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The Ides of June: Kerensky's War Allowed Bolsheviks to Triumph in Russia

June 7, 2019 in Economics

By Doug Bandow

Doug Bandow

World War I resulted in two seemingly minor events which had
epochal impact: a little known army operative took over a small,
radical, racist political party in Germany and an exiled political
agitator returned to Russia. The consequences of the latter, as
intended by the German government, which facilitated his transit,
were more immediate. In just a few months the Bolsheviks
established tenuous control over remnants of the imperial Russian
state. Out of which emerged the Soviet Union, which Ronald Reagan
so accurately called the Evil Empire.

When the “Great War,” as the conflict was originally
known, began in August 1914 the Entente’s members proved to
be skilled propagandists. They said they were fighting a war for
democracy and against Prussian militarism. It was the war to end
war, a fabulous phrase even though the very definition of oxymoron.
The maladroit and heavy-handed Germans inadvertently did much of
the allies’ work.

Still, the Russian Empire was a great embarrassment to the
Western allies. Belgium was perhaps the most murderous colonial
power and revenge animated French military policy, but the Tsarist
autocracy, a backward anti-Semitic despotism, most dramatically
undercut Entente image-making. Under pressure the dynasty had been
liberalizing, but remained far from liberal or democratic.

It took 74 years —
and how many lives? — to begin to correct his
mistake.

Then came a “constitutional” revolution in March
(February in the old calendar) 1917. The Entente’s slogans
suddenly seemed true even in Russia.

However, the Provisional Government was weak and political
stability was beyond reach. Royalists, liberals, socialists, and
communists all struggled for power. Foreign Minister Pavel Milyukov
promised the allies that the government would continue the war and
uphold the original annexationist war aims, which inflamed popular
opposition.

For men in the ranks the conflict was a purposeless horror.
Soldiers’ committees formed, calling for “peace without
annexations or indemnities.” Urged on by former exile
Vladimir Ilych Lenin’s Bolsheviks, military personnel mixed
with civilians in calling for Milyukov’s resignation. In
early May Milyukov and Defense Minister Alexander Guchkov were
ousted. The latter was replaced by 36-year-old socialist Alexander
Kerensky, who embarked upon a speaking tour at the front,
supporting continuation of the war. “There is no Russian
front. There is only one united allied front,” he expounded.
And he plotted a new military offensive.

The latter was a disastrous decision. By June few Russians
outside of Petrograd (St. Petersburg was renamed in 1914 to sound
less German) backed participation in the conflict; the soldiers, in
particular, expected the new authorities to end the war. The impact
of his rhetorical efforts quickly faded; soldiers initially
captivated by his eloquence soon remembered the inanity of the
conflict. Lenin called …read more

Source: OP-EDS

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How Lithuania Destroyed the Soviet Union

June 7, 2019 in Economics

By Doug Bandow

Doug Bandow

Lithuanians like America. Their unofficial slogan might be
modeled after the famous Mexican lament: “So close to Russia,
so far from America.” Although Vilnius is a member of the
European Union and NATO, Lithuanians look to Washington as their
protector. Their desire to strengthen that relationship led the
Atlantic Council, a think tank founded in 1961, to organize a trip
for some Washington policy nerds to visit.

Lithuanian fears over Moscow’s possibly malign ambitions
are understandable, if probably overstated. Vladimir Putin is no
friend of liberty, but attacking any of the Baltic states would
result in far more costs and risks than benefits. A pragmatic
authoritarian, he is unlikely to start a conflict that would, in
the best of circumstances, dramatically intensify his
government’s diplomatic and economic isolation and, at worst,
lead to nuclear war, while yielding little in valuable booty.

Still, one can understand concern over Moscow’s behavior.
Lithuania spent much of its history as an involuntary part of the
Russian and Soviet empires, suffering especially badly under the
latter.

Decades of stubborn
resistance have resulted in today’s free and prosperous
state.

The first united Kingdom of Lithuania arose in 1253. For a time
it was paired with Poland. In the late 18th century Lithuania was
absorbed by the Russian Empire, a backward, ramshackle, and
authoritarian agglomeration of different peoples. Under pressure,
Russia began to liberalize. Then came the Great War, of which the
tsar may have been the single greatest casualty. After little more
than two years of carnage, the monarchy tottered and moderates
launched the first revolution.

However, they continued the purposeless and destructive war, an
act of political madness. The Bolsheviks, led by Vladimir Ilyich
Lenin, organized and agitated, while promising food, peace, and
bread; in November they staged a putsch against a provisional
government whose support had ebbed away. A bitter, brutal civil war
ensued, as the new authorities negotiated terms in Germany.

Lithuania declared independence, which was affirmed by the
Treaty of Brest-Litovsk between Berlin and Moscow. Germany expected
Vilnius to be a puppet state, but Berlin’s defeat in the west
ended the latter’s imperial aspirations. Lithuania then had
to successively fight Russia, with the Poles’ assistance, and
then Poland, to preserve its nationhood. A military coup soon
ousted the democratic government, though Lithuanians prospered
economically despite their lack of geopolitical security.

As World War II loomed, the country remained focused on Poland,
the Lithuanians told me. However, while plotting Poland’s
demise, Nazi Germany and the Soviet Union coldly bargained over the
Baltics, with Lithuania ending up in Moscow’s sphere of
interest. In October 1939, Moscow insisted on stationing troops in
Lithuania; the following year the USSR issued …read more

Source: OP-EDS

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The Latest Balkans Breakdown Is None of Washington’s Business

June 6, 2019 in Economics

By Doug Bandow

Doug Bandow

The Balkans has regained its reputation as a geopolitical black
hole. Kosovo recently deployed armored vehicles to arrest ethnic
Serbs in the north for alleged smuggling. Ethnic Albanian police,
meanwhile, have clashed with ethnic Serb civilians, which Serbian
government official Marko Djuric called a threat to stability and
peace. Belgrade has put army units on alert. Russia, Serbia’s
ally, has criticized Kosovo’s “provocation.”

Germany’s famed Otto von Bismarck once warned that war in
Europe would be triggered by “some damn foolish thing in the
Balkans.” He was proven right when three decades later, the
continent plunged into the abyss of World War I. Out of that
conflict emerged what the Germans called Saisonstaaten, or
“states for a season”: small, undemocratic, and mostly
ethnically based nations that proved vulnerable to rising
totalitarian powers. Most were in or near the Balkans.

The Cold War largely froze these national disputes. But once the
Soviet Union dissolved, multiethnic Yugoslavia joined it in
history’s trash can, and the Balkans again became a fount of
conflict.

Geopolitical meddling has
failed in that part of the world before. Why should we try
again?

However, the extended combat and outside intervention that
followed were not inevitable. In 1992, Bosnia and
Herzegovina’s Alija Izetbegovic accepted the Lisbon
Agreement, which would have granted Croats and Serbs the same right
of secession as his dominant Muslim community claimed from
Yugoslavia. Then at the urging of the U.S. ambassador to
Yugoslavia, Warren Zimmerman, Izetbegovic reversed himself and
decided on war. Three years of brutal conflict ensued, killing tens
of thousands. Ethnic Serbs committed noteworthy atrocities, but so
did Bosnian Muslims and Croats.

Washington took a reflexive anti-Serb position, supporting
anyone who sought to leave a Serb-dominated government while
denying ethnic Serbs the same right to secede from other regimes.
The Clinton administration would not even call the expulsion of
150,000 to 200,000 ethnic Serbs from their ancestral homes in
Croatia’s Krajina region ethnic cleansing. Moreover, the U.S.
counted as a great achievement bombing the Bosnian Serbs into the
1995 Dayton Peace Agreement, which preserved a multi-ethnic Bosnia
against the wishes of most Serbs and Croats.

What of Washington’s handiwork today? Bosniak journalist
Aleksandar Brezar complained that “this multicultural,
multi-ethnic project is under serious attack.” But why hold
it together with international baling wire and duct tape if so many
of its people reject it? (Ironically, Bosnia has not recognized
Kosovo, presumably fearful of encouraging secession by the
Serb-dominated Republika Srpska, which, along with the Muslim-Croat
Federation, makes up Bosnia.)

Bosnia is no model of nation-building. Freedom House rates it as
only “partly free,” and notes, “Politics are
characterized by severe partisan gridlock among nationalist leaders
from the country’s Boniak, …read more

Source: OP-EDS

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The Snowden Effect, Six Years On

June 6, 2019 in Economics

By Patrick G. Eddington

Patrick G. Eddington

Six years ago, the world was introduced to a previously unknown
government contractor who revealed the National Security Agency
(NSA) was conducting an unparalleled level of warrantless
electronic surveillance. Edward Snowden’s explosive
revelations about NSA’s telephone metadata collection program
triggered an uproar at home and abroad, culminating in the 2015
passage of the USA Freedom Act—legislation that supporters
claimed would “end” the kind of mass surveillance
Snowden had exposed to the world.

During the debate over Snowden’s revelations, federal
officials (including President Barack Obama) asserted the
surveillance program had saved lives—going so far as to claim,
without any evidence, that the program had
foiled dozens of terrorist plots against the United States. And
even after Obama’s own hand-picked review group found the telephone metadata
program not worth it (as did the Privacy and Civil Liberties
Oversight Board (PCLOB) in their report), Congress renewed the program in 2015
via the USA Freedom Act.

Supporters claimed the new legislation would effectively
end the NSA bulk telephone metadata program. Others, including
myself, felt the bill was somewhere between terrible and
disastrous
, because its reforms didn’t go far enough.
Last year, critics who predicted that USA Freedom Act would not end
NSA’s telephone bulk collection were, ironically, vindicated by the Office of the Director of
National Intelligence, which admitted that in fact three times
as much American telephone data was being collected than before the
law’s enactment
.

The USA Freedom Act
expiration deadline is an opportunity to holistically address the
wide range of these abuses, as well emerging technologies that
further threaten the constitutional rights and privacy of all of
us.

Amazingly, earlier this year NSA recommended to President Donald Trump that the
telephone metadata program be terminated, claiming the program was
too cumbersome to continue to execute and not worth the
effort—a tacit admission that critics were right all
along.

As it stands, the USA Freedom Act is set to expire on December
15 of this year. So, why not just let it die and move on? Because
even if the USA Freedom Act expires, other vast—and in my
view, unconstitutional—domestic surveillance powers and
technologies will remain untouched and, in at least one case,
completely unexamined publicly.

Executive Order 12333

Executive Order 12333, issued by President Ronald Reagan in 1981
and reissued by every administration since, is the governing
federal regulation for overseas intelligence collection for the NSA
and each of the other 16 agencies that comprise the U.S.
Intelligence Community (IC). Until the establishment of the PCLOB
in 2004, no element of the federal government …read more

Source: OP-EDS

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The SEC Can't Keep Kik-ing the Crypto Can Down the Road

June 5, 2019 in Economics

By Diego Zuluaga

Diego Zuluaga

The Securities and Exchange Commission, the most important
regulator for the largest capital market in the world, has been
grappling with the question of how to regulate cryptocurrencies for
more than two years. Yet as of mid-2019, more than 10 years since
the birth of bitcoin, it cannot claim to have made much
progress.

The latest example of the SEC’s ambiguous approach is the
launch of an enforcement action against Kik
Interactive, Inc. Kik is a social media platform that began issuing
its own cryptocurrency (Kin) in mid-2017.

Before the enforcement action, Kin’s market capitalization
was $40 million — tiny by comparison to the wider crypto
market ($245 billion), which is itself a tiny fraction of the $65
trillion market value of U.S.-listed stocks and bonds.

The SEC has a mandate to bring actions against individuals and
firms that issue securities without registering the offering or
adhering to an exemption. But the Commission has so far failed to
provide any reliable guidance as to which criteria it uses to
determine whether a token qualifies as a security.

The SEC has missed
several opportunities to give clear and consistent guidance about
the regulatory status of cryptocurrencies. This inaction has
needlessly prolonged uncertainty and instilled distrust and fear
among market participants.

Important spokespeople for the SEC, such as its Chairman Jay
Clayton and the Director of Corporation Finance Bill Hinman, have
made divergent statements. More generally, the SEC has repeatedly
stated that it will judge future cases by their individual
“facts and circumstances,” which has not helped market
participants understand its general approach.

What has been lacking is a clear statement of the circumstances
in which a token offering is not a securities offering. The SEC has
failed to provide an avenue for crypto issuers who — as
seems to be the case with
Kin’s promoters — do not wish to offer a security and
want to make that clear from the outset to prospective buyers.

Mixed signals

As recently as last year, Chairman Clayton claimed that
“all ICOs [initial coin offerings] [he’d] seen [were]
securities.” Yet, in the more than 12 months since, the SEC
has pursued three dozen enforcement actions against digital asset
issuers. That’s less than 10 percent of the 434 ICOs that the
SEC’s own complaint against Kin cites for 2017, using figures
from CoinDesk. What’s more, many of
those three dozen involve outright fraud, not just unregistered
securities offerings.

Clayton has not yet, to my knowledge, amended his previous
statement. Meanwhile, Hinman almost exactly a year ago said in a
<a target=_blank …read more

Source: OP-EDS

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Seventy Years Later, It’s Still '1984'

June 5, 2019 in Economics

By Matthew Feeney

Matthew Feeney

In October 1947, Eric Blair—known today by his pen name
George Orwell—wrote a letter to the co-owner of the Secker
& Warburg publishing house. In that letter, Orwell noted that
he was in the “last lap” of the rough draft of a novel,
describing it as “a most dreadful mess.”

Orwell had sequestered himself on the Scottish island of Jura in
order to finish the novel. He completed it the following year,
having transformed his “most dreadful mess” into
“1984,” one of the 20th century’s most important
novels.

Published in 1949, the novel turns 70 this year. The anniversary
provides an opportunity to reflect on its significance and its most
valuable, but sometimes overlooked, lesson.

The main lesson of “1984” is not “persistent
surveillance is bad,” or “authoritarian governments are
dangerous.” These are true statements, but not the most
important message.

“1984” is at its core a novel about language; how it
can be used by governments to subjugate and obfuscate, and by
citizens to resist oppression.

Orwell was a master of the English language and his legacy lives
on through some of the words he created. Even those who
haven’t read “1984” know some of its
“newspeak.”

“1984” provides English speakers with a vocabulary
to discuss surveillance, police states and authoritarianism, which
includes terms such as “Big Brother,” “thought
police,” “unperson” and
“doublethink,” to name a few.

The authoritarian government of Orwell’s Oceania
doesn’t merely punish dissent severely—it seeks to make
even thinking about dissent impossible.

When Inner Party member O’Brien tortures
“1984’s” protagonist, Winston Smith, he holds up
his hand with four fingers extended and asks Smith how many fingers
he sees. When Smith replies, “Four! Four! What else can I
say? Four!” O’Brien inflicts excruciating pain on
him.

After Smith finally claims to see five fingers, O’Brien
emphasizes that saying “five” is not enough.
“ No, Winston, that is no use. You are lying. You still think
there are four.”

Orwell’s own name inspired an adjective,
“Orwellian,” which is widely used in modern political
rhetoric, albeit often inappropriately. It’s usually our
enemies who are acting Orwellian, and it’s a testament to
Orwell’s talents that everyone seems to think
“1984” is about their political opponents.

The political left sees plenty of Orwellian tendencies in the
White House and the criminal justice system. The political right
bemoans “thought police” on college campuses and social
media companies turning users into “unpersons.”

But politicians can lie without being Orwellian, and a private
company closing a social media account is nothing like a state
murdering someone and eliminating them from history. Likewise,
perceived academic conformity might be potentially stifling, but
it’s hardly comparable to a conformity enforced by a police
state that eliminates entire words from society.

Yet when U.S. …read more

Source: OP-EDS

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The Poor Want More Opportunity, Not More Entitlement Spending

June 5, 2019 in Economics

By Michael D. Tanner

Michael D. Tanner

It probably won’t come as much of a surprise to learn that
most Americans regard the War on Poverty as a failure. According to
a new YouGov poll, conducted for the Cato Institute, 77 percent of
Americans call it “ineffective.” This includes 80
percent of Republicans and 72 percent of Democrats. In this age of
political polarization, that represents an extraordinary bipartisan
consensus. But what many might find to be even more extraordinary
is that the vast majority of poor Americans agree, too. Fully 63
percent of people receiving welfare today say that the War on
Poverty has not succeeded. Given the $26 trillion that the United
States has spent fighting poverty since Lyndon Johnson declared war
on it in 1965, that’s a scathing indictment.

Of course, the poor may think the War on Poverty failed because
$26 trillion wasn’t enough. Maybe they worry their benefits
are simply too low. That’s not the case. When asked whether
the government had the ability to end poverty even with unlimited
spending, 58 percent of welfare recipients said that it could
not.

A new poll shows that
even those whom the War on Poverty aims to help believe it has
failed. It’s long past time for a new agenda.

So what do the poor think the government should do to help them
escape poverty? An overwhelming 59 percent of welfare recipients
say that the government should focus on eliminating the underlying
causes of poverty, as opposed to “giving what money we have
to poor people to help them get on their feet.” Most
significantly, 76 percent of welfare recipients believe that
increased economic growth will do more to reduce poverty than would
increasing welfare spending. In fact, welfare recipients were more
likely to prefer economic growth than registered Democrats (67
percent).

In other words, those candidates who are calling for higher
taxes, increased business regulation, and more redistribution are
out of touch, not just with sound economic policy, but with the
wishes of those they are ostensibly trying to help.

Of course, this does not mean that the poor don’t see
barriers to their ability to become full participants in a growing
economy. But contrary to conventional wisdom, most of the problems
they identify are a result of failed big-government policies.

For instance, even if economic growth creates more jobs,
government policies may still make it hard for the poor to find
employment. To cite just one example, fully 45 percent of welfare
recipients and 46 percent of the unemployed said that the lack of
an occupational license or similar credentials prevented them or
someone they knew from getting a job.

The …read more

Source: OP-EDS

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Who's Afraid of Arabic Numerals?

June 4, 2019 in Economics

By Mustafa Akyol

Mustafa Akyol

Should Americans, as part of their school curriculum, learn
Arabic numerals?

CivicScience, a
Pittsburgh-based research firm, put that
question
to some 3,200 Americans recently in a poll seemingly
about mathematics, but the outcome was a measure of students’
attitudes toward the Arabworld. Some 56 percent of the respondents
said, “No.” Fifteen percent had no opinion.

Those results, which quickly inspired more than 24,000 tweets,
might have been sharply different had the pollsters explained what
“Arabic numerals” are.

There are 10 of them: 0, 1, 2, 3, 4, 5, 6, 7, 8 and 9.

Western conservatives
retreat to tribalism themselves when they deny the wisdom in, and
the contributions of, sources that are not
Judeo-Christian.

That fact prompted John Dick, the chief executive of the polling
company, to label the
finding “the saddest and funniest testament to American
bigotry we’ve ever seen in our data.”

Presumably, the Americans who opposed the teaching of Arabic
numerals (Republicans in greater proportion than Democrats) lacked
the basic knowledge of what they are and also had some aversion to
anything described as “Arabic.”

Which is indeed sad and funny — and also a reason to pause
and ask a simple question: Why is the world’s most efficient
numerical system, also standard in Western civilization, called
“Arabic numerals”?

The answer traces to seventh-century India, where the numerical
system, which included the revolutionary formulation of zero, was
developed. Some two centuries later, it moved to the Muslim world,
whose magnificent capital, Baghdad, was then the world’s best
city in which to pursue an intellectual career. There, a Persian
Muslim scholar named Muhammad ibn Musa al-Khwarizmi developed a
mathematical discipline called al-jabir, which literally means
“reunion of broken parts.”

In the early 13th century, an Italian mathematician named
Fibonacci, who studied calculation with an Arab master in Muslim
North Africa, found the numerals and their decimal system much more
practical than the Roman system, and soon popularized them in
Europe, where the figures became known as “Arabic
numerals.”

Meanwhile, the discipline of al-jabir became
“algebra,” and al-Khwarizmi’s name evolved into
“algorithm.”

Today, many words in English have Arabic roots; a short list
would include admiral, alchemy, alcove, alembic, alkali, almanac,
lute, mask, muslin, nadir, sugar, syrup, tariff and zenith. Some
scholars think that even the word “check,” which you
get from a bank, comes from the Arabic word sakk, which means
“written document.” (Its plural, sukuk, is still used
in Islamic banking to refer to bonds.)

There is a reason these Western terms have Arabic roots: Between
the eighth and 12th centuries, the Muslim world, whose lingua
franca was Arabic, was much …read more

Source: OP-EDS

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The Crusade for Trump's Tax Returns Turns Mccarthyist

June 4, 2019 in Economics

By Patrick G. Eddington

Patrick G. Eddington

House Democrats have pulled out every stop trying to get six
years’ worth of President Trump’s tax returns. Their efforts have
been relentless and should alarm every American who cares about the
security and privacy of their own tax documents and the personal
information they contain.

Let’s start with some facts. During the February 7, 2019
hearing that House Ways and Means Committee
Democrats held on Trump’s tax returns, the witness list contained
zero former IRS commissioners. That was the first indication that
Democrats were not interested in actually learning whether or not
the IRS had found any evidence of tax fraud by Trump, which might
have led to a criminal referral to the Justice Department. Indeed,
to date, no former IRS official with knowledge of Trump’s finances
has come forward to accuse the president of tax fraud or
evasion.

House Democrats’ efforts
are reminiscent of the HUAC witch hunts many years ago.

No experts from the privacy and civil liberties communities were
invited to the February 9 hearing either. That’s significant
because if anyone familiar with the Lois Lerner episode from Barack Obama’s
presidency had been in attendance, committee members would have
been reminded that IRS officials have on their own gone after
groups across the political spectrum for wholly inappropriate
reasons. And who says this congressional quest for individual tax
returns will stop at the presidential level?

Indeed, there is a well-documented history of congressional
committees using tax return data for political witch hunts.

On July 14, 1938, President Franklin Roosevelt signed Executive Order 7933-A, which gave the Dies
Committee—predecessor to the infamous House Un-American
Activities Committee (HUAC)—access to the tax returns of
individuals, groups, and businesses that the committee suspected of
having communist connections. The committee chairman, Democrat
Martin Dies of Texas, misused that authority to hound individuals
and groups that he alleged—never with credible documentary
evidence—to be in league with Soviet Russia. Dies went so far
in October 1939 to order his investigators to raid the offices of the League for Peace and
Democracy to seize not only tax information but membership and
contributor rolls. He later published the names of 600 federal
employees who were League members.

Between 1938 and 1975 (when it was finally abolished by
Congress), HUAC either attempted to obtain or actually utilized
sensitive personal information on American citizens to conduct
anti-communist persecutions that destroyed the professional and
personal lives of thousands of citizens. The irony is that the
current chairman of the Ways and Means Oversight subcommittee,
civil rights veteran Congressman John Lewis, was one of those
targeted for political repression by the …read more

Source: OP-EDS

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The Sanders-AOC Protection for Loan Sharks Act

June 2, 2019 in Economics

By Todd Zywicki

Todd Zywicki

Last month, Sen. Bernie Sanders and Rep. Alexandria
Ocasio-Cortez debuted the Loan Shark Prevention Act, whose chief
provision amounts to a national interest rate ceiling of 15%. In
a video accompanying the announcement, Sanders
invoked Hollywood’s version of loan sharks to illustrate his
point: “You’ve got all these guys in their three-piece
suits who are now the new loan shark hoodlums that we used to see
in the movies. You know, in the movies, they say, ‘I’ll
break your kneecaps if you don’t pay back.’ Well, I
don’t know that they break kneecaps …”

Sanders’s invocation of yesterday’s leg-breakers is
obviously intended to conjure the colorful figures of American
imagination, from Don Corleone to Tony Soprano. But the terror that
real loan sharks inflicted on immigrant and working-class families
is not merely the stuff of Hollywood; it was a brutal reality for
much of American history. And the ubiquity of loan sharks in
American history is directly attributable to forerunners of the
interest-rate ceilings proposed by Sanders and Ocasio-Cortez.

“Usury ceilings,” as interest-rate price controls
were traditionally labeled, began as a paternalistic effort to
protect low-income and supposedly vulnerable consumers from
exploitation by greedy bankers. Yet, as well-intentioned
regulations so often do, usury ceilings backfired spectacularly,
primarily harming those they were intended to help. And far from
shutting down loan sharks, history shows that usury ceilings have
been the primary catalyst for the loan sharks that have preyed on
low-income and vulnerable Americans throughout history.

Comparing today’s
financial markets to Hollywood villains diminishes the real terror
that loan sharks inflicted on generations of immigrant and
working-class families and ignores the pivotal role of usury
ceilings in creating the conditions for loan sharks to
operate.

The advent of industrialization saw thousands of prewar
immigrants and farmers flood into American cities in search of
work. The challenges of city living created unprecedented demand
for small-dollar, short-term loans. Yet making small loans to wage
earners was an expensive business. First, it was risky — the
same factors that necessitated borrowing in the first place (low
wages, periodic unemployment, and unexpected expenses such as
medical bills and home repairs) translated into high loss rates.
Second, the costs of small loans is high relative to the amount
borrowed -operating expenses such as rent, employee wages, and
utilities are very similar regardless of whether the customer
borrows $50, $500, or $5,000. In order to cover losses and those
operating expenses, therefore, the effective interest rate on a
small loan will have to be higher.

As a result, prohibitively low usury ceilings made it impossible
for working families to borrow the money they needed from
legitimate lenders. …read more

Source: OP-EDS