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Template:Infobox PF Topic It's a difficult topic since it requires more knowledge of economics than one would ordinarily expect of high school students. The basic question is whether American consumers are too easily allowed to borrow money, often at usurious interest rates, which they cannot pay back. Like many topics that are phrased in the passive voice, the lack of an agent of action in this topic will likely prove problematic for both pro and con.

Pro

The amount of credit that Americans have available to them is determined by free market mechanisms. That is, people decide to lend money do so based on their belief that they will make more money lending the money to a consumer than they might were they to invest the money in some other fashion. People who borrow money, hopefully, are borrowing based on their belief that they will receive greater benefit by borrowing money to purchase something now rather than waiting until they have saved enough money to purchase the good immediately. The problem comes in, however, when people who lend money prey on borrowers who are too often faced with no choice but to borrow money. Similarly, there are unscrupulous lenders who try to take advantage of people who do not properly unerstand the terms of the loans that they receive. There are countless horror stories of people being enticed into borrowing money under terms that are deceptive only to find themselves unable to pay back their loans. Finally, there are just some people who live for the present and borrow as muc money as they can with little regard for how or even if they'll be able to pay it back. The problem with all of this, however, is that the problem is not necessarily the amount of money that's available for people to borrow, but rather the terms under which it's made available.

The pro needs to keep in mind that limiting the amount of credit available can have the unfortunate effect of increasing the amount that people will need to pay in order to borrow money. It's a function of supply and demand. One would hope that increased interest rates will decrease consumer demand for credit, but this assumes that the demand for credit is relatvely elastic. Consider, however, the family who has run out of money midweek and needs to buy food for the remainder of the week. Given that people's demand for food is inelastic (i.e. people need to eat), this family is likely to borrow money regardless of the price that they need to pay to borrow the money. It's probably the people who are least in need of credit who are least likely to borrow money when the supply of credit is tight.

Given this, the pro needs to speak specifically of predatory lending practices and the problem of lenders making money available too easily at too high a price. The argument the pro has to make is not so much that the overall amount of money being made available to borrowers is the problem, but that consumers are being too easy access to money. Indeed, the government already regulates lending. There are numerous State and Federal laws that regulate credit markets. The pro side needs to argue that the quantity of credit available is problematic when it extends to things like "payday loans" and other usurious and predatory lending practices. These credit markets, the pro should argue, should be closed off to consumers.

Con

Con has an eaisier burden here. Con's argument is, in effect, that the problem is the quantity of money being offered, but the quality. That is, too much money is being offered at too high price.

Credit has powered the Amrican economy for years now and this is not a bad thing. When the economy slows, interet rates go down, and people borrow and spend money improving the economic outlook. There's a reason why the Federal Reserve Bank raises inerests rates when the economy is going well and lowers them when it's going down (N.B. the Federal Reserve does NOT set the interet rates that consumers pay when they borrow money). The problem of people having to borrow money to eat is a problem of a societ without an adequate social safety net, not a problem of credit.

Much of the con argumentation is discussed above:

• Reducing the quantity of credit available hurts those least well off;
• The problem is not the amount of credit available but the terms at which the credit is made available;
• Consumers should be offered a choice of whether they want to borrow money.

The con's position is a traditionally anti-parternalistic and pro free market one argument.

Consider, after all, that the Nobel Prize was given to the Grameen Bank and Muhammad Yunus, who lend money to the poor.

External Links

Center for Responsible Lending
Payday Load Consumer Information
Grameen Bank and Muhammad Yunus
Nobel Prize web site