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Will the cash splashes lift the economy? : Comments
By Nicholas Gruen, published 13/3/2009Australians owe nearly $350 million on credit cards. Less than 15 per cent are paid off each month, and about 70 per cent accrue interest.
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What happens when the consumers are the producers?
Every retailer wants his/her customers to be rich. Duh. Of course sellers want buyers to be rich; this almost goes without saying.
At the same time, those same retailers want producers to be poor (cheap). The poorer the producers are, the more affordable the retailer's saleable goods will be.
So what happens when producers are also consumers?
This is where globalisation steps in. Back in the sixties, we had several heavily industrialised (and at the time, poor) nations -Japan, Singapore, Taiwan- just dying to manufacture goods for us. Why would we bother manufacturing our own goods, when we can pay someone else to do it for us?
A funny thing happens when you keep putting your hand in your pocket, to pay someone else.
They end up with all your money.
So what do you do, when after decades of giving all your money to your trading partners, they end up richer than you are?
You come back to the same problem. What do you do when your producers are also your consumers.
You offer them credit cards, of course. That way, your poor producers can act like rich consumers, without actually being rich consumers.
This tactic has the added benefit, that not only can poor producers pay for your goods, but you can actually make them pay for the goods 2 or 3 times over (at 19% interest).
But of course, this is only a short term solution. What happens when all the credit cards are maxed out?
Well, in that situation, what else can you do?
“NOTHING TO PAY, FOR 6 MONTHS!”
“NOTHING TO PAY, FOR 12 MONTHS!”
As I recall, the last one I saw offered nothing to pay for 3 years. Where does it end?
PAY NOTHING! (we'll bill your children).
YOUR CHILDREN WILL PAY NOTHING! (we'll bill your grandchildren).
Nicholas Gruen asks:
“Do people who are paying between 11 and 20 per cent interest sound that rational to you?”
More than 90% of Woolworth's Supermarket customers use a credit card.