I was helping a young artist set up his wares in a gallery when he told me with some satisfaction he was now debt-free, for he had paid off all of his credit cards. Very good! Knowing he had a condo, I asked if he had paid that off too. Chagrined, "No" he answered. He then quickly calculated he was still a quarter million in debt.
Bur he owns an asset against the debt, that is the condo, and that is some consolation. He gets nice mortgage interest deductions, so no doubt overall owning is cheaper than renting. Credit cards you have nothing to show for the debt, except perhaps for memories.
A selling point by the credit card companies to retailers is the customer spends 20% more (or some such) using a credit card. The flip side is the consumer is not as careful with credit as he is with cash.
Long ago when I started making money, just before credit card use went universal, I carried two wallets. One to give up in a robbery and one for me to keep. Getting robbed for cash was far more common back then, since anyone with money usually carried quite a bit of it. I recall a conversation in Hong Kong with a businessman who told how he finally switched to credit cards if for only to cut his own chances of getting robbed.
Since I was cutting edge, I already had some expired credit cards, and those were in the "give-up" wallet. This was before there were even ATMs. But credit cards were easy to use fraudulently, since there was none of the communications means available to track fraud. A business made a paper impression of the card and in a week or so a bank would know about any fraud. Cards were better than money. A thief seeing a wallet full of credit cards would be off like a... well, bandit. The sooner he gets busy with the cards, the more he gets to keep.
It is funny who things change so much over so little, or so little in spite of so much change.
Money and credit are two different things. By paying with money, you never get in debt. By using credit, you get in debt. The business world has always run on credit, and that is "vendor financing" where since within 30 days of receiving a shipment of dresses a retailer has received enough cash from enough dresses sold at $40 to pay the wholesaler his $15...
since within 30 days of receiving a shipment of dresses a wholesaler has received enough cash to pay the manufacturer his $10...
since within 30 days of receiving a shipment of fabric a manufacturer has received enough cash to pay the fabric house his $5...
since within 30 days of receiving a shipment of yarns a fabric house has received enough cash to pay the yarn dealer his $3...
since within 30 days of receiving a shipment of yarn a yarn dealer has received enough cash to pay the yarn mill his $2...
since within 30 days of receiving a shipment of wool a yarn mill has received enough cash to pay the shepherd his $1...
Until about 40 years ago, anyone who got greedy or miscalculated found himself shoved out of the network and his place taken by someone more reliable.
But note something... so much business, so little cash. The end-user used cash, which called forth industry from the shepherd to the retailer, all organized around that end-user sale. It is the end-user who pays for everything, including all interest and taxes. (Business cannot pay taxes, only end-users pay taxes. Taxing a business serves only to hide taxes from the end-user, or to destroy the targeted business.)
What changed is banks made all these relationships unnecessary since the bank stepped in and lent the money to each player at each step, easier for those involved, better for those who would otherwise be forced out, and a money maker in terms of interest for the bankers. And since all transaction are now tracked by banks, much easier to tax by the state, so now you know why the state will always bail out the banks, at least the big banks, and let the small banks die off, as is now the case.
State and bank policy is one, for the benefit of the state.
WE are being treated to sideshows about longer lines at airports, children with no vaccines (I wish!) and unfueled naval vessels for fiscal cliffs and sequestering. People do not quite get it is already over. We are falling now. It all seems so light and airy and easy, and we are making remarkable progress. This is really not so bad.
Our opinions will change when we hit the ground. It is coming up fast, indeed faster with each kick of the can down the road.
We have systems that work. Inviting "banks" into commerce was a huge mistake. Industry does not need banking. The state does, but not industry. Banks make for a concentration of power that crushes the innovators and maintains the zombie.
This system will fail, there is no turning back. But there are systems that work perfectly fine. Time to begin exercising those systems again. They will come in handy when we go back to the future.
Maybe we'll know we are there when we see men buying two wallets at a time.
Feel free to forward this by email to three of your friends.
Bur he owns an asset against the debt, that is the condo, and that is some consolation. He gets nice mortgage interest deductions, so no doubt overall owning is cheaper than renting. Credit cards you have nothing to show for the debt, except perhaps for memories.
A selling point by the credit card companies to retailers is the customer spends 20% more (or some such) using a credit card. The flip side is the consumer is not as careful with credit as he is with cash.
Long ago when I started making money, just before credit card use went universal, I carried two wallets. One to give up in a robbery and one for me to keep. Getting robbed for cash was far more common back then, since anyone with money usually carried quite a bit of it. I recall a conversation in Hong Kong with a businessman who told how he finally switched to credit cards if for only to cut his own chances of getting robbed.
Since I was cutting edge, I already had some expired credit cards, and those were in the "give-up" wallet. This was before there were even ATMs. But credit cards were easy to use fraudulently, since there was none of the communications means available to track fraud. A business made a paper impression of the card and in a week or so a bank would know about any fraud. Cards were better than money. A thief seeing a wallet full of credit cards would be off like a... well, bandit. The sooner he gets busy with the cards, the more he gets to keep.
It is funny who things change so much over so little, or so little in spite of so much change.
Money and credit are two different things. By paying with money, you never get in debt. By using credit, you get in debt. The business world has always run on credit, and that is "vendor financing" where since within 30 days of receiving a shipment of dresses a retailer has received enough cash from enough dresses sold at $40 to pay the wholesaler his $15...
since within 30 days of receiving a shipment of dresses a wholesaler has received enough cash to pay the manufacturer his $10...
since within 30 days of receiving a shipment of fabric a manufacturer has received enough cash to pay the fabric house his $5...
since within 30 days of receiving a shipment of yarns a fabric house has received enough cash to pay the yarn dealer his $3...
since within 30 days of receiving a shipment of yarn a yarn dealer has received enough cash to pay the yarn mill his $2...
since within 30 days of receiving a shipment of wool a yarn mill has received enough cash to pay the shepherd his $1...
Until about 40 years ago, anyone who got greedy or miscalculated found himself shoved out of the network and his place taken by someone more reliable.
But note something... so much business, so little cash. The end-user used cash, which called forth industry from the shepherd to the retailer, all organized around that end-user sale. It is the end-user who pays for everything, including all interest and taxes. (Business cannot pay taxes, only end-users pay taxes. Taxing a business serves only to hide taxes from the end-user, or to destroy the targeted business.)
What changed is banks made all these relationships unnecessary since the bank stepped in and lent the money to each player at each step, easier for those involved, better for those who would otherwise be forced out, and a money maker in terms of interest for the bankers. And since all transaction are now tracked by banks, much easier to tax by the state, so now you know why the state will always bail out the banks, at least the big banks, and let the small banks die off, as is now the case.
State and bank policy is one, for the benefit of the state.
WE are being treated to sideshows about longer lines at airports, children with no vaccines (I wish!) and unfueled naval vessels for fiscal cliffs and sequestering. People do not quite get it is already over. We are falling now. It all seems so light and airy and easy, and we are making remarkable progress. This is really not so bad.
Our opinions will change when we hit the ground. It is coming up fast, indeed faster with each kick of the can down the road.
We have systems that work. Inviting "banks" into commerce was a huge mistake. Industry does not need banking. The state does, but not industry. Banks make for a concentration of power that crushes the innovators and maintains the zombie.
This system will fail, there is no turning back. But there are systems that work perfectly fine. Time to begin exercising those systems again. They will come in handy when we go back to the future.
Maybe we'll know we are there when we see men buying two wallets at a time.
Feel free to forward this by email to three of your friends.
0 comments:
Post a Comment