As before, the question from my younger brother :
question that you might like to chew on from my property law class…..
1. What role does secured credit play in modern society? What are socio-economic implications of the mortgage transaction for private citizens, and for society as a whole?
My response, adnotated for Contravex readers :
Dear Professor :
The implications of mortgages in particular and secured credit in general, as they exist in modern society at present, are more those of effects than causes. You see, mortgages are but instruments, and are therefore inherently user agnostic except for in when and how they’re used. So it’s in how and where they’re used that we will focus our anthropological microscope herebelow, that we may learn more about the culture that guides their implementation.
At present, mortgage creditworthiness, that which speaks to the quality of the borrower,i is predicated on the platonic/soviet construction of the beacon score,ii wherein an individual is reduced to a number so as to more “fairly” assess their creditworthiness by an arbitrary institution. This historical aberration, which replaces methodically- and thoroughly-developed trust-based relationships between individuals and where the lender assesses the borrower’s risk using the former’s own means and methods,iii aims to at once remove “bias” (and therefore any degree of discernment, naturally) while mostly serving to increase the quantity of credit, as well as the number of participants, in the financial system as a whole. This, the soi-dissant powers-that-be call “financial inclusiveness,” an aim to which they strive with all their might, including all manner of economic perversion from negative interest ratesiv to the creation of entities Too Big To Fail.
But the net effect of this ostensibly warm-hearted “inclusiveness” is, of course, an inflation in the monetary supply and a degradation of the quality of any given Dollar/Pound/Ruble/etc extant in the system as a direct result of the degradation in the quality of the borrower. This is how money works, after all, as a representation of the cultural wealth and productive capacity of a given society. This is why the Zimbabwean Dollar is worth nothing at all and why the Deutschmark v2.0 aka “Euro” is most definitely worth something : because Africans are useless and can’t so much as produce a functioning refrigerator ex nihilo, while Germans are highly useful and produce things that we all want, such as Mercedeses,v aspirin pills, and very good footballers.vi This is also why Picassos and Bitcoins are so valuable: because the people who hold them are wealthy, productive, and are themselves valuable. Value, predicated fundamentally on scarcity as it is, begets value. The good attracts good, as it were.
So given that a six-figure mortgages can be, and regularly are, given to anything with a pulse, not as a matter of “predatory lending” but as a matter of public policy intent on achieving the classic panem et circenses effect as a means of drumming up popular support both for the scummy borrowers themselves and for the middle class right above them who enjoys the rising tides of property values and the consequent “wealth effect,” the value of the Canadian Dollar, US Dollar, British Pound, etc. are on a course towards worthlessness (or at least much, much less worth). This isn’t just because, as Voltaire noted for neither the first nor the last time in history, <<Une monnaie papier, basée sur la seule confiance dans le gouvernement qui l’imprime, finit toujours par retourner à sa valeur intrinsèque, c’est-à-dire zéro.>> but because value is determined by exclusivity – ergo things that are more exclusive are more valuable – and therefore anything that aims to be maximally inclusive also aims to be maximally worthless. Just ask Twitter and MySpace how the failure of the mass market approach tastes when it fails, as it always does. I’m sure they’ll tell you it tastes a lot like shit, which shouldn’t surprise the reader, because that’s exactly what it is. What could be more inclusive than undifferentiated fecal material ? Everyone poos !!
And since everyone poos and everyone can haz cheezburger, I mean mortgage, it’s little wonder that “buying” (put in quotations because you per definitio don’t own something you can’t destroy)vii a house is widely viewed as an “investment” despite having little, or at least unpredictable, scarcity,viii thus making mortgages not only a significant challenge for the borrower to price their return on investment prospects, but also for the lender to accurately price the credit risk. Not that these glaring problems have even mattered much in the last few decades, principally because the lenders (i.e. major banks) have been implicitly backed by the taxpayer, via the government, through “bail-ins,” thus spreading the fundamental unworthiness of the vast majority of “citizens” onto the better, or at least the aspirational, parts of society, leading to what is commonly referred to as “systemic risk,” all while the aforementioned aspirational set has been seeing (what they perceive to be) excellent returns to capital as house prices have increased by multiples, if not orders of magnitude, on the backs of ever-less-creditworthy meatpuppets signing their names on the dotted line.
Therefore, on both sides of this rotten and illegitimate “mortgage” contract,ix the incentives have, for some time now, aligned such that both lender and borrower figure to themselves: hell, why not ? The systemic risk, therefore, is not “the evil banker’s fault”x but rather a cultural issue wherein representative democracies take the mistaken position, and to their death do they take it, that everyone is a person and everyone deserves a chance, which might be a comforting notion, but is demonstrably false and is a fundamentally ruinous stance to take against nature. Yes, against nature. Make no mistake about it, if you stand for absolute equality, you stand firmly against beauty, justice, science, and everything good than man has ever achieved.xi Not everyone can have our parents, recall, nor could they for all the tea in China, which is also why, for all its struggles and its dogged persistence, the USSR failed. For just as all attempts at socialism always and everywhere fail as a matter of course,xii so too do they leave in their wake a vast emptiness and little of enduring cultural value. Good things simply can’t be for everyone, no matter how much you may want them to be, and any assumptionsxiii or pretenses to the contrary can only lead you on that dark, if well-traveled, road to Hell. L’enfer est plein de bonnes volontés ou désirs, indeed.
All the being said, there’s nothing inherently wrong with mortgages nor with secured credit, just as there’s nothing inherently wrong with lending and borrowing money that isn’t secured (as if there can be such a thing)xiv ; the issue rests entirely in how these instruments are used contemporarily, not in any inherent quality of the instruments themselves.
Much like a rocket can be used to deliver a man to the moon or deliver a nuclear payload onto a city, mortgages can be used in productive or destructive ways. It’s the culture that decides which.
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- Someone’s creditworthiness doesn’t just speak to their quality as a borrower, but also as a person. Yes, if you can’t prioritise your finances, make a budget that you actually stick to, and produce more than you consume, you’re literally no better than a farm animal. This is why no one gives a fucking goat a suitcase full of cash “on loan.” OF COURSE HE’S GOING TO EAT THE FUCKING CASH, HE’S A FUCKING GOAT !!!1 Seriously.
“Lending” to animals isn’t lending, it’s charity, except the woefully ineffective sort because it’s i) coerced, ii) managed by inept bureaucrats, and iii) predictable, or basically everything charity isn’t, making it essentially the opposite of the Salvation Army.↩
- Well, it’s really beacon score plus plus plus an entire echafaudage supported by Nobel Prize winning “economists” and associated Harvardites. It’s quite the dog and pony show, really.↩
- Y’know, like in a proper Web of Trust.↩
- At least until the various federal reserve banks kick their “pain plans” into gear.↩
- Even if said Mercedeses are 25-years-old, we still want them!↩
- Germany did win the last World Cup, after all.↩
- See There’s no progress without control.↩
- Not only does housing have little to no enforceable scarcity, but with the advent of the Internet, geography has just gone the way of the dodo. The only location (location location) that matters anymore is on Bitcoin’s blockchain.↩
- Itself a ridiculous, if inevitable, extension of the now-dead social contract.↩
- See Bankers aren’t the bad guys.↩
- And you’re fundamentally a scammer, whether you know it or not, for it’s the scammer’s specialty to paper over the differences between perception and reality.↩
- See Software doesn’t fail. Socialism does.↩
- Assumptions, particularly the unchecked variety, will land you in hot water, which is to say that you’ll be in no better position than the poor crab in the bucket, at least until dinner time.↩
- Even if a contract isn’t secured with physical collateral, as with GPG contracts, they can still be secured, eg. with reputation. Unsecured contracts aren’t contracts, they’re charity.↩