The Debt Crisis

The Debt Crisis

By Manuel E. Yepe

How did America, collectively and as individuals, become a nation addicted to debt, pushed to and over the edge of bankruptcy? The savings rate hangs below zero. Personal bankruptcies are reaching record heights. America's total debt averages more than $160,000 for every man, woman, and child. On a broader scale, China holds nearly $1 trillion in us debt. Japan and other countries are also owed big.

"The story begins with labor. The decades following World War II were boom years. Economic growth was strong and powerful industrial unions made the middle-class dream attainable for working-class citizens. Workers bought homes and cars in such volume they gave rise to the modern suburb. But prosperity for wage earners reached its zenith in the early 1970s. By then, corporate America had begun shredding the implicit social contract it had with its workers for fear of increased foreign competition. Companies cut costs by finding cheap labor overseas, creating a drag on wages."

"Even as wages fell, consumerism was encouraged to continue soaring to unprecedented heights. Buying stuff became a patriotic duty that distinguished citizens from their communist Cold War enemies. In the eighties, consumers' growing fearlessness towards debt and their hunger for goods were met with Ronald Reagan's deregulation the lending industry. Credit not only became more easily attainable, it became heavily marketed. Credit card debt, at $880 billion, is now triple what it was in 1988, after adjusting for inflation."

"This is all great news for the corporate sector, which both earns money from loans to consumers, and profits from their spending. Better still, lower wages means lower costs and higher profits. These factors helped the stock market begin a record boom in the early '80s that has continued almost unabated until today.

"These conditions created vast riches for one class of individuals in particular: those who control what is known as economic rent, which can be the income "earned" from the ownership of an asset. Some forms of economic rent include dividends from stocks, or capital gains from the sale of stocks or property. The alchemy of this rent is that it requires no effort to produce money.

http://www.politicalaffairs.net/article/articleview/6369/1/309/

Easy. Americans are bombarded day and night with credit card offers. The relentless junk mail from credit card companies starts when you're in college or earlier, and continues all your life.

Get a credit card, and 10 other companies will start bugging you to get THEIR credit card.

Go shopping, and stores offer you a 10% discount on today's purchases if you sign up for a store credit card.

On top of this, stores relentlessly hawk expensive merchandise that they claim you need, that you "can't live without". Every year you have to get a bigger tv, a new computer, a new game system. Kids grow up demanding newer and costlier toys every year because their shows are cluttered with commercials.

When was the last time you saw a commercial or public service message telling you to save your money and put it in a savings account or a CD or (shades of the past) a Christmas Club account?

why are Americans so much like sheep? It's like they are unable to think for themselves.

Here's my theory - more and more, parents give their children whatever they want, giving them an extreme sense of entitlements. When these kids grow up, they are unable to deny stuff not only for themselves but for their spoiled children too.

I grew up wearing hand-me-downs and learned how to pinch pennies at an early age.

I think the majority of Americans are brainwashed by the corporate media

I wore my brother's hand-me-downs - LOL, I don't think I had any girlie clothes until I was 8. I had the double-whammy of a depression era dad and a WWII bomb surving Brit mum - frugality was the normal way to live and I still live very simply - with no debt.

That's one way.

layoffs lead to an interrupted income stream.

Debt is not an interrupted obligation.

so you have constant obligations being financed by erratic income streams.

Consumers have been financing the gap with credit cards and Home Equity loans. Unemployment is only for 6 months but now you have a lot of people with no unemployment because they are working on a 1099 basis.