The Random Comic Strip

The Random Comic Strip

Words to live by...

"How beautiful it is to do nothing, and to rest afterward."

[Spanish Proverb]

Ius luxuriae publice datum est

(The right to looseness has been officially given)

"Everyone carries a part of society on his shoulders," wrote Ludwig von Mises, "no one is relieved of his share of responsibility by others. And no one can find a safe way for himself if society is sweeping towards destruction. Therefore everyone, in his own interest, must thrust himself vigorously into the intellectual battle."

Apparently, the crossword puzzle that disappeared from the blog, came back.


Sunday, May 24, 2009

Is Greed Good?

There's a lively debate going on over at this site. Creditors Not To Blame For Our Greed. It's an opinion piece about the problems of debt and greed. Alas, my flesh was weak. I got drawn in, I made a couple of comments. But it is something I feel strongly about. Debt is a terrible master. I know, I have feared it much of my adult life.

I started out after the Navy with a new wife and a baby on the way. And no job. In a poor economy headed for recession. I was lucky, I got a job that had security though not great pay. One that had benefits. One that I liked. But we struggled. We lived in a house my mother owned (a scheme to get rich buying old houses and fixing them up... it didn't pan out) and paid rent that was enough to barely cover her mortgage payment. We watched our money carefully. We lived frugally.

When I was a small child, my parents were struggling to get my father's business going. We ate a lot of spaghetti, and Spam, and baloney (it was cheap then). In my teens, my parents weren't well off. My father no longer had his own business but was a salesman. My mother worked as a secretary. She also juggled the finances. And juggled them well. But occasionally dropped a ball or two. There were a few times I came home from school and found the electricity turned off. I knew Mom sometimes cashed a check at the supermarket and deposited the cash to cover a check she had written previously.

I was determined never to do that. And I didn't. But I didn't have a credit card until 10 years into my marriage. I was 34. I only got it so that I would be able to rent cars when I traveled. The rental companies would no longer hold your return flight ticket as collateral. Even though I had a card, I paid cash when I returned the car. I tucked money away in a space in my wallet, away from the regular cash, so I would always have something in reserve.

Even today, I have a little "mad money" in my wallet. Even though I have a few credit cards. Old habits die hard, I suppose.

I was given some advice when I was taking evening classes at the community college. I was mostly majoring in "G.I. Bill", to collect some monthly cash from the government for my service during Vietnam, and not so much to advance my knowledge. My math instructor, an engineer at Raytheon, told me to save money for any purchase less than a house. Then pay cash and pay myself back in payments equal to what a loan company would charge. In essence, be my own personal loan company. It was advice I tried my best to follow.

I see people around me who are immersed in debt. Who have large balances on their credit cards (I pay off each month). And I wonder how they can live with that on their minds.

Whose fault is it? The credit card people? The lax loan policies at the banks? The constant enticement to buy by stores and car dealers?

Or is it the consumers? The ones who make the choice to buy?

What say you?

[1143/1144/1013]

6 comments:

Neo said...

my thought would be it goes back to the consumer; However it is a tempting thought prodded along by the creditor and then there is that little demon "Greed" But than again, as long as you can continue to make the payments, greed is also what will drive you to be successful

Unknown said...

Unfortunately, it's not a simple situation and, while I am a total believer in personal responsibility, I also recognize that there are situations that are no-win. For example, many new, small business owners can't work without materials and can't get materials without credit. All it takes is for one client to defer on a payment and the small business owner is in trouble. Some might say that the small business owner should have funds in the bank to cover such a scenario but, in reality, the cost of starting a business is high and typically depletes a bank account so that the new business owner depends on a good year to get back into the "black".

It would be very nice if we could wrap the situation up nicely and say some person or bank or institution is to blame but ... I just don't think that's reasonable.

Small Footprints
http://reducefootprints.blogspot.com

Douglas said...

Neo - It is a matter of knowing your financial limits, of practicing personal fiscal discipline. People will always be tempted by businesses who wish to sell and will make it as easy as possible to do so. I believe it is up to the consumer to control his spending, he (or she) is the one who needs to know and protect his (or her) own interests.

Small - I was speaking, as was the column, about individual consumers. Of course small business people need to maintain a credit line and it can be risky in times of economic uncertainty. But the referenced opinion piece was aimed at the credit reform bill recently passed and about the ones it is supposed to protect. These are not small business people for the most part. These are people who over extend their credit through the less than judicious credit card use. Think of those small businesses that are having trouble because their customers cannot pay their bills because their debt is too high. A responsible consumer is a good customer.

Inspector Clouseau said...

Basic question: Why should adults, who theoretically are free to make choices, and capable of making their own decisions, expect anyone else or any agency to protect them from anything, including greed?

Either the phrase caveat emptor applies, or it does not. Agruably can't have it both ways.

Douglas said...

Inspector - You do realize that people don't agree with you about that? they not only think they can have it both ways, they insist on it by electing those candidates who promise it. People do expect the government to take care of them when they make mistakes. It wasn't always this way. But it has changed. I suspect the trend began in the Great Depression.

Steven said...

You asked if greed is good, then posted about debt. I'm pretty sure those are two pretty distinct topics.

I don't know that greed is "good" or "bad," it's just a part of human nature. Capitalism can only work because of greed (even if one's version of greed is just "I would rather live than die"), and capitalism has done more good for millions of people than any charity ever has.

As for debt, I prefer to use it to my advantange. Sure, I can afford to buy this $1000 computer, but I'd rather take the unsecured loan with 0% interest and just be responsible for paying it off in 12 months. I COULD use cash all the time, but I'd much rather have the convenience of credit card payments and cash bonuses with the small task of logging into a website monthly to make a payment (much easier than visiting an ATM...that was by far the worst thing about Greece). Sure, I could have been more patient when I bought and furnished a house and an engagement ring and a wedding ring within two months...and I did do some sweating about carrying a credit card balance for a short while, and wasted a few hundred dollars, but I took the route of a 0% finance special offer, paid it off in the 12 months allotted, and think I got the better end of the bargain.

We have a large safety net put away, and contribute heavily to retirement and a little to other investments, so we could start paying off small student loan and car loan debts...but since we're young and in a stable position, we chose instead to buy a sports car and go to europe while we're young and can enjoy such things. It's greed, we both know, having made the decision to not have kids and enjoy our lives how we want it - but I don't see any problem with enjoying the fruits of our labor (and our parents' labor to get us here). I'm thankful for the myriad ways to take advantage of debt. I think there's a lot of people too stupid to do any of those things or use them responsibly, and I find it hard to pin down my exact feelings on the subject of those who aren't as intelligent as us. I'm against government intervention, and I certainly don't contribute to charity, and I think we need to have repercussions for our actions, but I don't know where to draw the line of society versus social darwinism.

So anyway, I don't think anybody should be able to pass blame from themselves as consumers for the stupid things they do and the credit holes they get themselves into. I've seen it happen with friends. I'm not going to touch the subject of free will versus moist computers, and just stick with Neil Peart and Geddy Lee even though deep down I think I agree with Scott Adams.