Debt @ MindSay 
money
David Brooks, NYTimes - The Great Seduction
(I don't always agree with Brooks, but he certainly gets me thinking)
The people who created this country built a moral structure around money. The Puritan legacy inhibited luxury and self-indulgence. Benjamin Franklin spread a practical gospel that emphasized hard work, temperance and frugality. Millions of parents, preachers, newspaper editors and teachers expounded the message. ...
Over the past 30 years, much of that has been shredded. The social norms and institutions that encouraged frugality and spending what you earn have been undermined. The institutions that encourage debt and living for the moment have been strengthened. ...
The deterioration of financial mores has meant two things. First, it’s meant an explosion of debt that inhibits social mobility and ruins lives. ... Second, the transformation has led to a stark financial polarization. On the one hand, there is what the report calls the investor class. It has tax-deferred savings plans, as well as an army of financial advisers. On the other hand, there is the lottery class, people with little access to 401(k)’s or financial planning but plenty of access to payday lenders, credit cards and lottery agents.
The loosening of financial inhibition has meant more options for the well-educated but more temptation and chaos for the most vulnerable. Social norms, the invisible threads that guide behavior, have deteriorated. ...
The agents of destruction are many. State governments have played a role. They aggressively hawk their lottery products, which some people call a tax on stupidity. ... Payday lenders have also played a role. ... Credit card companies have played a role. ... Fifty-six percent of students in their final year of college carry four or more credit cards.
Congress and the White House have played a role. The nation’s leaders have always had an incentive to shove costs ... onto the backs of future generations. It’s only now become respectable to do so. ...
The list could go on. But the report ... also has some recommendations. First, raise public consciousness about debt the way the anti-smoking activists did with their campaign. Second, create institutions that encourage thrift.
Foundations and churches could issue short-term loans to cut into the payday lenders’ business. Public and private programs could give the poor and middle class access to financial planners. Usury laws could be enforced and strengthened. Colleges could reduce credit card advertising on campus. KidSave accounts would encourage savings from a young age. The tax code should ... do more to encourage savings up and down the income ladder.
There are dozens of things that could be done. But the most important is to shift values. Franklin made it prestigious to embrace certain bourgeois virtues. Now it’s socially acceptable to undermine those virtues. It’s considered normal to play the debt game and imagine that decisions made today will have no consequences for the future.
Yves Smith (http://www.globalstrategywatch.com/independent-insight/990e5c20df26aa346d093495f659e026/) writes, “I've been meaning to discuss how increased income disparity is bad for economic growth, because in the end you wind up with insufficient labor income to fund consumption . . . and too much capital chasing too few investment opportunities. . . . It turns out I was beaten to the punch by nearly 50 years [since]. . . former Fed chairman Marriner Eccles . . . links the consumption shortfall directly to a shift in wealth towards the top. And some of the other patterns of the Twenties, such as debt-fueled growth, are worryingly familiar.” Strange how Robert Reich and other economists should be pointing this out now, especially since the shift in wealth towards the top and debt-fueled growth have been going on for at least three decades. What good are economists who don’t raise policy issues before their disastrous effects happen?
What Fed chairman Eccles described are simple mathematical results. An economy, regardless of the economic theory that governs it, consists of workers employed by enterprises that produce goods and services for sale either domestically or internationally. The value of the products and services sold must equal the sum of the wages paid to workers, the overhead of the enterprises, and their profits. If all the products and services are sold, the sum of the incomes of the buyers must equal or surpass the value of the products and services, for if the sum is less, the products and services could not have been bought (unless the shortfall were met by borrowing), in which case the economy would have to shrink. If the shortfall were met by borrowing, the future incomes of the buyers would have to be sufficient to both buy additional products and services and service the debt. The result is that in the absence of growing wages, buyers will eventually reach a point where they can neither continue their levels of consumption nor service their debt, and the economy ceases to function.
The American economy has been characterized over the past several decades by policies that were bound to produce this result. First American companies shifted a great deal of manufacturing offshore. Second, they created conditions designed to hold down wages. Third, they made borrowing easy but expensive.
The first of these made consumption the economy’s driving force (perhaps 70% of the economy is consumption driven.) If the borrowing had not been made easy, consumption, and the economy as a whole, would have collapsed because of the restraint on wage growth that resulted from the second policy. But given that restraint, the debt assumed by consumers had to eventually reach a level that made it unserviceable. The only possible result of these policies is an economic collapse.
That economists could not have foreseen this consequence is incredible.
© 2008 John Kozy
Nick Anderson cartoon 1/25/2008
By BASIL C. ADAMS
March 16, 2008
People want to blame corporate executives and the government and subprime borrowers and everyone except the real culprit. You see, unless you're saving money every month and are constantly paying off your debt without adding any new debt, you are the malefactor.
True, you've been enticed by advertising and admittedly the temptation is powerful to accumulate more stuff, but you are the problem nonetheless. Here's how it works:
People buy things on credit and defer payment to a later date. When the day comes to make a payment, they have less of their income for things they want and need so they borrow more. Then more still. And the cycle of adding to consumer debt becomes a lifestyle.
You'll pay for it some day. You will. You know you will. But right now it would be nice to have another iPod to leave in the third car . . . and let's not forget that the Xbox in the family room is almost a year old, and the Wii at your buddy's house is mighty cool.
Well, every time you buy something you really can't afford to pay for, you make it look like the economy is growing. But all you've really done is dedicate some future income to today's economy. That's not growth, that's as close to a time warp as we'll see in our lifetimes.
There comes a point when you can't afford any more debt, and you have to make some difficult decisions. You can file bankruptcy (which is a polite way of saying that you decide to steal all the stuff you bought on credit) or you decide to change your lifestyle and start paying off your debt. And just before you make that fateful decision, the government lowers interest rates, and you can now afford another $50 a month on your credit card to go buy more stuff. Life is good, all is well, let's all sing "Hallelujah!"
Then the government sends you $600. Rather than paying down your debt, you do what you're told and spend it on more stuff. And you add a few more dollars of debt so that you can buy what you really want. Well, that $2,500 big screen is now really only costing you $1,900 (what a bargain!) If you had used the $600 to pay down debt, it only would have saved you $10 a month in interest -- forever.
But the day is still coming when the bill will come due. And the whole world knows it. They know that when the bill comes due that the U.S. economy is going to suffer mightily.
So the rest of the world stops wanting U.S. dollars -- right now. At one time, a few years ago, you could buy a euro (that's money in most of Europe) for 85 cents. Today, a Euro will cost you over a buck and a half. If a gallon of gas used to cost $2.25 and now it's $4, it would have cost about 2.65 euros at both times. The price of gas hasn't really gone up, the value of your dollar has gone down.
And why has it gone down? Because so much of our future individual income is already committed to paying off debt for stuff we've already forgotten.
You hear the pundits talking about wanting to avoid inflation? Well, inflation is defined as having to pay more for the same good or service than you did last year. Congratulations to the government on keeping inflation low. What they've done is to allow the dollar to get weak instead. It really still is inflation -- it's just not included in the way the government calculates the statistics. I'm so giddy with joy that I think I'll whip out the plastic and go buy some lawn furniture and a gas barbecue.
There's only one formula to fix things, and it's impolitic in this election year but the sooner we start, the better. Raise interest rates. Stop buying stuff. Let the economy take the hit. Reduce your debt load. Save money every month.
If enough people start living within their means and reducing their debt, the dollar will get stronger. The more money people save, the more is available to lend and interest rates will go down all by themselves. It'll be painful, but the time has come to stop subsidizing destructive behavior.
Don't let the advertisers or the government or the lenders cajole you into making the problem worse. Don't let them bribe you with your own money. Take control of the future by being responsible today. (Yeah, that'll happen.)
If government wants to get involved, let it pass legislation that every unsecured consumer debt must be paid off in five years -- that would only make the minimum payment on a credit card equal to all of that month's interest and fees and one-sixtieth of the balance. Let them pass legislation limiting unsecured consumer debt to a reasonable amount.
So the next time you see someone reaching for their plastic, clear your throat, make them feel like a smoker in a restaurant. Let everyone know that you want our economy to become stable. Let the people that are stealing your future know that you're not happy about it.
Make sure lawmakers know that you don't want bailouts and incentives. Do everything you can to live debt-free (except for your first mortgage) and to save money every month. You're going to need it when you retire -- but that's another mess for another time.
Basil C. Adams, a Petaluma resident, is a business professor at Golden Gate University.
Well, I finally did it. I sent it back at last and I feel so much better because of it. I should explain . . . A while ago, a dear friend of mine visited the Auschwitz-Birneau death camp memorial and museum. As she was taking her photographs, she managed to get hooked by a piece of rusty barbed wire. The original wire which, along with the guards and their dogs kept the death camp prisoners trapped.
I have no relatives who were imprisoned or died there nor am I jewish but I do feel a kind of bond with the place. Perhaps because it was the first thing that ever made me feel ashamed of growing up in Germany. I don't know. I do know that when my friend kept the piece of wire and gave it to me as a gift, I felt awkward. I love her and she's a lovely girl but I didn't want this gift in my house. Knowing where it came from and what it represented gave me a chill.
I had thought that I might frame it and put it up somewhere but where does one hang an item from a death camp? So I decided to send it back! It took a while of procrastination and looking for the address but eventually I was ready and today, I took the package to the post office. That's where the trouble started.
"What's in the package please?"
"um . . . a piece of wire."
"Wire? What kind of wire?"
"um . . . a piece of barbed wire.?"
"Barbed wire? You're sending someone a piece of wire? Why?"
"Well . . . *explains the story*"
"good grief, are you for real? Mk, I'll mark it as a commercial item I guess."
Eventually, it did get posted and hopefully it will be back where it belongs soon.
---------------------------------- Arbeit Macht Frie ----------------------------
As I sat here in my office, I ask myself are we celebrating Christmas because of the birth of our Lord Jesus Christ. Are we using this Holiday Season to purchase gifts, buying lots of toys for the kids, decorateing the house, haveing family and friends over for dinner and parties and a New Years Eve gala and going into debt because this is a tradition thats been passed down through the years? Nothing wrong with this, if this is what you do every year. But I still wonder is this celebration for the reason and that being that the Christ Child was born not necessarly on Christmas Day but nevertheless born. I'm not at all sure if anyone truly knows the exact date of the birth of Christ, but tradition not truth has it that the 25th of December is the date. The link is provided for those of you that love ole and I mean ole time down home Gospel Music,c music you've never heard before. Its to be found on the Bishop Frank. A Willett Ministries, just scroll down on the left I'm third from the bottom. PS. This blog is posted from another I write for.
Celebrating Christmas
Are we celebrating the reason or are we patronizing the season ?
I suppose people have gotten away from the old ways of celebrating Christmas by going to Church thanking God for his only begotten Son born of the Virgin Mary in whom he was well pleased. Giving God thanks that we've lived to see another year end and we still have a reasonable portion of our health and strenght and are able to continue to do the things we injoy. We'er able to continue to fellowship with one another in love and express our true feelings for one another. I'm speaking of seniors at this point. There seems to be a lot more living now then ever before and I wonder how many are greatful and thank God for their time ? I wonder ! I wonder if you thank God for yours ?
Link: http://www.studiovee.com
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