“It is worthy of remark, that the first borrowers must have been for the most part men driven to this necessity by the pressure of want, and contracting debt as a desperate resource without any fair prospect of ability to pay; […] The borrower is in this unhappy state rather a distressed man soliciting aid than a solvent man capable of making and fulfilling a contract; and if he cannot find a friend to make a free gift to him in the former character he would not under the latter character obtain a loan from a stranger except by the promise of exorbitant interest and by the fullest eventual power over his person which he is in a position to grant.”
An interesting quote from Grote – how then should we evaluate the varying interest rates available to borrowers today?
The Government lends my money, as a taxpayer, to the banks as bailout bonds, and charges 12% interest.
I lend my money to the banks, as a saver, and am offered 1% interest.
Either the Banks are a “distressed man soliciting aid” and anybody lending to them should be getting Just Compensation – or the Government is engineering a situation where the Banks are engaged in Predatory Borrowing.
Surely the honest solution would be to allow Savers to provide the Bailout Bonds directly?