Notes from underground

يارب يسوع المسيح ابن اللّه الحيّ إرحمني أنا الخاطئ

Archive for the tag “mutual money”

How you too can participate in the financial crisis

About 15 (or was it 25?) years ago many building societies conned their members into agreeing to them turning themselves into banks. Was this the law of unintended consequences in action? Oh the joys of capitalism!

Bishop Alan’s Blog: HBOS: Personalised Credit Crunch:

Welcome to the share offer that enables you to have your very own credit crunch at home this Christmas. As a student I earned some holiday money and put it in the building society. Then the building society became a bank and my shares were converted into, er, more shares… Imagine my joy, then to be sent an “important document” this morning that “required my immediate attention.” It’s my opportunity to bail the bank out by taking them up on a very special offer — They are willing to flog me 261 shares, as a special favour, at only 113.6 pence a share. Here comes fate, tapping me on the shoulder, offering me a career as a major capitalist, and all for only £296-49! Deep Joy!

650,000 Americans Joined Credit Unions Last Month — More Than In All Of 2010 Combined | ThinkProgress

650,000 Americans Joined Credit Unions Last Month — More Than In All Of 2010 Combined | ThinkProgress: “One of the tactics the 99 Percenters are using to take back the country from the 1 percent is to move their money from big banks to credit unions, community banks, and other smaller financial unions that aren’t gambling with our nation’s future.

Now, the Credit Union National Association (CUNA) reports that a whopping 650,000 Americans have joined credit unions since Sept. 29 — the date that Bank of America announced it would start charging a $5 monthly debit fee, a move it backed down on this week.”

Now there’s an interesting thought.

The South African equivalent of a credit union was a building society, but the building societies all went commercial, turning themselves into banks in about 1987.

Building societies specialised in one thing — lending money for building and buying houses; in other words, mortgages. It was something they were actually quite good at, and something commercial banks are very bad at — much of the economic crisis of the last four years or so was caused by American banks playing fast and loose with mortgage finance.

So the news that Americans are moving their money to credit unions might herald the beginning of a return to sanity.

As I understand it, a credit union is like a general putpose building society, lending money not only for building and buying houses, but for other things as well. I believe that, like the building societies, they are cooperative rather than commercial.

Can South Africans do the same thing?

Are there any building societies left? Perhaps this is their opportunity to make a come-back. If anyone reading this knows of any South African bulding societies, please post a link in a comment. And revived building societies could even help to solve the housing shortage.

There are, of course, stokvels, but they usually have to keep their money in commercial banks, with the ever-increasing bank charges. I saw that my bank now charges R25.00 for a cash withdrawal.

That’s a good and sufficient reason to move my money to a building society… if there was one.

Personal Banking – simpler, better faster?

The Standard Bank of South Africa used to have an advertising slogan “simpler, better, faster”, until they were inspired and motivated to make banking more involved.

Now along comes Capitec bank, which, if their blurb is to be believed, is out to really make banking simpler, better, faster.

If their publicity documents are to be believed, this will provide the first opportunity for ordinary people to save money since the demise of the building societies in 1987.

Personal Banking | Global One Facility | Capitec Bank:

We believe that simplicity is the ultimate sophistication. That’s why we offer the Global One facility – a single solution to daily money management that lets you transact at the lowest fees, earn highly competitive interest on your savings, and get the easiest access to the best-priced credit through a Daily Savings Account.

The way building societies worked was simple. Lots and lots of ordinary people would put their spare cash in a savings account, which paid fairly low interest. And they would lend this money to people at a somewhat higher rate of interest, so they could build houses.

Then the building societies converted into commercial banks, and imposed fees on savings accounts. Thus any money you tried to save would disappear, as the banks would take it in fees.

Now Capitec Bank does not work quite like a building society. It still charges fees, but if the fees are R4.50 a month, and they give you 6% interest on your savings, then if you have R100 in your account, your savings will still grow by 1,5% a month.

Perhaps if more “fincancial services providers” had thought like this, there wouldn’t have been the sub-prime lending crisis that led to the current recession.

One thing I have against Capitec Bank, though. Like other financial services providers, it likes to think of itself as a financial products provider, and likes to call its services “products”. I’m not sure what it produces, but such evidence of woolly thinking makes me uneasy. The question of which word to use might not be the only thing they are confused about.

I’m not yet a customer of Capitec Bank, but I’m thinking about it.

The importance of co-operatives

One of the factoids one often encounters is the idea that “socialism” invariably means state ownership, and that that is the only alternative to profit-driven capitalism. There are, in fact, various kinds of free-enterprise socialism as well.

The importance of co-operatives | Peter Lazenby:

The announcement that Labour will pump resources into the development of the co-operative movement if it is returned to power in the general election is to be welcomed. If the pledge is honoured the potential is enormous.

To appreciate the significance, we can learn from the history of co-ops in Britain over the last 170 years. It reveals not only the emergence of an unprecedented force for social change through worker ownership and control, but also the extent to which capitalist society in Britain felt challenged by such a movement.

Hat-tip to Nouslife: The importance of co-operatives.

More information is available on a blog devoted to Mutual Money.

In South Africa most of the building societies, and certainly all of the big ones, went commercial more than 20 years ago. They would have made good partners for the ANC’s hastily-abandoned Reconstruction and Development Programme (RDP), the only remnant of which is the pejorative “RDP houses” for a sub-standard jerry-built dwelling, built by commercial builders who have cut corners in construction to increase their profits.

Mutual life insurance cooperatives followed the building societies in demutualising a few years later, one of the worst being the “Old Mutual” — a deliberately deceptive name, since there is no longer anything mutual about it, and it should surely be called the “New Commercial”.

SA savings rate dips below zero

The savings rate has slipped below zero? Why are they surprised?

One thing is certain: a penny saved is a penny lost. If you try to save money, it will dwindle away to nothing.

The Times – SA savings rate dips below zero:

South Africa’s saving rate has dropped from 2.7% in 2001 to a negative rating of -0.5% in the second quarter of this year, the SA Saving Institute said today.

If the SA Savings Institute wan South Africans to save, they must work for the bringing back of the building societies.

Before the building societies went commercial a little over twenty years ago, anybody, but anybody, could open a savings account at a building society with R1.00, and earn interest on it. With R10.00 they could buy indefinite period or fixed period paid up shares, and have the dividends from these paid into their savings account, and accumulate savings, no matter how poor they were. A R1.00 a month subscription share could accumulate over 3 years, and so people could save for a fixed term objective, a holiday, for example, and, of course, in the case of building societies, a home.

But now, since the building societies all turned into commercial banks, anything you put away for a rainy day will be swallowed up in bank charges, and eventually the bank will send you a letter to say that you owe them money.

And it’s interesting to see that a lot of the present financial crisis began with mortgages, and that some of the institutions in most trouble in places like Britain have been building societies that became commercial banks.

The present situation favours only the rich, those who can afford to put away enough money so that the dividends or interest received outwighs the bank charges. But for the poor saving makes no sense — far better to spend it as soon as you get it.

The SA Savings Institute is not just barking up the wrong tree, it’s barking in the wrong forest.

Post Navigation