4 ms·

poor people don't get lower rates. they get payday loans and 19% credit cards, or a tent. inflation is "good" for debts if your budget is otherwise balanced an

by ruined 5y ago

poor people don't get lower rates. they get payday loans and 19% credit cards, or a tent. inflation is "good" for debts if your budget is otherwise balanced and your income rises apace, but if either is not the case inflation will only depress purchasing power. historical farmer revolts were interested in higher inflation because they had land, a real asset, and sold crops, real commodities, that provided appropriate income. modern poor people generally have zero assets.

xxpor 5y ago
>they get payday loans and 19% credit cards, or a tent. The rates for those are still lower than they otherwise would be.
- ruined 5y ago
  payday loan APR is generally around 300% to 700%. this is not a rate set by a market, it is the claw of a predator, useful only to deal a killing blow.
  - whimsicalism 5y ago
    Rates are set by a market. It's interesting how even as formal christianity is in decline, the moral constructs that it popularized (distaste for usury, protestant emphasis on liberty over well-being) morph into new forms.
  - xxpor 5y ago
    A lot of states have capped those rates relative to prime.
    - ruined 5y ago
      which simply reinforces the idea that it's not a market. credit cards, too, are generally capped. the rate always maxes out the legislated cap. so it's not really dependent.
      - Ericson2314 5y ago
        Yes the market power is also one sided, capping the rate also doesn't really help without guaranteeing more access to credit. The best thing is: a) UBI, just hand out a tiny bit of money to make poor people more liquid, because liquidity kills, not insolvency b) postal banking, because even shittier than a payday loan is high fee check cashing without a pretense of debt! Poor people hopefully at the point can save up a paychecks worth of buffer in their bank account, and don't need postal bank loans to replay payday loans.
  - kbelder 5y ago
    "Can I borrow $10? I'll pay you back $11 next week." There, you've just committed the sin of collecting 14,000% APR. You can't compare payday loans to things like mortgage rates or bond returns. It's a market, but it's a very different niche. It's like comparing the cost of mineral water at the grocery star to the cost per gallon of your tap water.
whimsicalism 5y ago
> poor people don't get lower rates. they get payday loans and 19% credit cards, or a tent. Rates are relative, looser money absolutely translates to lower rates, even for poor people. Claiming otherwise is (social) science denial. > modern poor people generally have zero assets. Poor and lower class people are often deeply in debt. Many poor people will even have homes with very large mortgages outstanding, and without a route to paying it down. The median black person in Boston, for instance, (not to conflate race and poverty, it is just an illustrative statistic that comes to mind) has $8 to their name. That does not mean they literally only have $8 in a wallet somewhere, but it does mean half of those people are underwater in debt. This is before you even start looking at mortgages. I'm assuming that is not unique to Boston. That is actually very analogous to the situation we are finding ourselves in. Tighter policy would increase the real value of the payments that poor people have to make on their homes, etc.
- Ericson2314 5y ago
  Poor people don't have mortgages. In a non-shit city they shouldn't even have cars (a depreciating asset won't do them any good). Pay check to pay check can mean literally that. Money comes in, money goes out. There is no buffer. UDP not TCP life :D.
- fivea 5y ago
  > Rates are relative, looser money absolutely translates to lower rates, even for poor people. Claiming otherwise is (social) science denial. This hypothesis presumes that loans are priced exclusively based on cost. However, all products and services are priced based on willingness to pay, and profit is the delta between cost of delivering it and what customers are willing to pay. Price gouging runs rampant on credit cards because they are designed to gouge their users. The credit card adoption and payment customer experiences are extremely smooth and free from any resistance to the point where you can pretty much find yourself with a new credit card in your pocket without knowing how. However, avoiding charges and interest payments is extremely hard by design, specially when compared with debit cards. Customers cannot escape these charges, and with low income customers they syphon a relatively large portion of the little disposable income they have.
Ericson2314 5y ago
Farmers needed loans to get them between harvests, and those were also quite usurious. The land was in relative abundance (even with the "end of the frontier"), so it's not like it was the sort of anchoring asset that middle class home-ownership today is crocked up to be. But you are right that poor assets or debts are not enough to explain how interests rates are supposed to help or hurt them. The idea is very roughly that lower interest rates unlock investment which causes them to have jobs. The traditional first approximation is regular people live entirely off income and have no meaningful assets or debts, and rich people don't work and just have assets and debts, live off profits/dividends, or even just loans with their appreciating assets as collateral. It is "class as calculus" as I wrote more about in another comment.
- dnautics 5y ago
  > The idea is very roughly that lower interest rates unlock investment which causes them to have jobs. Let's be honest here, this is just a neoliberal fantasy that amounts to a liberal equivalent of trickle-down:. Enrich the rich and the $ (via "jobs") will make it magically to the Lower classes.
  - Ericson2314 5y ago
    Yes, but sadly the idea is less controversial with rich institutions (who presumably buy much of the treasury bonds) than it is with rich people/households.

by ruined 5y ago

xxpor 5y ago

>they get payday loans and 19% credit cards, or a tent. The rates for those are still lower than they otherwise would be.

ruined 5y ago
payday loan APR is generally around 300% to 700%. this is not a rate set by a market, it is the claw of a predator, useful only to deal a killing blow.
- whimsicalism 5y ago
  Rates are set by a market. It's interesting how even as formal christianity is in decline, the moral constructs that it popularized (distaste for usury, protestant emphasis on liberty over well-being) morph into new forms.
- xxpor 5y ago
  A lot of states have capped those rates relative to prime.
  - ruined 5y ago
    which simply reinforces the idea that it's not a market. credit cards, too, are generally capped. the rate always maxes out the legislated cap. so it's not really dependent.
    - Ericson2314 5y ago
      Yes the market power is also one sided, capping the rate also doesn't really help without guaranteeing more access to credit. The best thing is: a) UBI, just hand out a tiny bit of money to make poor people more liquid, because liquidity kills, not insolvency b) postal banking, because even shittier than a payday loan is high fee check cashing without a pretense of debt! Poor people hopefully at the point can save up a paychecks worth of buffer in their bank account, and don't need postal bank loans to replay payday loans.
- kbelder 5y ago
  "Can I borrow $10? I'll pay you back $11 next week." There, you've just committed the sin of collecting 14,000% APR. You can't compare payday loans to things like mortgage rates or bond returns. It's a market, but it's a very different niche. It's like comparing the cost of mineral water at the grocery star to the cost per gallon of your tap water.

whimsicalism 5y ago

> poor people don't get lower rates. they get payday loans and 19% credit cards, or a tent. Rates are relative, looser money absolutely translates to lower rates, even for poor people. Claiming otherwise is (social) science denial. > modern poor people generally have zero assets. Poor and lower class people are often deeply in debt. Many poor people will even have homes with very large mortgages outstanding, and without a route to paying it down. The median black person in Boston, for instance, (not to conflate race and poverty, it is just an illustrative statistic that comes to mind) has $8 to their name. That does not mean they literally only have $8 in a wallet somewhere, but it does mean half of those people are underwater in debt. This is before you even start looking at mortgages. I'm assuming that is not unique to Boston. That is actually very analogous to the situation we are finding ourselves in. Tighter policy would increase the real value of the payments that poor people have to make on their homes, etc.

Ericson2314 5y ago
Poor people don't have mortgages. In a non-shit city they shouldn't even have cars (a depreciating asset won't do them any good). Pay check to pay check can mean literally that. Money comes in, money goes out. There is no buffer. UDP not TCP life :D.
fivea 5y ago
> Rates are relative, looser money absolutely translates to lower rates, even for poor people. Claiming otherwise is (social) science denial. This hypothesis presumes that loans are priced exclusively based on cost. However, all products and services are priced based on willingness to pay, and profit is the delta between cost of delivering it and what customers are willing to pay. Price gouging runs rampant on credit cards because they are designed to gouge their users. The credit card adoption and payment customer experiences are extremely smooth and free from any resistance to the point where you can pretty much find yourself with a new credit card in your pocket without knowing how. However, avoiding charges and interest payments is extremely hard by design, specially when compared with debit cards. Customers cannot escape these charges, and with low income customers they syphon a relatively large portion of the little disposable income they have.

Ericson2314 5y ago

Farmers needed loans to get them between harvests, and those were also quite usurious. The land was in relative abundance (even with the "end of the frontier"), so it's not like it was the sort of anchoring asset that middle class home-ownership today is crocked up to be. But you are right that poor assets or debts are not enough to explain how interests rates are supposed to help or hurt them. The idea is very roughly that lower interest rates unlock investment which causes them to have jobs. The traditional first approximation is regular people live entirely off income and have no meaningful assets or debts, and rich people don't work and just have assets and debts, live off profits/dividends, or even just loans with their appreciating assets as collateral. It is "class as calculus" as I wrote more about in another comment.

dnautics 5y ago
> The idea is very roughly that lower interest rates unlock investment which causes them to have jobs. Let's be honest here, this is just a neoliberal fantasy that amounts to a liberal equivalent of trickle-down:. Enrich the rich and the $ (via "jobs") will make it magically to the Lower classes.
- Ericson2314 5y ago
  Yes, but sadly the idea is less controversial with rich institutions (who presumably buy much of the treasury bonds) than it is with rich people/households.