Originally Posted by jayeff

Absolutely wrong.

The average person is not someone who takes, as you put it, the bank's money and turns it into profit. Would that it were so easy. He or she is much more likely to begin working life with $20K in credit card debt and $30K in student loans. And from there it is downhill: $400+ a month to buy a car, etc, etc. Within a few years they will add a mortgage to their debt mountain. Off the top of my head, someone taking a 30-year note on $500K will pay back about $1.2 million...

Because so many get stuck on a credit treadmill they can barely handle, then yes, the prospect of saving to accumulate the cash for some project or other becomes daunting. But without the credit culture which puts us on that treadmill in the first place, the picture could be completely different. You cannot escape the reality that the interest people pay on everything from store credit cards through to mortgages is often more than the ticket price of the goods they were able to buy. Most do not get far into adult life before their money starts to buy less and less because so much of it is covering interest in one form or another.

Just as the theory of using credit to make a profit depends on everything going right, so does the idea that if people used cash, they would actually save what they would otherwise being paying in interest. Thus there is a world of difference between theory and practise in both cases. That said, especially now it is harder for people to declare bankruptcy, regardless of whether people would actually save by not getting into debt, at the very least they would reduce the risk of catastrophe. Particularly when an economy is weak, carrying debt is an extremely bad idea.