The Cure

Guest Post by Eric Peters

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Imagine how different cars would be if people had to pay for them – as opposed to financing them.

Debt – which is what financing is – allows people to buy more car than they can afford. It hides the actual cost of the car. It enables the government to impose costs in the forms of mandates which would otherwise be unaffordable – and so, objectionable. People would complain in the one language the government understands.

They would not comply – because they could not buy.

This would put the brakes on what seems unstoppable: The endless and accelerating juggernaut of “safety,” “fuel efficiency” and “zero emissions” mandates coming out of the federal regulatory apparat. It’s lovely – to a federal regulatory apparatchik – to call a press conference at which the latest technically feasible “safety” system is urged upon the public. Air bags that deploy outside of the car, for instance – to cushion the impact of your car upon the body of a jaywalker, for instance (and yes, they are actually talking about mandating exactly such a system). It is another thing if the system in question is something that can’t be folded into the low monthly payment of a seven-year loan.

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Debt financing also enables the economically irresponsible to drag the economically responsible into the red by raising the cost of everything and thus making it hard and often impossible as a practical matter for the economically responsible to avoid financial wastage.

Consider: It is effectively impossible for most people to avoid driving a car with at least two air bags, because all cars manufactured for the past 20-plus years have been required by federal law to have at least that many. Unless a person is willing to drive a car significantly older than 20 model years (you’d need to go back to early 1990s to find cars without at least two air bags) one is effectively forced to buy a car equipped with at least two air bags.

The cost of those air bags – of which there are now usually at least six in most new cars – is hidden from buyers by spreading out the cost over a lengthy period of debt-financing. People  do not see – so they do not object. This is not unlike the diabolically clever business of “withholding” taxes from people’s paychecks; they never actually have to write a check to Uncle; they never miss money they never actually had in their hand. Imagine the roar that would emanate if people had to write Uncle a check each year for the money currently withheld from their paychecks. That roar would almost certainly result in lower taxes.

Hence withholding.

Hence financing, for the same reason.

Air bags were a dead letter when people had to choose to pay for them – and the cost of them couldn’t be folded into a six or seven year loan. Because – at the time – such loans did not exist. You generally had to pay for the car over three or four years. Adding 20 percent to the car’s cost – the cost of air bags at the time, when they were still a la carte options – could not be discreetly folded into a loan of such short duration. It would be like trying to hide a brick under a carpet.

The obviousness of the cost and the impossibility of obscuring it via Methuselean debt financing caused most people to abstain from buying the air bags – when they had the choice.

Which would be even more the case today given the six (or more) air bags which are now to be found in all new cars. . . if people had the choice.  

If these were offered a la carte – as optional equipment and had to be paid for without resort to a loan as long as most people spend going to high school and college. If that were the case it is a good bet almost no one would buy them, because almost no one could afford them.

The thing speaks for itself. 

But because almost anyone can finance them, we are all effectively forced to go into debt for them. There is no great roar of outrage about the imposition of these costs because the costs are hidden from view. Gradual impoverishment via debt is like old age; they each creep up on you. A person looks in the mirror one day and notices he is going gray. A person reaches late middle age and takes stock of his finances and realizes his net worth is practically nil – but he is living in a “nice” house and driving a brand new car with six air bags.

And a back-up camera, tire pressure sensors, LED projector beam headlights, 18-inch wheels with $150 per piece tires, automated emergency braking, with a direct-injected/turbocharged engine under the hood, putting the power down via a nine-speed transmission connected to a viscous coupled all-wheel-drive system.

Probably, our man would have bought none of these things – government mandated or not – if he hadn’t been enabled to do so via the diabolical device of debt-financing. It – more so than Uncle, who merely uses it toward this end – is responsible for the economic enslavement of the population. It’s a comfortable enslavement, in the sense that never before have debtors enjoyed heated leather seats and a great stereo system. But they are enslaved nevertheless. Because insurmountable debt amounts to perpetual insecurity. One is constantly sweating money, beholden to a job – which one may despise – and a particular employer, whom one dreads in the same way that a galley slave dreads the whip master.

One hundred years ago, the average person didn’t have access to the baubles – and luxuries – that are now seemingly everyone’s birthright. The difference then vs. now is that while there may have only been a simple Model T parked outside of the person’s home, it was probably paid-for.

And so was the home it sat in front of.

Its owner may not have had heated seats – or six air bags. But he had something else, infinitely more precious.

His freedom.