American credit reporting companies aim to magically make us bigger
Bureaucrats at the Bureau of Weights and Measures are so stingy. Their refusal to shrink the foot means that none of us can grow taller. If they just cut the foot in half, we could all be 12 feet, or something like that.
Except that no one would be fooled by such a transparent attempt at magic. A foot is a measure, as opposed to a device of deception. Call it a veil. Changes in its length will not make us taller or shorter. Reality always impinges on attempts at deception.
What is true for the feet is also true for the money. In the 1960s, American industrialists feared that the stable dollar defined as 1/35and of an ounce of gold limited the competitiveness of their exports. They literally thought that a change in the value or “length” of the dollar would make them more prosperous.
Eventually, President Nixon granted them their wish. Love or hate his decision to sever the link between the dollar and gold, doing like Nixon was an explicit devaluation of the dollar. Manufacturers applauded? Probably for a while, just for reality to creep in. You see, all production of anything is a consequence of global cooperation, and certainly of global inputs. As the dollar went down, the dollar cost of everything skyrocketed. In other words, it was not just oil that soared in the 1970s following the devaluation of the dollar. Almost completely. With the falling dollar, the number of dollars needed to buy things has increased. For manufacturers, the supposed gains of a cheaper dollar than they imagined never materialized given the rising dollar cost of production. And the story gets worse.
Growing companies are regularly in the market looking for financing to improve and facilitate their growth. The problem was that investors were no more fooled by a weaker dollar than producers. Figure that investors are looking for dollar returns when putting money to work, but with the greenback in decline, investors’ willingness to commit capital for ever-uncertain returns has also diminished. Why risk wealth if returns could return in shrunken dollars?
It’s a long or short way of saying that messing with reality doesn’t mean reality takes a break. No, reality always delivers its verdict. Markets are reality personified.
This all brings us to a recent announcement from credit reporting companies like Equifax, Experian and TransUnion that they will stop counting individual medical debts in their individual credit ratings. At first glance, this may seem like a gesture of compassion. For a variety of reasons, individuals have been hit over the years with shocking medical bills that were completely unexpected. Given that the debt was in no way planned or expected, it just doesn’t seem right for those big bills to weigh on our credit scores? Maybe or maybe not.
Regardless of the answer to the above question, it has no bearing on today’s market. Reality, as stated earlier, always has its say. Credit bureaus can erase debt from our profiles to make us appear as a better borrowing bet, but only on paper. Those who actually part with real money will certainly not be so blasé about what individuals owe. They won’t because the money we owe is significant and it certainly affects our creditworthiness.
Which means that one way or another, the truth about our real debt will find its way to the creditors. This will be true even if the actual amount of money owed by debtors cannot be calculated. How is it? The answer is simple. If credit companies choose to provide inaccurate or incomplete information about what people owe, creditors will have no choice but to respond with higher borrowing costs to reflect the lack of clarity provided by reporters. credit.
Furthermore, it is not unreasonable to assume that one or more credit companies, having been awakened to the sheer stupidity of cleaning up credit reports of substantial significance, will choose to report the truth. In other words, the decision of some to whitewash the truth will exist as a market opportunity for others to tell it. The loan is risky and as it is correct information about the debt is very valuable.
Getting back to currency, although the US dollar hasn’t been pegged to gold since the early 1970s, it’s not as if gold has ceased to function as a market signal. It is still traded every second of every minute of every day. Markets do not sleep.
This matters given President Nixon’s attempt to fool the markets with a smaller dollar; while being acclaimed by mindless doctors and manufacturers. No one was fooled. Currently a dollar buys 1/1923rd of an ounce of gold against 1/35and of an ounce when Nixon made his fateful decision.
Markets talk every second of every minute of every dollar day. They keep reporting what Nixon, doctors and slow-witted businessmen thought could be hidden. The same will happen if the credit bureaus try to deceive the lenders.