Beggar Thy Neighbour - Essay Example

Beggar Thy Neighbour Number Page Number of BTN Sentence that prompted the question. Question Pg. 138 paragraph 4. The Americans also acquired a taste for trading securities and suffered two panics in their rudimentary markets before 1800. If speculation was such a dangerous game that intrigued people but had catastrophic effects, why was it introduced into the economy? 2 Pg. 141 paragraph 2. Federalists and Alexander Hamilton claimed that a bankruptcy law was necessary in order to discharge an insolvent from his debts so that business could be renewed and progress achieved. What led to the development of the American Bankruptcy Law? 3 Pg. 143 paragraph 3 Like many businesspersons, he did not favour the usury laws because they were not in line with markets rates of interest. What led to the repeal of the British Usury Laws? 4 Pg 149 paragraph 2 The Americans clearly were looking to the British for guidance on the matter. How did the usury laws affect American usury law development? 5 Pg. 150 paragraph 1 Less than a hundred years later, the clergy would be allowed to invest in interest bearing accounts and securities without incurring the wrath of the church hierarchies. How did the church and religious laws affect the setting of the Usury laws? Q 1: If speculation was such a dangerous game that intrigued people but had catastrophic effects, why was it introduced into the economy? Much debate exists within the manner in which intangible assets were introduced into the economy. Securities and interest accounts were at first imagined to be a scheme to dupe people off their money. Most government laws prohibited investment in intangible assets. Regardless, few experiments indicated that these intangible assets would derive money for other people. However, for the laws to be introduced as a strategy to govern speculation processes of intangible assets, the people had already expressed interest in the field and were working to develop a good speculation strategy. Primarily influential people making their wealth from such securities influenced the increase in interest in securities and interest bearing accounts. After the American independence, several merchants made themselves incredibly wealthy from securities trading. People such as William Duer were able to make a lot of money from the stock market and their influence, fame and resumes grew exponentially. Similarly, Robert Morris made himself exceptionally wealthy by trading securities on leverage from loans. Like Duer, his influence sparked many people to venture into the securities and commodities market. At the time, there were no laws governing securities trading and thus market panics were inevitable. By this point, the government had already understood that its role was to regulate this trade. In the absence of government regulations, the public was unprotected from the possibilities of fraud and loss of their money, which prompted the government to bring out new laws. Lenders were increasingly giving money to speculators and this led to the need for the government to control bank lending as well. Through regulating lending and investment, it is evident that government control was protecting the public. However, by governing the interest rates, the government and merchants did not come to agreeable terms, as most of the initial policies were ineffective. Some changes were implemented and this has continued to date making our financial system the current jargon it is today. Q 2: What led to the development of the American Bankruptcy Law? Many influential people participated towards the improvement of the financial industry. Some of the people were in the continental congress as foretold by the preceding chapter. Duer, an influential congressional representative was one of the first people to make the public aware of the need to have a bankruptcy law. He had made a fortune from the stock market only to lose it all in the panics of the market. This change led to the need to develop programs that would help improve the performance of the financial system relieving the debtor off his insolvency and eventually contributed to the growth of the business sector as uncleared debts were written off and new progress was to be made. The financial panics that happened before 1800 immediately after American independence led the government to institute laws that protected lendors from going to debt prison, as was the case in Europe and America at the time. The financial panics saw many people come out broke and penniless hence filling the debt prisons. Although the laws were set, the debtor alone would not declare bankruptcy but rather the creditor had to be involved in the decisions as well. Creditors would lose much of their money to the market failures, but the debtors would lose some of their creditworthiness in the process. Similarly, Robert Morris went into bankruptcy but was very adamant to admit his situation. As such, he was sent to prison after his insolvency was realized to be as high as $ 3 million. Such an amount would not be paid back due to fact that it was impossible, and at the same time, he had no means to pay back. Having such am individual in prison was a waste of federal and state resources and the sad thing was that most debt prisons were filled with such individuals. Q3: What led to the repeal of the British Usury Laws? Merchants and traders were some of the most respected members of the society. They were the core drivers of the economy and they had a great say in economic matters. Regardless, the British usury laws were a little inflexible and were based on unrealistic predictions of what interest rates the market would allow. At times, these laws were oppressive to these individuals and had a greater advantage to the government, a situation that led many merchants for the repeal of the law. Such modifications were enacted with the main aim to ensure that the merchants received interest rates that were comparable to those of the market. Secondly, the laws set for defaulting on loans were unrealistically high, which largely discouraged borrowing, which had negative impacts on banking profitability. These factors collided with the fact that most businesses were in ruins after recurrent financial panics, which left many stockjobbers, businesspersons and bankers in financial ruin. Altering the borrowing rules also meant considering the changes in the bankruptcy laws as a strategy to make better usury laws. Similarly, the overcrowding of debt prisons showed how ineffective some of these laws were. Likewise, some of the states and countries were changing their usury laws and as trends demand, the Britons had to change theirs as well. The experiments conducted in other countries proved to be very effective which thus made some countries consider changing some of their laws as well. Evidently, the usury laws were not considerate of the masses but were mainly set to benefit the government in terms of tax returns and the lendors or businesses selling some of the intangible assets. Therefore, altering the usury laws was a result of increased pressure from the public, merchants and collective continental and global forces prompting change. Q 4: How did the usury laws affect American usury law development? Understandably, America had just gained her independence from Britain. As such, most of her laws were developed guided by British law making procedures. Most aspects of their culture back then were borrowed from Britain. Furthermore, Britain was one of the most successful empires that had ever lived. Emulating them, for this new ambitious nation, was the surest way to economic success, which these new nations so much needed. The main justification behind the imitation of laws was to have the best or to emulate the best. America wanted to be free from the British, but also wanted to be equally successful. With very many innovative minds moving into this new land, having the best laws meant copying several of British laws. Secondly, various other European nations were changing their laws. Changing the usury laws back then had some critical impacts on the country and hence most of the nations decided that it was much better to use some laws that were functioning appropriately. Some of the experiments made by people during this era in changing local usury laws were completely catastrophe and thus having one of the most stable nations guide the law making process was necessary for America. Likewise, most of the leaders left in charge had ties with Britain, which thus made increasingly easy for them to emulate their former leaders. Since most of these leader still looked to Britain for leadership guidance, when it came to important policies such as lending, borrowing and usury laws, it was only easier for America to rely on the British for guidance. Evidently, this approach was equally effective as using the British financial system to regulate this new nation was vital. Furthermore, America had not had a financial panic before their independence, which meant the financial system implemented by the British was highly effective. Q 5: How did the church and religious laws affect the setting of the Usury laws? At the time, the influence of the church on political matters was still minimal. However, in countries such as Italy the influence of the church on laws made was still evidently very high. As such, what the church declared was seen as highly moral and many shunned what was not approved. Therefore, the influence of the church was felt when the laws were made with church approvals making these laws acceptable. Likewise, the churchs jurisdiction on such matters was limited. When clergymen were allowed to invest in intangible assets, churchs approval of the usury laws was stamped into power. Therefore, the church made very few laws pertaining to the usury and very few of their guidelines were followed when making these laws. The only influence they had over other people was to decide if the laws were acceptable or not. Their support, however, reinforced the usury laws and increased their popularity in other nations. Work Cited Geisst, Charles R. Beggar Thy Neighbor: A History of Usury and Debt. New York: University of Pennsylvania Press, 2010. Print. Read More