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The wizards of consumer lending
Tuesday, December 01, 2009
Lost in the shuffle of last week's Thanksgiving holiday festivities was another in a series of fine documentaries from the folks at PBS Frontline - The Card Game - in which it is learned, among many other things, that U.S. consumers use plastic for 100,000 transactions a minute.
This is a follow-up to The Secret History of the Credit Card, what should be considered required viewing for anyone who desires to understand just how the consumer culture in America has come to be over the last thirty years.
Cue the music ... Tonight on Frontline. For thirty years, Americans have played a game with the banks with the banks holding all the cards...
1 comments:
The central bank wants to control spending, so it can smooth the economic cycles. It cannot control cash spending, only credit mediated spending. The bank confiscated productivity improvements from citizens for the last few decades, and loaned the extra goods out to spendthrifts. That way, the bank could control spending by metering credit.
Of course, this strategy meant continuously rising debt to GDP. It also meant that workers didn't take home any more widgets per hour worked, despite producing more. (Shareholders also didn't get the extra, the banks did for lending out.) Retirees had a steadily decline standard of living, as the bank confiscated their pensions for lending.
A better way would have been to just let CPI prices fall as productivity improved. That way all consumers would have benefited from productivity improvements without too much debt.
Of course this means the bank would not have been in control of spending, but so what. Central planning by the bank is disastrous in the long run. Better to just let the market work, and accept an occasional small recession. Better a few small recession along the way, than storing up a major problem for the future the way they did.
Better a few small recessions than a steadily declining standard of living. Who needs the bank confiscating resources from citizens to loan back to them.
No more printing.
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