Friday, September 3, 2021

It Is So Easy!

The local radio personalities were jabbering yesterday morning about how great the new Affirm partnership with Amazon will be. I hadn't heard about it and had no idea what it was about so I checked it out and sure enough this is a Big Deal:


What is Affirm? It is a Buy Now, Pay Later offering with the added bonus that for most people there isn't any interest being charged.

The partnership, which was made available to some Amazon users Friday, will allow customers to break up purchases of $50 or more into smaller installments. It also marks Amazon’s first partnership with an installment player, though the company already offers installment options on some items.
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Some of the biggest companies in buy now, pay later space include Affirm, Afterpay and Klarna. Most of them do not charge interest.

Now you can get basic consumer goods and pay in installments with no interest and no credit check. Boom it is just that easy. It is even better than credit cards because you can borrow with no interest.

This seems like an unqualified good. People can pay via installments with no interest. That sounds great.

As Lee Corso would say, not so fast my friend.

What is the biggest driver of inflation in most areas? Easy credit. Whether you are talking college tuition where easy credit is available to people with no credit history or home prices where mortgages backed by the Feds make credit a lot easier to obtain or general consumer goods with the ubiquitous credit card, having easy credit makes it easier for people to overspend. 

As a grossly oversimplified example. If I want a new pair of tennis shoes but I only have $50 to spend, I am limited to shoes that are $50 or under with sales tax. But if I have a credit card with say $1000 in available credit, I am not limited to shoes that cost $50. Now I am shopping for $150 shoes. Because easy credit is so ubiquitous, it stretches the shopping budget of consumers for shoes allowing shoe companies to charge more and more for those shoes. They certainly are not more expensive to make and most high dollar Nike shoes are absolute garbage, made for a few bucks in some sweatshop, but the image and the availability of easy credit allows Nike to market them for more and create demand for shoes that cost more and more while at the same time being made more poorly.

Still, most people have always understood at some level the danger of credit card debt and most people of Gen X age or younger have gotten into trouble with credit cards at one (or multiple) times in their lives. With this new program from Affirm, you get all of the ease of credit cards without the massive interest charges. Why would Amazon do this? It is just good business. Affirm will encourage people to make purchases of consumer goods that they probably wouldn't have before, even with credit cards, because they get to borrow the money for free. I assume Affirm is getting a slice of the sales price of every item they finance so Amazon is betting, probably correctly, that the increase in sales will offset this. 

It will also lead to more price inflation as the average idiot keeps buying stuff that is a) more expensive and b) increasingly poorly made and will need to be replaced in a couple of months.

A sign that we are in the end stages of America is the wholesale revamping of our economy to basically be nothing other than retail consumption of foreign made goods and the financialization of that consumption. Most of our innovation goes to making it easier to consume more crap, both physical crap and entertainment crap. It is hard to remember sometimes that America was the home of so many modern miracles of engineering and invention.

Buying overpriced jeans made in China via installment payments. What a country!

5 comments:

  1. There's another important point I think you missed. All this does is pull demand forward. There is no more income to pay it, so if you buy $150 dollar shoes on credit today (seriously WTF?), you won't have that extra $100 to buy more stuff later as you pay off the original. (not that most people buying on credit will realize this, they'll just spend and spend and spend until they run up against the brick wall of "no more credit").

    IMO it's the last days of the bust out. They are trying to get every penny they can before it all falls down and this of course only makes the collapse worse when it happens. (also you notice that no one says "if it collapses" anymore? now we are all discussing when).

    Everything is fraud and grift. Once you accept that, it all makes much more sense.

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    1. You can definitely see how this could ladder debt in a dangerous way. $8.95 a month for a pair of jeans sounds easy but when you get a couple dozen different items you are buying on time, servicing that debt can become an issue.

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  2. But can I get rifles, ammunition, optics, armor, night vison and stuff? Free shipping? The Taliban did.:/ Another sign screaming; 'stick a fork in it. we're ______ !' Probably can't even enter to lose unless you're fully current on your shots.

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  3. Any business left out here on life support is probably going to have an impossible time against this juggernaut. This is the first time I have heard of this concept also, Arthur. Medium irony being Labor day weekend and such. Until further notice I'll just look at it as the birthing pangs of trying to push all this communist bone, gristle and afterbirth through the pipe.

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    1. That is another good point. Small local retailers won't be offering this so that is one more reason to just buy online, which I do too often

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