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BANKS - MONEY FROM NOTHING(cid:1) ~.~.~.~._.~ . - Continued from page 14 Usury originally meant 'lending money at exorbjtan:t interest', and thi$ is what Congressman Gonzales meant How right he was. Australia has tolerated usury and has not prospered because of it The next reason for variation in interest rates is the variation in th-e mk to the lender. Thus the base rate applies to [loans where drere is assumed to ibe no risk at all. The extra per centage is then rIike an insurance premium which you pay for to insure that bank against the mk of not getting their money back. This sounds fair enough, but it results in a Catch 22 situation: if your capacity to repay is in doubt, you are charged extra interest to cover the risk. But if you are a bad m'k, the higher interest rate will make you a worse one. This is the source of one of the most blatant banle malpractices. Say you go to them for a housing loan - normally one of the safest and hence cheape~t Moral: make sure you get a loan whose massive scale. ,interest rate matches your trustworthiness and We have seen that the banks' power comes capacity to repay. If you are a [longstanding from their unique ability Ito create credit and customer with a secure income, do not allow destroy credit, to collateralise assets and dic them to persuade you that the only type of tate interest rates. The impact of ~ loan they can give you is a high-interest per sonalloan. 'Remember: they are not giving you inde pendent advice, like a solicitor might They are just loan salesmen. Like any other sales men, they won't show you straight to tIle best value car in !!he yard; they will first try to sell you the one giving them the biggest profit margin. Caveat emptor. The rate of inflation and risk are two rea sonably justifiable reasons for interesJ rates to vary. However, in contemporary Australia interest rates have served two more purposes which do not sit comfortably together. Banks have used' high interest rates as one way of covering the bad debts from their debauches of IpilnS a billl!c offers. They the late 1980's, while governments have used know thaJ their money is safe with but them as an instrument of monetary policy - a YO\,l, they want to get a higher interest rate. So they means of consQ"aining consumer expenditure refuse the housing loan, b_u.t instead offer yuu and therefore intla!io.n alld encouraging a flow an overdraft or a personal loan, with a lien on of funds from .overseas to finance our foreign your assets as collateral. You are then paying debt mch has conveniently blamed the other o\'erdraft or personal loan interest rates on a for exorbitant interest rates. Meanwhile the loan which is as safe for them as. the housing rates have inhibited business investment and loan they refused to give you. caused financial hardship and misery on a this was neatly summarised by an eminent Chancellor of the Exchequer in England, Mr. Richard McKenna, who said this: i am afraid that ordinary citizens will not llike to be told that the banks can and do create and destroy money. And they who c_ontrol the credit of the nation direct the policy of the governments and holdl in the hollow of thei~ hands the des tiny of the people. Paul Metean was a foundation membt'r of the (cid:1) Australian Democrats, and was elected as a(cid:1) Senator for :'IISW in 1937. He came to (cid:1) prominence especially through his historic bailie (cid:1) to get the now Infamous "Westpac tellers" before (cid:1) the parliament and puhlic scrutiny. (cid:1) This resulted from his pursuit of hank malpraclice (cid:1) and corruption in the Senate. He (On~tantly called for a Senate inquir~'. and moved a bill (cid:1) proposing a full Royal Commission into the (cid:1) han king system.) (cid:1) At the time of his resignation from the Senate in (cid:1) August 1991, he had (,00 cases of h.mk (cid:1) rnalpraclife on his desk (cid:1) 64-NEXUS AUGUST-SEPTEMBER 1992