The credit card problem is not the monster that keeps the US economy awake at night, debt is. 

“Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”

-The Red Queen from Through the Looking Glass

Time has a habit of speeding up when you borrow from the future. Like in Through the Looking Glass, this acceleration makes it difficult to keep up, let alone make any sort of progress.

Imagine that you find 1 million dollars worth of oil on your property and it costs $100,000 to access it. Borrowing that money on interest turns the 5 years it would take to accumulate that money into a year. Credit is an incredible time machine that delivers your dream of prospecting for oil closer to the present. 

Here is what your dream of oil prospecting looks like without credit. It is a long uphill battle:

When you borrow from the future, it adds weight to the timeline, pulling you closer to your goal. A healthy amount of credit balances out the timeline giving you a reasonable path forward:

You realize that the rate of return from the oil is slower than expected. The loan payments are cutting into the cost of rent, food, and transportation. These are not required to achieve your original goal, but you have grown accustomed to this sort of lifestyle. You decide to borrow more at a higher interest rate in order to remain comfortable. 

The debt for comfort and living expenses is different than the previous debt. The legal definition for this is unsecured debt. It is debt for items and services that disappear after you use them. Credit card debt is an example of this and is typically discharged (forgiven) through bankruptcy.   

The debt used to start your business is called secure debt. This includes physical assets that are liquidatable and can grow in value. 

The unsecured debt exponentially increases the weight of debt on the timeline because it doesn’t offer any value in return. It is just eating into the promised million-dollar payout. 

In order to prevent tipping the scale further into debt, you need to work harder and faster in the other direction: 

This is when you enter the Red Queen’s race. You need to run twice as hard to balance out the scale. Most people aren’t lucky enough to be gifted with the sudden ability to run faster, so they look again to the future for riskier opportunities. You take out a loan and try prospecting for more oil in a foreign land. You quickly realize that there is not enough oil in the whole world to pay back the debt. The only way forward is to continue to borrow in order to run harder and faster in the other direction. You try balance transfers and even investing borrowed money into speculative instruments.

Eventually, the payments get too large, you default, lose access to credit and crash into the inevitable future:

The reason so many of us are using credit cards, is that the total US debt is too heavy for our productivity to keep up with. Like the desperate oil prospector, companies are choosing to borrow more money to buyback stocks instead of giving raises. They are trying to out run the exponential growth of debt through short term speculative gains. This creates an illusion of record high growth that is proportional to our credit card debt, but is dwarfed by total debt.

The ability to stimulate the economy with easy credit is no longer reaching the middle class. It is stuck in a feedback loop that only enriches the 1%. The middle class is stuck paying 26% interest rates in order to keep up with the illusion. The more unsecured debt that is added to the mix, the heavier our debt problem gets. At a certain point, many of us may need to use bankruptcy to discharge that debt. We will need to reset the economy and slowly work our way back to sustainable growth.  

If you feel that you that you have already reached that point, I recommend speaking with a bankruptcy attorney today.



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