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PaperclipPerfector  7d ago (text post)   29394 thread views

Culture War Roundup for the week of January 12, 2026

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There was a twitter debate on Trumps plan to limit credit card interest rates to 10%.

In my view this is an interesting exchange between bad academia (fed paper), expert (Patrick Mckenzie), MBA logic, populists (Trump).

Trump proposed a policy of capping credit card interests rates at 10%. That set up a twitter folly of the high rate people are subsidizing low rate people with rewards backed by a fed paper.

https://www.elibrary.imf.org/view/journals/001/2023/054/article-A001-en.xml

Ackman backing it: https://x.com/billackman/status/2009976076559077844?s=46

Personally being a dumb MBA I feel like I can perfectly segment pnl between subprime borrowers and rich people. If I make money on subprime and lose money on rich people I can just shutdown the rich people business and deploy more money to poor people. So the academia people are most likely wrong based on simple logic?

I can’t find it now but somewhere he did a longer post on how all cc are segmented https://x.com/patio11/status/2010185232159518904?s=46

I think for culture war attributes there are: Academia can do bad research. Ignore basic (or a price) and find a conclusion that seems smart but does not pass a logic text.

Honest experts can give full market breakdown.

MBA and idiots can give a logic that makes sense and is more correct than an academic trying to make a paper.

And then there is the Trump 10% interest rate cap. Maybe most borrowing above 10% interest is bad? I might compare this to online gambling where the people doing it and are profitable it’s bad for them. Or legalized weed.

If I didn’t make it clear above. Most of the rich people rewards are paid for by the high interchange fees of 3%. It’s not credit risks. It’s not subsidized by poor people.

Edit: as a high income high fico. I would prefer we limit credit card fees. And rewards go to zero. Then the store I go to doesn’t pay a processing fee. So they cut prices. And it probably saves me more money than getting 2% cash back.

That set up a twitter folly of the high rate people are subsidizing low rate people with rewards backed by a fed paper.

I see in your edit that you understand that rewards are funded almost exclusively by interchange. So what does limiting the rate/fees accomplish?

Then the store I go to doesn’t pay a processing fee. So they cut prices. And it probably saves me more money than getting 2% cash back.

Well sure, if you essentially appropriate the credit card networks and force them to operate it nearly for free, then we can all enjoy the enormous benefits it confers without paying the owners. This is not a sustainable equilibrium though.

Also, you should look up or ask your most trusted LLM what the average cost to a retail business is for accepting/processing cash. The interchange for electronic payment (plus the benefits of immediate settlement) is competitive to the labor/logistic overhead of processing cash, especially for smaller businesses.

We have been regulating natural monopolies like water and power companies for decades. One of the key test would be rather the product degrades when you fix price. It’s unlikely we would would see worse transaction processing unlike housing where price fixing leads to shitty housing.

The price of processing cash is not what the interchange should be. That basically assumes the CC company can take 100% of the surplus which implies a monopoly exists. In a lower barrier to entry market that doesn’t have monopoly power (shale oil, airlines) the businesses themselves will run at basically costs and have zero economic profit. These are the type of businesses we want to create in society.

These are the type of businesses we want to create in society.

You haven't solved the planning problem.

I am just saying low barrier to entry businesses then to produce high consumer surplus and are generally good for society.

You've got your idea of how things should turn out, you've declared that since the way they have turned out doesn't match that they're a monopoly (they're not), and have a government solution (treat them as a utility) which you swear will work fine based on a "test" that you've executed only in your head.

Do people consider European payment systems broken? Because they do fix these fees in Europe and the system works. We actually do have a real world example.

Credit cards are a lot more popular in the US than Europe, making up 42% of point of sale purchases in the North American and only 18% in Europe. So Europe is doing something that's hurting credit card uptake.

Europe has a much simpler credit risk rating: Are you bankrupt? Do you have a job? Is your salary enough to cover your existing expenses plus another loan? Has any bank reported you for missing your payments or defaulting on your loan? Here's your loan.

This results in a much narrower band of available APR's, but this also means you don't need a credit card to build up your credit score. If you don't ever dip into overdraft anyway, you can just use your debit card for everything. And yes, debit card rewards are still a thing.

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