09-25-2009, 03:16 PM
Hoofhurr Wrote:It's a bit naive to think that all consumers are going to be informed consumers. If you look at things like credit card contracts, home loans, paint/toys/pet food from china, advanced financial instruments,the actual cost of health care, and subsidized food industries, you can see where even half-way smart consumers like myself might get into trouble.
Imagine a market where the consumer had to understand everything they were purchasing. Much less would be purchased and this is clearly not the case for most purchases. Advertising would take the form of a lesson plan and there would be fewer hot chicks in commercials. Most people take it on faith that reputable companies won't try to screw them and that regulatory agencies are properly motivated and funded to protect us. Unfortunately, neither of these are true and there's not much the average consumer can do about it.
As long as the gap between consumer and product continues to widen we're going to experience more of these boom/bust cycles.
I guess that's where I'll always disagree with most people here. I believe that, once protected from fraud (labeling a snake as a pet rock), the onus is on the consumer to be an informed consumer. Most people with credit card debt are not in that position because they didn't read the fine print. They're in that position because they knowingly spent more money then they had. The fees and increased rates certainly exacerbate an already bad situation, but they are not the root cause.
Think about it. Should I, knowing nothing about classic cars, go and spend 100K on some sports car from 1950? Of course not. I should look at consumer reports, ask a friend who is an expert -- or better yet, refrain from diving into an area where I don't have even the basic knowledge to decide if I'm getting value for my money. This is essentially what happened with these exotic financial products. People just didn't understand them. As always, back to Buffet, he turns down deals that he doesn't understand. That's why he only took a 25% hit through this crisis instead of a 99% hit like many consumers of exotic assets (i.e. that town in Iceland).
"Hamilton is really a Colossus to the anti republican party. Without numbers he is an host within himself. They have got themselves into a defile where they might be finished but too much security on the republican part will give time to his talents and indefatigableness to extricate them. We have had only middling performances to oppose to him. In truth when he comes forward there is nobody but yourself who can meet him. His adversaries having begun the attack he has the advantage of answering them and remains unanswered himself. For God's sake take up your pen and give a fundamental reply to Curtius and Camillas" - Thomas Jefferson to James Madison