The Coyote ChroniclesÂ challenges Free Marketers to defend deregulation of the credit card industry:Â
You can make the argument that people who canâ€™t pay their balances in full every month should not take out a credit card, but thats more than a little disingenuous since we would see a staggering drop in consumer spending if people only spent when they could pay cash. The restaurant and travel industries would suffer immediately. I doubt there would be a Black Friday at all. Donâ€™t even get me started about the car business.
I’ll take a shot at this one.Â First of all, Black Friday, car financing, and credit cards themselves are all fairly new concepts.Â Somehow, civilization survived before they existed, and suspect it will survive long after they are gone.Â The assertion that our economy is propped up by the insane amount of consumer credit that exists currently tells me that we are, as a country, living above our means.Â The fact that the savings rate keeps declining while consumer debt continues to rise tells me that we are in denial of this fact.Â Government regulation that enables this foolish behavior only delays the inevitable crash that must occur to correct the market and insures with each passing year that the crash will be harder.
What would happen to the economy if people stopped using credit cards and started paying cash?Â One thing is for sure.Â Every debt free individual would haveÂ greatly increased buying power because a higher percentage of his income would be available to purchase goods and services instead of paying interest on the Big Mac Value Meal he bought 4 months ago.
Hat tip to MCB.