Is Money a DRUG ?

The VALUE of a Dollar.

A Pawnbroker's Perspective.

With 25 plus years in the industry, and now retired, this is one of my observations. I have witnessed and participated in the following EXAMPLE.

I have had a customer come into my business with a BRAND NEW, in a unopened box, (an item that for the purpose of this example we will call a Makita Skil-saw, and that we will value at $100.00, which was evidenced by the accompanying receipt, with that amount having been charged to a CREDIT Card account.)

After negotiating an appropriate LOAN amount (which in the pawnshop  industry is about 25% of replacement cost, and depending on the current condition, and based on it's perceived resale  value, in the event that the item is not redeemed as per the LOAN agreement.) And again for the purpose of this demonstration, because it is NEW and had a receipt that MUST be left with the item, we have agreed upon a $50.00 pawn loan.

So let us do the math here based on the loan agreements entered between ourselves (that being 3 parties) and based on the TWO month pawn loan agreement (which was the pawn industry norm).

The customer has committed to the two loan companies, the CREDIT Card: at an interest cost of (at a rate of 19.9% annually would be $100. X 19.9 = $19.90 divided by 12 = $1.65/mth X 2) = $3.30, plus the PAWNSHOP: at an interest cost of (at a rate of 20% monthly [current industry norm] $50. X 20 = $10./mth X 2) = $20.00, a TOTAL cost of interest ($3.30 + $20.00) = $23.30, leaving a NET value for this transaction of, (original loan $50.00 minus the cost of interest $23.30) = $26.70

Using this formula as our guide, the TRUE VALUE of a Dollar is ($26.70 divided by 50 = 0.534 X 100) = 

And that VALUE is ONLY if the above agreements are met. Just imagine if those interest rates are extended with either of the two lending institutions.

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