November 14, 2011
I got a new credit card recently, serviced through a major bank that is unpopular at the moment. The bank’s website lets me schedule an automatic electronic payment of the minimum monthly amount due. That’s convenient, right? Nice feature. But from that point, things get evil quickly.
The bank’s site doesn’t allow me to schedule an automatic monthly payment of the entire balance. If I could conveniently pay the entire balance every month, it would be convenient for me, and bad for the bank. Do you think the bank left off that feature by accident?
But they aren’t done with me yet.
When I navigate to the page where I can enter any amount I want to pay that month, the site no longer displays my current balance. I assume the bank hopes I don’t remember that figure from the previous page. An accidental underpayment is good for the bank, and bad for me.
You might wonder if what I’m describing is simply shoddy interface design. But consider that perhaps half of the people who go to the payment screen want to pay the entire balance, and it would take the bank about five minutes of programming to display that figure. Also consider that the bank’s biggest competitor had the same suspiciously bad interface design until recently.
So my first point today is that people have good reasons for distrusting banks. It’s not paranoia.
Now let’s move to my second point: What the hell is going on with Greece and Italy?
As a general rule, you can usually assume that someone is trying to screw someone else whenever you find these two elements working together:
Complexity is how evil schemes are hidden from the public. Complexity is what caused so many people to get mortgages they couldn’t afford. Complexity is how hedge funds hide their treachery. Complexity is how the derivatives debacle was possible. Complexity is how your financial manager can get away with charging you for doing nothing. Complexity is why you don’t know if you can get a better deal with another phone carrier.
When it comes to the Greek debt situation, the public has been warned of the scary possibility of a domino effect. Exactly how does that domino thing work in this particular case? It seems…complicated.
I understand what a default is, and I know what a domino is, but I don’t understand how Greece’s debt problems, and Italy’s too, will destroy the rest of Europe. And when I don’t understand something, I automatically assume someone, somewhere, is trying to screw someone.
I know my readers, and you’ll try to explain to me in simple terms how Greece’s and Italy’s debt problems will ripple through the economy. But I’ll bet you can’t do it without resorting to a psychological element such as “And then people will be afraid to make loans to anyone.”
You should always be suspicious of psychological explanations. In my reality, there is plenty of money on the sidelines, thanks to the famous 1%, and there will always be a willingness to lend to the creditworthy.
So my question to you is this: If the situation in Greece and Italy causes some big banks to go under, how much will that affect anyone who isn’t a stockholder or a depositor of those banks? Won’t the surviving banks, of which we have too many, end up stronger, with greater market share, when the dust settles?
Just to be clear, I’m not saying the problems in Greece and Italy can’t create a devastating ripple effect. All I’m saying about that situation is that three things are involved: