There has been a rash of revelations of late involving banks not having adequate paperwork to foreclose on people’s homes. Naturally, this is a serious matter, since the taking of an individual’s property is something that requires valid cause. And if a bank can’t show any validity in the foreclosure proceedings, then they are essentially committing grand theft if they successfully foreclose on someone.
But the problem has been getting larger, since banks are now foreclosing on homes they zero documentation on and the courts are allowing them to get away with it. So what is an individual, the smallest minority as Ayn Rand put it, to do in this situation.
The solution to the problem is actually quite simple and, at the same time, will deliver a huge blow to the banks and to the government as a whole. To discuss the solution, however, one needs to know that the problem is not that the banks specifically, but the very nature of their business. A bank makes profits off of the interest it receives on the money it has loaned. In essence, the banks are making money off of debt.
So the real problem here is not so much the banks, but the banking system itself and the nature of the way they do business. Debt, in America anyway, is nothing more than a product. Next to cars, it is probably one of the most aggressively marketed products in the United States. There are tons of commercials out there that advertise debt, usually showing the benefits of going into debt.
My solution, as an individual, is to never go into debt again. No mortgages, no car loans, no credit cards, or anything else debt-related. I am currently renting, so that means that I may not get to home ownership for another decade or so, but I would rather own a home free and clear than be in debt. This is a hard road, to be sure, but it also means that my long term outlook is much better than many other people.
Think of the impact this line of thinking would have on society as a whole. Inflation would, by and large, be reduced drastically. If you believe in Austrian economics, this is because the currency is only inflated once more money is lent out to individuals and businesses. If you believe in any other theory, this is because the demand for goods and services will drop off a bit because people who can’t afford something will simply not buy it, instead of going into debt to satisfy the whims of their momentary desires.
On the other side of this, if you refuse to do business with the banks in this manner, then they won’t have much ability to claim that you owe them money. Naturally, some of the more greedy and unethical individuals will still try and seize your property, but by and large if you are debt-free, you are off the radar of most banks. When all you have on your credit bureau report is your name and an outdated address, you are in good shape. I yearn for that day myself.
The bottom line here is that this whole mess could have been avoided had people avoided debt. I’m not against big homes, nice cars, or other luxury items being available for everyone. But if you can’t afford it, you shouldn’t be strengthening the banks in order to get your own material whims. Otherwise you end up with situations like these where the banks are misbehaving (to put it politely) and the courts are ignoring the injustices being thrust upon the little man.