your friends.


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