Predatory Lending, Government-Style

Why developed nations must drop third-world debt

As often as demagoguery takes its toll, we see the government doing the exact same thing it condemns with regard to private market actors. While certainly not the sole example of state hypocrisy in this scope, the perpetration of third-world debt, largely brought about by the power hustlers in the wealthiest nations, has left Africa wounded beyond what any man of good conscience can afford to ignore.

A simple law to consider: whenever the government decries any practice of private industry, the state equivalent does vastly more net harm.

And to add insult to injury, the state is often the enabler - if not, the enforcer - of the very same practices it demonizes, in a desperate effort to deflect the blame.

The political left, lusting after government control, bemoans the free market, or even a mixed economy, as a system in which "corporations are people" under law. Obviously, corporations cannot be punished without punishing the very people who represent them, in any given form.

Let's apply the "Uncle Sam" personification accordingly: if governments were people, they'd all be in prison.

I. What is "Public Debt?"

"Public debt" is essentially the denial of private property. Inhabitants of any debtor nation have no personal responsibility for what their governments borrow, regardless of the amount.

The "seen benefit" of third-world debt is the reaccumulation of capital, paid with interest to the federal government. But this money, as economist Murray Rothbard put it, "will simply be wasted, thrown down the rat hole of unproductive and profligate government spending."

Rothbard offers an important distinction between public and private debt.

Most people, unfortunately, apply the same analysis to public debt as they do to private. If sanctity of contracts should rule in the world of private debt, shouldn't they be equally as sacrosanct in public debt? Shouldn't public debt be governed by the same principles as private? The answer is no, even though such an answer may shock the sensibilities of most people. The reason is that the two forms of debt- transaction are totally different. If I borrow money from a mortgage bank, I have made a contract to transfer my money to a creditor at a future date; in a deep sense, he is the true owner of the money at that point, and if I don't pay I am robbing him of his just property. But when government borrows money, it does not pledge its own money; its own resources are not liable. Government commits not its own life, fortune, and sacred honor to repay the debt, but ours. This is a horse, and a transaction, of a very different color.

This is as true of the third world as it is for the United States.

Particularly throughout the 1970s, the US government made loans to corrupt African rulers, when it was commonly understood that they would never be paid back, dooming the citizens within the various jurisdictions to a double-whammy in taxation - one round for their own government, and another for ours. If this is not a form of "predatory lending," logic would permit every private entity facing this charge to declare itself a government, and the charge no longer applies.

But knowing the established definition of "logic" as far as our "leaders" are concerned, it's more of the same. We have to feed the beast that is constrained by no founding document; rather, by what it can get away with. As a result of state-perpetrated predatory lending, so must the third world.

All too often, they feed the beast only to have their land occupied by a foreign military. Its citizens have any promise of a greater standard of living sucked out, all for the benefit of tax-eaters in far-off, wealthy nations. And for what, to buy votes? To harass their citizens? To enforce one needless mandate after another?

As we can plainly see by now,

this debt has a way of enslaving everyday American citizens as well, but on a far lesser scale, to be sure. The borrower is slave to the lender, is it not?

It is interesting to observe the correlation between the government's third-world enslavement and the current fiscal catastrophe at home.

Our current crisis is the result of the state forcing private actors to behave more like them, only to condemn them for following the marching orders. Banks were ordered to give risky loans to those who would not have qualified for them under a genuine free market system. In return - wink, wink - they were essentially promised a bailout if things went wrong.

The mortgage crisis was further perpetuated by the Federal Reserve's easy credit practices, aimed at pushing the interest rates artificially to an all-time low. Moral hazard was inevitible, as banks lent huge loans, enabled via government handouts in the form of new money, hot off the printing press.

Obscene lending with a near-zero chance of ever being paid back?

History repeats itself like a dog returns to its vomit.

We've seen one family after another at home deal with the devastation of losing homes, jobs, and retirement savings; just as families in Africa and the Latin American "banana republics" suffer enormous debts inherited from past oppressors.

It is a curious course of events to see the state rush to demand private debt forgiveness domestically , while scrounging for every dime it can get by maintaining the plight of debtor nations. But on second thought, it is clear who votes and who doesn't.

To properly assert the illegitimacy of third- world debt, we must examine the nature of man, the of the economy, and of the state.

II. Economic Hit Men

In his book, Confessions of an Economic Hit Man, John Perkins claims his work as an "economic hit man" involved convincing underdeveloped countries to accept massive development loans from such institutions as the World Bank and USAID. The United States government, Perkins contends, used its lender status to pressure various foreign governments to operate to their liking. He offers a blunt job description of an economic hit man:

Economic hit men (EHMs) are highly- paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign "aid" organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet's natural resources. Their tools included fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder. They play a game as old as empire, but one that has taken on new and terrifying dimensions during this time of globalization.

As The Economist reported in 2000, "The poorest continent owes the rest of the world a staggering $375 billion, an amount equal to three-quarters of its GDP and nearly four times its annual exports. Half of its governments pay as much per person in debt service as they spend on health and education combined."

If it's so devastating for them, why would governments of developed nations be so blind?

If you have to ask, you must truly believe the state has your best interests at heart. Money talks, and compared to the most influential cronies, you have very little. You won't get a bailout if the government sets your house on fire right before your eyes, but the banksters, the zombie companies, and any other prominent influences will milk the system, as established interests and the political establishment are all but cut from the same cloth.

III. The One-Party System

The two-party system is more or less a one- party system in practice. "Governing mode" is worlds apart from "campaign mode."

While there are differences to be acknowledged, they are mostly rhetorical, if not circumstantial.

Both the neoconservative and progressive movement demand a bigger state. For the right, the magic word is "national security." For the left, it's "compassion." Like a magic wand, these words have the power of depriving any right - whether expressly enshrined in the Constitution or not - of being freely exercised. Whatever the style, whatever the "abracadabra," the end result is the theft of human liberty.

The GOP will stand firmly with their heads thrust high, demanding a Balanced Budget Amendment, so long as a Democrat is President. But the minute they get their hands on Washington, "deficits don't matter." Harry Truman brought us to the heart of the matter when he defined a bureaucrat as a Democrat with a job a Republican wants.

The Republicans position themselves as the party of the free market, at least in rhetoric. Yet, almost nobody stood up for the free market when the Patriot Act was passed. Or when George W. Bush vastly expanded the national security state, and weakened the private economy in the process. Few seem even aware of the economic consequences of a world cop state, let alone, the blowback factor.

Following the 9/11 attacks, the TSA was created, which essentially nationalized airport security. For some time, fear of terrorism was good business for the Republican Party, even if it meant that America's founding principles were compromised, if not outright attacked. The original Patriot Act authorized federal agents to write their own search warrants, which were referred to as National Security Letters. While many recipients of such letters had no reasonable suspicion of a terror connection, they were nonetheless given a gag order, prohibiting them from disclosing any information on the matter.

"Conservatives" made excuses for the same police state they once opposed during the Clinton presidency. And we're supposed to be suprised when the Obama Regime sends the TSA out to grab our junk at the airport?

So typical is the nature of politics. Constituents who favor the party in power will misplace their faith in the regime, delegating yet more power to the ruling class without a second thought that their political rivals will eventually inherit that very same authority, and use it to suit their own interests. Consequentially, they have no right to be suprised when they become political targets.

Private security was not the problem to begin with, and another layer of bureaucracy littered with government incompetence has been no substitute. Pilots and flight attendants were prohibited from keeping and bearing arms on the job by the very same government that is obligated to protect that right. The same constitution that has been roundly attacked in the name of national security, coincidentially, would have prevented the worst attack on American soil, had it been followed.

Stale tax reforms promise "revenue neutrality," which doesn't add up with any political movement that actually seeks to cut government. Republicans are as fond of backdoor taxation as Democrats when it comes to "closing loopholes." That is to say, ending tax exemptions.

The "FairTax" is the scam du jour, which consists of a 23% national sales tax on nearly every purchase (although a variety of taxes are eliminated as a trade-off), along with a dependency check. You know, since the government has done such a great job with Social Security. What is so "fair" about the FairTax, anyways? It misses the point. I thought we were "Taxed Enough Already," and any deviation from that plank insofar as taxation is concerned is a complete and utter waste of time.

"Getting back to the Constitution" will remain a pipe dream, so long as the Sixteenth Amendment provides for the theft of our liberties. It must be repealed - not by a "revenue-neutral" bait-and-switch scheme, but by retaining the maximum amount of capital in the private economy.

The Income Tax is the great enabler of the welfare-warfare state. A phase-out of the three major "entitlements" (Social Security, Medicare, and Medicaid), the regulatory apparatus, and disbanding of the many needless US military bases throughout the globe is not only desirable, but necessary in order to make any serious headway towards a genuine repeal, free of gimmicks.

For as short as the Republicans may fall on their claim of advocating a free market, it is the Democrats who have the nerve to calculate any tax relief for high earners as a government expenditure.

Careful, kids - once you start earning over $250,000 a year, the state officially owns the sweat of your brow.

And that's only a critique of the rhetoric.

But to be fair, the Democrats are more honest about their opposition to a free economy. Consequentially, they expect a "thank you" for allowing you to keep some of your income. But again, their arrogance is more upfront. Republicans, by contrast, are like lawyers who insist they are just like any other market actors, as they use the power of the state to pick one pocket after another.

It is a farce, however, to suggest that Democrats (or Republicans, for that matter) are "for the little guy."

The state is the most monopolistic institution on earth. The individual is the smallest minority there is. It is essentially David in diapers and Goliath on steriods. And both parties rob the former to enrich the latter. Follow the money.

IV. Fictions Require Compulsion

Politicians, especially those on the left, associate private self-interest with greed (as though bureaucrats are immuned from both), and supposedly enlighten us with the call for the much-nobilized common interest. But both self and common interest are morally neutral.

Behind every great invention is a self- interested inventor. Behind every Michael Moore comedy-horror film is a self-interested goofball with a video camera. And behind every presidential election, there are self-interested candidates, determined to impose a political agenda on over 300 million people.

People all over the world have a common interest in honoring Martin Luther King, Jr. Church-goers have a common interest in obtaining salvation. HBO subscribers have a common interest in the content that is provided to them. Politicians have a common interest in feeding their cronies.

But there is something particularly devious in railing against self-interest. Keyword: self. The limitations on our individuality. You cannot have self-expression without self-interest. Or self- respect. Or self-anything, for that matter. You are the robot of the collectivist state.

And may I ask who defines the "common interest?" Why, the self-interested political establishment, of course! They get to tell us what our interests are. How sweet of them.

This fallacy is not confined to the political left. When a Republican president decides that it's time to invade another country, who are you to disagree? Why, that would be un-American! I mean, it's in our "national interest!"

"National interest," "public interest," and so on are simply rhetorical variations of the same tactical theme. Politicians and their minions need a herd mentality to get what they want.

There is a mechanical difference in the two, as far as public affairs go. You don't need board of tyrants to compel an individual to act in his own self-interest, because this has already been established through human nature. On the other hand, you must compel the masses to accept the "common interest" if it is not their true will.

Fictions require compulsion, simple as that.

If the state declares it a "common interest" to maximize the US Treasury, then the third world, as well as "We The People," are stuck with it. By contrast, those stuck in debtor nations would be better off if the West respected the self-interest of every individual that suffers from the debts incurred by their government.

The lust for power is virtually without boundary. As with anything else, you have to stop subsidizing it if you want less of it. If the abuse of power (and the potential thereof) is abundantly clear, why not starve the state?

The predatory state intends to utilize every gun, every badge, and every prison cage at their disposal.

Waving an eighteenth-century document around seems to achieve little, if anything (although it is a great way to educate the public and expose the constant abuse of power). Every public official stands before God and takes an oath to uphold the Constitution, but he cannot protect it from himself - nor does he intend to. As far as he is concerned, it's an oath with the wind.

The political profession requires a master of persuasion and self-defensive rhetorical abilities. Just when you think you've put politicians on the spot, they always seem to wiggle out of it. That is not to suggest there are no good examples of stupified "political leaders" caught in an embarrassing moment, but rather, that the limits of their power are held in contempt, no matter what efforts are taken to constrain them.

One thing is clear: the state will not practice what it preaches.

Voters only matter on Election Day. Any other day, they are neglected like children in the woods, left for the beasts to consume. While voters often have selfish motives at heart, nothing compares to the power structure, which is, simultaneously, selfish and powerful.

For the most part, the government can tell its citizens to drop dead. After all, they have the nukes. The threat of revolution - for without, there would be no break from the British Crown - has grown more figurative and less viable by the day.

It is laughable to hear the political profession declared "non-profit," as though this is the great moral distinction between the state and the mafia. I would argue that nothing is truly "non-profit," especially not the so-called "public sector." Surely, there is a motive of self-interest behind every human endeaver, whether the profit is financial or otherwise.

There is one condition where the voices of the voting population actually seems to matter - that is, when the state can enrich itself with the help of useful idiots.

Any state expenditure compromises the private economy, which warrants deep suspicion for all government activity.

The private sector's ability to combat poverty through charity and job creation, for example, is impaired whenever the state seeks to expand, even with the best of intentions. The lines are now blurred between charity and state-enforced theft. Giving is no longer voluntary, let alone virtuous. And in order to aid the poor, the state must enrich middle-class social workers with incentives to get more Americans on the dole.

Obviously, this goes hand in hand with third- world debt, and any other source of revenue, for that matter, because it allows the government to destroy human liberty and reward an ever-increasing base of cronies at everyone else's expense.

V. Cronies Always Come First

Surely, some would argue that the government "needs" to be paid back, and that debtor nations are morally obligated to do so. After all, we have our own debt to pay off.

Let us imagine that the government suddenly found $16 trillion on the White House lawn. Is this really a sufficient enough reason for the ruling class to send the cronies to the back of the bus, and deal with foreign creditors once and for all? I would argue that it would take an embarrassing series of downgrades - and a tireless, irate majority - for the government to even consider casting its agenda aside and making debt a top priority.

Even if a drug addict has other bills to pay, it doesn't matter. You can lend him all you want, but that doesn't mean he'll spend it on anything but dope. And in doing so, what kind of planet are you living in if you expect him to pay you back?

Regardless of party, we've seen one debt hike after another. When was the last time the government lowered the debt ceiling?

If the cronies are faring well while everyday Americans are struggling to make ends meet, will they not become evermore parasitic with a greater public trough?

Third-world debt amounts to pocket change, as far as the US Treasury is concerned. Yet, it is a matter of life and death for many inhabitants of the third-world, stranded in a life of perpetual poverty.

Some argue that dropping the debt would lead to moral hazard, since third-world nations would be encouraged to borrow more as they anticipate debt forgiveness in the future. But this misses the root of the issue, which is heavy lending itself. Moral hazard is the inevitible result of the government's predatory lending practices.

The entire issue of moral hazard could be tossed out with the simple proposition to end lending in its entirety.

Several lessons have been learned on a national level in the past. Slavery, DDT prohibition, the military draft, and forced busing, for example, remain relatively untouchable subjects, for as inept and destructive as the political establishment may be. If these ideas can be stigmatized out of existence due to their uncontestably destructive nature, then why not add a policy responsible for perpetuating world hunger, the AIDS epidemic, needless wars, and the inheritance of grinding poverty to the list, given that it has managed to devastate an entire continent?

VI. Predatory Printing Enables Predatory Lending

Central banking plays a major role in kicking the third world while it's down. Predatory lending, by and large, would not be possible in the absence of a central bank.

While the Federal Reserve Chairman lectures us religiously about the horrors of deflation, loans to the third world almost always have to be paid back in hard currencies. And yet, most of the money loaned by the banks is created out of thin air!

Nobel Memorial Prize-winning economist Maurice Allais minced no words for this practice, stating "The 'miracles' performed by credit are fundamentally comparable to the 'miracles' an association of counterfeiters could perform for its benefit by lending its forged banknotes in return for interest. In both cases, the stimulus to the economy would be the same, and the only difference is who benefits."

Notice how concerned the mainstream economists are about the moral hazard created by the Federal Reserve's currency manipulation, and the lending practices of Gutenberg welfare recipients (in layman's terms, politically well-connected banks) that follow, especially with "too big to fail" bailout privileges and affirmative action laws in place.

Former Federal Reserve Chairman Alan Greenspan, carelessly mischaracterized as "laissez-faire," suggested in his autobiography: "I was aware that the loosening of mortgage credit terms for subprime borrowers increased financial risk, and that subsidized homeownership initiatives distort market outcomes. But I believed then, as now, that the benefits of broadened homeownership, are worth the risk."

Unlike you, Mr. Greenspan doesn't have to worry about losing his job, or his home, as a painful result of "subprime" lending.

Greenspan aside, was it "worth the risk" to the victims of the ripple effect that followed?

In light of the nasty "recession" here at home, we have to wonder just how many eggs we had to break for this omelet. And what a rotten omelet it turned out to be.

Obviously, the government gets off the hook by replacing the word "predatory" with "subprime" when it is clearly the culprit, although there is no fundamental difference in this context. Call it "outreach lending" if you wish, but the damage is still the same.

Since the primary aim of "quantitative easing" is to artificially reduce interest rates - thereby distorting market signals to attract more investment - then predatory printing must be addressed as a primary enabler of predatory lending.

When a private citizen is caught doing essentially the same thing, it's called counterfeiting. This paradox invites some seemingly ridiculous questions to be asked in vain to justify the double-standard.

Shouldn't counterfeiters also be held up as role models in Keynesian circles? Are some counterfeiters more equal than others?

The government's ability to print money out of thin air is an "invisible tax" to be sure, but the most devious aspect of all is relatively unknown to the common man. This is not suprising, given that the leadership in neither major political party bothers to address it.

Artificial credit essentially puts the economy on a sugar high. The inflationary boom eventually leads to a bust. The longer the boom is sustained through paper currency, the more painful the bust will be. Investors discover - too little, too late - that their projects are unsustainable, and their investments have been squandered.

Without a proper understanding of the business cycle, a reduced interest rate only serves as a false indicator for potential investors, when the rate has been manipulated through "quantitative easing." That is, the artificial expansion of credit. Investors also have no way to distinguish a genuine recovery from an inflationary boom without this knowledge.

Keynesian economists make the grave mistake of viewing interest rates as little more than barriers to prosperity. Consequentially, they believe the state, not market actors, should dictate their course.

The traffic light may serve as a useful analogy for understanding the proper function of interest rates in the ordered marketplace. At an intersection, one street is given the green light, while the others face the inconvenience of the stop light.

Let us envision a chaotic system where a green light is given to every street at any intersection. Here, you are bound to have far more crashes. Drivers who would otherwise be prevented from taking their chances in an ordered environment are now misled by the green light.

Bizzare this may be, the traffic lights serve the same function as the interest rates, as far too many passengers are misguided into driving at the wrong time. Just as it is impossible to discern which street should get the green light, there is no way to determine the real interest rate under a central banking system.

Far from a dispensible annoyance, interest rates are a market signal for investors. A high interest rate - akin to a red light - informs a potential investor to save his money for a better time. A low interest rate - the "green light" - signals a potential investor to act.

For all the rails against "deregulation," it is the central bankers who deregulate the natural order of market signals by manipulating the interest rates.

To be sure, a low interest rate is something that investors certainly enjoy. But when it proves itself as misinformation, they won't enjoy the lie for long.

VII. "Reagan Conservatives" vs. Reagan's Favorite Economist

Nationally syndicated talk radio host Michael Medved routinely dismisses callers who criticize the Federal Reserve with an eager passion, and moves on to tow the next established plank of the Republican Party. It is quite interesting of Medved to do this, given his quotations of Ludwig von Mises in his book, The Ten Big Lies About America, portraying the Austrian economist in a rather positive light.

Mises' greatest contribution to the science of economic thought, strangely enough, was the business cycle theory that Medved doesn't want you to know about.

So it's all well and good to offer a token acknowledgement of Mises, but you're a "Ron Paul kook" if you actually embrace his most important contribution?

It is an ever-greater coincidence that Ronald Reagan's favorite economist, F.A. Hayek - a fellow Austrian economist and intellectual disciple of Mises - won a Nobel Prize in part for his indictment of central banking.

How is it that "Reagan Conservatives" are so quick to marginalize the same school of thought - the Austrian school - that was advanced by their favorite president's favorite economist?

We must then conclude that there is no such thing as a "Reagan Conservative," as far as central banking is concerned.

VIII. A Loan In Your Name

At this point, I must reiterate the crucial distinction between private and public debt.

Let's make believe I show up at your front door in the middle of the night. I inform you that I need a massive loan, and demand that it is borrowed in your name. You refuse, and I pull out a gun. Threatened with your life, you give in.

When a private citizen does this, we call it nothing short of extortion. When a government does it, we call it "public debt." How's that for moral hazard?

As Thomas Jefferson warned us:

I place economy among the first and most important virtues, and public debt as the greatest of dangers to be feared. To preserve our independence, we must not let our rulers load us with perpetual debt.

Undoubtedly, we've been dealt far too few of Jefferson's intellectual heirs in the political arena.

If Admiral Mike Mullen was correct in asserting that "our national debt is our biggest national security threat," then we must also consider what it means for the third world: an undeniable threat on every front.

If there is a case to be made against an over- bloated government, unjustly enslaving Americans to the creditors in the Far East, then we must offer that crucial distinction between the looted third-world population and the corrupt governments that rule over them.

IX. Why Foreign Aid is Not the Answer

Perhaps with the best of intentions, foreign aid has been widely reconsidered in an effort to alleviate third-world poverty. Proponents call for a Marshall Plan in hopes of getting Africa and other impoverished regions back on their feet. All too often, we judge a policy based on its stated intentions instead of its devastating results.

Bestselling author and economist Dambisa Moyo is all too familar with the harmful side effects that foreign aid brought to her native continent. After years spent obtaining credentials in higher education, and later working for the World Bank and Goldmann Sachs, she concludes that foreign aid must be abolished.

"As she points out," notes Bill Walker, "real per capita income, lifespan, and other measures have actually fallen in Africa while the continent has absorbed over a trillion dollars in 'aid.' Between 1970 and 1998, poverty in Africa rose from 11 percent to 66 percent." Eilis O'Hanlon adds, "[Moyo] demonstrates that African countries which reject the aid route invariably thrive whilst countries which take it end up disappearing into a spiral of corruption and bureaucracy, in which entrepreneurship and democracy quickly die out."

In an interview with the New York Times, Moyo points to the success of the Chinese, who, only a few decades ago, ranked behind many African nations, but have since become the primary predatory lender to our debt-crazed government.

Do you know anybody who feels sorry for China? Nobody... Forty years ago, China was poorer than many African countries. Yes, they have money today, but where did that money come from? They built that, they worked very hard to create a situation where they are not dependent on aid... I believe it’s largely aid [that has held back African nations]. You get the corruption - historically, leaders have stolen the money without penalty - and you get the dependency, which kills entrepreneurship. You also disenfranchise African citizens, because the government is beholden to foreign donors and not accountable to its people.

Since the Bush Administration, both major political parties accept the expansion of foreign aid as a necessary expenditure.

Somehow, we're supposed to believe that today's political establishment is infinitely wiser than its past equivalent of decades prior. You see, unlike the days of Richard Nixon and Jimmy Carter, we've produced geniuses like George W. Bush and Barack Obama. Ever since, their "hope," their "change," and their "compassionate conservatism" has inspired an unprecedented level of confidence in our wise overlords.

Do you sense any sarcasm, by any chance?

I mean, if Howard Dean can suggest that he's more conservative with money than George W. Bush, I guess Dubya was pretty "compassionate."

But I digress.

The main problem with aid, we must conclude, is that it builds governments, not economies. There is an alternative, and that is the expansion of free trade.

Bill Walker points to some positive developments in his review of Moyo's bestseller, Dead Aid:

Since the 1990s, another positive trend has been African trade with China and the rest of Asia. Afro-Asian trade has grown at 30% per year. China is now Africa's third-largest trading partner. Moyo also praises the Chinese government's aid programs... they have a record of actually building railroads and roads to facilitate trade, not just buying weapons and Swiss bank accounts for the dictators.

Perhaps some of the most persuasive arguments in favor of free trade came from the late Milton Friedman. Here is a brief transcript of a famous exchange between Friedman and Phil Donahue.

Donahue: When you see around the globe the maldistribution of wealth, the desperate plight of millions of people in underdeveloped countries, when you see so few haves and so many have-nots, when you see the greed and the concentration of power, did you ever have a moment of doubt about capitalism and whether greed's a good idea to run on?

Friedman: Well, first of all, tell me, is there some society you know that doesn't run on greed? You think Russia doesn't run on greed? You think China doesn't run on greed? What is greed? Of course none of us are greedy; its only the other fellow who's greedy.

The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus. Einstein didn't construct his theory under order from a bureaucrat. Henry Ford didn't revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty you're talking about, the only cases in recorded history are where they have had capitalism and largely free trade. If you want to know where the masses are worst off, it's exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear: that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.

A lengthly case for free trade appears in Friedman's classic, Free to Choose: A Personal Statement, co-authored with his wife, Rose Friedman:

Another fallacy seldom contradicted is that exports are good, imports bad. The truth is very different. We cannot eat, wear, or enjoy the goods we send abroad. We eat bananas from Central America, wear Italian shoes, drive German automobiles, and enjoy programs we see on our Japanese TV sets. Our gain from foreign trade is what we import. Exports are the price we pay to get imports. As Adam Smith saw so clearly, the citizens of a nation benefit from getting as large a volume of imports as possible in return for its exports or, equivalently, from exporting as little as possible to pay for its imports.

The misleading terminology we use reflects these erroneous ideas. "Protection" really means exploiting the consumer. A "favorable balance of trade" really means exporting more than we import, sending abroad goods of greater total value than the goods we get from abroad. In your private household, you would surely prefer to pay less for more rather than the other way around, yet that would be termed an "unfavorable balance of payments" in foreign trade.

X. Conclusion

The deeper the deterioration of lending standards, both public and private, the less incentive we have to live within our means. This dangerous trend serves only the delusion that we can afford to stay the course.

Government, of course, cannot always be managed in parallel to a private firm.

If outright debt forgiveness is not politically feasible, there is some hope in allowing debtor nations to make ends meet with a generous consolidation plan on the table. This would still be a positive incremental step towards independence, as opposed to the perpetual dependency on the West.

To clarify, there is no pleasure in watering down on principle. That's essentially what politicians get paid to do. Anything short of ending subprime lending from the poor in wealthy nations to the wealthy in poor nations in its entirety leaves room for moral hazard to take shape, and virtues are compromised.

There is no need for a central planner to manage the internal affairs of the recovering debtor nations. The third-world population could reclaim their birthright to private property. Such issues as starvation and disease would then be fought more effectively, as their resources are no longer thieved away by a foreign entity. This could ensure a dramatic improvement in their standard of living.

Before we get too optimistic, there are a few additional factors to consider. First, most third -world debts are to the IMF, World Bank, and various governments worldwide. Secondly, many third-world nations defaulted on their debts in the 1930s. By the 1970s, this lesson was all but forgotten.

While the US government cannot manage the policies of other lenders, we are often seen as a pioneer of ideals. In other words, the United States is often the initiator, leading the way for the "free world." While this "superpower" status is envied, it requires us to initiate virtue.

If we set the trend in debt forgiveness, we may anticipate that other lending nations will follow suit. It must be publicly stated that with the debt relief on the table, we simply will not lend anymore. It may very well lead to more skepticism directed at the IMF and the World Bank; a domino effect may take shape in the most optimistic scenario.

We cannot afford to remain oblivious to the lessons of the 1930s. Rather, the government's predatory lending must be attacked and reviled for the culprit it is. Just as DDT prohibition is held responsible for countless deaths, the lending schemes deserve the same treatment. Unless that happens, we risk falling trap - as we did in the 1970s - to repeating past historical failures.

With regard to foreign debt, a new honor code must be welcomed to shore. As a merciful nation, we should forgive past debts and assume responsibility for preying on those at the mercy of rogue nation-states, under the condition that we never lend again.

Ultimately, the remedy is the open market. This requires knocking down any current barriers that stand in the way of free trade. The US government must allow American firms to hire workers all over the world for any wage that is agreed to. Imports must be welcomed, as any product from the third world deserves the same market test offered to domestic goods. Likewise, American exporters should have access to ship overseas with no fines or penalties. This includes not only commercial interests, but charitable interests as well.

If third-world debt is ultimately the health of the state, and consequentially, the destruction of the individual, it is never too soon to consider the only humble position - forgiveness once and for all.

From this day forward, we can no longer remain a lending predator. If the borrower is slave to the lender, then slavery must be abolished.