Don’t let people talk about financial innovation or anything and why it’s good or bad without looking at impact/actual usage.

This from Baker is worth reading in whole.

Financial Innovation: What Is It Good For (I)?

Brookings economist Robert Litan picked up the gauntlet thrown down by Paul Volcker and others, and put out a lengthy paper defending the major financial innovations of the last four decades. Litan surveys the field and pronounces most of what he sees to be good.

While there is certainly some merit to many of the points that Litan makes, he presents a very incomplete picture. A fuller discussion is likely to be more critical of recent innovations.

Credit cards are a good place to start. Litan notes the explosion of credit card use over the last three decades and sees this as a great advance. He notes the enormous convenience of credit card use over cash or checks. Litan dismisses the idea that credit cards increased consumer indebtedness, noting that the ratio of credit card debt to mortgage debt did not rise over this period. He even claims that credit cards have helped foster growth by providing financing to many small businesses in their start-up phase.