Tuesday, September 16, 2008

What does the economy look like without credit cards?

In my opinion there is a very good chance that banks will start cancelling credit cards in droves, even for people with perfect credit. The credit crisis and instability on Wall Street has led to a true liquidity crisis and no one is going to be immune from its effects.

What is going to happen to the economy if people have to pull out cold hard cash to make their purchases vs. their oh so handy credit cards?

Spending on [credit cards] operates on the same psychological principles as [casino chips]. Signing a piece of paper does not "feel" like spending money.

"Hospitality & Tourism: An Introduction to the Industry," P. 195
Robert A. Bryme

The inventor of chips was a genius. Plopping down a stack of $100 chips isn't nearly as painful as putting down a wad of $100 bills . . . Have you ever noticed there are a dozen places in a casino to buy chips but only one place where you can cash them in? Cash goes straight into your pocket, and the casino owners know they might never see it again.

Confessions of...a Casino Pit Boss
It will certainly be interesting to see how this plays out, I think it is going to be devastating to the US economy. Time will tell!

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