- - Wednesday, June 6, 2018

ANALYSIS/OPINION:

Few issues better illuminate the contrasts between the U.S. and Mexico, than do the controversies surrounding the border wall, which President Trump brought to the forefront once again Tuesday when he told rally-goers in Nashville, “I don’t want to cause a problem but in the end, Mexico is going to pay for the wall.”

On one side, continued unabatedly, is a vibrant economy and population, encouraged to invest and seek entrepreneur opportunities. On the other side, an economy, suffocating from its own failures, mostly due to conflicts, control and lack of incentives. Notwithstanding a second-world economy of suppressed wages and artificial employment, still the population sees itself as “entitled,” for the padron will take care of them/me. That is what is expected by the population whether mired in Mexico or viewing lives elsewhere — a false anticipation.

The U.S. reconfirms in the minds of its citizens, and others seeking to become citizens, that opportunity is here — if you are willing to work for it. Conversely, in Mexico, the mind-set is to not take the initiative, maybe due to a level of frustration. Maybe, too, the Mexican people should “expect” more, both from their government and of themselves.

The two sides of the issue and the wall, are like oil and water — non-homogeneous fluids forced into a single test tube with incompatible existence.

A perpetual welfare state, Mexico’s economy is suffering, badly. Its economy is propped up mostly due to its proximity to the U.S. population, both for the export (to the U.S.) of goods, and the convenience of tourism. One added factor, which can not be overlooked in any debate, is the value of the U.S. dollars being sent South of our border.

Estimates are that $75 billion annually is sent “home.” Just like the “undocumented” immigrant population, the figure is likely much more. If this influx of economic life blood does not continue, Mexico will likely become more like a Venezuelan autocratic regime, even consuming the equity of foreign investment and nationalizing businesses.

During a recent public debate inside Mexico, each of the four candidates for the presidency, advocated increased unlawful incursion into the U.S., an admission of a system falling deeper into failure. Perhaps the revision of Mexico’s economic policies and lending structure should be reviewed if they want their nation to survive.

By contrast, in the U.S., long-standing economic principles are applied, and do work. A private lending system, provides for investors’ ROI, and for borrowers seeking opportunity. But the model followed by the U.S. is neither an epiphany nor a new strategy.

The 18th century French philosopher Jean-Jacques Rousseau, in his discussions around society and his discourse, “The Social Contract,” gave thought to the importance of economics. In more contemporary minds, the great physicist, Albert Einstein, in his development of the Theory of Relativity, stated, “All things are inter-related.” And if we follow the thinking of Milton and Rose Friedman, contemporary economists, we better understand that, while all are related, all return to the dependence of and onto economics. A noteworthy identity, given the other individuals mentioned.

One basic economic premise implemented in the U.S., is the lender/borrower concept. One makes money available, to those who seek money and provide security to be able to borrow it. Whether for small businesses, home or car ownership, or commercial investment, the concept works, and works well. But what about those people who have no equity to secure a loan?

In home ownership, Dodd-Frank legislation required greater controls of lenders, suffocating many prospective lenders, resulting in even greater risk, to investors. Home-lending mandates became more liberal, irrespective of the outcome. One might say that such events and policies are ones of danger and might create a bubble, filled with inert gases. So, how do solid lending principles and practices, and the Mexico “situation,” intersect?

Mexico, and other populations, want money sent home. That is at an estimated $75B/year to Southern neighbors, an ever-expanding number. This “cash flow” is likely permanent. The wall is estimated to cost $7.5 billiion to $15 billion of capital investment plus capital maintenance and operations.

The end user, just like the borrower or a homeowner in any commercial transaction, pays for the money transferred. The general population should not have to pay for the value, conversion and convenience of American currency, when to the benefit of individuals. The value for that use should be borne by the individuals receiving the benefit — those sending the money, and those receiving the money. As Mr. Trump asserted, Mexico will pay for the wall. If not all the people of that nation, then those who benefit individually.

A simple imputed fee of 10 percent of the gross amount (at the time of the origination of the funds to be transferred) would amount to +/- $7 billion a year, more than enough cash flow immediately available to service the debt and operations if privately financed. Just like any other commercial transaction, the borrower/user/beneficiary pays for the use and transfer of the funds. In this matter, the recipient pays as an origination fee, transfer fee or even points.

The principle is not new. The concept incorporates the clear understanding funneled into both economic theory and the physical world. Some issues just sometimes need a little extra push to make a palatable result. Taking government and politics out of the private transactions is the art of the deal.

• Nate Brogin is an entrepreneur and founder of a number of businesses in California.


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide