Monday, 6 February 2006

Revolution 9

Last week I noticed that Fintrack's offices on South Road were closed, and that the sign on the window said "For Lease".
Fintrack is one of those finance companies that doesn't really do any financing but just acts as a middleman. Say, you want to buy a house and you need a loan (which pretty much applies to everyone I know), you go to one of the Fintrack like places and there they're supposed to find the "loan that's most suitable to you" out of all the different banks and financial institutions they're in touch with, thus saving you the trouble of having to drag your feet to several places and also allowing you to choose from more products than you'd ever go to if you were just hunting on your own.
While there are many such companies that I tend to regard with more than a bit of contempt as some type of a leech, I knew Fintrack in particular because a while ago I spent a couple of days there through work (they were a prospect). It was just at the time when Jo & I bought the house we're living in now, so they actually gave me some general advice although we ended up taking a home loan directly with our bank (which, in retrospect, their senior consultant said was the best thing to do).
As the years passed by (we're only talking two years here), Australia's housing market has cooled down by more than a bit. With their closed down offices I was therefore suspecting that with all the competition and the banks trying to get their clients directly as opposed to using the services of such agents, Fintrack could have stumbled on some hard times and went belly up.
So I checked their website, wondering if it's still there, and lo and behold: Not only are they alive and kicking, but they also moved from their humble Moorabbin residence to a shiny address in Brighton (translation to non Melbournians: Brighton = rich), opened up a new branch in Sydney, and to top it up opened up a new branch in Brisbane. Things are going well in the loan sharking business.

So far for the story and now for the analysis.
Fintrack is a company that makes all of its revenues through the commission it gets from the true lender of the money (e.g., a bank) for bringing forward a client that chose to borrow money from that particular financial institution.
For them to be so successful, they have to be getting lots of commission, especially at a time in which the market is stumbling a bit.
For the banks to give them so much money, they have to be making bucket loads through all the people like you and me that borrow money from them. No one can ever suspect for acting out of any mysterious philanthropic motives.
And the question that I'm asking is: Where do all the huge profits that the banks make go? Who is getting that money?
The answer is a bit complicated and I won't go there. What I will do is make a bit of an assumption with which I'm sure most people will agree: Those profits end up being distributed inside a very thin slice of society. The upper echelons. Not where people like you, who read this blog to pass some time at the office, belong.
And what is the result of this trend, where mere mortals such as you and I work our guts off to be able to pay our mortgages, while this very thin upper echelon gets all of our money for not doing much other than having lots of money to begin with? Simple: The rich will get richer, the poor will get poorer.
This trend seems to happen everywhere I go. Everyone knows that this is the way things are in the USA; yearly reports in Israel keep on saying that the gaps between the rich and the poor keep on widening with more and more people belonging to the poor side; and now, in Australia, the gap is also widening, aided by a government that represents the rich to begin with.
Call me one of the Marx brothers, but I do not think this trend is a healthy one. I do not think that society as we know it will be able to live with such a trend over too long a period of time, too. It's just that in my view, uncontrolled capitalism is not the way to go: It has environmental effects which we will need to face, sooner or later, and it has the social effect I was just blubbering on.
Do I have an answer for all of the world's problems? No, but my impression is that the Scandinavian model, involving much higher taxes and many more social benefits, is the best way to run things - at least as far as I am aware of. True, it lacks the motivating effect on people to go out and do more, as the margins are going to be taxed like hell, but let's face it: They truly seem to be successful and they do seem to be producing the best education.
Or if we look at it using examples, as lacking as they might be: We've all heard of Nokia and Ericsson; can anyone come up with a matching innovative product from Australia? Nope, here we're just busy building houses and getting the right home loans.

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