How to determine the price you are sold for in the slave market
September 26, 2016 § 28 Comments
Your personal price as a chattel slave, in dollar terms, is reflected in your credit rating. In this post I will outline a proposed methodology for calculating the price that you are currently selling for in the chattel slave market. I haven’t worked out the details: this post is really just a starting point.
Like many modern terms, ‘loan’ is used equivocally.
Suppose that you are a borrower of money. We can calculate your value as a chattel slave by looking at the differences between the non-recourse (and therefore non-usurious) loans you can acquire and the personally guaranteed (usurious) loans you can acquire.
Scenario 1: non-usurious borrowing
In one sort of loan — a non-usurious loan — you sell your lender a stake in some property that you are purchasing or that you already own. You retain the use of the property, so you pay rent to your ownership partner (lender). This rent is often called ‘interest’. You may also buy back your partner’s share over time. This is often called ‘principal’.
If your partner doesn’t know you very well, he is going to want to get some idea how well you will take care of the property that he owns in partnership with you. This kind of knowledge is provided institutionally by the modern process of establishing credit ratings. Based on your trustworthiness – whether established by credit rating or some other means – your lending partner may require a larger down payment (thus lower loan-to-value ratio) and / or may charge a higher rent (because he is taking a greater risk).
If you stop making payments for any reason, he can recover what he is owed by repossessing the property. Financially and morally this is the same scenario as a landlord evicting a tenant who stops paying the rent. Depending on circumstances, this may or may not affect your credit rating specifically or your reputation generally. But your partner’s financial claims are limited to the property that you own in partnership.
In this non-usurious scenario, your trustworthiness as a partner with custody and use of the lender’s share of the property is reflected in the interest rate and in the loan to value ratio (and thus the size of the required down payment). These in turn are generally determined by your credit rating.
Scenario 2: usurious borrowing
In a usurious loan, the lender’s claim is not against property or only property: it is against your personal guarantee that you will repay the loan. The thing you are selling to the lender in this case is not an ownership stake in property: it is a contractually binding ownership stake in you, yourself. This will generally be reflected in a larger required down payment and a higher interest rate.
Calculating your price:
Your current market price as a chattel slave is related to the similarities and differences between these two kinds of scenarios. Specifically it is related to the premium you have to pay in terms of larger down payment and higher interest rate for the unsecured personal loan. I’ll propose the following calculation for the sake of discussion:
Take the largest personal unsecured loan you could get approved by a reputable lender with your current credit rating. Then determine what size non recourse loan you could get approved – say to purchase some real estate – with the same down payment and interest rate.
Your current price as a chattel slave – the price for which your owners are currently buying and selling you in the marketplace – is the same as the price of the property that you could purchase with the non recourse loan.