Where Did You Learn About Money?
I had a blog post percolating in my head after an awkward exchange with a man on twitter about the whole "sexualisation debates" that basically boiled down to "porn is not the problem, the deeply inequal structural differences between how society VALUES men and women differently, whether they are sex workers or cabinet members - THAT is the problem." But it's not done cooking yet.
But then I read this and I realised that today's blog was actually going to be about debt. George Monbiot encapsulates some very complicated economics about the causes of great depressions (like the one in the 1930s, and the one it looks like we're a couple of years into at this point) and it boils down to the levels of private debt. And in the midst of a government that seems to be intent on shifting the debt for basic services like healthcare and education from the public sector, to private individuals - that idea scares the shit out of me.
I don't know how I feel about the suggested mass write-off of irresponsibly made loans. It's complicated. Seems a bit less furiously unjust than letting massive corporations off their tax avoidance interest. Many people that I know who took on those "irresponsible" loans were woefully underinformed about what they involved. I remember myself, in the US, when I signed for my first college financial aid package (including a couple of thousand dollars worth of loans) I basically thought I was being given free money.
What I do know is this: People need to be better educated about finance, and how it works.
Were you taught about debt, credit cards, interest, loans, etc at school? I know I wasn't. I was forced to take a semester's worth of "Home Economics" at one point but that was rather more about baking cakes than it was about balancing chequebooks. And yet, I'm one of the lucky ones, who has somehow kept out of the red though a combination of mostly privilege (racial privilege and class privilege I recognise and acknowledge - it's too easy to bang on about "bootstraps" when you are structurally well-heeled) but also partly because I got an early and chilling peek behind the curtain of financial services.
When I was about 23, my first post-college job, I spent a few months months temping in the call centre of a well known American credit card company, in the brief period before it was outsourced and moved offshore. In order to answer questions about basic account info and balance, we were given a two-day crash course in the products they sold, and the fine-print stuff. They taught us what interest was and worked, how interest was compounded, and how to calculate the minimum payments on card balances.
Simple stuff, right? (And this was in the early 90s, before much of this stuff was deregulated in the States, too.) I tell you, the scales fell from mine eyes.
As a teenger, I used to beg my parsimonious Scots Mum, nose pressed up against the glass as we passed Pizza Hut, wondering why we couldn't go out to eat every week, like many of my schoolfriends. "Put it on the credit card," I'd beg, looking at Ponderosa or Pizza Hut. "And where do you think that money comes from?" my mother would explain. "You have to pay it back eventually." And how.
They actually taught us to push the scams. Get customers to take out cash advances instead of store point purchases. The interest on cash advances was compounded daily, instead of monthly, like conventional purchases. That meant you were charged interest every day, on a balance including the previous day's interest. A few hundred dollars could shoot up into four figure balances. It didn't help if you tried to pay them off quickly - unless you specifically instructed the company (usually in writing) to apply a partial payment against the cash advance, the money would be automatically applied to the whole balance, interest first. That "interest first" thing was always the catch - they taught us how the minimum payments were calculated to cover the interest, but no more. And we were encouraged to assure the customers to make the minimum payment - even though this would make the debt roll on forever. If you followed the bank's friendly, helpful, free advice, you could pay and pay and pay, and never make the slightest dent in your balance. So long as you kept making the minimum payments, they'd raise your credit limit forever.
I was rubbish at that job. My idealistic younger self, unsaddled by a mortgage, used to patiently explain all of this to the poor ladies who rang up wanting to know why their bills were so high, and my contract was discreetly terminated.
The thing is, had I not worked that job, my 20-something self, nose pressed against the glass of Manhattan, would have signed up for every credit card I was offered and ridden them for the same "free money" that I thought my student loans had been. It wasn't that I was smarter or wiser than my friends who *did* fall into the credit trap - if anything, in a lot of ways, I was dumber, more naive, and believed in ridiculous things like unicorns and piskies and the record contract waiting at the end of the next gig. But that experience taught me just how hard banks work to get people to act against their better interests, and how *easy* it is to get sucked into colossal debt.
So, you know. I am not an economist. I'm just someone who's good with spreadsheets. I know that this economic crisis requires solutions which might be counterintuitive to me. I know that it's mainly not down to the individual, but that strong consumer advocates and legislation to protect the consumer against the interests of banking are absolutely vital.
But I do think that one thing we could REALLY do with, is putting in every school, the kind of financial education that I had to go work for a bank to learn. At the same age that kids learn fractions and percentages, they should be learning how interest works and how it compounds. How loans work, how mortgages work, how banks work. Knowledge is power, and banks trade on our ignorance.