More lawsuits against presale buyers
From the Vancouver Sun: Developer sues buyers for backing out of presales agreements.
Another Metro Vancouver developer has launched a flurry of lawsuits against buyers attempting to walk away from pre-sale contracts in one of its developments.
In January, Amacon filed suit against seven buyers in its Morgan Heights project.
This time it is Onni, the developer that is also attempting to unload hundreds of unsold condominium units in developments around Metro Vancouver, that is suing 20 buyers in the Aria 2 building of its Suter Brook community in Port Moody.
The statements of claim, filed on Jan. 21, accuse the buyers of breaching their contracts for not closing on their specified purchase dates, and seek to claim the deposits buyers paid as well as additional potential damages.
In the claim, Onni said it “has suffered and will continue to suffer additional loss, damages and expense,” including reduced property value at resale, commissions to realtors, marketing costs and legal fees.
The trend that’s not everyone’s friend..
Hat-tip to bdk for the link.
February 10th, 2009 at 7:17 am
"How does the developer have a legal leg to stand on when he sells the neighbouring units for half the price?"
The contract says the price the buyer pays. It is irrelevant that the developer later enters into contracts to sell other condos at different prices. The court looks at the price in the contract to determine whether the buyer is in breach.
February 8th, 2009 at 11:03 pm
How does the developer have a legal leg to stand on when he sells the neighbouring units for half the price? Sounds like their legal remedy is fair market value-that may be one reason that Omni sale is "below market value".
February 8th, 2009 at 3:05 pm
Thanks for sharing your experience, escada.
Vancouver, in particular, has a notable seedy side when it comes to real estate, and many other things. Always be on your guard.
February 8th, 2009 at 12:47 pm
This was my first experience to buy in Canada and I didn't expect this from such a recognized developer. The price was set by the developer and their rep prepared the sale offer contract. I just signed it and they took a 5% deposit. After few days the developer returned the contract increasing the price and asked me to make a counter offer. I decided to take my deposit back rather than dealing with such a unethical company. Next time I will for sure use some professional. Thanks
February 8th, 2009 at 12:03 am
escada:
You need a lawyer, not an agent. You're about to spend hundreds of thousands of dollars on this deal; spend a few hundred bucks for a lawyer to check the paperwork.
Contracts are simple. You need an offer, an acceptance and consideration of some kind (e.g. your deposit should suffice). Once you have those three elements it's a done deal.
The developer cannot change the deal or change the price on you after you have a valid contract. Like I said, get yourself a lawyer. And going to an internet forum for legal advice does not count.
February 7th, 2009 at 11:40 pm
escada:
Regardless of the price, the question I have is "Did you walk out of the room with an accepted agreement? It sounds as if you were in the process of negotiating an offer and recieved a counter offer. You should'nt have had to attach a deposit cheque until you had an agreement which read 'deposit upon acceptance or within a specified timeframe'.
Sounds a bit wacky. Maybe you should take an experianced person into the negotiations with you. Perhaps go back in and make them a much lower offer and make sure that you include all the chattels. Don't hesitate to ask for additional things like built in vacs and alarm sys, a lot of people forget the small things in the rush.
An agent won't charge you for the service of negotiating a deal for the buy, the vendor pays out the commish not you. If you go in on your own take enough value in add ons to compensate for 1/2 the commish. If you sign a deal with thier sales rep they get 100% of the commish anyway. It's called double ending.
Markets going down by the day so compensate for additional price reductions.
February 7th, 2009 at 10:29 pm
I went to Onni’s surrey location, Escada to see if I could buy a condo. First few days they showed different condos saying all of them were 25% off. They quoted the price $289,900 less 25% for a condo I liked. When I went to sign the sale offer contract, they increased the price to 334,000 for the same condo. After a brief discussion they agreed to give me 35% off to bring the discounted price to what was quoted a day ago. The Onni sales rep prepared the sale contract and I signed it. After 2 days I was told the “vendor”, Onni has increased the price again. Now I was told to make a counter offer, $30,000 more than that was quoted, agreed and put on the original sale contract by their own rep. I pulled out of the sales offer and took my deposit cheque. I feel Onni /Mac whoever is running the show, is just to greedy and unethical. Why can't they be sued for changing prices after signing the contract?
February 6th, 2009 at 10:08 am
Re Renting and/or Buying
As the saying goes, even the blind squirrel will eventually find a nut.
Do you get the feeling that even "the dullest knives in the drawer" aka the least sophisticated parties are catching onto the worst kept secret that it is BOTH a Buyers and Renters market ?
Of course, what adds to that is a tanking economy and all the uncertainty that goes with it.
February 6th, 2009 at 9:59 am
Well…
See the Bowra group is still trying to flog H + H with ads in the paper
Also, MAC Marketing has got a full page ad at the back of the current Georgia Straight for 375 units of ONNI product….
QUOTE:
"Due to the overwhelming response we have commenced sales of the 375 properties. Sales are brisk and excellent opportunities are still available. Call immediately while
selection is best."
What is going on here?
I thought they sold out……what kind of BS is this?
The background colour of the ad is YELLOW, how appropriate !
February 6th, 2009 at 9:50 am
John:
As you know, many VCI posters hang onto your every word.
You provide the few bits of good news, albiet you have a God given gift to:
– find condo deals,
– sell any SUV you get your hands on,
– plus your portfolio of Future contracts in Pepperoni or is it Pepper-ONNI?
BTW: met with AVTAR BAINS…he would like some pepperoni..as long as YOU GIVE IT THE "JOHN" Guarantee .
February 6th, 2009 at 8:57 am
REAL VACANCY RATE = 34% ….93 out of 270 high end condos vacant available immediately! Add up the monthly rents they want…heh heh heh and that much money is now not available to Vancouver s' local economy every month. (so say $2000 X 93=$186,000 every month of lost cash flow from ONE rental agency) By the way $2000 is probably below average! I have noticed that in general as each one now RENTED expires, it is not rented again!
http://www.uniqueaccommodations.com/
Search downtown and do the math!
February 6th, 2009 at 8:31 am
There is nothing greater than the greed of a fool that already has too much.
Pleading poverty after signing a perfectly legal and binding agreement based 100% on pure speculative greed?
De Cotiss are pure dog vomit and should NOT be dealt with but a deal is a deal.
February 6th, 2009 at 8:16 am
I didn't post that comment about the counterclaim. Why would you need to sue the developer of a condo when they're the ones responsible for making you rich? I don't understand. Anyway good news on the peperoni front this morning. I met with a rich asian this morning from Shanghai and he's agreed to buy some peperoni and an SUV. He's already got a condo in Yaletown though so no condo sale. Still, it's good to be me.
February 6th, 2009 at 7:40 am
Unemployments rates, this month and last month in brackets
-British Columbia 6.2 (5.3)
-Abbotsford, B.C. 5.8 (5.5)
-Vancouver 5.1 (4.8)
-Victoria 4.0 (3.7)
From statcan:
"Employment in British Columbia fell in January by 35,000 … construction employment fell for the fourth consecutive month in January, bringing total losses in that industry to 32,000 since its peak in September 2008."
It's just the beginning for construction jobs.
February 6th, 2009 at 7:35 am
Steevee: I like how the pessimistic economist, Helmut Pastrick said BC would lose 40K in 2009, 35K already, once again showing these jokers are flying by the seat of their pants. Economists in present times are more of less useless.
February 6th, 2009 at 7:10 am
John – That was one of the stupidest things you've ever posted, and there have been plenty.
February 6th, 2009 at 6:38 am
Steevee: Someone needs to tell those newly unemployed that "it's different here in Canada, we've decoupled from the rest of the world, we have nothing to worry about".
Seriously though, those numbers are bad but not surprising.
Cue the spin doctors!
February 6th, 2009 at 5:44 am
130, 000 jobs lost in Canada last month, 35, 000 in BC. The vast majority of which are full-time. Really can't be good for future home sales.
To put it in perspective, those numbers are equal to the U.S. shedding 1.3 million occupations in one month (on a per capita basis, obviously.)
February 5th, 2009 at 11:55 pm
I suppose if I buy a computer at Future Shop they have a duty not to sell the same computer later for a lower price? Give me a break.
And the market price is determined by – surprise – the market, not the developer.
February 5th, 2009 at 11:33 pm
Maybe the condo purchaser's can make a counterclaim against the developer for devaluing their property with their auctioning off of their remaining stock at a discounted price. Breach of fiduciary duty to preserve the value of the assets contracted for.
February 5th, 2009 at 11:16 pm
I feel sorry for the old couple but at the same time they shouldn't have purchased a property considering their age and circumstances. 79, with a fixed income, is not the time to be buying a new place.
The housing fall might have been a surprise but any other number of things, like illness or the death of one of the partners, could have definitely happened just as easily leaving them incredibly vulnerable if they did not have the full economic support of their family.
I know people don't like to think about worst case scenarios but just hoping things will continue fine with no wrinkles in the future is not very smart.
February 5th, 2009 at 10:02 pm
Vulture says 50%by Spring:
$1550 to live in a 2 bed condo in……..Coquitlam. Ha ha ha Ha ha haHa ha ha Coquitlam…$1550…2…bed…box…Ha ha ha Ha ha ha Ha ha ha
February 5th, 2009 at 9:51 pm
NO -LYMPICS:
Question posed : In the bigger scheme of things,..who should suffer ….the Developers or the purchasers?
What leaves a cleaner slate so the rebuilding and healing can commence?
If they were ready to take their profits, then they should be ready to accept their losses.
It would be terrifying what would become of these people's egos if they don't take a stinging spanking for their endeavours. Until a few months ago they all thought they were financial geniuses.
February 5th, 2009 at 9:00 pm
Denialisrampant:
“So at that time, we expected we would be able to realize adequate funds from our current property.”
Right. From the moment they bought the pre-sale they became speculators because they had a long position in two properties at the same time. They were making a bet on the market price of their old property at the time of the closing date on the new property. Well they lost.
One more thing – why does a couple in their late 70's need to buy a new condo anyway?
February 5th, 2009 at 8:59 pm
I just bought a membership in that company that rhymes with inject buy. It's the best place to get stuff for my condos. I'm thinking I might rent a couple because the pepperoni business is down a little right now and I haven't sold an SUV in a couple of weeks.
February 5th, 2009 at 8:56 pm
kingroland:
Necessary for the lender to be made whole. I thought that was clear from my post. If I lend you X amount of gold, I only need X amount gold back to be made whole.
"Being made whole" means nothing to the market. When people sell something, they sell it for the highest price they can get, not the price that is required to break even. Similarly, when people lend money, they lend for the highest interest rate they can get. And the highest interest rate they can get is the highest interest rate a borrower is willing to pay.
Which is why when people used gold coins for money lenders charged interest – the borrowers were willing to pay interest. And that is the same reason why interest is charged to lend fiat money.
February 5th, 2009 at 8:37 pm
Do these developers know something we don't?
Build in THIS market?
Developers offer low-income tenants money to move out of affordable housing
http://thetyee.ca/Blogs/TheHook/Housing/2009/02/0…
QUOTE:
A developer’s cash offer to tenants facing eviction from two low-income East Vancouver apartment complexes has been met with anger and frustration by the tenants, who say they are losing some of the last affordable rental housing left in the city.
Last week, tenants from 4550 Fraser St. and 4545 Prince Albert St. received a letter from building owner Sergio Cocchia offering them $2,500 each, plus their damage deposit, if they agree to move out by March 31. The deal is contingent on all tenants signing by February 10.
With the help of Ledingham McAllister Developments, Cocchia has applied for permits with the city to demolish the 78-unit Fraser Villa and the 48-unit Prince Albert Plaza. If the permits are granted, the properties will be transferred to Ledingham McAllister, which will evict the tenants and build condominiums, townhouses and market rental units on the sites.
February 5th, 2009 at 8:33 pm
ONNI is doing what's best for them. They prepared for this, and they knew it could happen: That is why they included it in the contract. By selling low and suing the specuvestors they maximize profits. Win win: They get to sell the units for a low price, and make up the difference from the "victims". This also serves as a "threat" to all other contemplating walking away.
So we end up with the BOTTOM OF THE PYRAMID, aka THE GREATER FOOLS aka THOSE HOLDING THE BAG aka THE SHEEPLE aka THE UNEDUCATED MASSES waking up from the dream of riches into the reality of a NIGHTMARE where they actually have to pay 700,000 for a 1 bdr apartment. And who is gonna finance that?
There are many, many people in that situation. Can you imagine the cold sweat at nights?
By the way, I cannot really sympathize with Mr Skoda. Fixed income, buying presales? Don't tell me he wasn't speculating. Sorry Nolympics. He gambled and lost big time.
Regards,
arit
February 5th, 2009 at 8:29 pm
Anyone catch the Local News ?:
Accomodation rates for the Olympics.
Place in Richmond
Feb. 2009 Rooms for $70/nite
Feb. 2010 Same room = $ 465/nite
Vancouver Hotel:
Feb. 2009 Rooms for $ 1200/nite
Feb. 2010 same rooms for $ 4600/nite
I kid you not.
See ! The Olympics will save the BC economy..there is your proof…almost on par with the "AVTAR BAINS guarantee".
February 5th, 2009 at 8:23 pm
To all you absolutely merciless "the specuvestors had it coming" types.
Legally , perhaps
Pragmatically, what happens if we reach the same situation as the US, the inventory piles up almost exponentially as unemployment number rise . Buyers become few and far between. Apparently banks are letting people rent their foreclosed -on houses, that is currently the best pragmatic approach.
Do people seriously think there are parties out there ready to pounce on RE once a certain benchmark price is reached and grab every available piece ?
BC is primed for a mega RE collapse. Fundamentals will kick in. I think developers will be in for a HUGE surprise when they chase the market down seeking purchasers which I think will happen within 6 months. The floodgates will open American style .
Some of their "bailers" or "close -to – bailing" may be the developers best hope too, as Jimmy Pattison said their first loss(original assignee/purchaser) = their best loss(hope for any cost recovery) . Suing the assignee may kill the only "golden goose" out there in the foreseeable future.
Pragmatic trumps dogmatic in most cases.
February 5th, 2009 at 8:09 pm
One year ago.
It was up and more up and up and up again..
muse papers kept drumming..
realtors were bling bling..
specuvestors high..
never seen so many big shiny trucks or cars..
everybody smiling with their white chicklet teeth
rush, hurry, buy now, olympics, best place, tv blaring, get rich!
And now..?
February 5th, 2009 at 7:59 pm
Big time boom for everyone since stimulus nearly passing senate time. Everyone in Obama world getting money! Buy now before too late for you.
February 5th, 2009 at 7:57 pm
IMHO..the Skoda story is one that will be the type that turns people off ONNI.
I had noted earlier that in the PR wars…this is the last type of story ONNI and other developers want in the news, ie senior citizens dragged into court .
While ONNI may have had the right to sue them does not necessarily mean it was in their best interests to exercise that right.
As the story notes, they were not specuvesting, they were upgrading and hoping to sell the other unit they currently own . In addition, keep in mind they fit the profile I suggested earlier of parties with assets to go after(ie their current condo), which is probably why ONNI filed the lawsuit against them (as opposed to some 0/40 type with no real assets).
If this plays out….ONNI may win a judgement that forces Skoda to sell and/or relinquish the condo they currently have…and they could end up homeless.
Legal or not, ONNI will look like a bag of shite.
February 5th, 2009 at 7:45 pm
Huh?:
Stories from the NEW Depression, reality sets in.
Every business day brings announcements of new layoffs at the big corporations. Layoffs in the small businesses, which comprise hundreds of thousands of jobs, do not get the publicity, but the consequences are the same–panic, worry, want and family disintegration. Animal shelters report that jobless people are bringing in the pets they no longer can afford to keep.
At the current accelerating rate of layoffs, we will be called on to deal with a catastrophe by the end of June. And at this time next year, the nation could be suffering 6, 7, even 8 million more Americans without jobs in a society singularly ill equipped to take on a disaster that many of the people in power thought could never happen.
Past recessions hit blue-collar workers and farmers the hardest and schooled them psychologically, if not financially, in alternating good times and bad. The white-collar wipeout is something new. We have no experience in handling the huge numbers of college-educated, technically trained unemployed
http://www.thenation.com/doc/20090223/von_hoffman…
February 5th, 2009 at 7:42 pm
The developers have every right to go after pre-sale buyers for the full purchase price, and deserve every penny plus interest regardless of the current market price. Developers don't rescind the contracts if the market value goes up before completion, so why should they let buyers get off so easily? For years pre-sale buyers have using condo pre-sales like call options, and with no intention of living in the unit, or even taking delivery of the unit. And for years, frenzied buyers including many of my friends have been saying that it doesn't matter what they pay because they're planning to live in it anyways and they didn't want to "throw away money" on rent. So there's no need to feel sorry for any buyers who have already lost all their equity and maybe owe even more on their mortgages than what the underlying property is worth. Bring them a bottle of champagne and congratulate them on no longer having to pay rent.
February 5th, 2009 at 7:40 pm
Post # 37: Vansanity
Sounds like they are setting up for a looooong stretch of having an empty hole on the Ritz-Carlton site.
February 5th, 2009 at 7:10 pm
I'm reminded of the story last year or the year before of a coquitlam housing development that ran out of money building the units and demanded that the buyers fork out more money to finish the development based on the fact that the units were worth more now than when they first put down a deposit.
Eventually the buyers were given the choice to walk away from their purchase and be refunded their deposits inspite of the increase in value, or fork out more money. This contingency was probably already written into the contract although people failed to read the fine print.
I wonder how that scenario compares to this situation, however, if it was written in the contract that ONNI could and would sue your asses if you walked away and the value dropped, then SO BE IT.
I can't hate people that took the risk to buy on margin in an overbought market. Congrats to them for cashing out on the top and making some dough.
If they got caught with their hands in their pants as the market crashed, or suckers that bought within the last 3 years. Oh well, the bank says you could afford it. Just pray that you don't lose your job because all you can afford is your mortgage payment (barely), so if you lose that job, you lose that house because you can't rent your place for the price of the mortgage!
Real Estate was an investment up to 2008. Now it will revert to be just a place that you live in.
Let the chips fall where they may!
February 5th, 2009 at 6:19 pm
patriotz:
"What do you mean “necessary”? Necessary for whom? Of course nothing ever stopped people from loaning out their money at zero interest."
Necessary for the lender to be made whole. I thought that was clear from my post. If I lend you X amount of gold, I only need X amount gold back to be made whole. If I lend you X amount of cash, I need X+Y worth of cash back just to be made whole, where Y is equal to the gross up needed to compensate for the erosion of my principal due to inflation.
"The reason lenders have always charged interest is that borrowers are willing to pay interest. Isn’t that self-evident?"
Borrowers are NOT always willing to pay interest. Isn't THAT self-evident? The current environment is a perfect example of what happens to interest rates when inflation goes to zero. In a zero inflation environment, the market interest rate for cash converges with the market interest rate for gold, i.e. zero. Borrowers with no credit risk (i.e. the federal government) do not need to pay lenders any interest whatsoever to attract deposits. In fact, interest yields were NEGATIVE on U.S. 30 day T-bills in December, meaning people were paying the government to take their money.
In a deflationary environment, banks do not need to pay interest on balances to compensate for inflation, and banks do not need to pay interest in order to entice lenders (i.e. depositors) to loan their funds to them.
If your U.S. or Japanese bank is paying you more than a diminimus amount of interest on your deposits, then it is either because (i) it is a time deposit like a CD or GIC whereby you money is locked in for a period of time, or (ii) there is some amount of credit risk associated with the bank for which the depositor/lender must be compensated.
February 5th, 2009 at 6:03 pm
patriotz:
It seems that it was , by his own admission , not the price of the condo that killed the deal for him , but the bad decision he ( Skoda) made on his own ( perhaps with bad advice or just stupidity) to buy a second condo before selling his own. At this point his options are limited.
Quote
"So at that time, we expected we would be able to realize adequate funds from our current property."
But the real estate market turned down and Skoda received no offers on his older condo.
So in September, he contacted Onni to find out if the $456,000 deal could be renegotiated and was told no.
Unable to sell his old condo and complete the deal on the new one, he was forced to walk away from the deal."
I think this is a common complaint amongst condo buyers of late . They now know they should not have done what they did and would like a 'do-over'. The age of the players is irrelevant. My Grandfather immigrated from Sweden in the late 1800's and lived in a hole in the praire ground and never asked nor recieved a dime from the government. I for one am really tired of hearing people whine about getting let off from thier responsibilities.
Maybe we'll hear of a government bailout initiative for failed greedsters soon, you think?
February 5th, 2009 at 5:56 pm
"Is there any better illustration of the depths to which this city has sunk? This couple obviously lacked the means to finance the purchase. They clearly been planning to flip the assignment. They’ve blown 68K on a failed bet and are liable to lose all their other unprotected assets."
These people voluntarily entered into the contract and are entitled to the rewards and exposed to the risks. Although it is a shame, this has nothing to do with the city.
February 5th, 2009 at 5:25 pm
RJB:
“I’m 79; my wife is 75. We have a very limited fixed income — the bare minimum,” said Skoda.”
So, he is 79 and on fixed income but he had $68,000 for a deposit on a $456,000 condo.
Is there any better illustration of the depths to which this city has sunk? This couple obviously lacked the means to finance the purchase. They clearly been planning to flip the assignment. They've blown 68K on a failed bet and are liable to lose all their other unprotected assets.
Like Deep Purple said, someone should burn this casino to the ground.
February 5th, 2009 at 5:24 pm
2012 London Olympics
Hmm..
Is the scam as follows? :
Step #1:
Create a building boom via demand for condos and other Real Estate with the mantra " Hey we won the Olympics !!! everyone will want to buy OR flip condos OR be mortgaged to the hilt for life based on the aura of a 2 week party "……makes perfect sense right?
Step # 2
…..THEN we Contractors bid on Olympic venues as labour and material cost rise…have the Gov'ts shite bricks (re: lose face)they won't be able to build the Olympic venues …, and then we allay their typical Politicians "ego-driven fears " that we Contractors can help Gov't with all sorts of cost- plus and shotgun etc.clauses that are assured to increase the final cost and our ultimate profit even when the economy tanks.
Talk about having your cake and eating it too.
Such a deal and a public service to boot !
February 5th, 2009 at 5:18 pm
kingroland:
The point is not whether charging interest is a new phenomenon. Nobody is claiming that. The question is whether charging interest has always been necessary.
What do you mean "necessary"? Necessary for whom? Of course nothing ever stopped people from loaning out their money at zero interest. The reason lenders have always charged interest is that borrowers are willing to pay interest. Isn't that self-evident?
The market interest rate is the cost of borrowing money and is the point where supply of money to lend equals demand to borrow. That's true no matter what kind of money you use, including gold coins.
February 5th, 2009 at 4:58 pm
Post # 51 realpaul:
Answer?
Assume the worst.
The Manure spreader is past the warranty stage.
As I said many times, not a fan of the NDP.
However, Campbell has shown himself to use every accounting trick under the book. He continually pulls projects and subsequent funding out of his ass often with Kevin Falcon as his "Robin" sidekick.
BC Gov't "Olympic" accounting has already had a template of deceit, stating its $ 600-800 Million…and ALL OTHER projects are separate (Non Olympic)line items, even though many are crucial as venues to hosting(ie Vancouver Trade and Exhibition ) and facilitating(Sea to Sky Highway) the Olympics.
In fact, I heard on the News that the RCMP knew that the Olympic security cost would be more than $1 Billion, but were told to STFU
Campbell had the sheer gall to question the a-political Auditor General's conclusions as to what should be deemed an Olympic Cost, did he not?
Unless some party spends the time money and effort to insist on a proper auditing , and not be obstructed by FREEDOM OF INFORMATION disclosure Exemptions…assume its $ BILLIONS .
The Olympic venues were built at a time of peak demand which created a premium for both labour and material prices…which symbiotically drove up the cost of ones "now depreciated condo" in a glutted condo market.
The only silver lining is the 2010 Olympics will be gone in just over a year. I and many others cringe every time we hear it.
February 5th, 2009 at 4:45 pm
Not sure if this has been posted here before, but the The Vanier Institute's "Current State of Canadian Family Finances 2008 Report" makes for some scary reading. I'm sure bitter about being a renter and having no debt and lots of cash in my household!
http://www.vifamily.ca/library/cft/famfin08.pdf
February 5th, 2009 at 4:38 pm
Finally, some really good news of happiness and joy. Hooray.
http://www.kcna.co.jp/index-e.htm
February 5th, 2009 at 4:35 pm
Drachen:
That cartoon IS a classic, concise and bang on !
February 5th, 2009 at 4:31 pm
Bill Gates says " we're in for a rough 3,4,5 years".
Geez Bill make up your mind. Those condos will be burned out crack dens in 5 years.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/…
February 5th, 2009 at 4:23 pm
patriotz:
[From the previous thread]:
“Do I have to say it again? Back when people used actual gold coins for money, lenders charged interest. Got that?”
Apparently my earlier post was over your head. Let me try again using grade school language.
The point is not whether charging interest is a new phenomenon. Nobody is claiming that. The question is whether charging interest has always been necessary.
Lenders charge interest for a variety of reasons. To guard against credit risk is one. To make a profit, if the lender engages in lending as a business venture, is another. And to protect his principal against inflation is yet another.
The risk of inflation eroding your principal is a modern day phenomenon after the advent of fiat paper money. However, the desire to make money, and the risk that the schmuck who borrowed your money may not pay you back, has been around since the beginning of time.
You conflate all these types of risk when you summarily conclude that “people have always charged interest, even when gold coins were used for money”. If you are not concerned about credit risk or making a profit, you do NOT need to charge interest when lending someone your gold. On the hand, even if you are not concerned about credit risk or making a profit, you STILL need to charge interest if you are lending someone your cash. This is because cash is vulnerable to depreciation over time due to inflation, and you will be essentially giving money away if you do not charge interest on your cash.
In Greek and Roman times, people either stored their gold/silver in their homes or sometimes in a vault at the temple. People felt the temple was a good place to park some of their wealth because it was solidly built, public, and associated with a deity. When they parked their gold at the temple, the temple did NOT pay you interest on your deposit. Why should they? The temple was not a lending business, and if anything, they were offering depositors a service by holding their gold.
On the other hand, money changers and loan sharks DID offer loans, on which they charged interest. Oftentimes a lot of interest. But this was to earn a profit and to compensate them for the risk of default.
So once again, absent a profit motive or credit risk, gold does not NEED to pay interest. On the other hand, even absent a profit motive or credit risk, cash generally MUST pay interest, because cash is vulnerable to inflation.
I should note that the reaction I get when I talk about gold and the monetary system today is much like the response I got when I told people 3 years ago that the real estate and financial markets were going to crash. Nobody wanted to hear it, just like nobody today wants to believe that our currency system is unstable. It was Shopenhaur who said that all truths pass through three stages. First it is ridiculed. Second it is violently opposed. Third it is accepted as self-evident.
February 5th, 2009 at 4:19 pm
NO -LYMPICS:
2012 costs go through the roof in London but at least the numbers are public information and not hidden behind thick walls of BS as they are here. If the costs in London are what they are and given that we have comparable cost structures then what is the true cost of the 2010 Olympics going to be or are we ever going to find out. Will it take a freedom of information lawsuit to get to the bottom of it?
http://www.thisislondon.co.uk/standard/article-23…