Hmmmm... spending money you don't have is how modern economies work, to a great extent. Companies take out loans to fund investment when cost of capital makes sense. People take out mortgages to buy homes.
> However, the financially irresponsible tend to blame the tool (eg credit cards) rather than becoming more responsible, and, in the case of this article, Gen Z seemed to have fallen prey to a similar tool but with a newer name.
Well, there is a certain class of loan products that preys on people who don't deeply understand how our financial system works. That understanding only comes from experience. How much can you truly blame someone when the "tool" is designed in such a way to take advantage of them. Lenders obscure the cost/risk, use advertising to make it seem like free money, etc. They target young people, because they are the ones most vulnerable to such tactics, and they can probably work for a long time, so you can make a ton of interest odd them, especially with the current bankruptcy laws.
I think it's worth distinguishing between different kinds of debt here. The article is discussing consumer debt (caused by consumption). The debt you are referring to is capital-debt, ie debt incurred to purchase an asset (which could be resold) or used to build an income.
Consumer debt is typically bad, and asset debt is typically good
But your point is not wrong. Western economies are largely fueled by consumer debt. If consumers all spent according to their means, and saved as much as they could, the effects on the "economy" (which is literally the "movement of money") would be devastating.
You basically just described loans. So the mortgage industry.
I'm not looking forward to bailing people or companies out for being irresponsible again (referring to 2008 housing, I'm fine with student loan forgiveness).
If your life is "unstable" in the sense that you change address frequently for work reasons, or your income is insecure, then making long term commitments make no sense.
On the other hand lots of people live stable, productive lives, and are lucky enough to have good job security, and good financial discipline. Let's call this group the "middle class" - they earn a reasonable salary, with good job security, but don't have access to capital, but equally are not as insecure as the masses living day to day.
Providing this group with access to capital has benefits to them, and society as a whole. It encourages long-term decision making and promotes community stability. Ultimately it allows people to "rise up" the economic ladder.
On an even longer scale than the mortgage, it provides security. Someone approaching retirement discovers they will forever now live rent-free, or alternatively have accumulated capital that can help fund retirement.
If you never get a mortgage you still have to live somewhere, but you'll be paying rent for 50 years, not 20.
I found a 450k home near me on Zillow. If I put 20% down today with a 30 year mortgage, include property taxes, home owner’s insurance and the $100/mo hoa fee I will spend $550k in interest, $210k in property taxes, $30k in hoa fees and $60k in homeowners insurance or $850k of money that isn’t equity over the lifetime of the loan.
My rent is $1400/mo in the same area. Let’s make it $2k to account for some inflation. I will spend $720k over 30 years and all my “equity” actually pays because it’s in the market and not my roof.
But wait that’s not at all realistic. I want to own a house! If me and my partner can save 5k/mo (which is actually low since that mortgage was gonna cost us 3.7k a month and be at most 30% of our cash flow) we can buy cash in about 8 years.
So we spend $192k in rent to get $450k of equity or we spend $550k to do the same.
And this isn’t theoretical either. I’m two years and 130k into this process. I would be further but I had to eat a high six figure medical bill which thankfully didn’t financially ruin me and cost nothing setting my clock back. And if that isn’t the biggest endorsement of this strategy I don’t know what is.
Why? Is that so different? I'd consider owning ones own home via a mortgage to be more sensible than overspending on a student loan.
I would agree that higher education shouldn't be the price it is and should be funded. However, student loan forgiveness is kind of back door higher education funding, it's pretty odd.
The system is designed to obligate people to use credit, and I can see how tempting and easy it is for someone that lives paycheck to paycheck to use their credit card and carry balance.
Edit: I wanted to add. News websites have a habit of blaming gen z for all the different issues but forget to blame the system. Gen z is poorer than previous generations, and that should be highlighted everytime they're blamed
Fixing the system from the top probably works better for the future, but the current generation cannot be helped like that.
They used to blame millennials. It's amazing how little introspection media outlets have.
The thing that makes me angry is that I am not interested in their money, credit is still needed even when installing internet at my home (looking at you AT&T), where the bill could be prepaid instead, but they could still reject you and charge a high deposit. It's beyond ridiculous.
> I think only the US has this system?
I think so. And I hope no one gets "inspired" thinking the US is perfect and copies the same system in their country.
Don't take on debt to pay debt.
Meh - I've spent money I didn't have when I was younger - life is short, what was a lot of money back then is irrelevant to me now and that's expected (you earn more the further you go in your career). I can't go back to twenties now no matter how much I saved back then.
Note that in cases where people go into debt for much more unavoidable reasons ("her husband got cancer and racked up a million dollars in medical bills before he died", "she was born into poverty and had to start work as a waitress at a young age to keep a roof over her sibling's heads"), people are much less likely to victim-blame, because those cases are much more legitimately victims.
Who is the moral arbiter of what kind of debt is/isn't valid. Everyone on here is pretending like people are perfectly informed about how these companies collect on their debts, but the nature of this article suggests there's more behind the scenes from these companies.
If I open up "xracy's murder tools" am I responsible for people who buy things from me to murder people? Surely not, surely it's only on the people who didn't read the terms and conditions in my store that explicitly state you can't use my tool's to murder people.
These companies are offering people one-off credit cards without actually stating that. That's shady business at best, and actively misleading at worst. Surely they're to blame for misleading promises. I would bet dollars to donuts also that in the next few years it'll come out they have other shady practices too...
They're not victims. They knew the risks and decided to venture.
Obviously, one should not blame a murder/rape victim
Have you read the terms and conditions of buy-now-pay-later companies? I think the clearest takeaway from this article is that people aren't well informed.
Things like gambling, pay day loans, credit cards, buy now pay later are all forms of predatory behaviour and are in that way similar to rape/murder but considerably less grievous. The threshold for victim blaming is alot less in these situations but you certainly still could.
I don't think you should admonish someone for victim blaming here or make out they're equivalent to rape or murder, they're clearly not.
Is the person who built his house upon the sand to blame or is he an innocent victim of the people who sold him the land, the bricks, the plans and the labour?
Mostly because it's at least drawing people to consider there is another side to this.
There are similar parallels with ancient Sparta. Back then, boys were soldiers by mandate, and were taught to steal from local farms. They were whipped for getting caught - not for theft. Theft was encouraged, getting caught was severely punished.
Just interesting things to consider that come to my mind.
People consent to giving people their money all the time, and it is still illegal and immoral if the person offering deceived them. OR maybe you're a phisher and you think there's nothing wrong with phishing...
Ftx claimed a token they made up had value and it didn't. Everyone knew the token was made up
Many around ~20 don't have a sense for financial responsibility yet, and will rack up debt without being aware of the consequences.
Banks & Co. couldn't care less though, a young person in debt will have all its life to pay up, so why not just shower them in money.
Never used a credit card before?
Why are credit cards regulated pretty strictly for this, but these loans aren't? That doesn't sound like personal responsibility to me... that sounds like regulation doing its job...
However, the financially irresponsible tend to blame the tool (eg credit cards) rather than becoming more responsible, and, in the case of this article, Gen Z seemed to have fallen prey to a similar tool but with a newer name.