Tuesday, June 30, 2009

Attention Walmart shoppers!

I find this remarkable. I dare say it stopped me in my tracks.

If the financial crunch has taught us nothing else (or should have), it's that maybe we ought to stop squandering money on overpriced and/or name-brand items whose only advantage is rooted in narcissism or some ill-formed perception of intangible "worth." And maybe we should stop making all those purchases in today's precious lifestyle malls, as they're known, where one drives on cobblestone esplanades into an ersatz "town square"...and everything is marked up an extra 50 percent to cover the added cost of ambiance.

And now credit issuers are going to penalize people for being frugal? For buying the items they need in their most stripped-down form, at budget retailers?

Question: How much longer, do you think, before America gets repossessed by China?


I am informed that the latest Skeptic, containing my long article, "Criminal Injustice: The Flaws and Fallacies of the American Justice System," should now be arriving at a bookstore (perhaps in a lifestyle mall?) near you. Check it out...especially if you found the other day's blog, on pedophiles, provocative. You'll find some interesting perspectives from some of the nation's top legal minds, as well as an illuminating quote or two from former New York police commissioner Bernie Kerik.


Elizabeth said...

"The company lowered credit limits on cardholders who shopped at certain establishments or used certain services, including pawnshops, massage parlors, tire retread shops, marriage counselors and bars and nightclubs."

Massage parlors and marriage counselors?!

This is outrageous, on one level (the more important one, IMO); but, on the other, you know, what else is new in the system designed to fleece Joe Shmoe and his relatives to fatten the profits of the big banks and corporations...

Let's revert to using cash. It's not unheard of. Screw the credit card companies (wait...what is it that I hear? my credit score going down...?)

Chad Hogg said...

I guarantee you that if credit card issuers are basing decisions on these sort of things, they have hard statistics to back them up. It is amazing what kind of correlations you can find when you have a huge dataset to analyze. If your goal is to maximize the amount of credit you issue while minimizing risk, then you absolutely care that people who shop at pawn shops are 0.05% more likely than the general population to default on their debts.

"But wait!", you say, you are an anomaly who both frequents these establishments and is very responsible with credit. If you want to make an argument that basing decisions on data about large classes of people is discriminatory, fine. But then you need to outlaw the entire insurance industry.

Steve Salerno said...

Chadd: I'd be curious to see whether the insurance industry could withstand the sort of targeted challenge that, say, the Supreme Court ruled on yesterday (re the "reverse discrimination" against white New Haven firefighters).

I don't dispute that correlations of the sort you describe are there to be found. I'm talking more about the broader implications: the meta-message. Reduced to its essence, your argument (and, undoubtedly, the argument the credit companies would mount) is that "people who shop in high-line stores are less likely to default on their debts." That's logically because people who shop in high-line stores generally have more money to spend. But think about that: Why should people with more money to spend buy more expensive versions of products than they need to? That's part of the very mentality that got us into this mess: overspending or living up to the limits of our income.

I'll give you a pointed example: my sister, who lives in an elite San Diego suburb. She is a banker's dream--rolling in cash, seven-figure equity in her home(s), etc. She mentioned in passing a few months back that she has never set foot in a Walmart. She just can't bring herself to do it. She buys all of her staple products, including such items as toilet paper and household cleanser, in boutique-type stores. She buys milk in pricey "whole-foods"-type stores. That means she overpays for everything. Does that make any sense? I don't care how much she can "afford" to spend, how can you justify paying $3.19 for the same bottle of Mr. Clean that I buy in Walmart for $1.89? Or $2.29 for the same half-gallon of milk that I buy in 7-Eleven for $1.65?

I could pointedly show you step by step how this "vanity tax" raises prices for everyone and is driving America to the poor house. In fact, I'd planned to do a book on it.

Anonymous said...

Anything Maxine Waters is for, I'm against. Her anti-redline mortgage crusade in the 1990s was responsible for the sub-primates borrowing money they would not repay.

Waters and her buddies forced Fannie Mae and Freddie Mac to lower their lending standards, and she forced the other banks to follow or face penalties.

The way people spend their money is a great indicator of just how irresponsible they are. And irresponsible, poor people should deal with payday advance companies and rent-to-own loan sharks, and stop pretending they deserve legitimate credit cards.

I am 100% for the credit card companies: figure out who will stiff you and then refuse them credit.

Steve: ever notice how industries get demonized just before Obama takes them over? Wall Street bankers; domestic automakers; cigarette makers (now FDA regulated); utilities (hello cap and trade); health insurance companies - that takeover is still in the works; and credit card companies are now "evil".

Credit card companies are not evil - the government is evil because it forces companies to treat the deadbeat losers the same as their best customers and pretend that all demographic will behave them same. The truth is that irresponsible losers engage in irresponsible behavior. And they vote for democrats like Maxine Waters.

Steve Salerno said...

Anon 6:04, that comment is a bit broad and sweeping, don't you think? The credit-card companies are the white hats and the government is "evil"? Come on, now. Does anyone have any doubts what this country would look like if banks were left completely to their own devices?

People, I don't know why we have to Sean Hannitize every issue. I'm not saying that everyone does that, but some people seem to find it necessary: Every single idea that emerges from the left of center is "evil," and every single aspect of unregulated life is "good." That's simply not how it goes in the real world. There are a lot of venal people out there who sorely need to have someone looking over their shoulder, otherwise we'd quickly revert to the Robber Baron era. The notion that capitalism automatically self-corrects in every case is sheer nonsense. History tells us that.

And just for the record, the liberals are just as bad the other way: They can't seem to find anything to like about Big Business or free enterprise. We convert every freakin' issue into the Super Bowl, where it's all about advantage-seeking and winning at all costs, and I'm growing tired of it, frankly.

Chad Hogg said...

If we agree that the correlations exist, then it is not the credit card companies that are writing the meta-narrative, just the ones who are recognizing and using it. You will not find me spending more money to purchase the name-brand version of something or in some other way raise my status, but it does not bother me at all that credit card companies or anyone else make negative assumptions about me because of it.

In other words, I agree that no one "should" buy more expensive versions of products than they need to, but stating what people "should" do and recognizing what people "do" do are not incompatible.

Oh, and there are philosophical / moral / political reasons besides vanity to avoid patronizing WalMart.

Steve Salerno said...

Chadd, I can't argue at all with your last line. It's a complex topic.

As I had planned to argue in my book, however--based on a fair amount of evidence I'd compiled and analyzed--the purchase of an item at a cost beyond what is necessary not only inflates the cost of that item for the person who buys it, but for other people buying cheaper versions of that same item. A quick example I used in the proposal for the book was, If there were no $45,000 Cadillacs, you would not have to pay $30,000 to buy a Buick. The Lexus (which is considered an "affordable" luxury car) still costs $15,000 more than it had to, by the Toyota chairman's own implicit admission. It costs that much--in oversimplified fashion--because BMWs exist. And so on.

Bottom line, your neighbor's Porsche is costing you money. I can prove this...if only some publisher would let me.