On Special this week – Access to short term credit:
Whites using credit/charge-cards: 150% per annum.
Blacks and Hispanics without cards: 30,000% per annum.
Why worry? It’s all nominal.
If you are high enough in the socio-financial pecking-order to use a credit/charge-card to access short-term credit, then your free-loan or interest-free-period only costs you about an average 150% per annum because of the concealed-credit-charges that you don’t know about – after all, they wouldn’t be proper concealed-credit-charges if they told you about them. (See The Free Loan Story for the full depressing story).
But if you are a member of the working-poor who don’t qualify for such privileged status you can always go to a payday-loan-company or other Truly-Astronomical-Rate (TAR) credit provider to borrow at an average 30,000% per annum.
Allow me to explain.
Here is what a truly arrogant and malicious entrenched-money-power might do in response to the rioting and racial-tension over the death of George Floyd.
Employing what is called the nominal method of interest calculation and declaration / disclosure, they could set up a system of tens-of-thousands of mega-high-interest-rate micro-loan and payday-loan companies nationwide, and especially at the gates of military bases, that make loans and advance credit to minorities – and more generally the working-poor – at average interest rates of 30,000% per annum.
The most critical object and policy would be to siphon-off their working-capital so that they remain in a state of perpetual poverty and political powerlessness. And there is nothing like ever-mounting debt to motivate the rank-and-file military to re-up for combat-tours to get those re-enlistment bonuses. The first time is relatively easy – but getting them to go back – not so much.
And of course it would be near equally critical not to tell them what you are doing, or to even make it easy for the targeted-classes to figure it out.
To see the obvious potential, consider the entire global debt-based economy as one big on-going or rolling 30-year mortgage. Based on a stated 3% per annum and the corresponding stipulated monthly payment, the same mortgage (or total debt in the economy) that takes 30 years to pay off at a nominal 3% requires only 29.75 years to pay off at a real 3% per annum. Almost no difference.
But by a stated 15% per annum and corresponding monthly payment, the same mortgage / debt that takes 30 years to pay off at a nominal 15% takes only 18.7 years to pay off at a real 15%!!!
The exponential error and fraud that has almost no effect at a stated 3% balloons or blows-up so fast that by just 15% per annum it quietly increases the cost of credit and total amount of interest money to be paid by 93%, per se, and accounts for 48% of all the interest money to be paid over the entire 30-year period!!!
Do you think that the quants in the financial system that measure performance by the basis-point or 1/100th of 1% would be unaware of it or fail to systematically exploit it?
So just have Congress pass a federal law requiring all creditors nationwide to disclose and declare a logarithmic-derivative of the interest rate instead of the interest rate. This will allow the creditors to disclose and declare an interest rate of 6% per annum when the real rate is 6.167% per annum, so as not to burn the moneyed-classes too much, while concurrently disclosing and declaring 300% per annum to the working-poor when the real rate is 30,000%.
It would be as brilliant as it is diabolical.
Then label the logarithmic-derivative of the interest rate as the “nominal” interest rate, so that if anyone brings up the fact that it is not the real interest rate, they can be told “That’s right – It is not supposed to be – It is the nominal rate.” (“Nominal” means “existing in name only – not real or actual”).
A relatively high proportion of Blacks and Hispanics, and the working-poor more generally, are systemically poorly-educated and the likelihood of them figuring it out would be near-zero.
Eventually the masses could even be nominally cautioned by a financial consumer protection agency to be very careful taking out payday-loans because receiving $300 today for an obligation to repay $400 in 14-days represents an effective or real interest rate of 435% per annum.
Yet virtually no one who mattered would even realize that the nominal-rate pretence had been abandoned, and that they were now being directly lied to, nor would they have the slightest clue that the real interest rate defined by that simple transaction is 180,754% per annum.
Of course, you could always refer them to the (mostly banker-written) Encyclopedia of Banking and Finance, as a typical example, which explains under the general heading “Interest” (in material part, emphasis added):
“…if the interest period is less than one year, the [interest money assessed under the] nominal…interest rate is greater than the true interest rate… Practically, however, the difference is disregarded.” [!!!]
Yes, technically there is a difference between 435% per annum and 180,754% per annum, but for those in the financial services industry, the difference is practically disregarded. You just have to trust us. We would never systemically and systematically lie to the people upon whom we feed about something as important as interest.
And of course no self-respecting financial-professional riding the Nominal-rate-gravy-train would ever be so crude as to call it by its highly-complex technical / scientific name, which is the “Some-number-we-made-up-because-people-have-been-dumbed-down-enough-to-believe-it-method”
And then, just to rub salt in the open wound, they could label the federal legislation requiring disclosure and declaration of the bogus or pretended interest rate as the “Truth in Lending Act”.
Then using this nationwide nominal interest rate device on all the debt, the entrenched-money-power would be able to collect and spend on themselves almost all of the interest and principal money paid on all of the debt in the whole economy roughly every fifteen years, while still leaving all the (endlessly-pyramided) principal as still owing because every payment is applied disproportionately to interest instead of the proper allocation to interest and principal reduction. Over a fifty-year-period they would collect three times as much interest money as they were entitled to at the agreed interest rates.
And then, at the end of the fifty-year-period, the people would also still-owe-them three times as much because all of the payment rake-offs taken as inflated interest charges would also not be used to reduce the principal outstanding!!!
Dr. Evil himself couldn’t come up with a more insidiously diabolical scheme to enslave and financially cripple the working-poor, while concurrently looting all other classes according to what the civil-law refers to as their station-in-life. Virtually everyone gets screwed by it, but the poorer you are, the more you would get exponentially screwed by it.
The situation could then persist generation after generation while every time the system started to break down from the incessant drain on working-capital and the inability of the working-poor to service their debts at real rates of up to 30,000% per annum, even though they have been properly and legally informed that it is only a nominal 300%, the entrenched-money-power could smugly imply that it is because they are of inferior races who just cannot adapt to an advanced technological society, while snickering behind their backs that the proof of it lies in the fact that they cannot even tell the difference between 300% and 30,000% even when you rub their noses in it, and so they kind of deserve to be screwed-over anyway. The entrenched-money-power love nothing so much as a self-fulfilling circular-argument.
They could even imply that if you are in such financial shape that you have to agree to borrow money or obtain credit at what you are told is 300% per annum, then what difference does it make that it is really 30,000% per annum? It’s not as if you have a choice, and telling you the truth would only cause increased levels of psychological-depression and social-unrest.
The entrenched-money-power people might even be able to delude themselves that they are systematically lying and looting the working-poor for their own good.
Wouldn’t all that just burn the masses royally, and let them know what the entrenched-money-power really thinks, acts and believes?
Oh wait! My mistake! Sorry! Sorry! Sorry!
I just remembered – We already have all that and have been living under it since the U.S. federal Truth in Lending Act of 1968 (Regulation Z).
Never mind. Sorry to have bothered anyone.
You may now return to your regularly-scheduled-programming.
P.S. While we weren’t paying attention, the two most critical events of 1974 were when (1) the U.K. banned the U.S. nominal method of calculating interest as criminal fraud on the grounds that it is “false and seriously misleading” (and which was itself the understatement of the century), and (2) U.K. nominal creditors immediately reacted to it by switching to another equally criminal method and device to achieve the same result.
The bankers and other nominal creditors in both countries then continued their systemic looting as if nothing had happened. Remember the screaming headlines in the newspapers of both countries in 1974:
U.K. bans U.S. method calculating interest as criminal fraud!!!?
Of course not – because there wasn’t any.
The mainstream media – mostly owned by the same people who owned the banking system in both countries – failed to report any of it, other than to characterize the new law criminalizing the U.S. nominal method in the financial pages as a minor technical / administrative change in the U.K.
The current raging public discussion over systemic racism is just another diversion or fire-wall to prevent a genuine, competent, and comprehensive audit of the global financial system that will reveal such egregious and mind-blowing systemic and systematic fraud that every last lawyer, judge and politician would be hanged with the entrails of every last banker, broker and other rake-off artist.
Without a word of deceit or exaggeration, for at least the last century the single largest industry on Earth has been the concealment and misrepresentation of the rates and amounts by which the entrenched-money-power has been harvesting the wealth of the world.
Nothing else even comes close.
While I have not been tracking the grand-totals for a few years now, according to the 2016 report from the Financial Health Network in the U.S.:
“This year, we report that financially underserved consumers [primarily the working-poor] in the U.S. spent approximately $173 billion [$173,000,000,000] in fees and interest during 2016 to borrow, spend, save, and plan across 29 financial products in this diverse and continually growing marketplace.”
If the total were taken entirely from the poorest 50 million people in America, then it would work out to about $3,500 each.
So if we could just get the average real rate of return to the near-wholly-parasitic financial services sector down to about 500% per annum, it would save a typical poor family-of-four about $10,000 per year.
So what do you think would affect Black Lives more profoundly – a significant reduction in police use of deadly force, or an extra $10,000 per household per year? (And where the latter would likely lead to the former regardless).
And the entrenched-money-power’s answer is: Well that really isn’t a fair question because we have gone to such extraordinary lengths to conceal both the rates and amounts by which we are harvesting wealth from the masses. The extra $10,000 per year never even gets to them, so they cannot appreciate the fact that it has been stolen from them by lost opportunity and by being buried in the cost of everything they buy.
I recently took note of the 30th anniversary of my temporary 1990 win on the issue of the grotesquely-fraudulent nominal method of interest calculation. It was eventually fully and finally overturned by the Supreme Court of Canada in 1995 after the lawyers figured out how monumental it was and that the lawyers would be co-liable for the trillions of dollars in write-downs and refunds that would be owed by the near-wholly-parasitic financial services industry. Canadian banks have a proud tradition of employing the same frauds in Canada as do those in the U.S.
Appendix A – text of April 27 1990 Edmonton Journal article
Court win could spur claims worth billions
City man defeats Eaton’s in interest-rate case
[by] Ron Chalmers
Journal Staff Writer
An Edmonton man says his court victory over Eaton’s department store could spark billions of dollars in claims against banks and other creditors.
A lawyer agrees that “drastic consequences” could follow.
Tim Madden argued that Eaton’s did not accurately disclose its annual interest rate on his charge account.
M.B. Funduk, master in chambers at the court of Queen’s Bench in Edmonton, agreed in a recent decision, applied the Interest Act and awarded Eaton’s only five-per-cent simple annual interest on Madden’s $467.27 charge-card balance.
Eaton’s had claimed interest of 2.4 per cent per month which, on information it provided to Madden, was equated to 26.8 [sic] per cent annually [should read 32.9 per cent annually] Mr. Chalmers likely confused (or cross-confused) the fact that 2% per month is equal to 26.8% per month, while 2.4% per month is a “nominal” annual rate of 28.8% but a real rate of 32.9%).]
But Madden successfully argued that 2.4 per cent monthly compounds to 32.92 per cent annually.
[No! – 2.4% per month is 32.92% annually – in the same way that 220 feet-per-second is the same speed as 150 miles-per-hour – just two ways of expressing exactly the same thing. Based on the position of the bankers and their lawyers, they would witness one vehicle moving about 15% faster, per se, than another one, and then argue that both vehicles are moving at the same speed and that the apparent difference is because one of the speedometers is calibrated in miles-per-hour and the other is in kilometres-per-hour! That is psychiatric-institution-level crazy].
Funduk, citing the recent precedent of The Bank of Nova Scotia v. Dunphy Leasing Enterprises Ltd. [sic] [actual case name is Dunphy Leasing Enterprises Ltd. v. The Bank of Nova Scotia] agreed with Madden and ruled that “as the contract does not provide an effective annual rate of interest, the defendant has to pay interest at 5 per cent per annum simple interest.”
Madden says that that will save him about $1,000 – and could create a $100 billion headache for banks, finance companies and department stores.
Bradley Willis, a Red Deer lawyer who has acted for clients who sue banks, says the Interest Act clearly states that “If you don’t come to an agreement, it’s five percent.”
[The above statement is wholly non sequitur – Mr. Willis is referencing s. 3 of the Interest Act and not s. 4. Section 3 provides that where parties agree to interest but fail to provide for a rate, then the rate shall be 5% per annum. That had nothing to do with the case.]
He suggests, however, that Eaton’s or The Bank of Nova Scotia might argue, in appeal, that their contracts did effectively disclose the true interest rate and that their customers agreed to them.
[This statement, also by Mr. Willis, is nonsense because the word “nominal” means “existing in name only – not real or actual” and the people in the credit business rely upon that meaning in fact to justify the inaccuracy of their stated annual rates. The whole point is the so-called “nominal interest rate” is not an interest rate. It is a circular reference for the number of payment periods in a year and has nothing to do with the rate of interest, per se.]
[Also, and although I did not know it at the time, the Canadian bank/system’s “nominal method” had been prohibited outright in the U.K. as criminal fraud since 1974 on the grounds that it is “false and seriously misleading” (and which is itself the understatement of the century.
And my subsequent research would reveal that the whole purpose of the Canada Interest Act section in 1897 was to prevent creditors from using the nominal method which the legislators had recognised as wholly fraudulent. The truly mind-blowing reality was that the bankers had been getting away with simply ignoring the federal securities law for 90 years.]
If the appeals fail, “drastic consequences may well be the case”, Willis predicts.
Madden believes that credit granting companies [in Canada] earn as much as $10 billion annually from the discrepancy between real and advertised interest rate[s].
He foresees “massive lawsuits” and possibly the “collapse of the banking system” if his victory stands.
But he only wants the credit grantors to change their practices.
Local Eaton’s executives refused to comment. Max Gold, lawyer for Eaton’s, says they are considering a possible appeal.
Bernie Webster, spokesman for the Canadian Bankers’ Association, predicts the Dunphy case will be appealed.
In the Dunphy case, decided March 26  in Calgary Court of Queen’s Bench, Justice Peter Power ruled that Dunphy Leasing Enterprises Ltd of Calgary had over-paid the Bank of Nova Scotia by $85,000 because the bank had equated a monthly interest rate of two per cent to an annual rate of 24 per cent. [actual rate per annum is 26.8%]
While I do not believe that either Mr. Chalmers of the Edmonton Journal, or the Red Deer lawyer Mr. Willis, deliberately set out to obfuscate or confuse the issues, it would have been difficult for a typical reader to fully grasp what the Courts / judges had actually ruled, because of the errors and omissions in the article as pointed out above.
Although Mr. Chalmers does seem to have cherry-picked my comments from our actual conversation / interview to emphasise the consequences to the banks etc. instead of the massive amounts of money involved from the differential and the exponential nature of the error / fraud in the nominal method. He did mention the $10 billion figure but that was only the then-current-year overcharge taking all of the existing debt as legitimate. He did not mention that all of the debt then in Canada was a direct function of the accumulated overcharges from the bogus methodology.
Also, Master Funduk had actually been rather hostile to my position, but he was bound by the higher Court ruling in Calgary that had been released six days earlier after a trial that had lasted eight years and which had involved extensive evidence on the bogus nature of the nominal method from Dr. Charles Prentice who was a business math professor from the University of Calgary.
Master Funduk’s ruling and reference to “simple interest” was also incorrect and contrary to what the Calgary judge had ruled. The term “simple interest” literally means “interest at a declining rate” and the judge in Dunphy had ruled that the Bank of Nova Scotia was bound by s. 4 of the Interest Act to use the mathematically accurate effective or real interest rate formula. The difference is slight at that low level (about 5.1% versus 5%) but it is still important to get the details right. On the whole I did not get the impression that anyone involved (other than Dr. Prentice) had a firm grasp of the math or of its consequences.
The ultimate spin on the issue from the lawyers, bankers, and mainstream media was that the discrepancy was so small as to be trivial, and / but that the financial system would collapse if they had to pay it all back!