by Akim Reinhardt
I belong to a credit union. It's been fifteen years since I kept my money in a for-profit bank.
Nearly one-third of Americans also belong to credit unions, and for most of us, the reason is obvious: for-profit banks suck. They nickle-and-dime you to death, looking for any excuse to charge fees. And that makes perfect sense. After all, banks aren't designed to do you any favors. They're designed to make money off of your money.
Credit unions, however, are non-profit cooperatives. So they're not out to fuck ya. People who keep money with them are shareholders, not targets of exploitation. And when a credit union does charge fees, the reason and amount always seem sensible, to me at least. So not only do I keep my money in a credit union, I also took a home mortgage with one and run my credit card through one.
The financial meltdown of 2008 only reinforced my decision to avoid for-profit banks at all costs. As profiteering financial institutions hit the skids, and were either bailed out with public money or put down altogether, the credit union industry was relatively unscathed by comparison. Reasonable regulations and responsible banking practices ensured that most credit unions never gambled away their shareholders' money.
In fact, no retail (a.k.a. consumer or natural person) credit union, the kind that operates like a bank for regular people, has ever been bailed out with taxpayer money. Ever. Furthermore, compared to banks, only a fraction of retail credit unions went under, although it should be noted that the financial meltdown did substantially damage the wholesale (a.k.a. corporate or central) credit union industry, which offers investments and services to the retail credit unions, not their patrons.
Fewer fees and peace of mind are nice perks, to be sure. However, there are certain disadvantages. One inconvenience that plagued me for several years has to do with the relatively sparse physical presence of credit unions, compared to the monstrous for-profit banks that loom large on the landscape; it seems you can't spit without hitting one of the latter, while the former is far less ubiquitous.
With fewer branches and outlets, credit unions can't offer nearly as many automated tell machines as do the big boys. Of course the credit union would never charge me for using someone else's ATM. Again, they're not looking for excuses to screw me over. But the non-credit union ATMs that I did occasionally use invariably charged me for using their machine.
So to avoid fees, I had to take care to make withdrawals only from the relatively few credit union ATMs, none of which were near my home. Either that, or I had to suck it up and pay the piper.
Fortunately, my credit union came up with a solution. They cut a deal with 7-11. As a result, I can withdraw money with my credit union ATM card at any of their stores and pay no fees. And it just so happens that there are two 7-11s within a few blocks from my home.
Using a 7-11 as your primary ATM is, as you might suspect, a little different from using a bank or credit union outlet. For starters, there's the nearly endless prattling of the lottery ticket machine. There are also the depressing ATM receipts, left behind by people who just withdrew nearly their last dollar. And of course there's the very strong urge to spend the freshly withdrawn bills on chocolate milk and corn nuts.
They go really well together. Trust me.
But there was also an unexpected oddity to the 7-11 ATM that threw me for a loop. If you withdraw a hundred dollars, the machine spits out five $20 bills, as is standard practice. But if you withdraw two-hundred dollars, it gives you five Jacksons and a single $100 bill. Punch three-hundred, the max, and you'll get five 20s and two c-notes.
The first time this happened, I thought to myself: Shit. Where am I gonna break a $100 bill?
In my mind, a crisp hundred dollar bill . . . well, actually the ones from the 7-11 ATM usually aren't that crisp. Really, they're mostly kinda wormy. But either way, a greenback with Benny Franklin's portrait on the front has always been at once special and also a pain in the ass. It's a rarity; it's the crown prince of currency; and it's the bill that most places don't want to break.
You can certainly use it easily enough to buy a big ticket item, if you happen to be paying cash. A new pair of shoes or a couple of bottles of decent wine. Perhaps you can collect cash from your fellow diners and use that big note to pay a restaurant tab. But generally speaking, most retail outlets don't want to break a hundred dollar bill, right?
Well, as I've begun to learn, expressing that fear was really just a way of dating myself. Sure, back in the 20th century many retail outlets looked askance at a $100 note. Breaking it might put a dent in the register drawer, and establishments even worried that the observable transaction made them vulnerable to holdups. But nowadays? Nobody seems to give a shit.
Maybe it's that I'm getting old, but no one really looks twice anymore when I offer up a Benjamin to pay for a sandwich or a slice of pizza. Ninety-plus in change? No problem. I've stopped shyly explaining that I don't have anything smaller. I no longer bother asking, Can you break this?
Just the other day, I used one to pay for an eggplant parmesan at a local pizzeria. The cashier didn't even blink. When I tried to make small talk about “the old days” when few places wanted to take them, the woman behind the counter, who was about my age, just smiled half-heartedly and looked away, as if trying not to insult me while thinking to herself: Where the hell have you been?
But this isn't just about me yelling at kids to get off my lawn and to turn down that god damned, good-for-nothing rock n roll music. I may be out of step, but of course the real culprit here isn't my outmoded sensibilities. It's inflation: that cackling maniac, who along with the dour and grim-eyed specter of recession, form the janus-faced villain that is the arch-enemy of healthy economies.
As the frenetic high to a recession's depressing low, inflation draws a complicated set of reactions from people. A recession, or even, god forbid, a full on depression? There's nothing happy about that. Nothing sexy. But there's also not a lot of irrational fear about the prospect of one. Everyone knows recessions are bad, and let's just hope one doesn't come along
But cultural attitudes about inflation are different. They swing like a pendulum. Inflation is at once the seductress and the bogeyman.
The appeal stems from our lust for stimulation, and inflation is, essentially, an over stimulated economy. And much like an actual manic episode from which an individual might suffer, inflationary cycles can start off well. Just as the early phase of someone's manic episode might begin with that person being happy and productive and even euphoric, an inflationary cycle might begin with lots of profitable economic activity. It's attractive, it's fun, and it's potentially seductive.
But it's a fine line between being energetic and being at the outset of a wild ride.
The recent worldwide real estate bubble was one helluva ride before the wheels fell off the wagon. Likewise, the tech stock bubble before that was a raucous party until all the beer and chips were gone.
In the early stages of inflation, people can be downright giddy. Yes, prices are rising, but the increased economic activity often feels good. There's more money in circulation, it's being spent more freely, and at first its easy to mistake that for increased wealth, overlooking the currency's decreasing value.
To the contrary, people are almost never happy when a recession begins. There's nothing seductive about deflation. Everyone just starts feeling poorer.
Yet, if bad inflationary cycles can start out as a positive before going horribly wrong, then perhaps its no surprise that the popular culture often looks upon inflation as if it were the femme fatale from an old Film Noir. Some go running towards inflation, drawn by its siren call. But others, mindful of stories about the barrels-full of German deutch marks needed to buy a loaf of bread during the Weimar Republic's hyper inflation, and how this more than anything explains the rise of Adolf Hitler, proffer knee jerk opposition to inflation no matter the circumstances.
But if the attractive qualities of inflation can be misleading, so too can the fears. For example, while Germany did in fact experience hyper-inflation in the aftermath of World War I, it wasn't the wheelbarrow phase that led to Hitler. By 1924, the German economy was actually on the rebound. The earlier period of hyperinflation had far less to do with Hitler's rise than did the post-1929 economic depression.
It's not that Germany didn't experience hyper-inflation after WWI. It did. And it's not that hyper-inflation wasn't a tremendous economic burden. It was. It's that the pop-culture interpretation of post-WWI Germany overemphasizes the impact of that inflation while simultaneously downplaying the utter catastrophe of deflation.
And so in some ways, sometimes irrational fears of inflation can be as problematic as the irrational lust for economic growth that can promote inflation and even speculative bubbles. Both attitudes can cloud our understanding of economic cycles and can hobble our efforts to manage them.
Those who are seduced by inflation, which can be anyone really, can help drive an economy towards the brink. However, those who fear inflation under any circumstances can help keep a sickly, deflated economy from getting healthier.
But all of this is complicated by the inescapable problem that Inflation can be a little slippery and difficult to nail down. There are many different types of inflation and ways to measure inflation. For example, the tech and real estate bubbles weren't the result of just regular old inflation. They're categorized as Asset Price Inflations. As for the form of inflation that worries most people, and which affects a broad range of consumer goods and services, there's no one sure-fire gauge. Determining the best way to measure it is, to some to degree, up for grabs, which explains why the United States uses the Consumer Price Index while Great Britain uses the Retail Price Index.
The assortment of inflationary categories and statistics makes things a big foggy for the average person. This is compoounded by the fact that in actual experience, most inflation doesn't come in the form of an instant shock. Usually it's more modest forms of economic growth that are difficult to personally keep tabs on over the years.
I remember walking down the street with my father in 1980, bemoaning the price of a slice of pizza, which had recently crested the 50 cent threshold at a local joint in the Bronx where I grew up. As we walked, my father reminisced about having first come to New York in 1959, when a slice and a soda was something like 15 cents. Now the cost of that same combo had risen to a dollar. I turned to him and joked:
One day, just a slice itself will be a dollar.
We laughed. What a ludicrous thought.
Nowadays a slice is close to three dollars. And I can pay for it with one of my 7-11 issued $100 bill.
Inflation can tug at our fears, a la the German wheelbarrows. But the chance to catch more of the money circulating through the economy at a higher speed can also be alluring.
A the moment, our current economy remains deflated, so personally I won't worry too much about a little inflation. I'll stop fretting about the chance to pay for a slice with a hundred dollar bill so long as my change is mighty substantial. And maybe one day they'll even bring the $500 bill back into circulation.
It might be all about the Benjamins for now, but perhaps one day, it'll be all about the McKinleys.
Akim Reinhardt's website is The Public Professor.