Blog by Sumana Harihareswara, Changeset founder
Not Just Simple Interest
Hi, reader. I wrote this in 2005 and it's now more than five years old. So it may be very out of date; the world, and I, have changed a lot since I wrote it! I'm keeping this up for historical archive purposes, but the me of today may 100% disagree with what I said then. I rarely edit posts after publishing them, but if I do, I usually leave a note in italics to mark the edit and the reason. If this post is particularly offensive or breaches someone's privacy, please contact me.
Last night I finished watching The Secret History Of The Credit Card, another great Frontline show. I am going to look up my credit score by getting a free credit report, and investigate credit unions that don't suddenly raise interest rates or fees on their customers for no good reason (unlike most issuers).
I worry about the innumeracy of my fellow Americans. Remember the magic of compound interest from math class? Remember the graph that makes it look so neat to save money and so scary to borrow? Too many people have forgotten it, or never learned.
I can't post about usury without pointing out Daniel Davies on Ezra Pound on usury.
Loan sharks seek out poor neighbourhoods; they don't create them, and the fact that extremely poor people are nevertheless prepared to pay extortionate prices for the ability to move consumption around in time just confirms what a great thing it is to have access to debt...
It is absolutely horrible to be deep enough in debt that you worry about it, and this simple truth about modern life is one which is not mentioned anything like often enough. One of the consequences of having a social relation of debt is that it creates fear and worry in the lives of debtors, and this is a cost which ought to be set against the benefits of an expanding credit-based economy, and to be minimised as far as possible. Specifically, although loan sharks provide a valuable service to the poor, they often do so in an extremely destructive way, and they should be regulated as tightly as possible; also, the bankruptcy law for individuals should be easy and free of stigma.