Credit Where It’s Due

Hey Rob! Glad to see you are still getting shocked at stuff!

To answer your question:

1- Why is it good for the credit cards?: Because the likelihood of you being stuck into debt and paying extortionate interests more than offsets your likelihood of defaulting on the debt. That’s the only reason why. Of course, as a uk resident and Guardian reader, I am meant to lament the evils of these credit card companies and completely forgo the fact that, well, no-one is forcing anyone to get into more debt.

2- Why is it good for the economy?: Because of the multiplier effect (http://www.answers.com/topic/multiplier-effect), which makes more money available all around to spend, and as a consequence generally benefits consumption. In a simplistic example imagine if no one could borrow to buy a car, people would have to wait till they saved to buy one, meanwhile they won’t be able to jobs that required cars and limit their earning potential, car manufacturers don’t get paid, car workers don’t get paid, they don’t consume, they don’t less stuff, stuff makers suffer and stop consuming… etc. etc. and you end up in a lovely recession. In this view, if you save your money and don’t consume, you’re not helping the economy much.

Of course some people overdo it and get into stupid amounts of debt, but it’s entirely their fault and of whoever lent them and, in uk at least, the bill is footed by both of them.

You are destroying the fabric of reality by not spending you careless fool!

Seriously though, it apparently comes down to confidence. If people don?¢‚Ǩ‚Ñ¢t spend then there is no confidence in the manufacturing sector, therefore they lay off workers who were earning money but who are now claiming benefits and therefore not spending on unnecessary items themselves. And above all are the brokers, who used to make money by betting on the spending habits of the world and who are as highly strung as a cat tied up like a marionette and made to dance across a large pool of piranhas. Bastards!

So yes, essentially it?¢‚Ǩ‚Ñ¢s all your fault!

It?¢‚Ǩ‚Ñ¢s interesting that in the Far East there is a great tradition of saving and not being so consumer led. Somehow they?¢‚Ǩ‚Ñ¢ve always managed to do that and not collapse their economy like a reality star?¢‚Ǩ‚Ñ¢s personality.

Well it’s nice to know I’m not as powerless as I thought. Screw you all! Hahahahahahahahahah!

Actually it’s all interesting stuff, but clearly bollocks after a point since it rather hangs on the fact that it’s fine so long as nothing goes wrong.

Definite irresponsibility by the lenders in my opinion though, despite your view it’s the borrowers’ fault, Emir. After all it basically goes:

“Here have some more credit. Oh, don’t borrow more than you can afford mind, but please do have the potential of doing so. It’ll probably be fine after all! Okay if it’s not you’re screwed, but what are the chances of that, eh? So yeah… go on… have more… have more… Oh and you can’t say we didn’t warn you. You signed that form yet? Hurry up! Look – shiny things!”

Of course, the system only really works if someone goes mad and gets into serious debt. Quite a bit of money is made on charging people high rates on money they’re unlikely to pay off soon. Remember a good risk doesn’t make them (much money) pay off your cards in full and never spend more than you can pay and the whole system becomes pointless.