I still don’t comprehend how we have a system where you have to borrow money to make borrowing money cheaper, and you have to open random accounts at department scores to help you pay for your car better?
It never was explained very well to me but I hate it and want it to go away
Assuming you have a monetary economy, credit is both necessary and good. You shouldn't be constrained by immediate cash surplus.
The problem is interest on credit (aka usury), particularly when that rate is higher than the household rate of income growth.
The Marxist take on this is "just abolish money". The Succ view is "just abolish debt". The Neoliberal view is "just lower interest rates". But, at the end of the day, you can't just not have credit in a monetary system.
Money allows individuals to engage in commerce without a prior working social relationship. And it grants a fungibility to goods and services, such that you can gauge their exchange value relatively easily.
This is preferable to a Gift Economy, where one needs strong social bonds to discourage the free rider problem.
Credit allows a certain degree of Gift Economy to be incorporated into the monetary system, as individuals are able to obtain fungible monetary gifts. This grants them the ability to build capital stock and access seed money that would otherwise only be available to wealthy social circles. One of the big challenges of early 20th-century communism was in how to encourage entrepreneurship without falling back into a capitalist economic state. The East European Soviets leaned too heavily towards central control and produced a great deal of cronyism as a result. However, German Mittelstand and their 21st century East Asian peer systems get around the stagnation of a fully-centralized economy with a functional credit system that is not a perpetual financial obligation on the recipient.
Private for-profit credit systems become problematic, because they no longer employ gifts, but binding contracts enforced through state power. Rather than extending communal surplus to entrepreneurial individuals, we're establishing claims on their productivity potentially in excess of their capacity to produce. The western system's embrace of private credit causes western leftists to fear it too much.
It never was explained very well to me but I hate it and want it to go away
The gist of the thing is that people who are going to lend money to others want a way to know how likely they are to pay it back. A credit score is [theoretically] a measure of how reliable someone is with paying back debt. Thus, in order to increase it you have to take on debt and pay it back. Having a low credit score means that you don't have a history of paying back debt, so they ratchet up the rates to make up for the increased risk. On an individual level it doesn't make any sense, but from a higher level statistical viewpoint, the higher interest rates balance out the risk of nonpayment amongst a group.
I still don’t comprehend how we have a system where you have to borrow money to make borrowing money cheaper, and you have to open random accounts at department scores to help you pay for your car better?
It never was explained very well to me but I hate it and want it to go away
Malcolm X's father puts it pretty well: ‘Credit is the first step into debt and back into slavery,’
That's about all you need to know, really.
It's so dumb that you also have to intentionally get into debt and pay it back to get a credit score so you can buy a house.
Assuming you have a monetary economy, credit is both necessary and good. You shouldn't be constrained by immediate cash surplus.
The problem is interest on credit (aka usury), particularly when that rate is higher than the household rate of income growth.
The Marxist take on this is "just abolish money". The Succ view is "just abolish debt". The Neoliberal view is "just lower interest rates". But, at the end of the day, you can't just not have credit in a monetary system.
The existence of money necessarily produces misery. By extension, while credit may suit the monetary system, it isn't good.
Money allows individuals to engage in commerce without a prior working social relationship. And it grants a fungibility to goods and services, such that you can gauge their exchange value relatively easily.
This is preferable to a Gift Economy, where one needs strong social bonds to discourage the free rider problem.
Credit allows a certain degree of Gift Economy to be incorporated into the monetary system, as individuals are able to obtain fungible monetary gifts. This grants them the ability to build capital stock and access seed money that would otherwise only be available to wealthy social circles. One of the big challenges of early 20th-century communism was in how to encourage entrepreneurship without falling back into a capitalist economic state. The East European Soviets leaned too heavily towards central control and produced a great deal of cronyism as a result. However, German Mittelstand and their 21st century East Asian peer systems get around the stagnation of a fully-centralized economy with a functional credit system that is not a perpetual financial obligation on the recipient.
Private for-profit credit systems become problematic, because they no longer employ gifts, but binding contracts enforced through state power. Rather than extending communal surplus to entrepreneurial individuals, we're establishing claims on their productivity potentially in excess of their capacity to produce. The western system's embrace of private credit causes western leftists to fear it too much.
Lmao
Sorry. Here, let me try it this way.
Monetary Economy + Gift Economy make Communism Work Gooder
deleted by creator
The gist of the thing is that people who are going to lend money to others want a way to know how likely they are to pay it back. A credit score is [theoretically] a measure of how reliable someone is with paying back debt. Thus, in order to increase it you have to take on debt and pay it back. Having a low credit score means that you don't have a history of paying back debt, so they ratchet up the rates to make up for the increased risk. On an individual level it doesn't make any sense, but from a higher level statistical viewpoint, the higher interest rates balance out the risk of nonpayment amongst a group.
technically it can just be few dollars, there are some neoliberal startups that offer cheap loans to build credit