Commentary
I’ve become a fan of TubiTV. It’s obvious why it is growing in popularity as a streaming service. There is no login and everything is instantly available. The movies and shows stream one after another so that you can have it on for hours, same as television in the old days. And it costs nothing at all. It pays for itself with advertising, and the ads are oddly welcome because they are not the usual ones you see on network television.
Many great old movies are there and plenty of shows too. Tired of woke? This is a service for you. Most movies before 2000 are actually reliably free of that nonsense. I always check this site before paying for content on other venues. It also allows me to observe what kinds of things are being advertised to those who are either unwilling to pay for streaming or lack the financial means. That alone is instructive.
A major advertiser for this service are the financial apps classified as BNPL, or “buy now, pay later” services. There are so many of them now that it is hard to keep up. The ads feature someone at the store with a large tab. The person notes that there is not enough money in the bank account to cover the costs. The idea is that you download an app, link it to your bank account, and then get an instant cash advance.
Maybe such services would be popular anytime but I suspect more so now that real income has fallen in these inflationary times. There are signs of hope on the horizon that the economy will improve in the future. Wall Street certainly thinks so and retail spending seems to be recovering but these ads tell a different story. They reveal just how much suffering there is out there right now, how many people truly do not have enough in the bank to pay basic costs.
On the one hand, this is very sad. On the other hand, these services are valuable and somewhat brilliant.
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I’m not joining the chorus of commentators who are calling for them to be regulated or abolished. They exploit no one. They serve plenty of people. To be sure, they do cost money. What is the interest they charge? That’s a complicated question because mostly they are fee-based, like an ATM. The fees can be quite high in accord with the going rate, so anywhere from 7 to 20 percent.
One way or another, these companies are going to be paid back and then some. There is no such thing as a free lunch or free groceries. The bill is going to be paid by someone.
Thinking of how these services work helps us understand something about the loan contract of medieval origins. They represent an exchange of people with capital in the form of money and people without capital in the form of money who need to consume something. When the first loan contract came along and families like the Medicis got rich, there was something of a moral panic in Europe. How can people make so much money merely by moving money around? It seems strange.
Every religious tradition has something different to say. The Christians (both Protestants and Catholics) mostly condemned the charging of interest as “usury” while Islam carved out a number of exceptions. The Second Lateran Council (1139) and Third Lateran Council (1179) both denied Christian burials for usurers. Indeed the Catholic church did not fully liberalize on the topic until the 19th Century.
Judaism did not condemn interest, reasoning that it was a perfectly justifiable exchange between people with excess and those without. It is for this reason that Jews developed the reputation as the money lenders: other religions could not come up with morally sophisticated justifications for the practice. Islam still retains its strictness though with exceptions.
What is the basis of the charging of interest? It is relatively simple: goods obtained now are more expensive than the same goods purchased later. It is called “time preference” in the economics literature, but you see it every day in regular pricing habits. It’s conventional that a flight purchased for two weeks from now is going to be cheaper than a flight leaving tomorrow.
It always pays to plan ahead. This is why people who forgo consumption today in favor of saving earn interest while people who live on revolving credit cards are paying more than 20 percent for the privilege. They are simply involved in an exchange: high time preference trading with low time preferences. Interest also covers other factors such as the risk of not being paid back or the risk, in the case of business loans, that the enterprise will not be profitable.
Regardless, the free market has proven to be brilliantly adept at managing the exchange between the present and the future and pricing it in a rational way. You want those groceries now but don’t have the money to buy them? You can get a cash advance—at a price that you agree to pay. There is nothing sketchy about this: it is a deal struck by parties based on voluntary decision-making.
The interest rate itself merely reflects the pricing of time relative to available resources. Like any other price, it can fluctuate based on underlying realities. When society is full of savers, more resources become available for lending and the interest rate is going to be pushed down. When society is full of high time preferences with more borrowers than savers, the interest rate is going to rise.
There is no role in any of this for the Federal Reserve to intervene to drive interest rates up or down.
The belief that the Fed can and should manipulate interest rates is based on myth rather than reality. When the Fed artificially lowers rates below market levels, it creates a distortion in the economy known as “forced savings,” leading to unsustainable investments and contributing to boom-and-bust cycles.
These distortions do not promote overall economic growth but instead fuel market instability. Artificially low interest rates result in the creation of new money and credit, which ultimately leads to inflation.
While Buy Now, Pay Later (BNPL) programs offer an alternative form of lending, capping interest rates on credit cards, as proposed by the Trump administration, may not be a beneficial policy. Such regulations could lead to higher fees for users or restrict credit access for those who need it, ultimately benefiting the BNPL industry.
Interest rate caps, like any form of price control, create market distortions and do not reduce borrowing costs. The credit market would be better off if left to operate freely without government intervention or unnecessary regulations.
Despite personal preferences, the availability of credit options like BNPL programs is important for those in need. It is crucial to recognize that different individuals have varying financial needs and that credit markets can function effectively without excessive interference.
The opinions expressed in this article are solely those of the author and may not necessarily align with the views of The Epoch Times.
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