Vulnerable people need protection from the poverty trap

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From: William Dixon Smith, Welland Rise, Acomb, York.

PERSONAL debt is the blight of our times, as Bishop John Packer’s argument implies (Yorkshire Post, December 20), yet loans serve a valuable, and often an essential purpose in society. Mortgage is a prime example. All depends upon the use to which the finance is applied, the probity of the lender and the credit-worthiness of the borrower.

As with all transactions, there is risk. Debt can become a problem because the risk is not borne equally by lender and borrower. Contracts favour the lender, as does the law. If a lender chooses to lend to a borrower with poor credit status, the lender ought to share responsibility with
 the borrower for that risky decision. A difficult debt should not simply be sold off, or transferred.

There should be no impoverishing penalties. Rather than collection agencies and the courts, there needs to be a national arbitration service to deal with personal loan-generated debt.

Education has its place, but a glance at the internet will show the temptations that abound in a largely unregulated market.

The poverty trap is well baited. What vulnerable people most need is protection, not advice.

From: Michael Swaby, Hainton Avenue, Grimsby.

Economics and politics make odd bedfellows, and Godfrey Bloom’s article has drawn an interesting response from Allan Davies (Yorkshire Post, December 21).

Mr Bloom does indeed take a swipe at “the neo-Keynesian tradition of spend and borrow”. However, the main thrust of his article is to propose a series of radical measures which, rightly or wrongly, he believes would restore “sound money”.

Mr Davies draws our attention to the successful policies of British governments during the quarter-century after the Second World War. This is fair enough. However, it should be noted that a hugely important factor during this period was sound money. Our governments had no option but to live within their means. As soon as the nation started to overspend, a balance of payments crisis would occur, forcing the government to curtail demand, usually by way of increasing interest rates and/or taxes. The ensuing recession was usually short and mild.

This does not happen now. It so happens that our balance of payments recently deteriorated suddenly. However, we will not hear much about this, and any adjustment will be left to “the market”. If the trend persists, the outcome could be a damaging and unwanted fall in the exchange rate. The matter will be fudged, and nobody will admit to error or take responsibility.

This is a consequence of the current global non-system of fiat money, floating currencies, and ever-increasing debt.

Mr Bloom suggests that a return to sound money will require that “all political connection with the medium of exchange must be removed”. I agree absolutely. But it requires political decision-makers to voluntarily surrender some power, and agreement on an international scale would be needed. Mr Bloom’s call can be taken to imply a restoration of the gold standard, in some form.