THE MACHINE

So, here's something I think I just figured out. I realize many people have probably already figured this one out, but at the time it became clear to me, I must admit that I felt my brain expand by 2%.

Having recently moved to the US from Canada, I was amazed at how people here are practically falling all over each other to give you credit. Bad credit, Poor credit, No credit, No problem. So I got to thinking, doesn't this in the end create an economy that would crash since all its profits would be in the form of credit? And then the beauty of it hit me.

The US is predominantly christian (which may or may not have anything to do with my point). Given that dishonesty and lack of honor is frowned upon (at least in theory) I began to think of how this sets up the motivation. What motivation? Bear with me for a few lines.

So, you have all this credit being given to people that probably shouldn't be having it. Bring in the Socio-moral contract that loosely states that you should essentially pay back what you borrow, and then wrap that in the capitalist concept of always wanting bigger, better, faster and more of whatever the economy has to offer. Suddenly you end up with a perpetual motion economic machine that essentially propagates from it's own cycle of extending credit so that people can buy stuff that is produced. Of course, as time goes on, inflation takes care of the price of things being more expensive.

OH WAIT. STOP! An important aside...

The argument of nominal dollars enters into play here. While some things may be cheaper today than they were 50 years ago because of nominal dollars, the fact is that I was not alive 50 years ago and therefore any debt that I have is in Real Dollars in the context of my lifetime, not some nominal dollar from 50 years ago. i.e. My debt is real-time, The nominal dollar... not so much.

Ok, so where was I ? Ah yes, so, we have people getting credit which they max out pretty quickly (anyone who had a credit card between the ages of 18-24 will know what I'm talking about) and then they have this feeling of obligation to pay back what they borrowed, so they have to either keep their job – or in worst case scenarios, find one – so they can pay back what they owe. If you keep your job and your payments up to date, the creditors reward you by saying "Well done, here's more credit". And then we get a raise and we reward ourselves by treating ourselves to more stuff because, well, we've earned it. Then some of us consolidate our loans to break it all down in to 1 easy payment. And then? We're offered more credit, to buy more stuff, which we'll have to pay back, so we keep on working harder which helps us stay on top of our payments, which creditors then like to reward and...

Now, take this and then multiply it over all of the population of the US. A pretty staggering concept on how the machine just keeps on growing because we keep on feeding it. Don't get me wrong, I like my Tall Soy Mocha as much as the next person, but just think of what would happen if everyone did that most dastardly deed of the credit game and claimed bankruptcy. Game over? Nonsense. Remember... Bad credit, Poor credit, No credit, No problem.

So What's your take-away? Well, maybe what we have is enough, and maybe using more credit just because we have it is not such a good idea.

Just a thought, before you go out and extend that credit of yours just a little more. As for me, I may put off buying that "Potty Putter" just a little longer. Maybe until I reach my next all important milestone in life... the Amex Platinum Card.


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DISCLAIMER: This blog is intended to house my opinions and observations on the world as I see it. Although my arguments may come from the more emotional realm I do try to apply as much fact as I have available to me at the time of writing. I am not writing an encyclopedia here, I am writing opinions. Av
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