Collateral Damaged: The Marketing of Consumer Debt to America By Charles R. Geisst; Bloomberg Press; 288 pages
About 80 pages into his recounting of our misadventures with borrowed money, finance professor Charles Geisst describes the credit-card industry of the early 1970s. You wouldn't recognize it. A piece of plastic that allowed a person to carry a balance was a fairly new concept, and if you had one, you also probably earned a decent salary--because a company wouldn't give you an unsecured loan otherwise. How quaint.
Geisst then dives into what follows. America binges beyond its means on credit cards and home-equity loans, thanks to easy regulation (the end of the bank-limiting Glass-Steagall Act, for instance) and even easier money (cards and mortgages for the asking, thanks to a tsunami of financing from commercial paper and securitization). This is well-worn ground of late, and Geisst isn't the most eloquent in covering it.
What's more novel is the historical context he provides to help explain our lust for debt. Overborrowing, it turns out, is a common human endeavor. In the 14th century, Edward III of England had a debt-to-income ratio of 3 to 1; he pawned the crown jewels at one point and left his pregnant wife in France as collateral. A few years later, on the other side of the pond, William Duer got in over his head buying bank stocks on margin, helping cause the 1792 New York stock-market crash (and inspiring the first U.S. bankruptcy code). The free spending of the 1920s is still the quintessential picture of that roaring decade. As Geisst reminds us, it was the first time, but not the last, that consumer spending hit two-thirds of national output.
Through much of the narrative, Geisst weaves in the concept of usury. For millenniums, societies have struggled with how much interest lenders may fairly charge. The Romans said no more than 10%, the medieval church tolerated 4% to 5%, and the 15th century Brits couldn't make up their minds, going from 10% to none (like the Muslims) and then back to 10%.
Geisst argues that the lack of strict usury restrictions in modern America--Citibank took its credit-card outfit to South Dakota in 1980 specifically for the easy lending laws there--has been a key cause of our recent woes. Charging higher interest to less stable borrowers may be framed as the democratization of credit, but in another light it's the overextension of debt. As we've been reminded yet again, that comes with consequences.
$20 per Gallon: How the Inevitable Rise in the Price of Gasoline Will Change Our Lives for the Better By Christopher Steiner; Grand Central Publishing; 283 pages
We've all seen depictions of cities of the future: people packed into urban centers with flying cars whipping around high-rises. This vision may not be far off, according to Christopher Steiner, a Forbes writer. In each chapter he addresses how our lives will change with $2-per-gal. increases in gas--changes like a huge reduction in air travel (at $8). There are positives too, such as a return to local food production (at $16) and expansion of the high-speed-train system (at $18). Still no flying cars, though.
Next Stop, Reloville: Life Inside America's New Rootless Professional Class By Peter T. Kilborn; Times Books; 254 pages