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In a sense, financial education might be poor by design. It's already three decades that people are pushed quite shrewdly into stock or real estate markets with the norm of intuitive or herd knowledge. Lay people succeed or fail there more by dumb luck than by their earnest knowledge. Asking (tellingly too late) people to overcome the "uplifting" noise of financial analysts, media cheerleaders and political clowns is like asking all first-grade schoolchildren to learn to play piano or chess without any hints or coaching. Yeah, a few Rahmaninoffs or Kasparovs can do that - but this is not education.

Even at universities, the popular economy or business courses probably prepare (for the crises times) more suckers than really knowledgeable investors. It's not science, but fashionable brainwashing for business cycles. Did you try to take a course on financial derivatives? Goldman Sachs gladly needed you.

And one more thing. Comparing mortgage with borrowing a toy is very unsound. It's more like you borrow a shovel and you are asked to return an excavator.


by das monde on Wed Aug 25th, 2010 at 03:00:51 AM EST
[ Parent ]
good point with the financial education, however I think that at least some sense would return to some people. Furthermore, no one could say that they didn't understand what they were doing! Not with buying a house anyway, really complicated structered products is another issue...

with the shovel and excavator example I assume you want to address the issue of interest? While that is indeed something that needs to be considered from an economic perspective, my point was purely from a moral perspective: you burrow something, you have to give it back. That simple...

by crankykarsten (cranky (where?) gmx dot organisation) on Wed Aug 25th, 2010 at 04:10:20 AM EST
[ Parent ]
It's not only the interest. When something is lent in abundance times and claimed back in meager times, you morally get the same shovel/excavator situation.

Besides, banks do not lend anything technically. They do not give something they have and then want that back (plus interest). The money they "lend" is not theirs nor anyone's. It's just money creation "out of thin year" - we discussed that.

What does that mean morally? For one thing, banks are in a privileged position. While everything goes right, banks get profit from the interest on money they did not have. When things get tough... at least for now, banks are the first to get a bailout, while obligations of the others remain the same (or grow).

Obligations is the thing to look in this money alchemy. For someone to earn a million someone has to borrow a million. The urge of lenders can easily be larger than the urge of borrowers. Even if borrowers follow their own will, is the urge of lenders morally impeccable? Or aren't they worse than cash hoarders, as on balance they stockpile money faster?

Say, you are the only millionaire on an isolated island. Is it bad for you if other fellows on the island borrow from you? You actually need borrowers, because otherwise you would have to grow crops and build a hut yourself eventually. That "refraining yourself" from spending the cash is actually evil, as it enslaves others, especially when barbarous interest eventually claims more than the whole island produces.

by das monde on Wed Aug 25th, 2010 at 05:17:01 AM EST
[ Parent ]
das monde:
It's not only the interest. When something is lent in abundance times and claimed back in meager times, you morally get the same shovel/excavator situation.

Lending out snow in January and expecting it back in July to use a (north side of the planet, snow country-centric) playground metaphor.

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by A swedish kind of death on Wed Aug 25th, 2010 at 02:53:09 PM EST
[ Parent ]


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