By
C. Neuroticus Absolutus
Americans are hedonistic. Like the
grasshopper of legend, we don’t save, which forces the U.S. to
borrow from abroad, from China and others. A great amount of the
interest we pay on the loans goes out of the U.S. instead of
bolstering the U. S. economy. Americans have a feel-good gene that
demands that we feel good all the time. It expresses itself in the
form of greed and impatience. We desire instant gratification,
instant return on our investments, and demand short-term returns on
everything. We have a “what’s in it for me?” attitude and
haven’t the patience nor the temperament for long-term investments.
Even our government runs on borrowed money. Consider what our nation
could do with the interest we now pay to foreign investors just to
service the loans on the money we borrow from them. This should be
our incentive for paying off our national debt as quickly as
possible.
For those who pay off their credit
cards each month, their debt is short-term and the cards are merely a
convenient way to avoid carrying so much cash on their person, a
matter of security. But for others, credit cards are demons of debt.
Blame credit cards? Plastic money? I think not. Credit cards make it
possible for us to temporarily slake our hedonistic appetites and
attain insistent gratification which, at best, may last until the
next shiny bauble catches our eye. William Shakespeare advised
against debt and even more in Hamlet, Act I, Scene 3 (1623) when
Polonius warned his son:
Neither a borrower nor a lender be;
For loan oft loses both itself and
friend;
And borrowing dulls the edge of
husbandry.
This above all: to thine own self be
true,
And it must follow, as the night the
day,
Thou canst not then be false to any
man.
Smart man, ol' Willie Shakespeare.
Cash and Carry was once a popular term
as the pioneers moved west. It meant you could carry the goods out of
the store only if you paid cash. No loans, no credit, no way. The
purpose, of course, was to prevent westward-bound travelers from
taking advantage of kindhearted shop owners and skip town without
paying. Nowadays, without so much as a signature in some cases, a
customer can carry out of the store just about anything his heart
desires. The reason, of course, is credit. Before computerization of
purchase records and debt accumulation, it took several days for an
auto dealer to get credit approval on the car you wanted so
badly—unless you were already known by the dealer as well as the
bank. In this computer age, transactions for autos are arranged
within minutes and the customer once again (temporarily) slakes his
unquenchable thirst for instant gratification.
Window shopping and impulse buying are
such successful factors in marketing to today's generation of
shoppers that merchantmen carry larger inventories to insure that no
one leaves the store without purchasing something that tickles their
fancy. The successful merchant trades on the hedonistic traits of his
customer base. Lure the customer into the store with loss leaders or
deeply discounted coupons and they'll buy more than enough to cover
the cost of the loss-leader and discounted items many time over.
The merchant is happy and the customer
is happy. Win-win, right?
Well, maybe.
Credit cards mean personal debt and
debt affects our lives daily in many ways. Credit card purchases are
short-term loans, the most expensive type of loans to enter into. In
practically no time, compound interest on these loans wipes out any
benefit the deeply-discounted prices and coupons may have initially
provided. And as long as the loan is in force (unpaid), the credit
card user is paying interest on interest. The system is not meant to
benefit anyone who will not or can not pay off his/her card monthly
as the debt is accrued. This is exactly the kind of customer the
credit card companies do not want.
Meanwhile, the credit card company is
double-dipping, maximizing profits charging the merchant up to 2%
just to handle the credit transaction at the same time they are
charging the consumer up to 21% (and possibly more) on the loan.
Credit cards are extra work for merchants and they pay for the
privilege of accepting credit cards for payment. Nevertheless,
merchants are well aware of the contribution of impulse purchases and
the contribution this makes to their bottom line. Consider how
Christmas sales would suffer if instant credit were not available.
The incredulous charges for missing a payment won't be discussed here
except to say they represent the clearest form of corporate greed in
America—with the possible exception of rubber-stamped home
foreclosures.
For the merchantmen, credit cards are
a win, too. Without the buy now—pay later knee jerk purchases of
consumers, the entire business cycle, from raw goods suppliers to
manufacturers, manufacturers to distributors, distributors to
merchants and merchants to consumers would barely creep along
compared to the present turnover rate of products in the cycle. With
the faster business cycle comes greater employment, a wider variety
of products, richer middlemen and merchants and ultimately happier
consumers. Maybe that's what trickle-down economics is really
supposed to mean—a description of the benefits of the business
cycle, not a plan to give money to the rich and let it trickle down
to the poor (popularly called Reaganomics). It begins with consumer needs or wants which generate
the demand for product(s) which the merchant then orders from the
distributor, and so forth. The lack of consumer credit slows the
cycle, decreases inventories, increases layoffs, and increases
unemployment throughout the product pipeline.
The economic engine of our country
slows when consumer purchasing decreases. Decreasing purchases mean
less tax money to run our country, repair and maintain our current
infrastructure, build new highways and bridges and waterways, provide
for the health, welfare and education of our citizens, and provide
for our national defense. And borrowing at the local, state and
federal levels increases to provide the services required by their
citizens.
Thus, the availability of credit for
the consumers is directly responsible for keeping our economy, our
economic engine, running.
So there you are. Credit cards: An
immeasurably great business based entirely on the hedonistic traits of
American consumers. “I want it now! I deserve it now!” Maybe,
even with the downside of overextending credit to irresponsible
consumers, credit cards are a necessary evil in our lives. They're
ubiquitous, everywhere you go, and have allowed the hedonistic
Americans to satisfy their cravings for the ever-changing trappings
of affluence and success—and in the end, perhaps unwittingly,
underwrite the success of our country as well.
But as always: Caveat emptor, which is
Latin for “Let the buyer beware.”
