
How We Justified Piling Debt on Poor Customers - smn1234
https://newrepublic.com/article/155212/worked-capital-one-five-years-justified-piling-debt-poor-customers
======
DoreenMichele
So, we don't want to give homeless people jobs because that's uncompassionate.
Everyone knows they are _charity cases_ and the only kind thing to do is give
them _charity_ , not _opportunity._

And we don't want to give loans to poor people because that's clearly
_predatory lending_. They would be better off without the option to decide for
themselves because everyone knows how stupid they are and how incapable they
are if making any kind of decent decision.

That's a recipe for a permanent underclass.

Opinion of a formerly homeless person who took out a Payday loan to go stay at
a dive of a hotel for three nights to escape a deadly storm. My logic: three
nights in a hotel was cheaper than replacing my laptop, which I needed to keep
earning money.

I had no idea how I would eat for the rest of the month and didn't care after
walking past a river about six times wider than I had ever seen it and my
"safe" campsite for weathering the storm that was currently under probably six
to ten feet of water -- before the worst part of the storm rolled in. I just
knew I would be in a hotel that night if there was any means whatsoever to
arrange it so I wouldn't die that weekend.

~~~
randogogogo
I think the author of the story aptly addressed this as an all to common
justification. The tricky ethical bit isn't whether or not cases like your own
do exist, but rather really how many of them are there on the whole?

~~~
DoreenMichele
The more you chip away at the human rights of poor people, the more you
succeed in making sure "cases like my own" cannot possibly exist.

And that's exactly my point. Your assumption that I'm some weird statistical
outlier is exactly the problem.

It comes across to me roughly like this:

"Oh, Doreen is actually smart or something. But that's the rare exception
among the poor. So fuck the rest of 'em!"

~~~
fzeroracer
The fact of the matter is that things like payday loans exist to exploit the
poor and homeless in a way that ensures that they live perpetually in debt.

To take your argument to its rational extreme, it would be a bad idea to
disallow poor people literally selling themselves to a corporation because
that's taking away their basic rights.

And this is literally something that happens when you don't put regulations to
stop it [1]. The fact that the poor predominately are people who take payday
loans which often end up exploitative of their situation should tell you that
payday loans might be a bad thing! The norm is that people are not escaping
payday loans. Payday loans need to go and we need an actual safety net in
place.

[1] [https://www.theguardian.com/us-news/2015/may/09/us-payday-
lo...](https://www.theguardian.com/us-news/2015/may/09/us-payday-loans-crisis-
borrow-100-to-make-ends-meet-owe-36-times-that-sum)

~~~
DoreenMichele
_to disallow poor people literally selling themselves to a corporation_

This isn't a right we grant other people, so, no, it is not the logical
conclusion.

The antidote to a Payday loan habit is more earned income or other access to
resources that aren't borrowed. So if you want to solve this, give cash gifts
to poor people you know, help vulnerable people access earned income or other
resources, work on solving the housing supply issue in the US and/or work on
addressing the healthcare issue in the US.

I do what I can to provide useful information to homeless and at-risk
Americans as my contribution, for example:

[https://sandiegohomelesssurvivalguide.blogspot.com/](https://sandiegohomelesssurvivalguide.blogspot.com/)

[http://whathelpsthehomeless.blogspot.com/](http://whathelpsthehomeless.blogspot.com/)

[https://genevievefiles.blogspot.com/](https://genevievefiles.blogspot.com/)

[http://streetlifesolutions.blogspot.com/](http://streetlifesolutions.blogspot.com/)

[https://www.pocketputer.com/](https://www.pocketputer.com/)

[https://writepay.blogspot.com/](https://writepay.blogspot.com/)

Simply cutting people off from the shitty resources they currently have access
to without giving them something better only makes their problems worse. It's
easier to cut people off than provide additional (superior) support and most
people arguing vociferously for cutting them off are not actually actively
working on better solutions, so it ends up being a big fat "fuck you" to the
poor with a self-righteous justification to make it sound better.

~~~
crooked-v
> This isn't a right we grant other people, so, no, it is not the logical
> conclusion.

It isn't something people are allowed to do now because we've decided that it
was too societally abused in the past. Look up the history of voluntary
indentured servitude, for example.

~~~
DoreenMichele
We developed other instruments. Indentured servitude was a way to pay a debt
when money per se and financial instruments were relatively primitive. It was
kind of the debt version of barter.

Develop better instruments and solutions, and then Payday loans can join
indentured servitude and dinosaurs in museums.

------
Aloha
I feel like the person who wrote this has never experienced being poor.

I used to be poor, I'd much rather have a credit card than need to rely on
payday loans, car title loans, or have no access to emergency money at all.

Out of all the issues the poor have, this is a relatively minor one, and
frankly articles like this are just another form of virtue signaling. "Oh yes,
even though I've never been poor, I obviously know best how poor people should
be living their lives, and those expensive credit cards have just got to
go..." is how it reads.

Yes, borrowers need more protections (rolling back the changes to bankruptcy
law from 2002-4 is a good starting point), but that mythical person who
couldn't get to work without using their card for car repairs? That was me at
one point.

~~~
coolgeek
I'm disappointed that this is the top rated comment.

"than need to rely on payday loans, car title loans, or have no access to
emergency money at all"

You'll get no argument from anyone but the purveyors of such predatory
products.

But it's a false dichotomy argument along the lines of "you have to overlook
all of the evil things Uber does because they're the only option for people
going to poor neighborhoods."

The reality is that both of these things are true - credit cards are the best
option for emergencies, AND that consumers (not just the poor ones) are
encouraged to outspend their means, often finding themselves falling into
catastrophic debt spirals.

I didn't bother reading the article, so I can't say whether or not its guilty
of virtue signalling. But if it does in fact explain how they "Justified
Piling Debt on Poor Customers", it's eminently reasonable to overlook any
virtue signalling.

~~~
Aloha
My suggestion was to change bankruptcy law so these products are less
predatory - the fact that its very very hard for the poor to discharge
excessive debt via bankruptcy is a huge issue and traps people in a cycle of
poverty.

Access to credit, real revolving credit, is a boon to the poor, if you can
teach yourself the skills to use it wisely, it can provide that cushion that
you otherwise wouldn't have. I literally started over again at 27, with my
slate clean by waiting 7 years, then I started fresh with a secured card from
C1, and built my credit from there - but at some point about a decade ago, I
used one of my cards to put tires on my car, which ensured that I had a
functional vehicle to continue to use to work - even though I was not of
traditional credit worthiness, that purchase allowed me to keep that job, and
gave me the skills to find a far better one later.

Yes, some do fall into a perpetuity trap, but we need to fix the system to
allow for an escape for that, not just change the system so you cant take any
risk at all.

------
mjevans
"... over the long run, a publicly traded company wasn’t going to sacrifice a
meaningful amount of income to avoid destroying lives— __ _unless the law
required it._ __"

Emphasis mine; I believe that's the true point of the article. I also believe
that banks, and lending institutions generally, as experts in that field
(rather than average consumers which should not be expected to be experts in
that field) should have a legal duty to the customer to act in the customer's
best interests first.

~~~
harryh
_should have a legal duty to the customer to act in the customer 's best
interests first_

What does this even mean though?

Say I'm getting a loan from a bank. It's in my best interest to get that loan
for 0%. But it's obviously not in the bank's best interest.

~~~
manicdee
We used to define this using heuristics like limiting loans to amounts that
can be serviced on ⅓ of the primary household income.

We could go back to using those rules, the catch is that people desperate for
finance will shop around to find a less principled lender, so FOMO leads to
acquiring customers who are one bad week away from defaulting.

------
shishy
Recently quit working at C1 as well, and share the author's sentiments
exactly.

Whenever I brought up whether the work we were doing might actually be harmful
(even as a general question), coworkers would reflexively quip about what
they're doing giving back to the community through outreach, or some other
vague response that obfuscated the people behind the problems they were
solving.

And of course, executives would just spam you with "Change Banking for Good".

I couldn't stand it.

~~~
d-sc
Sounds like cognitive dissonance. Your coworkers felt like they are nice
people, but nice people don’t steel from the poor, so their brain didn’t know
what to do.

------
rossdavidh
I believe (although I can't find it now) that it was Nassim Taleb who said
something like, "Every truly long-lived civilization has banned interest."

~~~
xhkkffbf
Examples? Islam is not as old as Christianity. Nor Judaism. This seems wrong
on the face of it.

Oh sure, there might be some lost tribe in the Amazon but I don't accept it,
even if it is technically long-lived.

Interest is how we pay people to save and share their savings with others.
Growth and reinvestment is much easier with it. This is why the Muslim world
has come up with financial gymnastics to reward savers without technically
paying some interest.

~~~
WorldMaker
You do realize that the Islamic prohibition on interest comes directly from
the Christian New Testament, right? That early Christians forbade interest for
centuries? That some Christian groups still forbid collecting interest?

~~~
reissbaker
As other posters have mentioned, but to put a little more emphasis on how this
worked: the Christian world of early to middle Europe banned _Christians_
collecting interest on loans (which, effectively, banned Christians from
operating loan-based financial service businesses). They didn't ban interest
on loans in general, and in fact depended on loans with interest. They
outsourced their financial services to their minority Jewish populations, and
then every hundred years or so when the interest payments piled up too high,
they evicted and/or massacred all their Jews, and seized their property.

Not a great deal for the Jews! Although they were also legally barred from
doing almost any other work (they could also be tax-collectors, which was
hardly a better job)[1]. But it's definitely not the case that the
civilizations of Christian Europe didn't have loans with interest.

This was also largely true in Islamic societies: they did rely on loans with
interest, by once again relying on their minority Jewish population to provide
financial services. [2] Unlike the Christians, though, the Muslims generally
paid back their loans instead of murdering their creditors.

[1]
[https://en.wikipedia.org/wiki/Medieval_antisemitism#Restrict...](https://en.wikipedia.org/wiki/Medieval_antisemitism#Restrictions_to_marginal_occupations_\(tax_collecting,_moneylending,_etc.\))
[2]
[https://en.wikipedia.org/wiki/Riba#History](https://en.wikipedia.org/wiki/Riba#History)

~~~
rossdavidh
True, but "ok we will have interest but periodically massacre the people
interest is owed to", is much like not having interest, except nastier. You
are, in a sense, avoiding the problem of an interest load spiraling up out of
control.

But, it's true, it was not a perfect ban, but it certainly did have the
practical impact of not allowing those to whom interest is owed, from
hijacking control of the state. Again, not in a good way, but I think it shows
that long-lived civilizations eventually find that the Mathew Effect is
particularly strong with interest, and must be reined in somehow.

Hopefully in a better way than the medieval Christian one.

~~~
reissbaker
Or, alternatively, you could notice how the Islamic states managed to do
exactly the same thing but without massacres.

------
harryh
My natural tendencies are definitely in the libertarian/capitalist direction.
I think that people should be able to whatever they damn well please with
their money. I think that they will get it right more often than not and that
when the government steps in to make laws restricting the free exchange of
goods/services/money it's almost always a bad idea.

But I'm also a personal finance nerd, so eventually I found myself reading
[https://www.reddit.com/r/personalfinance/](https://www.reddit.com/r/personalfinance/)

And then I read different versions of the same story over and over and over
again. People with far more credit card debt than they could ever pay off.
More than a year's salary worth of debt. People that we just stupid about
money, and bought way more stuff than they could afford encouraged all the way
by the credit card companies and advertising and keeping up with the Joneses.

So now, from time to time, I sometimes find myself wondering if credit cards
should just be illegal. Such thoughts are heresy in my own mind, and I don't
know how to deal with them really especially because I know that credit cards
have been great for me with my 2% cash back and airline points. And I know
that they can be great for people who get into a temporary cash crunch and
know how to be wise about such things.

But then I read another couple of pages of /r/personalfinance and I wonder
again. Maybe people do need protecting from themselves. It certainly looks
like some of the people posting there do.

I find myself very sympathetic to the author's views.

~~~
save_ferris
There’s a simple solution here that doesn’t require banning credit cards:
requiring borrowers to demonstrate ability to pay before signing off on a
loan. Most creditors do this, it’s usually only the ethically challenged
lenders that ignore this.

The previous administration passed regulations requiring payday lenders to
verify ability to pay before handing out loans, which was promptly crushed by
the current admin at the request of the payday loan lobby.

Another solution is to cap the max interest rate far below current thresholds.
The problem with these loans is that lenders are hoping you’ll get into debt,
they’re in no way trying to create a mutually beneficial relationship with
their borrowers.

~~~
lostdog
I'm partial to an even simpler solution: Make it easier to go into bankruptcy,
and discharge the loan in bankruptcy.

If your debt load is unsustainable, such that your interest payments are more
than XX% of your income, then you effectively already are bankrupt. We can
either try to get people back on their feet, or let their debtors grind them
into the dirt for a while longer.

~~~
tptacek
In reality, credit card companies will already settle for a fraction of owed
principal if they believe you're seriously considering bankruptcy --- I've
personally watched them come down to less than 20%, and my understanding is
that people who are good at these negotiations can get them much lower still.

~~~
patio11
Can confirm. Remember, a) if they sell it to a debt collector, they're
probably selling at 3 to 5 cents on the dollar [+] and b) they can't sell it,
at all, if your bankruptcy notification gets to them before the Big Ponderous
Corporate Process pulls your account into their package being sold to a debt
collector.

[+] More if they haven't worked it a lot internally or if it is sold while
fresh or if you look like someone who is extremely collectible but let's say
"Typical case for people who are on verge of bankruptcy" pushes you waaaaay
down the stack on all possible ways to price debt.

------
Shaddox
Forgive my ignorance on the subject of matter, but aren't these credits so
expensive precisely because they're handed to unreliable debtors?

There is obviously a need for such a product since it's so popular, but it
can't be cheap to manage and collect them especially since they're so small.

------
PeterStuer
How amoral has your socioeconomic policy become when a credit card with a 27
percent interest rate and a $39 late fee marketed to people whose credit is so
bad they can’t get a credit limit without putting down a security deposit is
even legal?

------
timwaagh
You know, some people's destiny is to teach yoga and make pictures with cute
African-looking kids. Other people are destined to optimize financial services
so there are cute African-looking kids willing to take pictures with mediocre
yoga teachers in the first place. All is balanced in a perfect world.

------
jessriedel
> But the morality of the credit card executive is a morality of autonomy: If
> I’m giving people choices, that’s a good thing. “How could I be making this
> customer worse off,” a credit card executive asks herself, “if nobody is
> forced to use this product?”

I guess I'm an evil executive, because I do think that the default assumption
is that people are better with more choices. There are obviously exceptions,
but I'd want some evidence to the contrary before I started blaming others for
offering them choices. And I'd want especially strong evidence if banning
those choices is damn near impossible (since loan sharks will just appear), so
that unilaterally deciding to not offer choices makes people even worse off
(because they go to the loan shark instead).

I went searching in this article for evidence, but couldn't find much. This
seems to be the extent of it (am I missing something substantive?):

> As Scott Schuh and Scott Fulford have shown in a paper for the Federal
> Reserve of Boston, people who get credit limit increases tend to keep their
> “utilization” constant. In other words: If a person is carrying a $1,500
> balance when they have a $3,000 credit limit, you’d expect them to start
> carrying a $4,000 balance if the limit is raised to $8,000. If most people
> use the full credit-limit increases they are offered, the thinking goes,
> that must mean that most people want to borrow more money.

Isn't this consistent with poor people needing loans, and yet them also
wanting to make keep some of their credit limit in case things get even worse?

The author's main argument seems to be that Capital One has a lot of research
resources, and if they were making their subprime customers better off they
would be able to prove it with data, but they can't so they must not be.

> If [CEO] Fairbank cared to know the answer to any question—such as, “How
> many of the loans that we give out actually make the borrower’s life
> better?” or “What are the consequences of raising our credit card interest
> from the prime rate plus 19 percent to the prime rate plus 23 percent on
> child hunger in America?”—he could have gotten thoroughly researched
> answers. But those are the kinds of questions that the entire Capital One
> workplace was designed to drive out of view.

The author concludes

> When I was at Capital One, I wanted to understand if it was possible to keep
> loans as an option for the people who have exhausted all their better
> alternatives—without also causing suffering for those who would be better
> off forgoing purchases or borrowing money from friends and family. After
> five years, I concluded it was more or less possible to achieve that goal—to
> do the good loans without doing the bad loans.

But I can't see why she thinks that.

~~~
JohnFen
> I do think that the default assumption is that people are better with more
> choices

The problem is that the default assumption is not a universal truth. It's a
rule of thumb.

If someone is in bad financial shape and I offer a loan to them, they'll
probably take it because they have immediate pain that they want to fix. They
are not likely to consider that the loan may ease their immediate problem, but
will cause the problem to come back, but worse, later on. This is basic human
behavior -- we care more about what is real right now than what will become
real later on.

Lenders, however, know this (or should), and to give such people the "choice"
of making their situation worse later on in exchange for temporary relief
right now is simply inhumane. I don't think it's unfair to characterize that
lending behavior as "predatory".

~~~
jessriedel
1\. There is no lower-bound on wealth at which people stop needing loans.
Arbitrarily poor people can benefit (a lot) from loans. The main issue is that
people who are poor _in rich countries_ are more likely to be people who make
poor choices.

2\. You did not address my point that if there is no way to stop people from
getting illegal loans (loan sharks), it's better to give them loans at the
market rate rather than the even higher rate loan sharks must charge because
they operate outside the law. This consideration is very similar to legalizing
drugs.

~~~
JohnFen
> You did not address my point that if there is no way to stop people from
> getting illegal loans (loan sharks), it's better to give them loans at the
> market rate

I don't think this is a good argument at all. In both instances, vulnerable
people are being hurt. Arguing that it's OK for you to hurt them because
you'll hurt them less than the other guy seems dubious to me.

~~~
jessriedel
OK, but lots of people would disagree with you, e.g., in the context of
supervised injection sites.

Suppose it were unambiguously clear from data that (1) society as a whole and
each individual were better off when marijuana was legal and tightly
regulated; and (2) individuals would be better off not using marijuana. Would
you then vilify marijuana providers? (I generally would not, although I would
hold them to a stricter moral standard than I would for sellers of products
that are generally beneficial to the user.) What if we replaced assumption (2)
with assumption (2')?: 80% of individuals who use marijuana are better off
(say, because they use it only socially and the negative motivational effects
turn out to be small), and 20% are worse off (because they abuse it).

------
refurb
I have a great credit rating and my interest rate is 25% and late fee is $25.
Doesn’t sound like the poor are being offered something that drastically
different.

~~~
WrtCdEvrydy
Halfway through, I realized they were talking about the 'Bullshit Jobs' book
in application.

------
arduanika
At last a university bureaucrat comes clean!

Oh nvm, it's a Capital One employee. False alarm.

~~~
bmer
I'm not from the US (Canada), so it sometimes confuses me when people talk
about the cost of college. Doesn't the US have public universities? Are they
super expensive too?

~~~
orionblastar
Just the books are expensive in the USA but inexpensive in the rest of the
world.

Tuition has gone up even in public schools. Unless the student finds a good
paying job after graduation they will struggle with student loan payments.

------
RickJWagner
I wondered if this piece was from an institute of higher learning.

------
_bxg1
> It was common to hear analysts say things like, “I just love to solve
> problems.” But what they were really doing was solving something closer to
> puzzles. It’s clear to me, for example, that the janitor at my middle school
> solved problems when she cleaned up trash. It’s far less clear whether
> analysts at Capital One are solving problems or creating them.

> The rise of data science, machine learning, and artificial intelligence
> means that you don’t need venal corporate tycoons wearing Monopoly Man hats
> to grind the faces of the poor into the dirt. Under the data-driven
> directives of Capitalism 2.0, you can have a bunch of friendly data
> scientists who don’t think too deeply about the models they’re building,
> while tutoring low-income kids on the side. As far as they’re concerned,
> they’re refining a bunch of computer algorithms.

Let us all remain vigilant that the puzzles we solve in code are actually
solving problems, and not creating them.

~~~
anon1m0us
I heard a story on the radio the other day about the debate of whether or not
we should allow robots to kill people.

I wonder if ever in history there was a time when we needed to kill people
faster and set our engineering minds to solve that problem. Would there be any
lessons to learn we could apply to our current problem of automated human life
destruction.

I just can't believe there are human beings who would actually _write_ that
code!

Edit: Clarification, Yes, robots that kill automatically with _no_ human
intervention. Programmed to seek and kill the enemy.

~~~
QuercusMax
I mean, you have people who design weapons. They're explicitly intended to
kill people. Is programing a robot to kill people any different from
programming a weapon targeting system?

I'm not endorsing this, mind you, but it's not really any different that what
we've been doing to each other for millenia.

~~~
onemoresoop
But the responsibility of “pulling the trigger” makes these engineers
sheltered from any guilt. However, engineering the cases for triggering the
robots to kill and the resulting bugs can be directly attributed to the team
that designs it. Whether they care or not, or ever have a hard time falling
asleep at night is a different story..

~~~
gizmo686
There are plenty of engineers who build systems where bugs can lead directly
to death.

In the case of killer robots, the engineers are not (outside of a test gone
wrong) going to be realeasing the robots themselves. They are going to be
giving them to the military, where officers create and load particular
configurations then release the robots with that. These are the same people
who current create orders release frontline soldiers to execute said orders.

------
NTDF9
There is a place for debt in society. And that is: emergencies.

But why the hell does debt have to be the only way of creating money is
totally beyond me.

~~~
rubyskills
How does one acquire the necessary funds for larger projects when one does not
personally have the funds to do so?

Debt always needs to be measured against the value of brings. Does the
interest make up for the value you were able to generate today and throughout
the lifetime of the debt repayment?

IMO, there is good debt and bad debt (and a gray area in between). My personal
rule of thumb is, does that debt render me revenue above the monthly repayment
and will it do so through the lifetime I hold it? That is good debt. The rest
is bad.

Now, you can argue that other debts provide more than monetary benefit. That
is where the gray area is. That is a personal decision.

~~~
NTDF9
> How does one acquire the necessary funds for larger projects when one does
> not personally have the funds to do so?

Good point. As a thought experiment, can you answer why the larger project
costs more that what an average person can already afford?

~~~
rubyskills
Great question!

As it applies to new real estate specifically, you have a lot of materials,
labor taxes etc to deal with. These are the most common sorts of business
debts that I've been exposed to.

For existing real estate, I see value of things going up in value largely due
to population increase in a certain area combined with the fed printing money
(which it claims to do so constantly because the population will always be
increasing?). I also see values wildly inflated due to foreign investment. A
big issue in general is also due to the banking sector. I think the US
government allows banks to go a little crazy with lending to everyone on
anything without recourse. That being said, I personally benefit from the
system allowing me to borrow money so cheaply.

Sorry if this post was a bit disorganized. I have a lot of thoughts on it and
it is a great thought experiment. :)

~~~
NTDF9
Good answer! Now imagine if there was a society where money supply did not
increase because of more loans, but by something more of a function of labor.

What do you think would happen to the prices of materials, labor etc? Do you
think tying money supply as a function of labor would make cost of necessities
close to the median?

~~~
rubyskills
I think you may be referring to the Labor Theory of Value (LTV)? Certainly,
early versions of currencies were created to streamline the bartering process
between different kinds of labor and store that value for future purposes. I'm
not sure what attempting to remove debt from a market would look like in the
modem world as I only have the current context to compare to (for better or
worse). What do you propose as an alternative?

~~~
NTDF9
I don't have any alternatives without rough edges. THat's for overpaid
economists to figure out ;)

However, I'm thinking more along the lines of production. So if an
individual/company produces more units of something, the FED could print that
much money and put it into their accounts directly.

With expanding society, more money will be brought into circulation.

With lesser production, lesser money will be matched and produced by the FED.

The consequence of this would be that there is incentive to produce more with
less. There will be more value for physical labor and that the rich would
suffer as much as the poor. Hoarding money at the top will just result in
lesser and lesser money being produced for the rich to earn.

Now you could go and take a loan if you wanted to. But not from a bank. Take
it from any other party. It's between the two of you and you both go bust if
the loan fails.

There are caveats here but what it removes is the creation of money by debt.
Thus, to be richer as a civilization, we don't need more debt as a society. We
need to produce more goods and services that are actually desired by others.

~~~
rubyskills
So basically make corporations banks and eliminate banking as as a function?

How does the FED determine the value to give each corporation relative to
other services provided to the market?

It's an interesting idea if that's what you're thinking, though I foresee a
lot more government overhead.

Correct me if I'm misinterpeting. I think I might be.

~~~
NTDF9
No. More like a FED sponsored 401k match for wages. If a company thinks it can
earn more by producing more goods, it will hire more people and give them
wages. The FED will match it, effectively bringing money into circulation.

As company gets more and more efficient, they wouldn't need employees. But
this would cause lesser money to be brought into circulation, thus eating up
the companies earnings itself.

If the company wants more debt, they can go borrow from others (rich
institutions, individuals etc) but this activity will not create new money.
Thus, total money in circulation remains the same.

If an individual wants to buy a house, the house price will effectively be
closer to the median affordable income of population. Thus, it will
incentivize individual to produce more goods and services to reach median
income at least. The only way to become richer is to produce more.The rich can
try to buy more houses but it wouldn't be possible as much since leverage and
speculation is much harder.

~~~
harryh
You have essentially described a world with extremely high interest rates.

We have empirical data on what happens in such worlds: economies tumble into
recession and there is mass unemployment.

~~~
NTDF9
So a world with lesser speculation? Economies that move steady in the first
place so that recessions aren't these massive downturns causing so much grief?

~~~
harryh
No, not like that at all.

An economy where new business formation is radically more difficult so the
economy is far slower to adapt so there is mass unemployment and human misery.

Go talk to someone who actually runs a real business. Especially a business
with capital costs. Ask them if they could run it without access to credit.
The answer is no.

~~~
NTDF9
Why would business formation be so difficult if the cost of production will be
so low (because there is close to zero speculation?)

Why would capital requirements for capital intensive businesses be so high
when the equipment they are trying to buy will be cheap?

If they need to buy lots and lots of equipment right now, they could issue a
bond, investors looking to make a dime will lend. Since inflation is low
because of no speculation, interest rates would be low as well.

The one big caveat I see is slow growth but that's exactly what I'm looking
for. Slow sustainable growth directly proportional to labor.

------
anm89
This is a nice sounding well intentioned pile of crap.

This guy doesn't like the concept of credit cards. That's all this boils down
to. Instead of making a detailed structured argument about what he feels the
problem is, he tells a couple anecdotes about times credit cards didn't work
about for people and about his personal feeling that credit cards aren't that
great.

Ok fine. But then what's the takeaway? Not that there is any structural
problem here or that something needs to change but that credit cards make this
guy feel bad.

This kind of personal therapy masquerading as systemic or policy critique does
nothing but rile people up with vague sentiments and directionless anger. It's
a net loss for everybody involved.

For the record I'm not some kind of bank apologist, but the fact that there
are serious structural problems with the way banks operate in the US makes
this sort of infectual critique all the more frustrating

------
xhkkffbf
When it comes down to it, pretty much every service takes advantage of
someone's need. Someone needs to borrow money? Sure, lending the money at an
interest rate takes advantage of them. But so does billing for emergency room
services or, heck, charging for a bottle of water on a hot day.

Get over yourself-- and good luck finding a job where you're not pandering to
someone's needs and then exploiting it to make a living.

~~~
maximente
honest question: do you think $23B interest is just "making a living"?

because if not, then you acknowledge there's an opportunity to charge a teeny
bit less, and maybe not move in to an uber chic building, to completely
maximize potential profit according to the altar of profit-seeking.

hell, according to this whole "efficient allocation of resources" "hypothesis"
we should have long ago arrived at a point where the only way for these poor,
poor banks to make a nickel is to massively innovate on risk models,
technology, etc. because there's so much money (=> competition) that hundreds
of firms are competing by lowering interest rate and there's barely any
revenue to be made to pay for things like employees and computers.

so why aren't we there yet?

~~~
xhkkffbf
It's a fair point, but this $28b is not for one person. There are probably
hundreds of thousands of people working at Capital One. All of the profit is
spread out amoungst them. (Not evenly, of course). Many of them are making a
pretty average salary. So yes, for them it's just making a living.

