Lecture 18: The Democratization of Finance: Consumer Finance. Trends in Democratization of Finance. Financial and insurance institutions began with intellectuals and wealthy class
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SWW conclude that the biggest single factor in increase in personal bankruptcies in US has been growth of credit card debt.Average debtor in bankruptcy in 1997 had nine months’ income in credit card debt.
Credit card debt continues to be extended after initial application
Debt is incurred a little at a time
Payment schedules are different, can become ever more indebted while paying the minimum amount each month.
Milton Friedman, Capitalism and Freedom 1962: individuals sell shares in their future earnings, but feared “irrational public condemnation” and feared it would be difficult to track people and enforce contracts
Such loans should be based partly on income indexes, to reduce moral hazard