Everyone has heard this sentiment at some point in their lives, often to justify the "service economy." Great goal for an individual, but how does that make sense??
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"Service economy" jobs feed off people who produce products for a living, aka creating value. Without manufacturing, what producers do we have? The tech industry? The whole of America cannot subsist off the tech industry. So what's left? Construction? Farming? America is supposed to survive off providing healthcare and financial services to farmers and Google employees?
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To work in tech, or in most service sectors like finance, law, medicine, data analytics, etc, let's say your IQ needs to be about 1 standard deviation above the mean. That leaves about 80% of Americans in the cold. Overestimation? Maybe, but probably not far from the truth.
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So how does the service economy achieve a 5% unemployment rate? Top service job sectors are education/healthcare with 26M employees in schools, hospitals, and social services, and 23M employees in "government." LOLLLLL
So you have:
- government-funded (or directly government-run) schools, universities, and hospitals employing the biggest chunk of people
- then another 23M people explicitly paid by the government
- then millions of women in the private business sector who are essentially subsidized by government-mandated email jobs
- then the transportation and UberEats sector that feeds off these people's Amazon deliveries and takeout orders
- then the legions of people on disability or food stamps or not making enough to actually pay taxes
- then the remainder of the population that actually creates some kind of value (excluding service jobs like legal, financial, business services, etc)
Our country runs off unlimited debt and pixie dust.
Anyone with $2000 could take $2000 in debt and spend $4000 in nonsense and be left with nothing. Having money is not a good indicator.
What you want to know is how predictably they pay off debts. This requires not debt, but a history of paying them regularly and on time.
If this were true, then the score itself would be vastly wider, and it would be entirely based on whether the debt was paid or not. This is completely false on both accounts, for example, paying off a debt early to pay less interest hurts your credit score. Being a minority gives you preferential credit treatment. It’s never been about paying debts, it’s about how much they can fleece from you or write off from you for ESG money and government compliance. I’ve know people who have never once made a late payment or had any negative credit impact after multiple houses and they still can’t get above an 800 credit score, simply because they pay off the loans quicker.
I won't comment on ESG stuff, but regarding the original point of credit score:
Exactly. It's about predictability. Paying as originally stated is what's ideal for these purposes.
No. It's about predictability, not paying the debt itself.
That’s not “predictability”. If someone predictably paid off their debt early every time then that is just as predictable as scheduled. It’s entirely about squeezing as much interest as possible. If “predictability” was the actual metric my friend would have the highest credit score humanly possible, he makes the exact same percentage payment every time, it’s just one that benefits him more than the loaner.
You're arguing for the sake of arguing. I'm not giving my opinion here: I'm describing how it actually works.
When one makes a debt and promises to pay in X cuotas of $200, as a lender I can make plans for that income through time. Any deviation, regardless of whether the debt is paid, creates uncertainty. Even "positive" uncertainty worries me, because it could mean, for all I know, that the person might be impulsive (an unwelcome character trait in borrowers). Many people pay their debts early once they get money because they don't trust themselves not to waste it. Paying early can be an indicator of untrustworthiness.
So, lenders want predictability. Not just of paying the debt: that is not enough. They want predictability of each payment step. That is what determines that the borrower is disciplined and does things as expected.