Usury and the collapse of empires
lemire.me
lemire.me
How using my credit card to buy beer and chips produces wealth:
1) My rewards program immediately reduces the price by 1%.
2) If the chips are moldy and the vendor won't let me return them, I can cancel the payment.
3) I pay no interest. The credit card bill is paid in full every month.
<quote>Economists who expect people to be rational won’t believe in usury. Surely, people borrow money to be better off. Yet the average credit card debt per household is over $15,000 in the USA (and it grows all the time, of course). Does anyone believe that these $15,000 are invested in highly profitable ventures? (They would need to be highly profitable since credit cards often charge over 15% for loans.)</quote>
http://www.indexcreditcards.com/creditcarddebt/
revolving consumer debt (of which credit card debt is a large but strict subset) was only $7400 per household in November 2010 and I doubt it's doubled since then.
Indeed, http://www.federalreserve.gov/releases/g19/Current/ suggests it has gone down somewhat since then.
Still crazy high, of course. I can imagine how an emergency situation might cause someone to have to spend more money on a credit card than they have in their savings account. I can't imagine how the average person manages to get into that situation, though.
If everyone used credit cards like you do, the credit card companies would not be in business.
Who is the author to ignore the values and priorities of the rest of the public? It seems that he wants everyone to live by his own standards.
If the people borrowing this money believe that they're getting greater value than they are costing themselves, then they are in fact making themselves better off.
The author doesn't see that they're better off, either because he doesn't understand their values, or he's simply not looking at them as individual people but a monolothic heap of people. But either way, he's ignoring the evidence of their own actions.
People do things that are I believe are harmful to their own interests, and I stop short of embarcing an amorality where aiding and abetting them for my own gain is right since they have free will and make their own choices.
The do believe they are better off. I think I understand their values. I do not ignore their priorities. But that doesn’t mean I always agree with them. Crack addicts and smokers, that is. I don’t have as rigid a belief about credit card debt, I’m just pointing out that “Evidence of their own actions, values, and priorities” does not persuade me in and of itself.