Of Interest

I am, so to speak, indebted to the work of my friend John C Médaille on this one.

1978 saw Marquette National Bank v First of Omaha Service Corp. The US Supreme Court prohibited states from enforcing their own usury laws if the usury were legal in another state. Thus died America's usury laws. Interest rates were duly uncapped, and capital shifted into the high-return financial sector. That meant shifting it out of manufacturing, leading to ever-higher trade deficits. Leading, in turn, to vastly greater inflows of foreign capital, from absolutely anywhere at all.

Where did the banks invest all that new money? In making real things? No, in high-return gambling activities. Of course. And what sort of borrower does that require? We all know the answer to that one. Yet ordinary working families had no option but to become such borrowers. The end of manufacturing meant the end of powerful unions, and thus of proper wages. Workers either ruined their family life by working ever-longer hours, or they borrowed more, or they combined the two. Who says that capitalism is conservative? Conservative of what? General Motors, for example, only remained profitable through its finance division, building cars only in order to make loans on them. It was not untypical.

But it still had to beg and grovel for nothing approaching the bailout that Wall Street could assume as of right, just as the contracts of the bonus-claimant class are treated as absolutely sacrosanct while union contracts are broken at will.

In 1973, the US Supreme Court overturned the laws of all fifty states when it legalised abortion on demand at every stage of pregnancy. Its equally anti-democratic and anti-republican 1978 decision on usury has proved no less damaging. No more so. But no less so, either. Both must be reversed. By whatever means prove necessary where changes to the constitutional settlement are concerned.

And "only in America"? What do you think?