An amazing turnabout in American attitudes toward consumer credit is presenting Alan Greenspan with a monetary challenge that most of his predecessors did not face.
Greenspan, chairman of the Federal Reserve, has been tightening the money supply for nearly a year now, but consumers continue to buy up a storm, all but ignoring his efforts.At least part of the explanation lies in the fact that as Greenspan seeks to restrain the use of credit, the private sector is going all out to make it available.
So comfortable are Americans with easy consumer credit these days, that a comparison with attitudes in the 1960s seems to span a century rather than just two decades.
Back then, a personal loan at a commercial bank might have involved a long application form, an interview with a stone-faced loan officer and a wait of weeks while the bank's loan committee considered your credit-worthiness.
Generally, the specific reason for seeking the money had to be stated. And if the reason given was "bill consolidation" some banks would insist on using the funds to make the payment themselves rather than trusting the applicant.
Today, you need not ask for money. It is offered to you via credit cards by banks whose existence you had not known before and who obtained your name from a purchased mailing list. "You deserve a line of credit," they state.
Should you accept the offer and maintain a record of on-time repayments you might hear from the bank again. "We enjoy doing business with people like you who pay on time," they say. "We are raising your credit limit."
You needn't buy merchandise with your credit; you are free to ask for cash, and then to use at least some of it for regular living expenses. Money machines are placed so that your urge for credit can be indulged anywhere, anytime.
If you remain a reluctant spender you are enticed with merchandise and prizes. Big banks today are in the retailing business, offering cardholders insurance, television sets, travel arrangements and more The easy credit doesn't apply only to small items. In the 1960s, the idea of offering discount credit to car buyers probably wasn't even imagined. Today it is routine. Let Alan Greenspan do what he wants with interest rates, the sellers of automobiles will give you a rate considerably below that.