In the Merchant of Venice, Shylock (the alleged villain) is portrayed as a loathsome character (Shakespeare shows how Anti-Semitic the times he lived in were) who wants to exact his vengeance on a “hero”, Antonio, by making the terms of a loan include a pound of flesh if money loaned by Shylock is not paid back by Antonio. Spoiler Alert when Antonio defaults on the loan Shylock never gets his payment, however, I have to wonder, did Shylock not have the right idea?
Currently if I have a credit card, I can borrow money with very few physically painful consequences, other than adding more to my current debt load. Eventually I could get to a point where the credit card company might call a collection agency, and I might have to see a credit councillor or even worse, declare bankruptcy.
Still doesn’t really seem as bad as a pound of flesh, does it? Yes, it’s a terrible thing to live through, but let’s ask the question would anyone use credit as easily if the consequences were as severe?
In the horrible days that were the 1980’s loans were at 19% and that was for a mortgage, not for silly things like credit cards (which weren’t being handed out like condoms during Frosh week). Would higher interest rates cause a less loosey goosey attitude towards borrowing in the 21st century? Maybe, but 15% for a mortgage and a threat of losing a toe if you miss a payment would certainly lance any housing bubbles quite quickly, and cause most folks to really figure out if they can afford the $500K condo they think they can afford.
Shylock’s only short coming was that he didn’t specify that he wanted a pound of flesh ,”… organs, blood, bone and all”, then again, if you are writing a contract where you are attempting to maim your customer, would the wording really matter that much?
Am I being facetious? Perhaps, but it will be quite interesting to see if (and when) interest rates finally return to a more normal level.
I was thinking about this the other day too. There used to be a time in history when having debt brought massive shame upon you and your family. Now it almost seems like a badge of honour for some people. What if there was still debtor’s prison? People would surely think twice about defaulting if they’d wind up in jail. …So wouldn’t most people live debt free and be happier for it?
You are preaching to the choir brother.
I, too, would like to see interest rates rise to a more normal range. Yes, it will hurt, but it is going to hurt regardless. If we have a gradual rise, then people will be able to compensate with reduced spending. This will affect the part of the economy based on consumer consumption, but that is going to happen regardless.
I personally feel that artficially low interest rates are causing more long term harm than good. People are being encouraged to take on debt in order for banks to boost their bottom line. People living on investments are being forced to take riskier investment options to support their spending needs. Finally, people new to credit are being conditioned to believing that debt is a good thing.
With today’s use of “electronic” currency (credit or debit), it is simply not the same as living with $60 in your pocket. It is much more real and tangible. A plastic card s not the same. BCM, you and I both have stories of how we had to survive on $40 over a weekend waiting for the banks to open on Monday. That type of conditioning never happens any more.
Banks close? What? Unheard of… I remember being excited to have a Loblaws Cheque Card, which allowed me to pay for groceries with a cheque, so I didn’t have to carry around cash! Man we are old Mr. M.