Political Utility of Credit Cards

I wanted to talk for a moment about the political utility of credit cards. In The United States, consumers have racked up roughly $1,000,000,000,000 worth of credit card debt. That comes to around 200,000,000,000 annually in interest payments alone. Now in The United States, there are more credit card users than there are people in the workforce with around a 165,000,000 workers versus roughly 183,000,000 credit card users. If you were to divide the total credit card debt by the total number of credit card users and distribute that debt evenly across all people, that would come to an individual debt responsibility of over $5,000,000.

Now obviously, that's not the case. Obviously, most credit card users are not living like millionaires and the number is being skewed by the presence of millionaires and billionaires who use credit cards just as the actual median income in The United States, the average income is not really $70,000 a year as is suggested by reports. The median income is the half point between the highest income and the lowest income. So when the highest income is in the hundreds of billions of dollars, that skews the result, that skews what the median is, what the median point is, the middle point. The actual annual income for most Americans, the average income is gonna be somewhere between 25 to 40 k.

And the actual individual credit card debt for most Americans is somewhere between 5,000 to $10,000. Now the total consumer spending in The United States last year was around roughly $14,000,000,000,000. 1,000,000,000,000 of that was done through credit card debt. So that translates to roughly $1,000,000,000,000 that might not have been spent at all in the economy if people were only spending the money that they have in their wallet. Now here in Malaysia, approximately a 178,000,000,000 ringgits worth of total consumer spending, total consumer activity in this country was funded through credit card debt and that amounts to roughly 20% of total consumer activity, total consumer spending, which is just another way of saying that people's actual ability to spend is roughly 20% lower than it is.

If we were gauging people's ability to spend based exclusively on the money that they have in their wallets. What all of this means is that because of credit cards, people are able to pretend that they are doing better financially than they really are. And it means that governments can pretend that they are managing the economy better and more successfully than they are. And the cost of this game of pretend played by both governments and individuals is the rising level of individual and household debt. I mean, just imagine if there were no credit cards and everyone had to actually make do on their real incomes.

Now approximately a quarter of credit card purchases are spent on necessities and that figure has been increasing year on year. And even if people are using their credit cards on non necessities, those are lifestyle augmentations that they would not be able to afford on their real incomes. In other words, without credit cards, they would be forced to confront the much more bare bones reality of their financial situations. And governments would have to explain why their citizens are not thriving and many barely surviving in the economies that they manage. So you see government mismanagement of economies is being cloaked by the illusion of prosperity and robust spending that is solely enabled by credit cards.

So governments are not actually providing their citizens with the standards of living or the quality of life that they're able to pretend that they are providing. And the thing that is enabling them to pretend that they're providing this is their willingness to watch their citizens sink deeper and deeper into debt. If people could not swipe their credit cards up and down to create this illusion of financial stability and success, they might become unmanageably discontent. But with credit cards, the system is able to distract people from the failures of the economy and thereby the system is able to shift responsibility for the overall failures of the economy. They're able to shift responsibility for those failures onto individuals by burdening them with personal debts.

And of course, if they are unable to pay those debts or they declare bankruptcy, then everyone regards them as a failure. It's a pretty neat trick. Only spend the money that's in your pocket.