In the tapestry of American history, immigration has always been a hot-button issue, sparking debates on culture, resources, and national identity. Know-nothings, the anarchist-communist scares, and contemporary political factional debates reveal the steady thread. One facet that often gets overlooked is the symbiotic relationship between immigration and America's transaction-based, financial economy. It's a complex dance where the influx of newcomers becomes a driving force for economic growth for certain economic players, creating a cycle that seems nearly impossible to halt.
At the heart of this intricate connection is the undeniable role of transaction fees and middlemen. When you are paid by the deal, more people means more deals.. and you take your slice. With every immigrant crossing borders, there's a transaction cost attached – visa fees, legal services, and various expenses that lubricate the wheels of the immigration process. These fees generate substantial revenue for both government agencies and private entities involved in the immigration system. Non-governmental organizations receive grants to resettle refugees. Some of these organizations are not explicitly geared towards immigration, but the government funding helps them stay afloat. In essence, immigration becomes a perpetual transactional churn, with financial gains distributed among the middlemen facilitating the process.
Consider the immigration attorney who guides individuals through the system, or the agencies responsible for processing visas. These entities thrive on the constant stream of immigrants. No fresh meat, no revenue. As a result, the economic inertia of immigration is sustained by the very apparatus built to manage it. Attempts to curb immigration would be a blow to the myriad of businesses profiting from the bureaucratic intricacies. Alas, they are organized. Individual voters upset about this process are not.
Moreover, the impact of immigration on borrowing and lending practices cannot be underestimated. New immigrants became new marginal borrowers in the debt game. We are a debt based economy, so this flow of humanity expands the demand for loans. The influx of newcomers often correlates with an increased demand for loans – whether it be for housing, education, or entrepreneurial ventures. Lenders, recognizing this surge in demand from less than stellar borrowers, capitalize on the situation by offering loans at higher interest rates, providing a great return for their loan portfolio.
Immigrants, eager to establish themselves in their adopted homeland, find lenders who are more than willing to provide financial assistance. Immigrants from the Global South are considered minority borrowers, so it makes their borrower mix more acceptable to regulators. However, this assistance comes at a price, with interest rates that can be significantly higher compared to those offered to established residents. It makes sense as they are riskier borrowers. The day to day borrowing to survive in America through borrowed capital become a lucrative venture for financial institutions, fueling the engine of economic growth. Their earnings growth.
This borrowing-expansion dynamic not only benefits lenders but also contributes to the broader economic landscape. The funds injected into the system through loans drive consumption, stimulate demand for goods and services, and ultimately bolster activity in the economy. In this light, housing inflation, medical services use, public education, etc are all affected and receive their slice of immigrant enabled revenue.
This can work in an era of expansion and if controlled, can work, but it falls apart as stagnation or decline begin. There is nothing new to this as the Swiss clock and watch industry centuries ago dealt with immigration issues. Guilds were open to citoyens and bourgeois (citizens) but denied to habitants (immigrants) and even their children born in a canton (natifs). They needed the bodies as demand expanded but were wise enough to shut it down when demand declined. The West just sucks in bodies to depress some sectors’ wages, but for other sectors, the new borrowers and transaction initiators boost activity.
Attempts to staunch the flow of immigration become akin to disrupting a finely tuned economic machine based on churn and debt. The interconnectedness of transaction fees, middlemen, borrowing, and lending creates a delicate balance that, if disturbed, could crash that system. Those players are huge political donors and provide the power to keep borders open.
The intertwining of immigration with America's transaction-based and financial economy creates a formidable force that seems resistant to attempts at containment. Skills don’t matter; just sign the loan documents. We do not need tool & die makers, but more people means more patients for the wealth transfer scheme we call health care. From transaction fees and middlemen profiting from the immigration process to the expansion of borrowing and lending, each component plays a crucial role in sustaining the 21st century economic engine. These sectors need more immigrants to justify their head counts and P/E multiples for their stocks.
Great summary. It is always about money and preserving the consumption economy rather than a capital intensive one such as what Trump got us back to which is the real reason they kicked him out of orifice and want to remove his freedom.
Become formidable.
Instead of “Worthy”.