This Mess

Perhaps looking back is too much like crying over split milk. Still sometimes looking back serves to remind that “what is” frequently isn’t what was.  And if that is the case, perhaps too what “will be” doesn’t have to be “what is.”

What was in 1980 was that the credit card “industry” was going in the toilet.  Usury laws prohibited the “industry” from taking more than 12% interest on its unsecured credit card loans; but inflation was running at 20%.

At the same time, agriculture in South Dakota was going in the toilet.  Farmers needed credit and could get it only from local banks that were charging 30 to 35% on a business loan.  So Citibank contacted the officials of South Dakota and said if you remove your usury laws and allow us to charge the interest we think the market will bear we will move our credit card operation to South Dakota.

So that’s what happened.  No more usury laws.  The credit card companies were freed up—along with an assist from a law that said the credit card companies could “export” the interest rate they were charging in South Dakota to the whole nation.

So that’s how the floodgates opened.  De-regulation and legal chicanery and suddenly unsecured loads were available to every American.  This propelled the growth of what I call the consumer society.

And now we see the results—28 years later….

And the government could, if the government wished, once again enforce limits on the usurious interest rates now charged by the credit card “industry.”

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