Is it possible that usury is the salvation of South Africa?
The global economic system is in a terrible state, partly because of financial mismanagement on a gigantic scale. Broadly speaking, the mismanagement has happened because the rich, especially in the Anglo-American sphere but actually all across the whole global economy, have been plundering the economy to the extent to which there is no longer enough money to fuel capitalism. Capitalism depends on there being enough people wealthy enough to purchase goods and services. At the moment, this is not the case; the poor are simply too poor to do the purchasing. A huge crisis of underconsumption was at hand, and has been at hand ever since this process became acute in the late 1980s.
The solution to the problem has been simple: easy credit. The poor were not able to buy things with money which they had, so, from the 1990s, they increasingly borrowed things with money which they did not have. The problem with this was, of course, that if they borrowed too much, they would not be able to pay interest on the borrowing. Therefore their indebtedness would become a problem.
Usury has always been seen as disreputable in the Western world. Whereas Judaism existed before currency or banks, Christianity and Islam both arose after financial transactions were invented. Both religions made usury, the charging of interest on loans, immoral. Islam has actually persisted in this, while Christianity has abandoned it along with virtually all of its beliefs (which is why Christians hate Muslims so much — Muslims represent the integrity which Christianity once possessed but no longer possesses). Of course, here the Creator is speaking of nominal integrity — all of these are false religions, slaves to the Lie.
So there are people who say that usury should be done away with. Money should be lent at zero interest, as in Islamic banks. Of course, that means that the banks have to find other ways to make money from their money.
That anti-usury philosophy has come close to fruition in the West as a result of the easy credit policy. Part of the problem was that governments deliberately stripped themselves of all other methods of controlling the economy other than controlling interest rates — because all other methods were annoying to rich people, who didn’t like it. Therefore, any time there was a problem, the ruling class cried out for interest rates to be cut. Besides, periodically it became clear that the workers were not getting any richer, and yet somehow they had to continue being persuaded to buy stuff. Hence interest rates had to keep coming down to make it possible for them to borrow more. Banks loaned more and more money, finding it easier and easier to do so because as interest rates came down, the significance of interest coming in became less and less.
As a result, the banks began speculating. They had to, for what else were they to do with their money? The speculations got riskier and riskier, for the obvious reason that the banks didn’t have to pay interest to themselves, but also because banks had grown used to growing levels of income. The ruling class, increasingly, borrowed money not in order to do anything concrete with it, but for speculative purposes, because that was where the money was. Meanwhile, of course, with interest rates near zero, it became impossible for interest rates to stimulate the economy. However, raising interest rates is supposed to harm the economy. So nothing could be done with interest rates which would do the economy any good.
Now, the banks are insolvent. Banks are, in a slowly expanding tide, beginning to go bankrupt across the world. These banks are not going bust because of bad loans, they are going bust because of bad speculation — because they could not liquidate their speculatively purchased derivatives before the derivatives became worthless. The banks paid for worthless things in real money, and so their money became worthless.
Therefore, to cover up their insolvency, the banks are reluctant to lend. The Western countries are pouring enormous amounts of money into the banks — more than a trillion U.S. dollars already, with two trillion more promised. However, this is sheer petty cash compared with what seems to have been secretly lost already. Besides, what can the banks do with the money they are given? Interest rates are too low for anyone to want to make money out of lending. Besides, nobody wants to borrow. So the banks actually have, still, to speculate. But despite this, the stock markets are jittering downwards — meaning that the banks are losing their shirts. The US stock market recently hit 7400 — down 5600 from its high a couple of years ago. That’s down 43%. Usury having failed, and speculation having failed, neither the banks nor the financial consultants nor the treasury experts have the slightest idea what to do next. They can only fling money around and hope.
But the more money they fling around, the greater the risk. If interest rates ever rise, the West’s governments will face having to pay back all these loans. We are talking hundreds of billions of dollars which have to be found from somewhere — financing Bush’s and Obama’s stimulus and rescue package would cost more than the Iraqi or Afghan wars if the interest rates rise significantly. The trouble with this is that Obama, like Bush, has cut taxes in order to stimulate the economy, but it has not been stimulated — instead, it has contracted substantially. Therefore, there is less tax revenue to pay interest on a massively expanded national debt. The only way to resolve the problem would be to increase taxes — but it’s far from clear that the American ruling class would permit Obama to do this, or would pay the taxes if they were increased, so it’s possible that the whole system is self-defeating. (Obama could gain the money by nailing the poor, who can’t afford tax lawyers — but nailing them would further slow the economy, requiring even more proportionate taxation to earn the same amount of money.)
In other words, unless the interest rates can be kept low, the U.S. economy is fucked. But if interest rates are kept low, the banking system is fucked. Most probably what will happen is that both economy and banking system will go down together, mutually blaming Obama, al-Qaeda and the fairies at the bottom of their gardens.
And South Africa? Our interest rates are high. They are high, chiefly, to keep foreign capital flowing in so that the capital can earn interest. This is probably ill-advised and should stop; we should instead do something about our trade balance (preferably by making more stuff here and less stuff abroad — protectionism is indeed the answer). But at least this means, firstly, that South Africans have not been borrowing ridiculously much, because they knew they would have to pay. (Also, our banking regulation is a lot more serious than American or European banking regulation.) Secondly, it means that we have leeway to reduce interest rates without destroying all the profit that might exist from usury. Therefore we are not driving our banks into obligatory speculation in derivatives. Therefore our banks are still alive.
Of course this does not mean that we are clever — although it is true that we are more prudent. But the joke is that the current economic campaign is to reduce interest rates. Reducing interest rates might in some ways be sensible, if it is going to lead to companies borrowing money and using it to build plant through which people can be employed and production thus increased and the economy expanded. This is the reason why COSATU and the Communist Party want interest rates reduced — of course, it is amusing to see radical leftists speaking out strongly in support of the interests of big capital and exploitative small business, but that is another story, and not a pretty one.
However, this position is also completely wrong. Interest rates have virtually nothing to do with whether corporations expand or do not expand, because the rate of corporate profit is so much higher, on average, than interest rates, that they are not an immense factor in corporate decisions. Corporations seek to maximise profit, and therefore they always strive to shut down their least profitable elements — which invariably means their labour-intensive elements, and often means their most productive elements. Reducing interest rates will not help to reduce unemployment.
On the other hand, reducing interest rates will make it easier to borrow money, which can be used for speculative purposes. It is perfectly likely that this is why these august alleged leftists want interest rates reduced; they are annoyed because at the moment they are not having an easy time playing in the casino and they want the government to make it simpler to obtain chips. Meanwhile, unfortunately, making it easier to borrow money will almost certainly increase the rate of indebtedness and therefore make us more like the West. Imitating catastrophe is not usually seen as a good idea, but ironically this is exactly what these good leftists are doing with their frequent references to how “even the Western capitalist states” are flinging money at banks and running themselves desperately into devastating national debts. And, of course, Communists and socialists have always been enthusiastic about uncritically imitating Western practice in everything, not so? (Ironically, if you read “State Capitalism in the Transition to Socialism”, Lenin did indeed want to imitate Western practice — but it is quite possible that he didn’t fully know what he was doing, since he was fighting a civil war and trying to suppress dissidents at the same time as trying to figure out economic policy which he had never expected to need.)
So the Creator thinks that we are on a rocky road. But, at the moment, our rocky road is not quite so rocky as the rocky road which is rapidly devastating the jerry-built four-by-fours of Western economies. Unfortunately, most South Africans seem incapable of understanding this. We are so used to thinking of ourselves as necessarily inferior, of our economy and society as necessarily on the brink of disaster, that we refuse to countenance the notion that we might be doing something right. The customary colonial cringe, seasoned with the usual racism (“How can a bunch of stupid darkies run an economy better than the Iron Chancellor or the Great God Greenspan? Impossible!”) is leading our political masters to pluck at the sleeves of our economic masters, urging them to please, pretty please, follow the other lemmings off the cliff.
Not unlike the way we are all urged to follow Zuma et Cie, in fact . . .