I heard a few days ago that there are twice as many Cash Advance outlets as Starbucks in the US.
Now, there are plenty of Starbucks stores around. In fact, it seems that they are on every third or fourth block but, apparently, there are twice as many places lending people money at exorbitant rates of interest.
It shows that an increasing number of people are desperate.
When they have to pay a bill or borrow cash to buy a birthday gift for a loved one, they need to borrow the money. They have no savings, no bank account and no credit card. Sometimes they are simply maxed out, having borrowed and borrowed until they cannot borrow any more.
Borrowing from cash advance places does not improve a person’s financial condition in the long term. The APR can be a staggeringly high 1800%, depending on how quickly the money is paid back. Sadly, most of those borrowing from such places have little understanding of how to handle money.
With this in mind, it’s encouraging to note that Croatia has become the first country in modern times to cancel the debts of its 60,000 poorest citizens.
When you think about it, this may be a quick and effective way of getting an economy moving again, assuming the 60,000 can be taught how to live within their means. Further borrowing would only repeat a negative cycle.
Debt cancelation is not something new. You can see evidence of it in the Old Testament. Leviticus, chapter 25, commanded the cancellation of all debts every fifty years. It was known as the Year of Jubilee and began on the Day of Atonement at the beginning of the 50th year.
“Consecrate the fiftieth year and proclaim liberty throughout the land to all its inhabitants. It shall be a jubilee for you; each of you is to return to your family property and to your own clan.” (verse 10)
In addition to what we read of ancient Israel, the Babylonians had a similar system of debt cancelation.
It’s arguably the best way to get western economies moving again.
At a higher level, it could even be applied to countries like Greece, who are overwhelmed with debt. The problem, though, is that Greece has been guilty of reckless over-spending and does nothing about corruption. These would have to be dealt with at the same time as canceling debt obligations.
But canceling debts may be the only way out of the fiscal mess the West is in.