Skip to main content

The Price of Capital: Serving Your Interests, Incidentally

The assumption that credit ought to always remain cheaply available for the spurious investment, business or otherwise, is predicated upon the belief that advancements are linear, that they occur as a function of time, not as a consequence of thoughtful deliberation. 

Of course, it is the latter which determines a worthwhile investment, whereas the former simply creates busy work which was rendered feasible by the aforementioned easy access to credit and the artificially low costs of failure. 

Of course, credit creation is a luxury of savings, neither an entitlement nor an absolute benefit to the economy realized through its mere transition through the spending phase. 

The political Left tends to construct an emotionally-appealing narrative to establish the illusion that lives would improve if credit were only made more widely available for those mired in misfortune. 

Well, the theories of economics are not alone in disproving this fallacy, as even real examples of recent history illustrate the risks of artificially manipulating credit to pave the road to the purported American dream. 

After all, this was precisely the cause of the long-forgotten housing bubble and the ensuing financial crisis, and it has remained an insidious agent in the falsification of the U.S. bond and stock markets, in addition to auto loans, consumer credit, college tuition and even the reflation of an out-of-whack real estate industry. 

In summary, economic improvements take time to develop, and there is only so much savings to justify credit. 

The only way that this credit, and the risks attending its extension to hungry bidders, can be adequately assessed is through the appreciation developed through the laborious acquisition of said capital and thus the commensurate exposure to its potential loss. 

This is the point at which loss is most palpably evaluated, where the object acquires its incipient human appraisal. 

So while the sophist may produce a compelling diorama of what is possible, he is always far more likely to exhaust limitless resources to the sensational tune of promising nirvana, while the disciplined businessman operates within the reality of scarcity and shoulders the whole loss and thus conducts due diligence to ensure that resources are not going to waste, that the recipients are appropriately positioned to seriously manage the costly resources and pay back the principal and interest of the loan: this justification, known as profit potential, is the mark of a worthwhile venture, as buyers and sellers progressively coordinate services and supplies where they are most highly valued. 

This is the most objective measure by which we can reliably gauge the efficacy of resource allocation: not by what people say or promise, but rather by what they execute and deliver. 

And this is precisely why the price of capital is so profoundly important to the whole structure of an economy. 

It must be priced, first, to represent its own scarcity and its time value; second, it must act as an organic gatekeeper, preserving the capital for use based on risk, both economic and monetary, and the historic credit quality of the debtor. 

Finally, it must be priced to represent the real demand of the market, to favor viable business investment over reckless consumer extravagance. 

Incidentally, the economic community is far more handsomely rewarded by the careful employment of resources in such a way that it yields value beyond its mere cost of production than it might otherwise be by spendthrifts squandering it into oblivion. 

As renowned economist Milton Friedman once said, “Nobody spends somebody else’s money as wisely as he spends his own.”

Comments

Popular posts from this blog

Death by Socialism

This title is available for purchase on Amazon ,  Lulu ,  Barnes & Noble , and Walmart .

Get Your Copy of “Death by Socialism” Today

Buy your copy of  Death by Socialism  today at  Lulu ,  Amazon ,  Barnes & Noble , or  Walmart .  Every year, there is a list of the world’s top causes of death. The list ordinarily includes heart disease, stroke, pulmonary disease, lung cancer, tuberculosis, and malaria, among others. However, there is one cause of death that is conspicuously absent from this list; one that has claimed more than one hundred million lives over the past century alone, and one that has left countless mil- lions of lives and families in shambles. You will not find this cause of death listed on any coroner’s reports. You will not find any laboratories researching a cure. There are no fundraisers or public awareness campaigns around it. You will not even find a passing mention of it in any of the newspapers. It is the most ruthless of serial killers, and yet it never has its day in court. More than people, this cause of death has claimed entire civilizations. It is the most silent of killers: it is Deat

Rally for Route 66!

Keep up the fight for the Mother Road! Rally for Route 66! There is a lot at stake in preserving this irreplaceable monument to American history, not merely as a tourist attraction but as a means to permitting a glimpse into our past, as a means to virtual time-travel into a time and space otherwise inaccessible, as a means to capturing the imaginations of future generations and to preserving the memory of our forbears in both form and spirit.  We are nothing without reverence for our forbears, without our heritage or our identity as a people, without the preserved memory of our history. Without these reminders, without the tangible connections to our past and the efforts which have forged our path and come to define us, without these monuments to the pioneering and the innovative, we are destined to forget all of that which makes us uniquely human, all of that which has afforded us so much insight and abundance, all of that which has given us pause to reflect and remember and to appre