The ancient authors including in the Bible and Aristotle, looked askance on debt, and especially the lender.

However it is a universal tendency of mankind to prefer the satisfaction of a given want sooner rather than later, otherwise we’d never eat. It is this time preference that gives rise to the phenomena of capital and interest. It is an unalterable fact that man’s time on earth is limited. This has certain economic consequences. This time preference is reflected in all human action.

Capital is valuable because it brings us closer *in time* to the satisfaction of our wants than if we didn’t have the capital. To make capital goods someone has to forego the “instant grat” of consuming now everything that is produced; and setting aside some of what he produces to make a production good, rather than a consumption good. So instead of catching fish with his bare hands, the primitive capitalist took time out from consuming everything he produced in that way, to sharpen a spear or make a trap – the produced means of production – capital. The significance of capital is that it increases the amount that can be produced with a given unit of input, and so increases the wants that can be satisfied later – for those who are prepared to wait.

Thus, notwithstanding the prejudice of the ancient authors against debt, how could it be otherwise? If one did not expect a greater satisfaction in the future to compensate for delaying one’s gratification, how or why would anyone delay their gratification for long enough to produce the goods which the debtor consumes now for instant gratification– at the cost of paying for the waiting time, which is interest? The lender does no kind of injustice whatsoever to the debtor by lending him money. There is no injustice in debt nor the requirement to pay interest. The parties’ consent answers all questions of ethics involved.

Lowering interest rates in effect tells the borrowers of money that the lender is prepared to wait longer to get re-paid when in fact he isn’t. Conversely high interest rates reflect a high time preference. Artificially lowering interest rates causes capital to flow into malinvestments that are malinvestments precisely because they falsely refect the time preferences of the lenders. Such inflation of the money supply leads first to an artificial boom, and then an unavoidable bust, of which the current GFC is an example.

I was brought up in austere times and was taught from a very young age that is was not possible to gratify all my wants. In fact even in my twenties I was taught a valuable lesson when I borrowed 50 pounds from my father to buy a second hand motor scooter. He insisted that I pay him back within a prescribed period with interest. I wonder how many parents would do that nowadays. Consequently, apart from a mortgage which I paid off early, I have never used any form of borrowed money and don't feel the need to have a credit card. However, I was not raised in a time when we were exhorted to buy things by what I regard as immoral advertising which I now abhor. Just a little self control for a couple of years provides a balance that can be maintained with which to make cash purchases. Not only does it earn interest, but it can be used to buy stuff cheaper. It is all so obvious to me.

I defiantly agree with your post , however a Credit Card is not totally all negative .
My wife was totally anti however she got to change her mind .

We had five kids in six years .

Then catastrophe I got sick and was taken to Woden Hospital intensive Care for three weeks ; I didn't sleep , eat or urinate ; in a twenty minute cycle I went from freezing cold shaking so violently that I had to be isolated from other patients because of the noise of the bed rattling the only relief was a tepid shower until the shaking stopped ; then a rapid accent in temperature sometimes to 44 with the bed totally saturated with sweat the only cure a handful of panamax and back in the shower for a rapid temp letdown then back into a new bed for a repeat cycle then the nurses would make me drink 2L of water
Horrific you bet , then one night 1am it stopped ; all Dr Long could tell me was that it was indicatively a Virus judging by the white Cell count .
The experience left me with a faulty memory that 20 years on remains, so I couldn't remain self employed , we auctioned $60,000 stock and equip for a return of 10,000 and backtracked to Family support . After 12 months recovery I started working in maintenance $36,000 not much but a whole lot better than nothing ! Then a friend talked me into going to a Finance Broker with the intent of buying a Home , I thought it was madness with no deposit but he insisted go see the man ! So I did . ## CONTINUED

## CONTINUED

Instructions : Go find your house .

Increase your Credit Card limit , suggest 8 Grand , do it by phone .

When you have done this come back to me.

I'm back at "The Mans" ; Go to xx Finance he has my file , under no circumstances ask any questions (Thats what I'm for , That's what your paying me for) OK if he asks what you want the money for your buying a Caravan and a Speed Boat and Trailer . XXFinance didn't ask any Questions or "See" my Credit Card . I signed their papers and that was it , Back to "The Man" who relieves me of some Cash 350 for him the rest cash for expenses .

I was happy with the result but I concluded that I could never work in finance .

I needed to inform my Wife that I had bought a home , I had kept her in the dark after mounting anxiety from trying to rent Homes fit to live in "With 5 little Kids".

I walked in bear hugged my wife knocked the Kitchen table askew and passionately announced "We now have a massive debt and a Home of our own" my wife eventually said "Were is It?" My mother leaped up and exclaimed "What he's bought a home and you haven't seen it It'll be a dump with a bloody great Shed out the back !"

I don't believe my experience would have been possible without that Credit card with 16 grand limit with about 4 grand debit , sure it was expensive finance but the repayments were nearly half the Rental payments . About 12 months later we switched over to Bank finance .
So the only security was 16 grand limit on a credit card ?

Maybe once upon a time the primitive capitalist "delayed" his gratification to produce "capital" but it is hardly the case today.
Not to mention that your example of the spear maker is hardly analogous to todays capitalists is it? The spear was for his own use not to profit off the labour of others. Indeed under your capitalist system the spear maker would have been able to claim "intellectual property rights" and restrict the ability of others to benefit unless it was on his terms. Sounds like the beginnings of slavery to me.

Todays capitalists can hardly be said to be "deprived" of anything.
Maybe "deprived" of the 20th rolls or the third holiday home. Indeed the only reason they lend money is because they have a surplus above and beyond what they need for current purposes. "Waiting" does not equate to any hardship for current moneylenders.

Sure it is conceivable that say a single mother who wants to send her kids to a good school may have to "deprive" herself of luxuries to do so. That this situation is seen as the same as say a Packer who "deprives" himself of a new casino or a tropical island to lend money to people shows the inbuilt bias, unfairness and dishonesty that is capitalism. The rich man could hardly be said to be suffering while the single mother most definatly is.
This is "the grain of truth" that capitalists use to convince people that all is well with their system and it is not exploitative.

Interest, rent and profits are all usury. The rich and the strong exploiting and thieving from the poor and the weak.

I always try and keep my posts short and so it is always difficult to express an opinion in just a few words. Only a general overview can be made. I should have have added that there is good debt and bad debt. Good debt should be used for production and not for pure consumption. Obviously in the case of shazBaz001 there were extenuating circumstances. However I would not have put my self in the position of having 5 children as it would have put me in an risky financial position, but of course that is a totally personal decision.

As outlined above Mikk, there is also certain personal choice in debt and it sounds very much as though you have a personal grudge against people who make a lot of money. Perhaps you would prefer to live in a country, which is run by a dictator, is corrupt or has no real rule of law. We are fortunate that we live in a democracy......Not perfect by any means......but we have the opportunity of throwing out governments if dissatisfied. If you don't have superannuation that invests and give you a return from the companies you despise, perhaps you should do so independently. In spite of retiring only a short while ago and never having earned more than $20,000 a year while working, I am now a self funded retiree with no burden on the tax payer. You see, I always paid cash for what I purchased which was, and still is, a great help. I also know how to live cheaply......I could give you a run-down on that too !

*We had five kids in six years*

Sheesh, personally I would have used a credit card to get hold
of some family planning :)

I once read about a test called the marshmallow test. Young kids
are asked to either take the marshmallow now, or wait 10 minutes
and then have two marshmallows.

Some kids grab the one marshmallow on the spot, others wait. When
they follow those kids to later life, that is how they handle
money too. I have friends on high salaries who can't cope and
are always broke, others on pensions who manage quite well.

So it seems there is a genetic componenent here, some just
can't help themselves and others plan. For the former, the best
thing to do is snip their credit card in half, for the temptation
to use it is just too great.

Firstly allow me to thank everyone for their posts. It’s rare to find comments on web-based forums such as this which are insightful and well written; so thank you.

One point I’d like to pick up on is the somewhat ambivalent (in the Freudian sense) relationship we in the west tend to have with capitalism/democracy. In a sense we simultaneously love and hate it. Those of us who find fault with a system that tends to subordinate human/environmental well-being in the name of profit, have the freedom to do so precisely because we live in wealthy countries. There is no immediate threat of war or revolution, our goods are protected by well-established law and our every need is met. We are fed, clothed and protected by the very system we criticise. I still think though that there is a place for this kind of criticism from within. Perhaps the gluttonous, obtuse, Australian Idol-watching consumer is the more honest citizen of a capitalist society, when contrasted with the critic who rails against the capitalist mode of life but is unwilling to remove themself from it.

For myself, I can only say that the trinkets and oddities of capitalist society are endlessly fascinating, particularly for what they say about humanity. We drive cars, watch televisions, play with Iphones, pay with credit cards and amuse ourselves with countless oddities and yet these things seem perfectly natural to us. It would hardly do to suggest that things were better/simpler in “the good old days” (as if simple equates directly with good), but I think it’s important to consider where all this will end. Can we keep on going the way we have been indefinitely? Does some b-grade Hollywood apocalypse await our children or grandchildren? We are an endlessly curious and inventive species, but it worries me that our vocation (for want of a better word) has been thoroughly accosted (and is now directed to a large extent) by the widespread pursuit of profit.

I.B.

I reckon, for my 2c worth:

1. Put the drs and the A.MoneyGrubbers. Association back on the guvment MediCare rate

2. Put the Wig Parasites back on the legislated taxable rate

3. And the p!gs in the banks on a flate rate

AND

4. SAVINGS back in the hands of the hard workers who make this nation tick.

The reality is, credit cards unlock great time savings when one can orchestrate ones affairs remotely over the web. Better than traveling all around with silly pieces of paper, wasting gross amounts of time and tree resource when we need them for shade, clean air and carbon storage units.

The ugly Australian economic model is fundamentally flawed. Full employment should be insisted upon. Rises in pension and economic stimulus were not a question of cash handouts, but rather an experiment in lifting the wage of the base of the economy.

Too many people get paid too much, and too many people get paid too little. The extremities of the bell curve need to be drawn in.

A good rule of thumb is to only use credit to buy something that will appreciate in value, as ShazBazz did. Houses in, cars out. If we continue on our debt-ridden ways, we will increase our reliance on countries like China, where the savings of people far poorer than us are already propping up the profligate west.

All to many people are wasting their lives worried about debt. Others will never be allowed to retire because they have debt.
Smart people never get into debt that causes worry.
To retire you have to be debt free. And have a reasonable amount of investment.
House plans cause a lot of long term pain, the more squares you get the cheaper those squares become. On the other hand the more land you have to have.
All very good but it has to be paid for.
The recent trend is for smaller homes on smaller blocks.
I know i build them.