#190 Don’t Worry, Pay Interest

So I get this news item. It’s about one of those payday loan companies charging more than the allowed amount of interest because they let borrowers roll over loans and charged them an extra fee to do so. All well and good. We all know that these places charge a lot but they also bill themselves as being cheaper than bouncing a check. Then the article goes on to show the legal amount such a place can charge—15% of the first 500 and 10% of any balance after that. Again on the face of it, not that much, except that works out to about 391% APR. This is the legal amount. For some reason the word cornhole comes to mind. So this one guy had literally thousands of dollars of interest/fees on one little revolving loan amount.
Couple with this is a commercial I heard the other night from a major bankcard company. It said, if you can’t make your minimum payment this month then it will be waived if you make a further purchase. Now there’s an encouragement to fiscal responsibility. Can’t pay what you owe? Charge more. We all know there are some people who just ain’t too good with money. And these are usually the people who are paying the minimum and charging the max anyhow. Do they really need any additional prodding to charge more and pay less? And why the sudden generosity on the part of the bankcard companies? Simple, the new anti-bankruptcy bill passed by congress forbids including bankcard debt in your bankruptcy, when and if you do declare. So the banks, certain that they’ll get the money somehow, sometime, are only too happy to open the door to any additional interest they can flay off your financial hide.
I’m sure I screwed up some of the facts somewhere, but to me the point is a larger one. Is our apparently healthy economy once again being sustained on borrowing? What’s going to happen when people can payday no more? Too bad they don’t have a fiscal example to emulate, like the feds. The federal deficit is huge, and that means as interest rates creep up the budget of the United States is going to have to devote a bigger and bigger share of monies to simply paying interest on the government debt. And like a payday loan denizen the feds are going to have to keep rolling the principal over and hope that somehow they’ll catch up on the next go around.
Of course they never will. Until their economy, personal and federal, collapses. Maybe bartering will come back. Hey buddy, I’ll trade you this latte for a pothole-free road. Senator Lloyd Bentsen said something to that effect many years ago. “I could give the appearance of prosperity too if I could borrow a trillion dollars a year.”
The two horns of the political dilemma: tax and spend, or don’t tax—and spend anyhow.
America, ya gotta love it.