milkchaser

Credit Card Cancer

Unable or unwilling?

On Mar 16 12:08 AM William Cowie wrote:
> Great article. Interesting how politicians of every stripe have become
> unable to grasp simple concepts!

Credit Card Cancer

There are those who regret this. I am not wise enough to know, but there is something to the argument that commodity based money preserves its value.


On Mar 16 03:02 PM timwalsh300 wrote:
> You all need to wake up and realize that we don't have a commodity
> system of money anymore.

Credit Card Cancer

One could argue that this printed money essentially devalues existing currency. Hence, it is not cost-free.


On Mar 16 03:09 PM timwalsh300 wrote:

> And yes, Peter, credit DOES come from thin air. Banks don't need
> deposits to make loans. They simply need to borrow reserves (which
> are printed "from thin air") from the Federal Reserve through the
> discount window. That's where all money is born. That's where people
> get reserves in the first place that they later deposit at the bank.
>
>
> It's frightening that you are a financial professional and have such
> a poor understanding of the money creation process.

Credit Card Cancer

Although I cannot disagree with the thrust of the argument, Mr. Schiff slightly overstates. Not all credit is bad. It is unwise to spend cash when credit is available and cheap. The float on my credit card is free (to me anyway) and that allows me to earn interest until the payment due date. Why forgo that float?

The credit card companies do not do this to lose money. They make money on the fees they charge the vendors. The vendors do not pay these fees to lose money. They prefer a sale to a non-sale and know that a credit card payment presents a low-risk loan.

Of course, not all credit card holders are creditworthy, and banks would do well to winnow the wheat from the chaff. That need not undermine the usefulness of responsible credit.

Home equity loans and other collateral-based loans are also not worrisome, assuming the collateral is sufficient and the borrower is worthy.

However, the massive borrowing by the US gov't is atrocious and frightening. It is foolish for the US gov't to forgo moderate borrowing when the rates are low and the capital is available. But there is nothing moderate about the Obama deficits.