The article says "one" reason of why credit exists is to bridge the timing of money. But assumes fully later that that's the only reason, with no regards to how extractive credit can become, fueling bad habit. You can of course blame the individual for this, but ultimately it becomes societal.
Burrito Now, Pay Later
41–50 of 364 posts
Re: Burrito Now, Pay Later
#42I'm beginning to think that consumer debt simply shouldn't exist. If you don't have money to buy something, don't buy it. If you don't have money for necessities (food/housing/healthcare), putting you into debt isn't the right answer anyway. A safety net is the right answer.
I agree, with exception of housing. Most people can't buy home with cash, and for many this is a necessity. But homes are an appreciating asset, which cannot be said about cars or food - this is an investment, actually. But for everything else - cars, phones, electronics, food, subscriptions, jewelry - I 100% agree. Consider two people: * One person has $10k saved, invested into something safe and liquid. Then buys s…
Housing being an appreciating asset is a social ill. It means that housing can never be affordable, and that as it appreciates it locks out progressively more people.
This is true unless wages are also always going up, which is not the case unless it’s all just inflation in which case nothing is really appreciating.
Re: Burrito Now, Pay Later
#43I'm beginning to think that consumer debt simply shouldn't exist. If you don't have money to buy something, don't buy it. If you don't have money for necessities (food/housing/healthcare), putting you into debt isn't the right answer anyway. A safety net is the right answer.
I agree, with exception of housing. Most people can't buy home with cash, and for many this is a necessity. But homes are an appreciating asset, which cannot be said about cars or food - this is an investment, actually. But for everything else - cars, phones, electronics, food, subscriptions, jewelry - I 100% agree. Consider two people: * One person has $10k saved, invested into something safe and liquid. Then buys s…
I think without mortgages most people would rent or rent-to-own, rents wouldn't be dragged up by housing appreciation, and affordable/social housing would be cheaper to provide because of lower opportunity cost.
Re: Burrito Now, Pay Later
#44I have a background in options trading and fixed income markets, basically the kind of professional education one gets while participating in the "financialization of everything". I'm not sure it's great. It's definitely useful for people to be able to unbundle risks. Or rather, it's useful to someone who knows what they are doing. Something like what's described in the article, for instance, where there's a mutual b…
If houses sold for a lot less, there would probably be fewer built, which would drive up the housing prices due to increasing scarcity. But now people can’t take on debt to buy them, so everything just sort of… stagnates.
Re: Burrito Now, Pay Later
#45He brushes over ethical concerns of BNPL but draws the line at sports betting. But BNPL by design encourages you to buy things you can't afford and complicates your finances with more timed bills to pay. It makes it more likely people don't budget well and form buffers. A PNBL would be better, add 10% tithe to every purchase that goes to a checking account. Once that reaches $1k it overflows to an index fund. He says…
I've suggested a different take on PNBL in the context of gambling before, to protect people against addiction without outright making it illegal as is widely done today. The idea is if you want to gamble more than some unprotected quantity, you have to first allocate the money and leave it for a month or two. People with insufficient impulse control or financial security will find that hard, but light recreational users shouldn't be inconvenienced too much.
The same ideas can work for other things, though it's easiest to apply to predatory behaviour.
Re: Burrito Now, Pay Later
#46This treatise, from someone obviously in the industry, is merely another payday loan shark attempting to justify the existence of their clearly predatory products. How many of the consumers of this product are even remotely able to comprehend the piece as-is described? The article describes a "complete market". Yes, a market that is completely able to extract as much money from an exploited, uneducated populace as po…
An industry of parasites, extracting money from people already down on their luck. Rats.
Re: Burrito Now, Pay Later
#47> "Despite skepticism from Volcker and Buffet, financial innovation has been and will continue to be a massive net positive for humanity."
I'm not an economist by any means, but most 'financial innovation' I've seen has resulted in new regulations to rein it in and/or block it, which is not a good look for the entire sector. Strong start.
> "To free up capital, the provider bundles many $100 loans and sells them to investors for 95 cents on the dollar through securitization. This allows the provider to recycle funds into new loans, continuing to earn fees."
> "In exchange for fees, banks structure these loans and quickly move them off their balance sheets and to investors."
Even if we ignore the morality of providing predatory loans to people who can't afford to pay for groceries up front, you would think that someone making a good-faith argument would realize, upon writing stuff like the above, that no, this is not a good financial product actually.
If the author actually read some of the stuff they've linked, they'd come across stuff like this:
> "A larger proportion of interest-bearing loans will put the BNPL platforms under tighter regulatory scrutiny, since there are rules and regulations to cap interest rates and to ensure sufficient disclosures to consumers, said Stephen Biggar, director of financial services research at Argus Research."
> "Warehouse facilities tend to have the highest cost compared to other funding sources, while selling the receivables as asset-backed securities is generally cheaper but more volatile and risky, depending on investors' sentiment, Lucas said."
I'm sure the author would say that the fact that there's an appetite for this justifies the offering existing, and I'm looking forward to their next article about all the positive value that loan sharks provide, or why all the failures derived from high-risk assets falling through are perfectly fine.
> "Non-Systemic Risk (possibly famous last words but we’ll see)"
> "Do I want to see a Sports Betting BBS Index? No. Will it happen? Definitely. Sports betting does a lot of damage to the finances of American households but when the loans backing them are securitized, they will make for a great fixed income product because because gambling is a somewhat recession-resilient industry, much like other ‘sin sectors’ like alcohol and tobacco (BBS indexes for alcohol and tobacco will also happen, and around here is where I may get tired of winning)."
I hope that this entire article is a joke that flew over my head.
> "Late Fees: Miss a payment, and you’ll likely face a modest fee, often capped to keep things reasonable. Picture Alice, who forgets a $25 installment on her $100 DoorDash transaction. She’s hit with a $7 late fee, tacked onto her next payment. Annoying, but it probably won’t push her down a debt spiral."
Yes, I'm sure that tacking on a 30% late fee to a person who can't pay $25 is reasonable.
> "In Design, the principle of Universal Design focuses on creating inclusive systems and tools that improve usability for all. Autocorrect, text-to-speech readers, dark mode, and subtitles all came from Universal Design. Similarly, lending that makes credit more affordable and accessible for lower-income individuals will reduce credit costs for all borrowers."
This is such a bad-faith argument, I'm frankly surprised to see it written.
The _least_ I can say about the article is that I am unconvinced, and that I'd be happy if I never got the chance to meet the author.
Re: Burrito Now, Pay Later
#48How is everyone so sure this is not satire? Consider the subscription prompt:
>To receive new posts and support my grift, please become a subscriber.
The article reads straight, but this line and the highly generic and corporate name of the blog ("Enterprise Value") make me question that.
Re: Burrito Now, Pay Later
#49This treatise, from someone obviously in the industry, is merely another payday loan shark attempting to justify the existence of their clearly predatory products. How many of the consumers of this product are even remotely able to comprehend the piece as-is described? The article describes a "complete market". Yes, a market that is completely able to extract as much money from an exploited, uneducated populace as po…
Amen. It's been my experience that, for any innovation in financial technology, if you keep asking "and why is that beneficial?" for long enough, you will finally arrive (via tangents into "liquidity" and suchlike) at "it allows those with money to extract more money from those with less money".
Yes. That’s literally the economic system we have agreed upon in the United States States and continue to vote for.
Re: Burrito Now, Pay Later
#50This treatise, from someone obviously in the industry, is merely another payday loan shark attempting to justify the existence of their clearly predatory products. How many of the consumers of this product are even remotely able to comprehend the piece as-is described? The article describes a "complete market". Yes, a market that is completely able to extract as much money from an exploited, uneducated populace as po…
Amen. It's been my experience that, for any innovation in financial technology, if you keep asking "and why is that beneficial?" for long enough, you will finally arrive (via tangents into "liquidity" and suchlike) at "it allows those with money to extract more money from those with less money".
I don't know that's quite true.
I've seen cases where it allows those with money to extract money from those with a lot of money too.
Take this situation:
Business A and business B are both doing well and competing with each other in a duopoly.
a) No credit: Each business needs to be in the black, and competition is sustainable.
b) Credit: Whichever business borrows more money to spend on buying customers is more competitive in the short term (which can lead to monopoly long-term). Both businesses run in the red are and brittle. In any downturn, tightening of credit, etc. both are liable to go under.
This competition to raise increasing amount of money to be competitive (to increasing devaluation and/or debt makes for a pretty broken economy), and makes traditional businesses (which invest in R&D from profits) increasingly unsustainable.
This even goes to government level. Historically, if e.g. two European powers were in a war, whomever could borrow more to buy weapons / hire mercenaries would have an advantage. Access to credit made for more costly, more deadly wars, and broken national economies. If neither side had access to credit, both sides would be strictly better off.