Wednesday, July 11, 2007

In Debt we Trust

I happened to get invited (along with the trusty wife) to a screening of Danny Schechters latest documentary which I found extremely interesting and illuminating particularly since the line of work that I am in was cast as the evil empire - chewing up innocent, ill-informed americans and spitting them out on the trash heap of life.

The basic premise of the movie is that the credit card industry gives people, in this case americans, access to too much credit and once they have availed themselves of this seemingly free resource - they find out that it isn't really free and it drags them down in a spiral of interest induced debt. The director spends most of the movie concentrating on the evil empires of Mastercard and VISA and how they actively plot the impoverishment of the masses for the enrichment of the few which, although difficult to prove, is even more difficult to disprove.

While I appreciate that one needs to lay it on thick to really punch the point home I do feel that Danny should have attacked the credit industry as a whole rather than just the credit card industry. Nonetheless, he makes a very good point which is that while credit in some instances is a necessary facility, in most it is merely an additional cost on the purchase of the goods in question and that without management it can lead to people entering the debt spiral.

One really interestig tidbit that emerged from the movie was that research conducted by the credit card companies in the 60's and 70's showed that the poorer people were, the more likely they were to be honest and the more likely that they would try their utmost to repay their debts. I've never heard this from any other source but it sort of makes subjective sense.

In south africa we are currently suffering from a lack of capacity of electricity and the government has set up a division of eskom (I think) called "Demand side management" which is supposed to come up with ways and means of limiting the demand for electricity. We need some Demand side management programs for individuals to help them manage their insatiable demand for credit. If one managed to solve this conundrum one could gain instant osama bin laden status because of the number of industries it would destroy. It's easy to make up a few sensible rules as when to or when not to use credit but that definitely isn't the answer - nobody wants the rules.

After the movie we were chatting around the table and one of the other film makers asked me whether I had reconsidered being in the card industry and I felt like responding by asking if she had ever reconsidered being in the film industry because there was porn but I held my tongue and laughed.

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