Monday, April 27, 2015

Marie Villard's House and People of Positive Net Worth

Marie Villard was a free woman of color who owned property in New Orleans during and after the War of 1812. At one point, she sold her house to help Pierre and Jean Laffite finance their new venture in Galveston. Once the privateering operation was on solid financial ground, Jean and Pierre bought her house anew and presumably also something more to repay her for the money they borrowed from her.
At a time when a common laborer earned a dollar a day, Marie Villard owned a house worth nine thousand dollars. And what's more, she was not paying on a thirty year mortgage. The house was bought in four equal installments and owned outright in short order. Yes, some interest may have been paid to the seller for deferring the entire sum upon purchase, but Marie did not spend her entire life in debt, paying on a government financed loan,  just to eventually own a house outright in the distant future. She was not rich, but it probably would not be amiss to say that she was middle class, compared to other people in the society in which she lived. Some people had a great deal more. Some people had a great deal less. Marie Villard was somewhere in the middle.

Today, we hear quite a lot about the importance of the middle class, and every politician pretends that whatever measures he is sponsoring will favor the middle class over and above other classes, as if this were the only class that mattered. But a healthy society can't consist of just people in the middle class. In order to have a middle class, there also has to be a lower class and an upper class, because the term is relative. Without other classes in society, talking about the middle class would be meaningless.

It does not make sense to care only about the middle class. For a politician to campaign in favor of some people and against others means that he is not planning to represent everyone. Like a healthy ecological system, a healthy economy requires all levels of the pyramid in order to function. All levels save one: those who do not keep their promises and end up insolvent.

"People with a Positive Net Worth Unite!" Yesterday I made a T-shirt with the slogan represented above, except that I did not think to use the word "insolvent" at first, when describing the underground portion of the pyramid. I wrote "those in debt", which someone pointed out to me did not actually imply a negative net worth. So I rephrased.

There is nothing wrong with being in debt, if you are paying on that debt according to the agreement with the lender and do eventually pay it off. There is nothing wrong with borrowing money. There is nothing wrong with lending money. All that is also part of a healthy society and a healthy economy. Sometimes you don't have the full purchase price for an item you want, and someone else does, and will gladly lend it to you for a fee. The fee is called interest, and, no, I don't oppose "usury" -- the interest should be whatever the parties agree on of their own free will.

But in our current society, there are people who borrow more than they can possibly ever repay. Then they vote for politicians who will cause inflation, so that they can easily repay the same sum in money that is now worthless. It's happening as we speak, and believe it or not it happened after the war of 1812, too, during the Panic of 1819.

Many of the insolvent are considered "wealthy" as they can manage to borrow lots of money, and others are considered middle class, because they borrow less money. And some are considered poor, because their income allows them to only borrow a little money. What all these people have in common is a negative net worth.

Meanwhile other people stay within their means, however modest or however extravagant, so they have a positive net worth. The man who sleeps on the street and has only a dollar in his pocket, but owes nothing to anyone, has a positive net worth. The woman who lives in a small rented apartment in the city and walks to work and pays her bills promptly is also a person of positive net worth. The middle class family that lives in a house they own and whose mortgage they could easily repay even if the chief breadwinner were to be laid off tomorrow is also a family of positive net worth. And the millionaire in his luxury suite is  a person of positive net worth -- only as long as he has not borrowed more than he can repay come the  next stock market crash.

People of positive net worth, however rich or poor they are in income, should unite. Like Marie Villard in her day, we all have a common interest in saving ourselves and our future from the insolvent.

It's not really the rich against the poor or the middle class against the lower class. There is no sin in being poor. There is no sin in being rich. There is no shame or dishonor in being anywhere in the middle. All such people should be free to live their lives as they choose. But when people who owe more than they are worth vote for inflationary measures, they rob everyone -- even the person who only has a single dollar in his pocket. The problem is hidden beneath the ground, under the social pyramid we usually hear about.


  1. Interesting perspective. I am not into the economic side of this as much, but I will say I am tired of us borrowing money from China, and then using it on things we do not really have the money for. It some wife was doing that to buy a lavish wardrobe, people would think she was bonkers. China is investing in their own country, and they are not worried about helping every other country in the world. I have always thought charity was a good thing, but I think former presidents should be doing it on their own dime.

  2. Hi, Julia. I agree that we should not allow our government to borrow money from China. And I think all fiscally responsible citizens would agree on that, no matter how little or how much capital they currently control or what their income is. But then why are we doing it? Because people who live irresponsibly in their own lives are also voting for this type of financing for the country as a whole. That's why I think people with a positive net worth should unite politically, instead of giving in to politicians who sponsor class warfare.