Get Ready for the Pain of Paying

The most revolutionary notion in commerce today is one of the oldest. If you want to buy something, you may actually have to pay for it. We are quickly reverting from a borrow-and-buy model to the old school cash-and-carry model our grandparents and great grandparents knew. It may seem passing strange now, but paying hard currency for goods and services has been part of our consuming DNA pretty much from the beginning of time. Sure, medieval alehouses and mead halls may have allowed customers to run up a tab, and the Olesons extended store credit to Ma and Pa Ingalls in "Little House on the Prairie." But widespread consumer credit is really a 20th-century phenomenon
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Commentary by Richard B. Wagner, JD, CFP®

For many, credit has become synonymous with money-resulting in very short term thinking. We hear the slogans equating credit with life and become enchanted. (Seriously, did you know that MasterCard's website is www.priceless.com while Visa is accessed through www.lifetakesvisa.com/). Wow. How did humanity function for all those millenia?
Moreover, for years the world's economy rested very much on the back of the American consumer and his/her loose credit card tendencies.
No more. Cash carries a different psychology than credit.
As credit card companies and retailers tighten the reigns on credit limits, the behavior of the American consumer has undergone a noticable change.
In theory, when one has a high credit limit, tomorrow never comes so it is "ok" to postpone a reckoning. Gross makes some interesting observations about the behavioral and economic implications of the post "easy money" era. One example: How would one's eating habits change if restaurants charged by the bite rather than by the meal?
It should be interesting to follow the habits of the American consumer as this new (but old) "charge by the bite" commerce emerges.
Gross has written an intriguing and informative article for our post-"easy credit" world.
Daniel Gross is one of the most widely read financial and economic writers working today. He is a senior editor at Newsweek, where he writes the "Contrary Indicator" column. He writes the twice-weekly "Moneybox" column for Slate, which also appears on Newsweek.com.

Before joining Newsweek in the spring of 2007, Mr. Gross wrote the "Economic View" column in the New York Times, was a contributing writer to New York, and contributed regularly to magazines such as Fortune and Wired. From 1998-2007, Gross served as the editor of STERNBusiness, a semi-annual academic magazine on economics and management published by the New York University Stern School of Business.

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