Social Question

MatChup's avatar

Could America be a great nation without credit cards?

Asked by MatChup (204 points ) February 1st, 2011

Some cultures around the world still today don’t even believe in buying homes on credit, they save up their money to buy land, then save up more to build their homes from the ground up until they have enough to finish their home.

But these places are mostly in 2nd and 3rd world countries. Here in the US credit open doors, speed up purchasing power and opportunities. Absolutely, but you have to respect it and use it intelligently, which is not the case for most people.

Could our national debt be insignificant if that was the case? Rather than paying $500Million per month just on interests to pay the debt to China.

Would the economy be stagnant without credit?

Most people are spending money they don’t have, buying things they don’t need. They don’t have cash and when they get behind they lose control of their debt. Having cash in the bank and no debt gives you a lot more control.

As for me I am debt free.

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18 Answers

SkulpTor's avatar

I know I do very well without a credit card. Cash is king! Just wish I had more of it!

iamthemob's avatar

Well done on the phrasing of this question. More than people realize, debt is a fantastic driving force in the economy. Consumer credit and debt securitization allows for a lot of debt that isn’t liquid to become liquid, and therefore increase lending generally. And an economy that is friendly to lending is friendly to risk – and one friendly to risk is friendly to innovation.

The problem arises when consumerism takes over and when the market gets enslaved to various sector bubbles. Risk without responsibility and a careless attitude toward whether we’ve properly diversified our debt instruments were all big factors in the current crisis. And a healthy dose of consumerism fuels a market and pushes growth.

Yes – I do believe the economy would be stagnant without credit. But unreigned debt policies lead to overleveraging and overconsumption.

The_Idler's avatar

If you’re talking in terms of success of a debt-based economy, the USA is the greatest nation on Earth.

That’s not to say there aren’t a multitude of other ways to be a great nation, economically,
or indeed otherwise…

EDIT: And it’s also not to say there aren’t a multitude of other ways, in which the USA is a great nation…

iamthemob's avatar

@The_Idler – I wonder if you can point to anything showing how we can succeed as a great nation in terms of economy without a robust credit/debt market.

I don’t really think it’s possible to do so – but that’s not saying I think we’re doing it right right now. ;-)

Ladymia69's avatar

I am fairly debt-free as well, we are an underground force that refuses to pay for stuff with money we don’t have. And I don’t really want the burden of property.

Who knows if it could happen without credit…how would people get houses? Work for X amount of years, and then if you are steadily employed, you can buy a house at 60. A car at 37.

iamthemob's avatar

@ladymia69 – There’s also the concern caused by a consumption drop. How many jobs will we lose because of that drop?

mrrich724's avatar

I think a good balance of cash and credit would be good. If you don’t have $50 or $100 to spend, stop going out to expensive dinners. If you don’t have at least a small savings, stop shopping for excess on the weekends. But, should someone have to spend all their 20’s and 30’s to buy their first car in cash? I don’t think so.

The problem is we make credit available, and that American “I need it, and more of it, NOW” mentality ruins the hope of using credit responsibly.

There is a difference, and quite a big one, between personal debt, and the debt our nation runs on. They discuss it in Econ 101 in college. Ideally, it would be GREAT if America constantly operated in a surplus. But it is alot more realistic and acceptable for a nation to run in a deficit economy than an individual.

If you can’t afford something now, learn to live without it, or work harder to get it. I know it’s hard sometimes, but believe it or not, there are people who work two jobs just to have the things they want or need. I have met a few myself, who work alot to get the things they need, and they do so in order not to put anything on a charge card.

creepermax's avatar

No way! I have built my very identity off credit card debt. Haha, identity thieves nothing good to get off me.

Ladymia69's avatar

@imathemob: Ahhh…I love how the fear is put into us that if we don’t spend gobs of money or buy things we can’t pay for, the economy will crash and we will be to blame for job losses across the board. I do not think I should have to feel bad for lowering my consumption…I feel no shame in it! Why not look hard at the actions of the government in bailing out crooked banks and CEOs after they tipped the economy virtually over? Seems to me that there are far more likely corporations and powerful people who have more to do with the crashing of the economy and loss of jobs, no?

Ladymia69's avatar

I am so sorry for spelling your name wrong up there.

iamthemob's avatar

@ladymia69 – the banks and the CEOs have less to do with it in an intentional way than people think. There was really a perfect storm of events that caused the crash – and yes, some people did behave badly. But most didn’t.

Part of the problem was indeed that overspending was deemed being a responsible citizen. Overconsumption was a good thing for everyone. And that is what people should be ashamed about.

The point is to find the right line – credit and debt power growth, but we were in a market that both promoted and rewarded and obfuscated the risk associated with what turned out to be over-leveraging and faith instead of accuracy.

I am deeply offended that you spelled my name wrong. ;-)

Ladymia69's avatar

Is that Reaganomics? ;)

Ladymia69's avatar

Or Obamanomics? I think I just made up a new word

iamthemob's avatar

No form of -onomics has gotten it right yet.

Ladymia69's avatar

How about Nononomics?

MatChup's avatar

@ladymia69, you’re right, I agree with you that the big guys have more pull to bring down the economy. In my opinion bailing out those big lenders and banks was the biggest mistake Obama has ever made in his administration. However, this is entirely a different topic altogether here and we can expand it in more detail. In this thread the point I was trying to point out was the negative effect credit cards have had in our current economy since they first appeared and what would life have been if they would never been invented. Would we be in a stagnant economy? Would we be a 2nd world economy? On the other hand since they have been part of our life ever since I was born, we can focus on them as part of our life. Then the question arises as if there would have been better regulation and more strict gov intervention, we wouldn’t be in the mess we are in now, right? It is human nature to bend the rules, do what is easiest way out and not necessarily what is right and best for the country. Since credit cards are bailed out by the gov in case someone declares bankruptcy when they get into too much debt, then that’s the easiest thing to do. The negative side effect this causes on the economy is tremendous counting the huge number of bankrptcies happening every month. Sure your credit record will be messed up but you could live with it. So the way our economy is structured allows consumers to bail out of their financial responsibility, which in turns contributes to our amounting external debt.

Ladymia69's avatar

God, that irks me..what would we be like without that ever-encomapassing mountain of credit? What I don’t understand, and is probably a topic for another thread, is how did the US end up owing so much money to the rest of the world? In fact…

shirleylopez's avatar

That is interesting. Credit cards are supposed to be for convenience, and because of mismanagement of expenditures, we are now in deep trouble. Actually, credit is not bad if properly balanced. I wonder if there is a great economist who can solve this situation?

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