Debt, Gratification, & The Seduction of the Now

Debt PicIn a recent live journal entry, I asked, “How much money would be freed up if you were not in debt? . . . And what could you do with that money instead?” The key point was that you could save that money or invest it.

And thus we approach the age-old dilemma: savings versus debt.

In earlier entries in this series on money, sex, and power, we looked at the western money psychology, the dynamics of capitalism, the economic rules of survival, the service economy, and the living wage. And now we turn our gaze to debt.

Consider this: what if instead of purchasing debt (which is what you do when you use your credit card), you instead purchased interest (which is what you do when you save money)? With debt, you are constantly purchasing more debt with each payment that does not pay it off. With savings, you are constantly purchasing more interest each time you do not spend it.


Juicy AppleI earlier gave an example of someone walking through a carnival with only a quarter in her pocket, when some slick guy makes her a deal:

"This apple costs $2. If you want to purchase it, you can pay me a quarter now and every month afterwards for 2 years. OR you can put the quarter in your pocket and I will give you a dime for every month you don't take it out."

A reader pointed that, “Yeah, you save money [if you keep your quarter in your pocket], but ultimately you do not get the apple.” And I responded, “No, you do not get the apple immediately.”

So when you’re offered the above deal, here are your choices: you either pay $6 for a $2 apple, or...

... You wait a year and a half to purchase it for $2 using the money (interest) that the slick guy gives to you, or …

... You add a quarter to your pocket each month for 7 months and pay $2 using your own money and keep the dimes (interest) that you’ve accumulated, or …

… Any other combo that keeps the cost of the apple at or below $2!

What you do not get in any of the final three options is instant gratification.

And that is the real issue here -- instant, as opposed to deferred, gratification. Because, if you were not in debt, all the money used to pay debt could be saved. And if you had savings, you could pay for many emergencies from your savings instead of having to use a credit card. And, get this: you could save up for the items you want to purchase, instead of purchasing debt in order to have them immediately. Additionally, because you’d earn interest on your savings, you would get paid in order to defer your gratification.

Back in the ancient history of the 50’s, 60’s, and 70’s, stores were set up this way. Most department, furniture and clothing stores offered layaway services. You could purchase all kinds of things this way without incurring increasing debt. You paid a simple one-time fee and promised to pay every two weeks or once a month till you paid it off. Some stores allowed you to take the items home after you had paid a portion off. It was a good way to establish a credit history. Layaway helped many working class families (mine included) afford furniture, appliances and large ticket purchases such as back-to-school clothing and winter coats. Also most department and furniture stores offered the service along side store specific credit cards. For many small merchants however, lay-a-way was the only option besides outright purchase. Also, even with the fee, it was still cheaper than long-term credit card debt.

However compared to simply putting the money in a savings account until you had enough to buy the item, layaway compared poorly. You didn't earn interest and instead the store earned interest on your money. Plus, you lost the use of the money in case of an emergency. Thus, if you'd committed to put $50 in law-a-way every month for a $250 item and had done so for 4 months ($200 if my math is right) and then your car broke down and needed a $200 repair, you didn't have the choice to take the money out to fix your car so you could get to work. A better option even then was to rely on passbook savings accounts. Additionally most banks and credit unions advertised “savings plans or Christmas funds” in order to encourage folks to save money in order to make purchases.

For Sale: Debt

Sale StickerBut now it seems as if almost everyone is in the debt-selling business. Everywhere you look someone is offering a branded credit card with a cute picture most often from the big two in debt selling, MasterCard and Visa. It is a booming business. And it is a business that makes money twice on every purchase. First it takes a cut from the sale, so the merchant takes a hit. Then it makes money by selling you debt, tempting you with ridiculous minimum payments (albeit coupled with double-digit annual interest).

Just think, how come consumer credit rates didn’t go down when regular interest rates (i.e., the debt-sellers’ costs) dropped? The answer of course is: why should they? It is a seller’s market. So a few companies will offer you rates in the low teens -- big deal! We have been in single-digit interest rates for most other consumer offerings for a while. Mortgage rates, which are now inching back up, were at an all-time low, yet credit card rates barely moved at all.

The credit card business is too hot; you can make way too much money catering to instant gratification. Which brings us to another facet of our western money psychology, the belief that tomorrow may never come. We will always pay off our debts -- tomorrow, next month, when the tax refund comes in, when we get a raise, when the lotto hits, anytime that’s sufficiently far off into the future.

How else do you explain the increasing reliance on credit for “everyday” purchases? We “know” logically that we shouldn’t buy that movie ticket with a credit card, but our shadow steps in and insists that it’s “worth” it, nonetheless. Not because we “needed” to see a movie when we were short of cash, but because we “needed” to avoid facing some issue that our desire to see a movie we couldn’t afford would have brought up.

And, once you’re in debt, the monthly payments, even minimum monthly payments, can make it impossible to pay cash for things that are essentials, for those things like food and medicine that we really do need right now.

I kid you not; but you can now use a credit card to purchase bus fare. What madness is this?

The Seduction

It is not madness; it is seduction. We are being seduced by the primacy of the now. We are like toddlers running through the candy store. I want it all and I want it NOW! What the hell is that about? Really? I suspect it is a combination of several factors.

Migrant Mother PicOne factor has to be that modern western culture is an offspring of widespread hunger -- both literal and spiritual. You cannot get more primal and now-focused than hunger. The parents that reared most baby-boomers were themselves raised during the Great Depression and came to maturation during a war economy. Similarly, in Europe, the widespread wartime and post-war hunger also marked an entire generation. To what extent are we buying more than we need in order to “feed” the shadow hunger passed on to us by our parents, grandparents, and great-grandparents? At the same time, ancient spiritual traditions that once fed our spiritual hungers have died out and only consumerism has stepped in to replace them. Are we buying “stuff” in an effort to alleviate a spiritual hunger that goes unfilled in our collective lives?

We are also inheritors of post-war economic policies that insisted that the surest way to build national economic security was to consume and spend. A nation looking for a good price is very different from one looking for a good job.

. Which brings us to the last factor I plan to discuss – Marketing.

“Marketing is . . . is the process of moving people closer to making a decision to purchase, use, follow, refer, upload, download, obey, reject, conform, become complacent to another person's, society's or organization's value. Simply, if it doesn't facilitate a ‘sale’ then it's not marketing.”

Source: Wikipedia

Everywhere we look, someone is trying to sell us something. They’ll use sex; they’ll use Paris Hilton; they’ll use humor; they’ll use special effects; and, Goddess knows, they’ll use repetition. Sports stadia are now named “Enron Field,” until Enron dissolves in corporate disgrace and a new “sponsor” must be found. You can reliably get to a movie ten minutes late and miss nothing but the same commercials that you would see on TV. Sit in an airport waiting-lounge and you’re assaulted by “news” and ads broadcast on ubiquitous TV screens. And, speaking of TV, even PBS stations now air 60-second spots on behalf of corporate contributors. Spam ads for Viagra fill our e-mail boxes. Some of my favorite web sites are becoming almost unreadable with all the Google ads, banners, and advertising eye candy. Advertisers are looking at ways to send ads to your cell phone. To think that a generation or two ago, all we had to complain about were billboards!

Marketing also exploits our shadows. How often has an ad made you feel inferior? Not sexy enough, not thin enough, not rich enough, not having nearly as much fun as those shiny, happy people in the ad? And the solution is so obvious! Just buy this pill, this beer, this off-road SUV, this cigarette and it will all be better -- immediately!

Marketing, in its varied forms, is designed to create hunger -- to make you want something you’d never even heard of before. More and more of our economy is based on creating a hunger, then making money by fulfilling it. Hunger is immediate; hunger cannot wait. We no longer dream of acquiring, we hunger for it. We salivate for the apple before we taste it. We crave the car before we touch it. We can almost taste the clothing before we wear it.

Hunger is what creates the seduction of immediate gratification. And it is the primary reason why we purchase debt. Buy it today; sleep on it tonight. Today only! One day sale! Gotta have it! Must own it! Now, now, now!

We have become a nation of addicts. And the drug is consumerism. And credit card companies are the biggest pushers on the block. We think we are purchasing a blouse when in fact we are buying debt. We think we are buying a DVD player when we are purchasing debt. Every time we make a purchase, if we use a credit card, the item purchased is debt, debt, debt, etc.

How can we get off this drug? What are concrete strategies to eliminate debt and to keep us out of debt in the first place? And finally, what are the spiritual dimensions of debt, especially in how it relates to our western money psychology? We will cover these issues and more in part 2 of this article.

©2006 Katrina Messenger and Hecate