Money
Posted by E-George on February 29, 2008
It’s flat. Paper or silver (or gold, or copper). Covered in germs. And issued by by the government as “official legal tender.”
What’s not money: Rectangular, flat, plastic, embossed cards issued by anyone in a soup of predatory lending industries.
Let’s recap:
Money: Tangible, real, and (in most cases) in one’s wallet, creating a contemplative spending lifestyle.
Not money: Plastic cards that charge a fee plus interest for the privilege of a possibly more impulse-driven spending lifestyle.
Since getting married, and since we instantiated a very structured and controlled financial environment I’ve been almost grotesquely fascinated by some of the not-so-recent trends in the middle class.
From CNN this a couple of days ago:
“Consumers have racked up more than $2.2 trillion in purchases and cash advances on major credit cards in just the last year.”
and
“The overall credit card debt grew by 315 percent from 1989 to 2006…”
And, non-payments are at an all-time high:
I can hear some voices scoff and say, “Well, 5.4% isn’t too bad.” Let’s put it in some perspective: 5.4% of $2.2 trillion is, actually, $118.8 billion. $118.8 billion in delinquent credit card payments. These are numbers so huge they are practically incomprehensible. As I’m fond of saying, “It is my prerogative to fear and reject what I don’t understand.” But, we can be sure that banks and credit card companies aren’t ignoring it.
People aren’t stupid, either. They know they’re in over their head, but a poll by the cardsmart.com people (from whenst the above and below graphics are provided) show that the plans to reverse the trend are about as flimsy as the average New Year’s resolution:
The debit card helped with all these shenanigans by modernizing the checkbook. But, the underlying rickety foundation of logic still existed: If I have a debit card, I must have money (ala, If I have checks, I must have money). A lot of people are very rational and realistic and can handle their debit or credit cards with respect and aplomb. But, it has to be acknowledged that those are in the minority of the spending population. From where I sit, dealing with one’s money in a very non-personal, non-tangible way has appeared to remove any sense of reality regarding the act of transacting – the visceral exchange of money for goods or services.
So here we are. Over our heads and in denial. Is it fixable? No. I don’t think so. It is human nature to resist change to those behaviors which we do not think are wrong in the first place. $2.2 trillion in debt with $118 billion of in unpaid tells me that there is a spending epidemic fed by a spirit of entitlement.
What’s left for those of us who don’t live to or past the hilt? We wait patiently for Visa’s IPO in May and buy stock. As long as people live on credit, why not profit from their folly, too?
Filed Under: Misc - Comments: 6 Comments to Read
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Alessandro Machi said,
Interest free paydowns is the solution, it is the ONLY solution as well.
beef said,
meh. that’s only $400 per every person in the US. Cut the number of people in the US in have to figure for adults in the US and it is still only $800 per person. Big numbers in general are put there to make things seem worse than they are.
Another thing I don;t readily understand, is that the balance they are delinquent on? Because I don;t think most people’s credit card payments are that much each month. then again maybe they are.
E. said,
It’s not the bit numbers that are odd to me. It’s more the persisting trend to blunder forward pretending that the debt-lifestyle is sustainable.
“Average per household debt in the U.S., not counting mortgage debt, is about $14,500 — especially noteworthy because before the 1930s, most middle and working class people had no major debts. Banks would not lend to them; they rented their homes and if they did own a house, it was paid for as it was being built.” via Bankrate.com
I find this interesting because the possibility of living a comfortable, pleasant life without the dependence on credit card debt is possible, and had been very much the standard until Diner’s Club came out in the 50s.
Here’s what I think (so just chaulk it up to personal opinion): There is a sliver of society that abuses the notion of credit cards. They see it as “free money” that they are not culpable for returning, and they’re willing to live with the credit-rating consequences that follow. Then, there’s another sliver of society of fall into the “keeping up with the Jones’s” category who use credit cards and bank loans to live the life they believe is “necessary” to attain the social status and/or recognition that they desire. Then, there’s the last sliver who is just plain numbers dumb. These folks are no longer the minority of spenders.
People who pay their credit cards off each month, pay their bills on time, don’t live beyond their income, and save for the future are the minority. I’m hoping that the crushing weight of all this debt with help the revolving door of trends swing back around to follow a more responsible path.
“If your outgo exceeds your income, your upkeep will become your downfall.” Dave Ramsey
Matthew Bohnsack said,
Charles Dickens wrote the following in 1849:
This statement is as true today as it was then. $800 per adult US might “not sound too bad”, but it creates a sure misery that is certainly avoidable.
beef said,
i’m not encouraging said rampant spending/debt. Although, i believe that it’s hard to change attitudes toward this type of spending as our economy has been built on the principle that “we can spend our way out of anything”
at this point in time, it will require massive cultural changes (which at this point may not be possible) and would involve a severe restructuring of how we live our lives.
Matthew Bohnsack said,
Beef,
You’re right. Our culture and monetary system is increasingly based on debt. It would be incredibly difficult to overcome this momentum and change the whole system.
However, it’s much easier to see the pattern on a personal level, refuse to take part in the foolishness, and to then prosper from a contrary viewpoint as a result.
As I see it, people who know and practice the truth of the Dickens quote have an “angle” that gives them an competitive advantage compared to the majority of Americans.
I don’t hope to personally outlaw predatory lending practices or reform fractional reserve banking. Instead, I will communicate ideas about how living without debt is possible, profitable, and empowering.
Here’s another story: Households that carry debt from month to month carry close to $17,000 of unsecured debt on average.
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