Spencer and Jeff expose credit card companies’ predatory tactics—30% interest, rate hikes, and bankruptcy law changes—ranked top in customer complaints despite profits rivaling McDonald’s. Canada’s 1997 student loan reforms, pushed by banks, trap borrowers in debt for low-return degrees like archaeology, worsening inequality. Payday lenders exploit desperation with fees devouring 20–30% of scarce income, while federally chartered banks avoid low-income clients. Renters’ on-time payments never boost credit, yet landlords profit from rising equity and mortgage-backed credit improvements, revealing a system rigged against financial stability. Eliminating high-interest debt and mandating savings could force banks to serve businesses, not predation, but younger generations face systemic collapse due to unchecked lending and financial illiteracy. [Automatically generated summary]
The podcast would have a better name if they weren't all taken.
I'm Spencer, your host.
And back again today with Jeff, broadcasting from an undisclosed location.
Always.
On our Mulligan performance tonight.
Yes.
Some of you regular fans may be aware we had one attempt at this particular episode, but this is a topic that is very near and dear to my heart.
And I could not contain my pontification.
And we were dragged astray several times on subject, mainly because of me.
So rather than try and edit that down to something coherent, I have just promised to behave myself this time.
I contributed to getting off course.
Fair.
Fair.
Plus, no one knows the things I don't broadcast, so of course they won't know that.
But that's okay.
They should know that this is our second attempt at this particular episode.
Also, the second time we've had to redo an episode because the conversation just became unworkable.
Yeah.
So we are fond of that 30,000-foot view.
Debt is a problem in our world.
100%.
Credit cards are the first type of debt on my list of debt that I have an issue with.
And before we get into that, I think I'm going to go straight to a new thing that I've started to do, which is to include clips in the show.
Oh, is this that LA Law Clip?
It's not LA Law.
It's Boston Legal.
Boston Legal.
That's right.
Yeah.
Dated myself.
A little bit.
Yeah.
Share.
Okay.
You're not giving me anything here?
First of all, if I were to forgive your obligations, believe it or not, I'd be hurting you.
Hurting me?
Okay, this is me.
The way I raise my own kids.
It's not what you give them.
It's how you teach them to get things for themselves.
Just making sure you're real.
You know, I don't know you yet, Mr. Shore, but I get this feeling I'm going to like you.
May I ask, you spoke of honoring obligations as if it's a good thing.
Indeed, I did.
Then why do you and other credit card companies refer to the customers who pay off their debts promptly as deadbeats?
Well, that's not a term I would personally use.
No, because you're swell.
But your company uses a term like a mantra.
Here's the thing.
Let me tell you a little about me and why I chose to represent Prominence Bank.
Like any other credit card service, it's a business, sure, but it is a service.
We help people who are short of cash.
Help them make their rent so they don't get thrown out on the street.
Help them make a car payment so they can get to work.
Help them buy Christmas presents for their children during tough times.
You're like Santa Claus.
I can see you and I need to go out and shoot some ducks together.
Do you explain all the credit terms to your customers?
Well, they're on the back of every application.
Like this, with a tiny print?
I have a JD and an MBA from Harvard, and even I can't make heads nor tails of this deception and fraud.
It's deception and fraud.
Well, look who found his tongue.
And you, Mr. Shore.
You're a hoot, that's what.
Is it true your company actually targets people with bad credit ratings?
Well, we have an extremely complex marketing strategy, one that I'd be happy to take some time and explain to you.
That's okay.
I think I've got it.
You find people in dire straits and market directly to them with the hope of forming a lifelong relationship.
I had a former client who kind of operated his business the same way.
Really?
What line of work was he in?
He sold heroin.
Friend, I'm not a man who offends easily.
So I could call you a loan shark and you'd be fine.
When you charge your customers 30% interest, you're a loan shark.
That term implies criminal conduct.
It's not criminal because your parasitic lobbyists have penetrated both aisles of Congress.
The credit card industry is more profitable than McDonald's, Microsoft, and Walmart.
You've got yourself a multi-billion dollar racket going, Mr. Palmer.
Given that we are bigger than Walmart or McDonald's or Microsoft, we enjoy some security.
And potential lawsuits like this, we have an expression in Texas, Mr. Shore.
You're all hat and no cattle.
Here's the thing about me.
I am a hoot.
But I insist on putting adversary back into the system.
And I do it openly and notoriously for all to hear.
Well, a swell guy like you doesn't want the public to know that of the thousands of industries tracked by the Better Business Bureau, the credit card racket is number one in customer complaints.
You don't want them to know that you deliberately target those who won't be able to pay off their debts.
People you call revolvers.
People who see 0% interest in big blue print and don't know that with just one late payment, you skyrocket their interest to 30%, that if they so much as inquire about leasing a car, you raise their rates.
You don't want the public to know that while over 7 million families have filed for bankruptcy in the last five years, you got Congress to change the bankruptcy code to make it next to impossible for people to discharge credit card debt.
You don't want people to know that the credit card industry is essentially a pack of hyenas crunching on the bones of the poor, do you?
I smell something awful.
I think it's you.
Yes.
This case has the stench of big tobacco and asbestos all over it.
Luckily, our firm has nine offices around the U.S., London, and Hong Kong, strategically positioned for massive class action suits.
And once the company you represent smells it too, they'll find you not nearly smart or powerful enough, and they'll drop you for a firm that employs expertise and intimidation rather than down-home hokeum and smiley handshakes.
And this is my favorite part.
When your firm fires your obsequious ass for losing their client.
Oh my God, the stress.
Your tan will fade.
You'll gain a few pounds, drink a bit more, scream at the kids, and maybe your wife will finally leave you.
For the realtor who sells your house, because after all, he'll still be able to afford Christmas in Aruba and next year's convertible.
Hey, fella, don't worry about it.
It'll be a hoot.
So that's the clip.
It's obviously just fiction, except for, I believe, at the time this was made, many of those statements were factual about the nature of the credit card industry and targeting in the United States.
It's not that different in Canada.
That is the first thing I would like to touch on.
Yeah, absolutely.
Take them out.
And this is again the first off-topic bridge, which I will try and keep tight and on point.
I'm not aware if Canadian bankruptcy law has the same rules as United States bankruptcy law as far as credit card debt is concerned.
I think we've actually got more protections in Canada.
I know people personally who have declared bankruptcy and have shed their credit card debt along with everything else.
Consumer proposals are also a lot more common in Canada, which is like a step short of bankruptcy, where basically they negotiate a significantly smaller amount for repayment, but you don't go through bankruptcy.
You just go on a payment plan until you're paid off.
However, a whole other racket we have in Canada is the student loan racket.
And the Canadian banking industry in the late 90s successfully lobbied government to make student loans immune from bankruptcy.
And you and I know, having been attended university at that time, how many smiling men in nice suits at desks in the student commons and everywhere on campus who were there to just sell credit to young, dumb university students who didn't know any better, who had no idea that they were signing on for years of arduous payments, that they literally had no way of getting out from under ever, even through bankruptcy.
So, and I think we'll probably circle back to the student loan thing later on, but like this is an example of how like obscenely predatory the credit industry is.
Like a lot of practices that they engage in, you know, if you're a Joe off the street lending money to your neighbor on those terms, you are a loan shark.
You are committing a crime.
The interest rates that get charged by credit companies are like userist rates that are considered loan shark rates.
If anybody other than someone who knows how to lobby government uses it, that's true.
Another thing that I remember, not just the student loans themselves, but that I wasn't considered for a credit card at all until I went to school.
And it was part of, I can't even remember how I got the first one, but I think it might have been part of the package.
Like, yes, they were handing me.
They would set you up with a complete credit package.
You had student loans to cover your tuition, a student line of credit to cover your living expenses, which was backed by your student loan, which means it also could not be discharged by bankruptcy.
And then for your convenience, a student credit card that was backed by your student line of credit.
So it was basically like a whole house of debt cards piled up on top of this one thing that legally you could never get out from under.
Yeah.
And I always wondered why they were trying to push credit cards onto students.
I mean, I was always told that a credit card you needed to have be able to pay the interest.
You needed a job.
And students aren't going to have jobs typically.
I mean, some of them will, I guess, but because the banks wanted to condition a generation of users to plastic.
Well, I don't know if they wanted to condition them.
I think they just wanted them to be indebted to the banks.
Well, in debt, yes, absolutely.
Like, number one, yes, 100%.
But like, this is also a lot of what the move towards a cashless society is about.
Oh, this could be a bad deer.
You get your editing pen ready.
But like the financial institutions are invested in us using plastic whenever and wherever we can, whether it's debit or credit.
Credit, obviously, better because it's more lucrative.
But if they control the transactions, then they can squeeze profit out of every transaction.
So how do you make that happen?
You either incentivize the user with the card to use the card instead of using cash, and they do that with some little points programs and whatnot, like Air Miles or Avion or whatever.
But the other thing you do is you just condition your users to find the plastic more convenient than cash and you get your users using it young.
So, yeah, they want university students using it.
And that touches on something else that I saw in the video that I wanted to speak to, which when the folksy Texan lawyer gave his first defense of the credit card company and the service that they provide, did you notice that every service that he listed was like an important expense?
Like we help people make a car payment so they can get to work.
Like the closest into luxury he went with discussing what credit is for was we help people buy their children Christmas presents when times are hard.
When was that clip from?
Like early 2000s?
Late 90s?
Would have been early 2000s.
Early 2000s?
Yeah.
So like six or something.
Yeah.
So like 20-ish, just under 20 years ago.
Yeah.
So like in two short decades, the attitude towards credit has now evolved to the point where it's considered cavalier to just use your credit card for absolutely any purchase you make ever.
Like there's, there's no stigma attached to availing yourself of credit like there used to be.
It's become like a dis we become disconnected from our own money.
You don't worry about what you're making.
You just pay off your credit card when you get it.
And you don't worry about what stuff costs.
You just buy it with your credit card.
That's not an intelligent or fiscally prudent way to live, right?
But it's an incredibly profitable way for you to live for the people who gave you the plastic.
I think that there was in all of the decision-making that led to plastic, the use of cards and whatnot, there was a lot less of the social and psychological science angle that is brought up in this way.
It is true that using a card instead of having cash in your wallet doesn't make you think as much about that.
But I don't think that was a driving factor from the banks to push this.
I think it was just simple math.
It was easier for them.
It was less work for them if we used cards.
It was less cost for them if we used more cards instead of cash.
It was profit for them.
They can squeeze 50 cents.
They did add the additional fees and those were becoming big in the 90s.
And that's absolutely part of it.
But the first reason to do it was that they saw how much expense they had in just handling cash, the endless numbers of times you had to count it at the till, at the, you know, machines, all those things.
We're neck deep in our first bed.
Oh, yeah.
Because we're talking about cash versus debit cards.
And this is a conversation about debt.
So circling back to the credit card thing and circling back to the point that the folksy Texan lawyer made, where he listed off all the things a credit card would be used for.
I just, I find it striking that today we think nothing of using a credit card for so many more things.
Like multi-thousand dollar purchases that are put on credit at 20 or 30% with no thought given to when or how it's going to be paid off.
Like that's not responsible, man.
Yeah.
That's true.
But like, but we're in that culture of like it's, it's, it's something that's been pushed in popular media of, you know, self-care, you know, take care of yourself first.
You deserve it.
You know, if you feel you need a vacation, life is hard.
You work hard.
Go ahead and take that vacation because you deserve it.
And if you don't have the money for it, don't that don't let that be a barrier for you.
Find yourself.
Just put it on credit.
Yeah.
I'm probably more cynical than most people.
I'm definitely on the more cynical side of the scale.
I would concur with that statement.
And I see many of the advertisements in that space as smarmy excuses to empty my wallet.
That's how I see them.
That's, it's a, it's a, it's like a reflex action now.
And I look at them, I go, oh, I know exactly what they're doing.
They're trying to empty my wallet.
And I've thought that for a lot, like people say, maybe, maybe someone says, well, you know, that's, that's an older guy thing to say.
True, I definitely, when I was young, knew older people that said things like that, but I've thought that ever since I was young.
So it's not a thing that happened as I aged.
It might be something that I caught on to when I was younger and just looking at the nature of the world.
But that's how I see all of these, all of these luxury purchases.
They are attempting to blur the lines between necessity and luxury.
And in some cases, trying to indicate that these luxuries are a necessity.
Yes, you deserve it.
You deserve it.
Yeah, your mental health is important.
And that this is, it's, you know, if they were able to say it, if they could get away with saying it, they would say, this is medication for your soul.
Like, you know, that's the extreme version.
And it's important to note that this, like, this sort of consumer driven, this, this societal pressure for a consumer-driven treat yourself society.
It exists at all levels financially.
Like everybody, I'm sure, I can think of several friends off the top of my head who have like their earning power has improved as they've gotten older, as we all do.
Like we all start making minimum wage and we all find something and get better at it and command more money for our labor and make more money.
But like we all know those people who no matter how much they were making, they were living beyond those means.
They were spending money that they didn't have.
And it doesn't matter if you make 30 grand a year or 150 grand a year.
If you're spending 110% of what you make in a year, you're broke.
You're the same broke.
Yeah.
You're just broke.
You're just broke with nicer things that still have to be paid off.
But maybe let's tie off the college debt thing before we dive into the next one.
The student loan thing in particular, in Canada, anyways, I don't know the situation in the States, but in Canada, I get particularly incensed by it because the idea of student loans is inherently noble.
Like if you wanted to outlaw debt, say, you know, the first argument against outlawing debt would be, well, you know, people can't afford a house without a mortgage.
Okay, fine.
We'll let mortgages in.
And the second argument would be, well, people, you know, an education is important.
It's your best way to improve your earning power.
And education is expensive.
So if you're broke and you want to earn more and you need to borrow money for an education, that's a good investment.
You should be able to get a loan for that.
But like, look at the courses that are available at the university level in North America.
Like it used to be university departments, there was like a handful of academia, a handful of arts, and then it's all like engineering and business.
Like degrees in how to go and do smart things to make more money.
That's what university used to be for.
And now you can get a degree in most anything and you can take out a student loan for it and spend four years pursuing a degree, which I'm not here to argue or debate the societal value of academia degrees.
Like obviously they all have value to society as a whole.
But we're looking at university as a financial transaction.
You are investing in an education and what you want out of the backside of that education is better income for yourself.
If you're looking to take on debt for an education, that is the only consideration you should have is when I'm done this education, will I make more money than I make today doing what I've gotten my education?
And if the answer is yes, get a student loan.
If the answer is no, find a patron.
Don't take out a student loan for an art degree.
I'm going to be very unpopular by saying that.
But like, it's true.
Like, like so many, so many kids get, you're giggling because you know I'm going to piss my kids off so bad with this.
Well, I'm giggling because I know what you went to school for.
Well, exactly.
Exactly.
Right.
But however, I did not take out a student loan for that degree.
Okay.
All right.
I was, I was, I was, I was very fortunate in that I was raised by, I had a great deal of privilege that is not afforded to me.
You ground that thing out like a rounder, man.
I had a family, a middle-class family that was able to save for my education and I worked my way through school.
My path could not be followed by a student today because the cost of living is just like I was able to cough up my share of rent and food through university working like 16 hours a week.
Nobody could do that today anywhere in a university town.
And again, like cost inflation directly driven by accessibility of student debt is what has blown that out of proportion.
Yeah.
Right.
Yeah.
So I feel like the student loan industry in particular is excessively predatory because they preach a message of empowerment to young, impressionable kids.
And like, let's be honest, they're kids.
Nobody hits real adulthood until like their mid to late 20s.
True.
That, you know, you deserve it.
You deserve an education in what drives your passion.
But like if what drives your passion is archaeology, your philosophy, you know, you're sitting in a classroom with 30 other students and there's one teacher at the head of the room.
And your best job is what that one teacher at the head of the room is doing.
And he's teaching 30 of you and five other classes or 30 kids just like you every year.
What kind of future does that trade have financially for you?
Not great.
So if you're taking out a student loan for that, that's not a good move for you financially.
I know all kinds of kids that were in the same program I was at, the same arts-based program I was at in school, who went there on loans.
And then as soon as they graduated, they gave up five years of their life teaching English in Japan because it was the only way they could find to make enough money to service this crushing student debt that all of a sudden reared up and fell on them like a tidal wave.
Yeah.
I think I see this metaphorically as the company store.
The company store was a thing that sharecroppers used to be subject to.
Not just sharecroppers, mining camps, any kind of remote labor logging camps.
And it was, they would feed the people who were working there, but they wouldn't feed them for free.
They would allow them to borrow to feed themselves and they would let them eat all they wanted.
And then as soon as their paycheck came in, they would take all the money from that.
Gouge them on all of their living expenses.
Yeah, I can't remember the name of the immortalized in the song 16 tons.
St. Peter, don't you call me?
Because I can't go.
I owe my soul to the company store.
That's right.
Yeah.
Yeah.
And yes, financially, that's exactly what it is.
It's the company store.
Because even if your career is a lucrative one, even if you're going to engineering school or you're going to be a friggin surgeon, if you start your career six digits in debt, and you have to start servicing that debt pretty much immediately upon graduation, starting that far behind, that is, that is a tremendous load to have on your shoulders just starting out in any career.
Like you're not set up for success with that, right?
Yeah.
And it's, it's, it's a very, I understand that it's a very speaking from a very privileged position to say, well, if you can't afford to do that with your own money, then you shouldn't take out debt to do that.
But right, but it's a society, we want people to get educated.
We, we want educated people.
Like, what, why is this in some situations?
Why is this student loan thing and this degree thing considered a luxury that only the people who can afford it get?
Like, that's a thing that increases this social divide between the haves and the have-nots.
Yeah.
So speaking of haves and have-nots, let's move to the next topic because we talked this down really well.
And actually, we're, I've been keeping kind of notes on the side.
I think we're doing better than we were for this part of the conversation.
Ahead of pace.
Okay.
We're ahead of pace.
You have a couple minutes.
It will definitely come out.
But yeah.
All right.
So payday loans.
Oh, yeah.
Payday loans are a problem.
So the credit cards are no longer the most predatory lender in the field today.
Payday loans take the number one spot, really.
They are exclusively targeted at the people who need the money the most.
They are the in that clip, he talked about that you, the credit card companies were attempting to target the people that really needed them to and everything that lead loans.
Yeah, and everything that the folksy Texan lawyer mentioned for justifiable purchase for a credit card, that all lands squarely within what we think of payday loans today as a society, right?
Like even your average layman recognizes that the rates involved in payday loans are freaking userous.
Yeah.
But we all recognize, well, you know, sometimes when you're really poor or on your own and you're really tight, you don't have another choice.
You got to pay the hydro bill or they're going to shut it off.
And payday isn't for three days.
So, but like still, like if you're that tight where you have nothing and literally nowhere else to turn, anybody who is loaning you money holds a tremendous amount of power over you.
So obviously those organizations are not in any kind of free market system.
They're going to gravitate towards predatory just because they can.
This payday loan industry feeds on desperation.
And that's so dark, but also so incredibly obvious.
No one who's not desperate gets a payday loan.
Really?
Anybody who actually are some people who have been remarkably short-sighted and wanted to party on short notice that got payday loans and they just paid the price for that.
I live in Alberta.
That's a thing that really happens.
So, yeah, so we're going to take, we're going to, cause this was a big D-Roo last time.
Yeah.
We're going to set aside what we call the irresponsible.
Yeah.
The well, terminally irresponsible.
A lot of what we're talking about does circle back to responsibility.
So we do want to come back to that.
But like the statistical outlier of the resource boom market laborer.
Yeah.
But there's a reason why payday loan outfits are open late.
Yeah, 100%.
No one is shopping for milk or paying their Hydro bill.
Hydro bill at midnight.
No, but guys who ran out of their cash from their last paycheck in the bar and want to keep partying and payday isn't till next Friday.
Those guys look for a payday loan company at midnight.
Yeah, absolutely.
And so, again, it is designed to take advantage of people in weak moments.
And oh, sorry, go ahead.
Go ahead, finish your shot.
And then I haven't, I haven't designed to take advantage of people in weak moments.
And I have to ask, why are we okay with that?
Yeah, exactly.
Right?
Like, it's my wife works in the banking industry now.
She works at a credit union.
So I've learned, well, and I was raised by two bankers as well, but I've learned a great deal recently from my wife because I pay attention to her better than I paid attention to my parents, I guess.
But like, it's, it's actually law in Canada with the federally chartered banks, like Royal Bank of Canada, Toronto Dominion, Bank of Montreal, CIBC, HSBC, the big ones.
Those institutions are required to offer at minimum a checking and savings account to anyone who can present identification, even if they don't have a home address.
And like that has to happen because like so much of our society now, like to be a functional member of society, you have to have a bank account, especially if you're living at the bottom of the financial sector and having to rely on government assistance because everything is like direct deposit and stuff now.
So you have to have a bank account, right?
Yeah.
But none of these big, big charter banks want to deal with these distasteful elements of society as they see them.
You know, it is, it is a service they are required to provide, but they don't want the riffraff to mingle with their more lucrative middle class and upper middle class clientele.
So they do the absolute bare minimum that they are legally required to provide, and that's it.
They aren't directly getting involved in that bottom-feeding payday loan industry because they recognize there's more profit in keeping their white collar patrons away from the ickies.
That's my theory.
But, you know, free market being what it is, the payday loan companies have swooped in and have figured out, okay, so drug-addicted welfare people have trouble balancing a checkbook.
So their money isn't going to make it to next payday.
And we know that payday is rock solid because it's a welfare check and the government welfare checks never bounce.
So our doors are always open for people on welfare.
Now, if you're on welfare, I don't even know what the welfare payment is per month in Canada now.
I know it's not enough to live on.
We won't get into that whole living wage quality of life argument because that'll lead up an episode all by itself.
But like, regardless of what the amount is, say it's a thousand bucks a month, you know, most payday loans, once you add up all their charges, you're at like 20, 30%.
So that thousand bucks just turned into seven or eight hundred bucks.
Yeah.
So that's two to three hundred dollars, 20 to 30 percent of someone's already very scarce income that is going to financial transaction fees that does absolutely nothing for them.
It doesn't put a roof over their head.
It doesn't put food in their stomach.
It does nothing to help them in society.
It just pays off their shark.
Yeah, that's a good point.
The people who have very little money need what little money they have to be as efficient as possible.
So things like credit cards and payday loans make all of their money, just what little money they have, less efficient.
And at 30% interest, it's way less efficient.
Yeah.
So this is how the credit cycle has always kind of worked.
And that's also why bankruptcy has always been a thing, because it's always been kind of recognized that, like, the more stable you are as a borrower, the more rock solid you are, the more collateral you have, the more the bank can rely on you to repay your debt, the lower your interest rate is going to be because they know you're rock salted.
And that's what the whole credit rating thing is about.
And we'll get into that later.
But the more of a credit risk you are, i.e., the closer to destitute you are, the more expensive your interest becomes because the bank is just viewing you, you know, facelessly, soullessly, as a credit risk.
Yeah.
Like you might not pay us back.
So we want to make sure we make enough off of you in interest before you default that we've already cleared our profit and we're in the black.
Yeah.
And that, but there's a point where those two curves intersect, where you're boned, where your interest costs plus your basic cost of living are now so high that you cannot earn your way out of debt.
You are just, your debt is just going to keep ballooning because your interest costs have gotten too high.
It spirals out of control.
And then that's what bankruptcy is for.
When the whole capitalism game has failed, because it does, you are allowed as the consumer to individually walk away and say, oh, sorry, that one didn't work out too well.
Like going to take a mulligan on that one.
Give up all your assets.
That's all that's there.
It gets divided up amongst the people that you owe money to.
And you start head up with a clean slate.
That's what it used to be.
Bankruptcy was supposed to be head up, clean slate.
That's not what we turned it into.
But again, that was largely propaganda war and societal pressures put on by the people who want to make sure that we pay that debt because it's their profit.
Yeah, those poor banks are never going to turn a profit again because we allowed people to go bankrupt.
Yeah, exactly.
Yeah.
So next on my list is renting versus owning a property.
So I paid rent for an extraordinarily long time in my life.
And so this one's a little bit personal for me.
The government has said that they would like to encourage people to own rather than to rent.
There's more renters now than there ever has been before.
And they feel that this is a problem.
And rightfully so, because if it's all younger people who are renting and not buying, and if they're not buying, then you're going to have a massive cash crisis eventually because a big part of what maintains our money system is reliable debt.
And they aren't going into any of that debt.
They're avoiding all of it.
And it's getting pushed into fewer and fewer hands.
The system itself is much more stable when you have nearly everyone owning a house and paying money to a bank for the mortgage on that house.
There's still mortgages on a lot of these houses.
They just go to landlords instead of through renters.
But this is where what I found really egregious about rent was that the landlord gets paid in multiple ways.
First of all, they get paid because they get the rent.
And the rent isn't just the rent.
It's usually more than enough rent.
They get the equity on the property because generally properties are increasing in value.
Every once in a while, a couple areas of the country, they decrease in value.
But in a lot of places, they generally increase.
Long-term real estate never gets anything but more expensive because the earth is not getting bigger, but we are having more people.
Well, try telling that to the people of Tumblr Ridge and Fort Nelson.
Well, yes, statistical outliers caused by resource boom towns aside.
Okay.
All right.
All right.
I could make a much longer list there, sir.
Also resource boomed house.
Every town in British Columbia that isn't you know five I could list right like everything outside the lower mainland that isn't Kelowna Kamloops, Prince George and you know probably Fort St John is in danger at this time, pretty much because they.
I think this is a really dangerous side route for us to go.
Yeah, I disagree with you vehemently and I will happily supply facts to to make that our okay.
We can go so far afield from deeper some other time.
Yeah, but landlords generally have this situation where their equity, their the value of their property is increasing in addition to collecting the rent on the property, and then also they're paying for their mortgage and their credit increases, yep.
So when we have a situation where the government wants to encourage renters to buy, they don't seem to really do all that much about the situation.
When I paid rent for almost 20 years I my credit didn't move up one single tick for any of the rent payments I made, but it did move up for all of my landlords.
If there was a way to move some of that positive credit tick from the landlord column to the renters column, like how much of that movement would have to happen before this situation started to change.
As soon as you are paying rent for years and you're not missing any payments, how much better is your credit so that you can then go to maybe purchase a house or to purchase something else.
That again also increases your credit.
It is um, it is an interesting thought for like uh, a good first step in what would have to be, I think, a significant overhaul of the whole credit and credit rating system.
Because like, a lot about what makes your credit rating is is counterintuitive right, like we all know.
Everybody, most adults understand, like, high credit score good, low credit score bad yeah.
High credit score, any credit you're negotiating where the interest rate could be variable.
You're going to get better deals on your interest rate and on your terms.
If you've got a higher credit rating, the bank will lend you more money or give you more flexibility for repayment if you've got a higher credit rating than a lower one.
But as far as what moves your credit rating up or down, a lot of us don't understand what all of those things are even I don't, but some of them again become sort of self-perpetuating, like if your credit score is low, it becomes a policy that anytime you apply for credit or anything with any bank.
They have to do what's called a hard credit check, and a hard credit check actually negatively affects your credit rating.
So if your credit rating is down every time somebody checks it, it's going to get worse.
Um, by the same token and you had this experience it wasn't just paying rent for 20 years that torpedoed your credit rating.
You were also an incredibly diligent and responsible person with your finances and you lived almost exclusively on cash.
Yeah, to the point where the banking and financial industry didn't want to lend you money because they didn't know that you existed.
Yeah, like you had no history of borrowing money, and so they considered you riskier than a crack addict who steals.
I went because, just because there was no information right, I went to a furniture place one time to buy a couch and I was gonna do one of their payment plans and these furniture places live on these, on these deals like, yeah, because they get so much more money off the interest of fees and almost all of their all of their uh deals in this way.
Uh are go through other financial institutions.
Yeah, third-party.
Yeah, people like visa for the credit.
So I went to one of these furniture places and I don't know, it's, fifteen hundred dollars for this new couch or whatever, and uh, or the set or whatever it was.
And you know they said oh great oh, this is the price great, we'll just get this thing and we take this info and then we'll look it up and whatever.
And then the guy comes back and he shakes.
I don't know what happened.
No one fails that credit check.
Like, everyone gets that credit visa.
Just does not like you man, like I don't know what it is.
They just got your name and they spat it right back like, and I was like I don't know man yeah no, but this is it.
Like, like you get a good credit rating by interacting with credit and to to a point that makes sense.
Like, like you know, the banking industry would want to know that you can be responsible and you can repay what you owe right, but you actually, you move your credit score higher faster by making minimum payments on your loans than you do by making extra payments to get your debt paid off quicker.
Yeah, because they make more money, exactly on those loans, exactly.
But that's not.
That's not like you.
You think high credit rating equals I am a fiscally responsible person.
The bank sees me as a low credit risk, but that's not it.
The credit rating is also about how profitable, how potentially profitable, are you as a debtor?
Yes, right and well.
We played that clip earlier where they talked about how they like revolvers.
They like people who stay in debt and take a long time to pay, and that's how that credit score system works, which makes it predatory, by the way, and they don't like that.
I say that, but I don't care.
That system needs to be looked at.
I would actually like to see that system that you mentioned about like um, paying rent on time positively affecting your credit rating.
Yeah, because failing to pay your rent could negatively affect your credit rating.
Yeah, and positive things and paying your rent positively affects your landlord's credit rating because it gives him the money he needs to pay his mortgage and his utility bills, all of which would be would affect his credit rating if they weren't paid with your money.
If, if you were, if you were on trial for a crime say, I don't know murder um, and there was a test.
They wanted you to undergo A test, let's say some kind of blood test or a lie detector test or something, and the test could prove you guilty, but couldn't in any way prove you innocent.
Who would take that test?
Exactly.
No one.
But all the time, we have renters who are in a situation where missing a payment could greatly negatively affect their credit rating, but continuing to pay it doesn't positively affect it.
And who is okay with that?
I don't understand it.
Why are we okay with that at all?
So maybe it's time to move into the last part of this, which is because we've just about eaten up our lead.
Yeah.
This is a thought I have sometimes, which is that it's a thought experiment of what we think the world would look like if we removed the ability to be indebted in certain ways.
So we removed credit card debt.
We removed personal lines of credit.
Personal lines of credit, payday loans, overdrafts, all of those things were gone.
You can't use them.
And because you and I had something of a conversation like this earlier, I've added a new thing to this thought experiment, which is that in this fictional world we're creating where most of these lower levels of debt are gone,
we add in a social expectation that parents and guardians, as children are growing up, becoming adults, one thing that it's expected for parents to do is to help their children work to save up their first, say, $10,000.
And then the social expectation is among everyone that everyone has that.
And if they have a momentary blip where their car malfunctions, they need to get it fixed, they need to buy a new car because everything's just wrong and won't work and they can't get to work and they need their job, then that's when you dip into that.
But as soon as you do, you put off all other payments and expenses and everything else until you get up to that level again because everyone checks on everyone and says, hey, what's going on, man?
What you dipped into your $10,000 last chance thing?
Like, why aren't you paying that up?
Where would we be?
Where would we be?
Like, would we be in a situation where we could survive and maybe thrive?
A situation where the people among us who need their money to be most efficient have a chance for it to be more efficient.
What's your take on this?
What are you thinking?
I'll play devil's advocate a bit like I did last time and hopefully not derail it as badly as I did last time.
Okay.
Just to sort of point to within your thought experiment, the reason why this doesn't happen today.
Or one of the reasons why there's pressure for it not to happen today.
You said your line in the sand was $10,000.
I picked the wrong number.
Seems like a good number for an emergency fund these days, considering what stuff costs today.
So I just took a quick dip across StatsCam to find out how many people there are in Canada right now, aged 20 to 24 years, your average age of people moving out on their own.
And it's 2.5 million people, which is north as of 2022.
So at $10,000 a head, that's $25,200,000, that would disappear out of the economy.
No.
Nope.
That's money that would be taken out of circulation and go into savings accounts and not be touched.
We covered this in currency episode, sir.
When you put money in the bank, the bank is able to reloan that money.
Yes, but we're doing away with all kinds of loans and debt.
So like businesses will borrow that money to conduct business.
If we're outlawing credit, there's not going to be as many outlaw outlets for that money.
And so there will be an impact to the economy.
Anytime money flees into savings, the economy constricts.
We're seeing it happen right now with interest rates going up.
Investment dries up when the economy goes into savings mode.
So if we set a paradigm where people are expected to have $10,000 in savings at all times, then we're not spending as much as we used to, and there will be an impact on the economy.
Think about the shareholders, Spencer.
If the banks are required, are still pushed.
I mean, they're still in this same place.
If they need to loan a certain amount of money to get enough back to continue their existence or whatever, then they should find new places to loan that money, probably to businesses.
I feel that that would, you know, an increased drive from banks to invest in more businesses would definitely offer.
So this is leading to a more significant derailment than what I was hoping for.
The point I made up was brought up almost facetiously.
And that like we would notice if we as a culture shifted tomorrow to part of your graduation from high school is you have to have $10,000 in the bank.
And we all live like monks who keep $10,000 on reserve because we don't have access to credit.
Why would we live like monks?
I mean, we're working and making money.
No, I understand.
I'm trying to work around to saying I agree with you, Spencer.
Quit interrupting me to tell me that I'm wrong.
Sorry.
But if we move to this paradigm, there would be an impact to the meat and potato economy because the economy today does rely on credit.
Like that's that's part one of the reasons why they're so fast and loose with giving credit is because you can squeeze more consumption out of a consumer if you let him borrow money to keep consuming.
And then the financial sector will just squeeze a bit more cash out of him down the line in interest.
But he still bought your goods.
He's helped the economy.
So there would be damage to the economy if money, if consumer money dried up because it was put into savings.
But would it be a catastrophic blow?
Nothing near.
The economy would course correct almost immediately, like you say.
The banks would find other places to lend their money.
Some luxury consumer business, consumer goods businesses would probably dry up because people aren't pissing away as much money on disposable toys and fun stuff.
But other than that, there would be no significant impact on the economy at all, other than a very large portion of GDP would now go towards the purchase of real goods and services rather than just financial interest service charges.
Yeah.
Yeah.
I think that some portions of the financial industry would go away.
Many of these lenders who are lending to the less fortunate people would, well, they would go away.
Their financial sectors would be gone and no one would miss them.
Well, and sorry.
Yeah, exactly.
And I know I'm probably going to get shouted down and trolled for speaking for privilege because poor people can't afford to save.
But like, no matter where you are financially, there's always something you can do to put something away.
And yes, I understand the system's rigged against us.
Like cost of housing these days is atrocious.
Even cost of food these days is atrocious.
And there's very real systemic problems that need to be addressed to fix those.
But we also need to get back to just sort of a really simple grassroots personal accountability responsibility way of fixing this sort of thing, which is if you don't have it, don't spend it.
Because if you spend what you don't have, every dollar you spend costs you more than a dollar.
And unless you're one of the very privileged few, most of us can't afford to spend more than a dollar for something that costs a dollar.
Yeah, if you couldn't afford to spend the dollar, what makes you think you can afford to spend more than a dollar?
There was a show that I was a huge fan of in the mid-2000s and teens, around the time when my children were very, very young called Till Debt Do Us Part.
It was on one of the lifestyle shows.
I remember it well.
And the hostess of the show, Gail Vaz Oxlade, was a financial consultant guru, but like really what she preached was fiscal prudence.
And pretty much every person she dragged through the show, they went on a cash budget.
First and foremost, they went on a cash budget.
And like fully 90% of the time, these were households where they made decent money, but they just spent more than they made.
So yes, with the caveat that I do understand and concede that the working poor, the people who have to try and pay for a roof over their heads and food for their family on minimum wage in North America today, have a very difficult time salting any savings away.
There is a great deal of us who could save more than we do.
And these days, we should.
So I realize that it was a little facetious, but I also realized that some people can get confused by that, by what you said about the savings.
Putting money away in a bank doesn't cause a lack of cash in the economy.
If you put it away in something else, if you had it in cash and put it under your mattress, that definitely would take it out of circulation and negatively affect the economy.
That's a thing that people did after the run on the banks in the 30s.
They stashed money under mattresses and made the problem far worse by not allowing that money to circulate.
But when it's in the bank, the bank reloans it.
We talked about that when we talked about cryptocurrency, because cryptocurrency isn't a bank.
It's not reloaning anything.
The whole system of cryptocurrency is just a redistribution of wealth, mostly from the bottom to the top.
But a bank would get that money and then they have to work it.
It's their problem now.
If they want to, if you have a savings account or something and you get some small amount of interest, they have to make that money work to put that interest in that account for you.
It's going to be 1.5% or whatever, and they're going to loan it out for 7% or 10% or whatever it is.
But that money isn't going to work as hard for the large picture economy in which it lives if it is money that an individual consumer has saved and given to a financial institution in return for a term deposit.
Because in today's market, any financial institution that has that money on reserve, typically what they're going to go to first and foremost to lend it out, if they can't use it to leverage against really lucrative consumer debt, and they can't in the universe that we've created in this thought experiment, they're going to put it out on mortgages.
So they make a very profitable business out of turning individual savings into mortgage cash.
And that would be one of the main places they go.
But like taking out a mortgage for a house does nothing to push the economy forward.
Roof over your head when we're just buying commodities that are already out there and we're seeing those prices inflate because there's more and more and more money in the system.
When we start taking money out of the system, that's how things get cheaper.
If the reason why the federal bank raises interest rates is to cool investment, they accomplish the cooling of investment by making money too expensive to borrow and by making it more lucrative to stuff into savings where it will not churn up the economy as much as it will in a low borrowing environment where the money's out there flipping hands several times a cycle.
Like to bring it back to like individual consumer has 10 grand, he gives it to his bank and gets a 5% GIC for it.
The bank turns around and uses it as part of a mortgage that they fund at 7%.
But there isn't much in the way of real contribution to goods and services in an economy there.
Whereas if that same individual takes his 10 grand and spends it on consumer goods, he has purchased a bunch of goods and services that employs people through multiple steps through the economic food chain.
So yes, putting money in savings does not have as positive effect on the great big fat air quotes all caps neon underline economy as spending it.
But getting the great big air quotes economy as booming as possible is not something we need as a society.
Like there's a lot, there's a lot of societal pressure put on like the health of the economy and the health of the stock market and all that garbage.
But that's that's yeah, the stock market is not an indication of a strong economy.
Yeah, never should it have been.
It's not the indication of a healthy of an economically healthy population at all.
It is the measurement of the wealth of the people who own those stocks.
That's all it is.
Yeah.
It is not an indicator of the general prosperity of a nation, nor should it be.
No.
It's an indication of the markers would take a hit if our if our culture moved towards one based on savings.
But my argument is the hit they would take is not consequential enough to be something we should fear, nor would it affect the people that we should give a shit about whether or not it affects them.
I think that what you say is true, that people would be, you know, buying houses instead of spending money on, I don't know, clothes or whatever luxury item they clothes itself aren't a luxury item, but extra clothes are.
It's a fine line.
But I think this is a difference between short-term boost and long-term boost because a situation where fewer and fewer people buy houses leads to them spending their income on more and more of these items,
but it also leads to them being less and less able to make future purchases as they go down the line versus the people who bought houses and eventually are able to make more purchases because they're in a more financially stable place.
Yeah.
Yeah.
I think in the long run, it'll work out better.
Yeah.
Well, I mean, like the whole home ownership and housing prices and mortgages and all that stuff, that's another episode in and of it's a couple episodes in and of itself.
But like, suffice it to say, I think that the thesis that we can say we agree on is that we as a Western society have gotten far too cavalier with our concept of debt and credit.
And we view it as acceptable to use in situations where less than a generation ago, there was a great deal of stigma involved in putting these kinds of purchases on credit.
And that stigma existed for a goddamn reason because you shouldn't be putting those kinds of purchases on credit.
Yeah.
There's a great deal about the economic imbalances we have as a society today that are like big picture systemic problems that we struggle as individuals to do anything about.
But there's a lot of it that's just chains we put on ourselves by not being, like you say, efficient and responsible with our money.
Like the whole concept of credit, it's supposed to be there to help float enterprise through periods when income is unstable.
Like businesses need to avail themselves of credit because they, you know, agree to...
Want to take advantage of an opportunity or whatever.
Or a construction contractor agrees to, like signs an agreement with an engineering firm to build a 10-story residential tower.
And he knows that he's going to get paid X dollars and he's got three draws coming through the project, once when Roughin is finished, once when it's tied up and once at occupancy.
So over the course of the next two and a half years, he's going to see three paydays where he's going to make buckets of money on these three payouts when he hits his landmarks.
But every two weeks for the next two and a half years, he's got to come up with payroll.
And every time a shipment arrives of new goods for this tower, he's got to pay for that.
So he needs finance.
He needs to avail himself of credit.
We have taken that same concept and downloaded it to the individual consumer on purchases that we should be able to make with our own damn cash, right?
Where it's like, oh, well, paycheck isn't come until Friday, but like, I need groceries now.
Well, why do you not have money now?
Yeah.
If you're four days off from Friday and you have no food in your fridge and you have no money to pay for food, you have made a mathematical miscalculation, right?
I just put out an episode about math.
It's very important.
The generation of kids coming up, and I'm going to sound like an old cadre for sure.
Yeah.
But the generation of kids coming.
Now you'll sound like an old, not like normal kid.
Not my kids, you know.
Not the new generation of youth that is in school right now.
I've actually got quite a bit of hope for those guys.
But like the ones right behind us, like notoriously terrible with their money.
Millennials?
Yeah.
Like a notorious record for being terrible with their money.
And I don't know why I brought that up other than just to cast shade on people younger than me.
But they had millennials.
They were shorted a really basic part of our education around the idea of like only spend what you have.
Like when we were an agrarian culture or a hunter-gatherer culture, you know, you wouldn't eat credit meat because no such thing existed.
If you had no meat, you didn't eat.
If you didn't build a house, you didn't have a roof.
Like you only had what you could lay your hands on, build, create, or harvest or gather yourself.
And then we got a financial system where we could start trading labor at things that don't directly feed us and put a roof over our heads for pieces of paper that we could trade for those things.
But you still worked for your wages and looked at your wages.
How much do I have?
And you lived within the means of those wages.
And this very basic, simple mathematical calculation of how much do I make?
And can I build a budget of life that lives within the bounds of that income?
I don't see a lot of evidence of that in a lot of people.
And like, it's really frightening to me because there's a lot of predatory lenders out there that are going to take a tremendous amount of advantage of you if you don't understand that basic math.
They're happy to provide services to cover up for what's basically just personal irresponsibility.
You can absolutely slap a convenient band-aid on your finances called credit and get overdraft and credit cards and personal loans and a revolving line of credit on your house and never have to think about a dollar one day of your life.
And then one day you're either going to be bankrupt or you're going to be retired and eating cat food because that's all you have left.
Well, on that cheerful note, ending on a high note again.
So, reminder to people who listen to this podcast: if you have any feedback, you have any gripes with anything we said, you want to tell us how we got it all wrong, absolutely tell us how we got it all wrong because we'd like to know too.
Send that email to truthunrestricted at gmail.com.
And otherwise, you can find me arguing with Auntie Vaxras on Twitter at Spencer G. Watson.
And yeah.
And you won't find Jeff anywhere.
He doesn't actually exist.
Well, I do, but I prefer to exist anonymously because while I do enjoy the odd jousting match, I have no interest in being aggressively trolled or doxed.
So yeah.
Also, you are my ventriloquist dummy.
I've been arguing with myself this whole time.
Oh, I'm somebody's ventriloquist dummy, but I'm not yours.
Also, I think my daughter is sufficiently embarrassed at the possibility of me saying something that will humiliate her that I need to maintain some level of anonymity here.
But she's a teenager, so I don't really care what she thinks.