Americans living beyond their means

[Roland99]

Americans living beyond their means
Commentary: Economist Paul Kasriel sees party ending, hangover beginning

http://www.marketwatch.com/news/story/proof-americans-living-beyond-means/story.aspx?guid=%7B66122EA4%2DB773%2D46D0%2D9BFC%2DCC94968EEE77%7D

The 60-year-old economist, tapped in 2006 as the top economic forecaster by Arizona State University's W.P. Carey School of Business, has spent a good deal of that time trying to warn anybody who would listen about such things as excessive household debt while taking a jab or two (or three) at then-Federal Reserve Chairman Alan Greenspan. "Illusory" is how, in October 2004, Kasriel described the wealth created by Greenspan's interest-rate cuts in one of his edgy and somewhat irregular reports dubbed, "The Econtrarian," which are available on Northern Trust's Web site. A few months later, as household spending continued to sizzle, he wrote, "Today's 'partying' in terms of a disproportionate share of national output being 'consumed' by the household sector is a recipe for a 'hangover' tomorrow."

...

He is particularly alarmed at the relationship between personal disposable income and personal consumption expenditures and residential investment expenditures. That is eco-babble for the amount of money people take home after taxes minus the amount they are spending on everyday goods and services and what they spend on buying and fixing up their homes. According to that calculation, Americans have been running deficits in six of the past seven years.

Prior to the recent, unprecedented string of deficits, Kasriel says there have been only seven other years American households have been so upside-down in their finances since 1929. Two of those were during the Great Depression. Three more were just after the end of World War II. Another was in 1955, then again in 1999. That leads to an obvious question: If they can't afford it, how are people continuing to spend as Thursday's report of retail sales suggested they are continuing to do as if all is well?

The answer, which has become all too obvious in recent weeks and months, Kasriel says: They appear, in large part, to be borrowing against their homes, which will become less available as a piggy bank going forward. "Households are going into debt like never before," he says. They also have been net sellers of stocks. All of this means, Kasriel says, that there will be less cash for things we like to buy.

Ashes, ashes, we all fall down....

[Craftsman]

1. Like man could not see this coming

Sorry, but if you play you have to pay.

[unpossibles]

2. what? We Americans have a hard time thinking ahead to the consequences of our actions?

you don't say....

Sorry. My cynicism shines through sometimes.

[no_hypocrisy]

3. I agree with the thesis of affluenza and easy credit being the downfall

of many households and the American culture of consumerism.

OTOH, I feel that expectations of spending habits have been abused. If you believe you live in a middle class strata, you will continue to spend whatever it takes to remain there, even if it's illusory and puts you in debt. With the program of redistribution of wealth since Reagan, a lot of families are desperate not be classified as "poor", and will spend beyond their means to keep the illusion going. But in real dollars, they are.

[Roland99]

7. 'affluenza'

Excellent term

[Lorien]

76. And an excellent book, too:

http://www.amazon.com/Affluenza-All-Consuming-Epidemic-Bk-Currents/dp/1576753573/ref=pd_bbs_sr_1/102-0439729-2811363?ie=UTF8&s=books&qid=1189543661&sr=8-1

and a great film:

http://www.amazon.com/Affluenza/dp/B0001YFMM6/ref=pd_bbs_sr_5/102-0439729-2811363?ie=UTF8&s=video&qid=1189543661&sr=8-5

[Roland99]

78. Cool, thanks!

[MadHound]

25. And if they are foolish enough to do as you say, keep up with the Jones,

Then they deserve the pain that they get. Sorry, I know that sounds cold hearted, but when you sit down to do your monthly budget and overextend yourself all in the name of looking good, then you deserve to crash and burn.

[Clark2008]

44. What if you're doing it just to get by?

I doubt everyone in debt is trying to keep up with Joneses. Some are underpaid and trying to just have the basics.

[yardwork]

52. Many people are undone by health care costs.

Many people in this country are living just on the edge of disaster, and not because they buy luxuries. They don't. However, they live paycheck to paycheck, with no health insurance or other safety net. When a health care crisis strikes, they lose everything.

It's not the greedy selfish people living in McMansions who suffer. It's the hardworking people working two jobs at $12 an hour with no benefits who struggle to put food on the table. They are the people are society is really failing. Why so many of them vote Republican I will never understand...

[Katherine Brengle]

71. This doesn't account for *most* of these people though.

While there are many, many Americans suffering financially because of healthcare costs, most are not.

That doesn't mean it's not an issue, but it does mean that we can't sweep away all irresponsible spending just because it isn't the cause of *some* people's money troubles.

[CTyankee]

4. Mine is a dying breed. I live beneath my means.

I've reached an age where "stuff" just doesn't matter to me. In fact, I want less of it.

I don't long for a new car. It thrills me that mine has been paid for since 2001 and I keep it in good condition.

My house is modest and I keep updates to it strictly on basic maintenance and limit enhancements that are too costly.

I use the public libary and clip coupons.

It's just a way of life...

[jdlh8894]

5. Keeping up w/the Jones'

Don't do it,never will. Haven't made a car payment since '76. Pay cash for everything. The house is just about paid for.
It's called being FRUGAL! If you ain't got it,don't spend it!

[CTyankee]

10. Most people don't have a budget. Most likely, they are afraid to do one.

However, I find a budget to be liberating! Once you write down everything you spend money on, you see where you CAN save money. Of course, you do have to have enough income to meet your basic needs, but beyond that you have control over what you lay out money for.

Because for so many years I had to work and couldn't think about travelling, I am finally taking trips to places I really want to visit. I can do this because I have a budget and can see what I have to do to realize my travel dreams. I wish more people could bring themselves to do an annual budget but maybe it's just too scary for them...

[jdlh8894]

11. Just not the budget

First of all, congrats on the travel! Not sure where you're planning to go but PLEASE embrace the culture and people where ever it may be.
My 13 yr. old son has seen how people live in many different countries(and 3/4 of the USA)and is a much better person for it.

Second,"people do have control over what they lay out" But it seems like they think tommorrow is never going to come, so, spend it while I got (or can get)it.

[CTyankee]

17. I am trying to get to Europe (Italy in particular) once a year.

Because of unexpected health issues this year, I had to cancel a trip to the Amalfi Coast. However, I was able to transfer what I had paid for already and apply it to another trip with the same company for next May. I have been able to take 2 semesters of Italian at my local community college for free because I am a senior!

[Johonny]

26. I'm with you

I make more money than anyong in my family by far... yet I'm the only one without a sports car and a plasma TV.

[riverdeep]

50. satisfied saving

I bought this book years ago, used, that sort of changed me. It's called
"Make It Last-1000 ways to extend the life of everything you own". It became fun to take care of things, and repair them, and to know just how much life you could get from things. That Yankee motto-

Use it up,
Wear it out,
Make do,
Or do without.

These days, it's getting harder and harder to do that, since so many items are purposely disposable. It can be a thrill saving money and hunting for a bargain, that can help displace the cravings of conspicuous consumption.

[yardwork]

54. I would love to buy a modest house. They go for $225,000 and up in my community.

I could buy a small condo for less - maybe $185,000 - but the homeowner's association fees would be another $200 per month or more, and I'd be at the mercy of the homeowner's association when it comes to upkeep, and I wouldn't have a garden.

I could live in a drug neighborhood or go way out in the country, well beyond public transportation, and maybe buy a small house for $175,000. If I live in the drug neighborhood then I have to keep my doors and windows closed and locked at all times, which is going to cost me a lot in heating and air-conditioning. Currently, I live in a 3rd floor walk up apartment and can sleep with my bedroom window open. Living like this allows me to minimize my use of heating and air conditioning, but I pay almost $800 a month for a 2-bedroom, 1-bath apartment, and I still don't have a garden.

My car is a 1999 and I hope to keep it for another five years or 200,000 miles.

[CTyankee]

59. It's very hard right now if you want a modest house in a decent neighborhood.

We're in a section of town that is great: diverse racially and religiously, with lots of nearby services, 2 bus lines to downtown (my spouse takes the bus to work) and there are both big and little houses. Even so, taxes are high and houses maintain their value so no bargains are found here. About the best we could do was just get the lowest mortgage interest rate we could find. Also, a big plus for us is that the district is heavily Democratic and New Haven is the culture capital of the state so we are never very far from opera, theater, art galleries, free lectures at Yale, etc.

[yardwork]

66. I live in a college town, too and love those aspects of it.

If the country is really as conservative as the media and Republicans would have us believe, then why do *so many* people want to live in these "liberal outposts?" Clearly, lots of very wealthy people consider our towns wonderful places to live. Food for thought...

[CTyankee]

80. Especially great for retirees. All the free stuff.

Sometimes you can sneak into a Master's Tea at one of Yale's 10 colleges and hear some great talks. The Law School has A list speakers. Al Franken did his radio show from a Yale auditorium, etc.

Now Hollywood is filming here due to an attractive tax write off the state of CT offers filmmakers. Robert DeNiro and Al Pacino were just here filming. Steven Spielberg filmed scenes from his new Indiana Jones movie on the Old Campus a couple of months ago.

What college town are you in?

[yardwork]

86. Let's just say that I'm in the Southern Part of Heaven

:smoke:

[Katherine Brengle]

74. Amen.

I'm working on this myself. Scaling back, revisiting the ideas of "need" an "want" and trying to make better choices.

What's it all worth? I want to be comfortable and happy, make a little art, learn new things, play my guitar... it doesn't really take all the ornamentation to be happy.

I hope everyone learns that - consumer culture is this energy sucking beast that chews us up and spits us out and doesn't care one way or another.

[BellaB]

91. Same here sort of

We have not had a car payment since 2002 untill this march when a deer decided to play chicken with my wife and her car. Needless to say they both lost and we ended up with a car payment. The house she bought new 13 years ago is now about halfway paid off with a payment of UNDER 600.00,

We are not rich by any means, but, we also do not live above our means. Those that do deserve what happens when things happen, if you cant afford it DONT get it PERIOD!!!

[BlooInBloo]

6. It's bizarre than anyone would even THINK of blaming anyone but the spender...

... for spending more money than they can afford.

[Roland99]

8. Well, predatory lenders prey...

They work to convince someone who doesn't have the means that they really do.

[BlooInBloo]

9. They prey on irresponsible people.....

They also prey on desperate people, but that's a poor-folks problem, primarily with places like payday loansharks.

For the current topic, which was middle class, subprime home loans, and the like, the lenders are predating on irresponsible people.

[Love Bug]

30. I remember getting tons of home equity loan offers in the mail

encouraging me to take out all of of my equity as a loan to "get that boat you've always wanted." Those always horrified me because no matter what, a loan has to be paid back and it's just foolish to risk your house for a stupid boat or trip to Hawaii.

[HiFructosePronSyrup]

32. It's bizarre that any grown adult...

wouldn't understand usury laws and how they've been weakened over the years.

[BlooInBloo]

43. Unless part of their weaking is a provision forcing the borrower to borrow, it's immaterial.

[Mandate My Ass]

77. Amen

Sometimes the means shrinks, and only then are people living outside of it. Predatory lenders suck the lifeblood out of these people because they truly believe they can crawl out of the hole that has been dug for them.

[BlooInBloo]

85. If the means shrinks, they shouldn't take a loan out that they can't repay....

EDIT: They made a bet. They lost. It's nobody's fault but their own than they made the bet in the first place - same as Vegas

[Roland99]

89. What does the average American know about that?

They've been browbeat to consume, consume, consume throughout their lives. They're told that home ownership is the ultimate American dream and they see a chance to get a bit bigger home and a chance at making some money off equity and resale.

[renate]

98. well, shit happens

Someone loses a job, develops a health condition while uninsured or underinsured... I know you didn't mean to include people like that, but I think these exceptions are worth pointing out. People still need to eat and have a roof over their heads.

But I suspect you were talking about people who buy 52-inch TVs when they can only afford a 19- or 27-inch (or none at all), in which case I agree that that way misery lies, even though it really must suck to be unable to afford the things that the neighbors or, worse yet, the kids' friends' parents can afford.

[no_hypocrisy]

12. Too late to update, but I recommend this article found on DU.

http://www.prospect.org/cs/articles?article=the_real_economic_danger

[Javaman]

13. Yes and no...

Yes, we as americans buy way to much crap, but no, we are not paid they kind of wages we should be making in relation to the cost of living and inflation.

The gap gets wider between the rich and poor. The rich make more and more and not only are the poor making even less they are making less than what is needed to meet the basics in the economy.

My dad on his wages from the dept of sanitation in NYC was able to buy a house, support my mom and raise 4 kids. Do we still have that standard of living? hell no.

[UncleSepp]

33. Thank you, thank you, thank you

One person working one full-time job used to be enough to buy a home, usually a car too, and to support another adult and a couple of kids. Not only that, but one person working one full-time job starting right after high school could buy a home after less than 10 years - often, after six years. That's one full-time job for a person with a high school education, not one full-time job with a master's in engineering or something of the kind. Just a job, an ordinary job.

Now, one person working full-time straight out of high school can't ever expect to buy a home. Ever. Two people working straight out high school might be able to buy a home with HUD help, maybe. Chances are, they're also going to need to buy two cars to get that house, since it won't be anywhere near where they work and there won't be public transit that will get them to and from their jobs. Two people working straight out of college in higher-paid fields like engineering might be able to buy a home within 10 years, if they don't both have huge student loans. Chances are, they'll have a combined total of at least $100K in student loans, and will be paying $600 - $800 a month combined for the next 15 to 20 years. That doesn't make it too easy to save for the house, does it?

The problem of home ownership doesn't end with the relative wage drop compared to housing prices. The houses that have been built over the last 20 years are not the houses of the 20's through the 50's. The modest 600 to 800 square foot two bedroom one bath houses with a little bit of yard aren't there to be bought in younger housing markets. Sure, plenty of them still exist in older towns and older neighborhoods, but not enough to meet the demands of young families. The houses that have been built have grown into monsters, and I don't mean the minimansions of the 90's and 00's. I mean the 1800 square foot ramblers and ranches with two living rooms and bathrooms the size that bedrooms used to be. The average house size now is around 2300 square feet. The average home size in 1970 was 1400 square feet. How is an average family working average jobs with the average number of kids supposed to afford more than 50% more house for an average house, even without inflationary prices?

Direct comparisons between the way the generations who came of age in the 40's, the 60's, the 80's, and now don't work. We can't do what our parents and grandparents did the way they did it, and our kids won't be able to do what we did. It's easy to say "well, people these days just don't have the values people had in those days", but it just doesn't tell the whole story.

[midlife_mo_Jo]

68. that's how my parents lived

My father was a blue-collar worker in a small town. We had a small house, one used car, never ate out. My mom made a lot of our clothes, we cooked food from "scratch."

Heck, these days, it would be great if TWO workers could support a family of two adults and two kids.

[Pithlet]

38. Thank you.

I was just about to give up on this thread till I got to your post. :thumbsup:

[riverdeep]

51. A study touted in the media recently

especially in the 'USA, we're number one' type of places, showed that Americans workers (or workers from Norway, depending on a different factor the study used) are the most productive in the world. What the study or, more appropriately, commentary, never mentioned is that while productivity went up real wages have been flat or falling. Work harder, you bastards.

[Zodiak]

14. Whenever an article comes out like this

We see a cadre of people coming in to tell us how great they are doing and how frugal and responsible they are. That's great and all, but all the self-congratulations in the world will not address the fact that this is a serious problem that will only get much bigger in the coming months.

I am afraid that as long as we are self-congratulatory we are setting up an "us vs. them" scenario where those that screwed themselves by doing no more than they thought was expected of them will be out on the streets and starving and those that did not will be saying "fuck you, I got mine". Telling them they should have clipped coupons will not make the problem go away.

Same thing with the bankruptcy bill....more time was spent talking about how this DUer or that DUer isn't in debt any more than the potential impact of the legislation at hand.

So yes, you are all so marvelous for being restrained and responsible. A feather in your cap.

But now how to we save the people who do NOT have this feather in their cap because there will be an awful lot of them and their fate is intertwined. We share an economy with them.

[jdlh8894]

18. "will only get much bigger in the coming months."

They have had YEARS to get their s**t together,and they still think that they can spend more than what they make.Sorry, I have NO sympathy!!

[Zodiak]

28. Then you are dismissing millions and millions of Americans

many of whom haven't been taught any better, and in fact encouraged into that kind of behavior. I would expect at least a little more compassion from those who hangs out on a progressive board and understands the origin of such problems.

[CTyankee]

20. But don't you think "financial literacy" has something to do with it?

People can learn how to budget and how to save; you are not born with this knowledge. I worked in nonprofits all of my work life and had to budget every dime. For awhile I was a single parent and a vacation was camping in a state park with Parents Without Partners. My kids had to get scholarships to go to college. I had no idea that after the divorce I would be so poor. When I read statistics that said women suffer greater loss of income due to divorce than men, I realized that I was in the same boat as a lot of other women.

Believe me, I was not congratulating myself on anything, I did what I had to do out of necessity. As a survivor myself I have nothing but sympathy for those who find themselves in financial binds. I've been there!

[Bill McBlueState]

23. yes, financial literacy is a big part of it

Let's look at actual literacy. An adult who can't read may not have taken advantage of all the opportunities to learn how, so you might be able to place some blame on him or her. But it's a lot easier to learn how to read when your parents are good teachers and your neighborhood's public school is functional.

Same goes for financial literacy. Almost anyone can learn it, but luck puts some of us in a better position to do so.

[CTyankee]

34. You are right. I recently worked for Literacy Volunteers and financial

literacy was something we included in our ESOL program. It was part of a life skills curriculum that we used and also included health literacy. We had refugees from preliterate societies in Africa who had no written language and Afghani women who had never gone to school. The people faced incredible challenges...

[JBoy]

63. Sorry, I'm too busy

watching Paris Hilton news on my big screen to waste time reading about boring financial stuff.

[jdlh8894]

24. I have so many things to say

If I offended you, I apoligize.

[CTyankee]

35. No, you didn't offend me at all.

I was responding to a description of some DUers that I felt was aimed at me, but now I know it wasn't. I didn't mean to come off looking smug, that's all. Cuz I don't feel that way.

[Zodiak]

31. I know that my generation (gen X) was taught two things about finances

Jack and squat.

What I know I have learned through the school of hard knocks, and I grew up poor with a glorified bank teller for a mother (who knew thing or two about stretching a dime).

Now practically every friend I have is in deep consumer debt or deep debt of another form (like me, which is student aid). The boomers didn't teach us about finances like their parents (who went through the depression, and so the lesson was new), and it gets worse as you move down age list. And let's not foget the ole mantra...."go to college and you will be financially secure", which has been untrue for nearly a generation, now.

Not everyone is educated the same.....and when it comes to being a "smart" consumer, Americans are deliberately taught bad habits as if they are the right thing to do. I will not blame them or develop some sort of "lack of compassion" for them. They are my friends, neighbors, and family members....and it is the MAJORITY of them.

This is not in response to your response, really....just an observation I am making, especially from Mr. newbie (jdlh) here.

[UncleSepp]

42. I was taught that you HAD to buy a home

I grew up on "by the time WE were your age, we had (one kid|two kids|a house|another house)... if you pay rent, you're a chump!" The "go to collee and you will be financially secure" was part of it, too. I did learn how to budget and save like nobody's business, though.

I lost my job a year ago, when the funding for my position disappeared. Since losing my job, I worked a grand total of four months on short term contracts. All together, in the last year, I made 25% of what I made the year before. I finally got a new permanent job this month, at 66% of what I made before I lost my job. Yes, I'm struggling with the payments, but it's going to work out. I'm not going to lose my condo. If it would have taken a month longer to start my new job, I would have been flat broke, and I would've started missing payments. The job came along just in the nick of time.

I'd like to sell the place anyway, because even though I can make the payments on a lower salary, I can't do what I like to do, which is to make all the fixed payments for a given month on the first paycheck and have the second one for savings and incidental expenses. With the housing market being what it is, I am going to have to wait to sell it until either I can pay the commission myself or the value goes up enough so that the commission can come out of the proceeds. I have a crappy loan that was supposed to be temporary - the lender and real estate agent called it a "bridge" loan that I was supposed to be able to refinance within a year - but I am stuck with it now. I guess that makes me irresponsible according to the smug folks I see posting here. I honestly hope that the folks who are so ready to have "no sympathy" or to rush to judgment about why people end up stuck with debt never have to learn the lesson through experience that sometimes, all that good planning and frugal living and deep savings isn't quite enough.

[riverdeep]

47. I think there's roughly two groups

People who mostly do everything right, at least as far as they were taught, and still get caught in a storm, and those who choose to live way above their means with a McMansion and a Hummer and a plasma. It's harder to feel sympathy for that second group. But, like someone else said, their problem is going to be everyone's problem very shortly.

[UncleSepp]

58. I'm not sure how many groups there are

Personally, I'm not comfortable making up a picture of people who are in trouble, making up the reasons why they're in trouble, and then patting myself on the back because I'm better than the fictional characters I just invented. I don't know why people in general are in trouble. I don't know what the stats are on how many foreclosures are on McMansions and how many are on small starter homes. Since I don't know, I don't really want to make up stuff that makes me feel better to fill in the gap :-(

I suspect that what has happened in the real estate market is the same as what has happened at the end of every speculative market which then crashes, all the way back to the Paris exchange and the Dutch tulip bulb craze. A market for the wealthy, fueled by money that the wealthy have, turns into a market for the masses fueled by money loaned by the wealthy to the common folk. The market then crashes on the common folk, leaving them with debt owed to the wealthy. For the wealthy, it's a setback. For the common folk, it's a disaster. This happens over and over and over again in the history of markets. This isn't an explanation that makes anyone feel any better, I guess, which might be why it isn't very popular. It feels much better to say "oh, those dumbasses" so that we don't have to care :-(

[CTyankee]

61. I think there is a difference between the Dutch tulip bulb craze and the housing market

situation. Everybody has to live somewhere and our government chooses to give homeowners a tax break. Eventually, you will sell your house and if you haven't borrowed excessively on your equity, you have a decent chance of making some money off of it. At least, that has been my experience over some 40 years of homeowning (this is my 4th house). It's the old "value in use" vs. "value in exchange" situations I learned about in an Econ course I took in grad school.

I am far more worried about what it is costing the U.S. to extend our empire and the tax write offs that benefit only a tiny minority at the top. I am hoping those two issues will be promtly looked at when we get a Dem president...

[UncleSepp]

67. Definitely true for owner-occupants

It isn't so different for owners who buy in order to sell at a profit in the short term. To some extent, it can be true for owner-occupants who use their home as their only investment, who are counting on a continuing rise in real estate prices and a continuing seller's market. Some of the people who are buying are looking for value in use, and some are looking for value in exchange. For those who are looking for value in exchange, it's the same thing, especially for those who have borrowed money betting that the selling price of their house is going to outpace the interest they pay on their mortgages in the short term.

[CTyankee]

84. Value in exchange can be risky, altho gold seems to be an eternal standard.

Diamonds, too, probably. I don't know enough to be an expert on these issues.

My mother loved what my father called "widows and orphans" investments but my mother reasoned that everybody has to have electricity, phones, etc. I am able to retire now because of their modest, but wise, investments over the years, which I inherited. But they were greatly influenced by the Depression so I have also inherited some of their hesitancy of speculative schemes.

[PassingFair]

107. You are right about that, riverdeep!

I liken it to houses on a beach. Some are built right on the sand. Some are on
TALL stilts. But when the tsunami hits, ALL of the houses will get washed out
to sea. We will ALL suffer. No equity, some equity, full equity. If your job
gets outsourced, if your company completely folds, or if health care costs
overwhelm you, BAM, you're gone.

The housing bubble economy will get you anyway.

I am frugal. I live in a small ranch house. I live within my means.
I have great sympathy for those who are on the verge of losing their
homes and their jobs. For many, going into those homes was CHEAPER THAN
RENTING. Tax breaks were created that made it cheaper for them to buy
gas guzzlers. And the irony is WE WILL ALL SUFFER.

I live in Michigan.

It stinks here, it truly does.

[LondonReign2]

48. The difference is

...you haven't, so far as I can tell from your story, put yourself in a huge credit-card fueled debt hole. It is the people that have done just that, living beyond their means because they just really have to have that 52 inch plasma screen, that should get no sympathy.

[UncleSepp]

57. Absolutely no CC debt.

But you know what? I really don't give a damn if I have your approval or your sympathy. You're setting yourself up in a position of judgment over other people. I think that stinks.

[Blue_Tires]

88. very true n/t

[Roland99]

41. I pitched something like to my daughter's school once.

Teach kids starting at middle school, if need be, how to take care of money. And by the time they are in high school, they should understand amortization tables and FICO scores and bankruptcy laws and budgeting and ....

[Manifestor_of_Light]

40. Guess I should not have spent that money on that law degree.

Back in the 80s I was making enough money to go to law school at night, on the pay as you go plan.

I got a J.D. for about $20,000.00, books and tuition. I don't owe any student loan debt.

However, it has done nothing for me, as far as getting a job. Neither did the B.A. that my parents scrimped and saved to pay for, at a well respected private college.

Guess both of those degrees, which took ten years to get, were a complete waste of money, since they gave me no return in the form of a higher income and a better job.

Guess I should have put it in savings instead. However, at the time I believed the lie that a good education and lots of skills would give me upward mobility.

:banghead:

[Coyote_Bandit]

87. I hear ya'

Earned a BA, an MA and a JD, earily and mid 80s. Went back to school about 12 years later and earned an MBA. Without a doubt, the single worst investment I have ever made was in higher education. Ten years of toil and study, foregone earnings, and the expenses assocated with higher education. It has not been rewarded. Not at all. I find that I am now essentially unemployable unless I omit my education and work history and accept minimum wage work. So I am in the process of reinventing myself. I am learning the skills to work in an architectural niche market producing a tangible product. Hope to be succesfully self-employed.

[goodgd_yall]

94. Watch it. Here come the capitalist hordes out of the woodwork.

Maintaining the poor and lower middle class are irresponsible and fiscally illiterate.

:puke: :hide:

[napi21]

15. The article is RIGHT! I've always been very afraid of over extending

my debts, and when we bought our house in Tx. the loan officer AND the Realtor said "You know you qualify for a much larger loan!" My response was "But I want a mtg. payment that I know I can still pay even if I lose my job. I don't want to be contemplating suicide out of panic!"

My son had a nice smaller home that he bought Ne and it was only 7 years old. Many of the idiots he worked with told him he was living BENEATH his means, and should buy a nice new BIG ONE! He replied that he would rather have his nice smaller house and still be able to afford to go out to dinner once in a while, or buy some new toy he, his wife or kids really wanted, and not have to worry about drowning in debt.

Consumer advisors have been telling people, for a very long time, not to use the equity in their homes for luxury or frivilous items like fancy cars that depreciate quickly or vacations that leave you with nothing but pictures and memories, but no hard assets!

Yes it is a form of keeping up with the Jonses, and it's been dumb ever since it began.

[flashl]

16. Some Americans with that luxury may be living beyond their means ...

There are too many other economic indicators, which shows that even if you are not spending you are still SOL because you can't save.

[jdlh8894]

19. What do you mean,can't save?

I realise some people live paycheck to paycheck. But they could cut back on something,albiet-take your lunches to work,car pool (where possible), where do I start w/cellphones,Ipods,Cable(Dish),ETC. JMO

[jdlh8894]

21. Sorry, forgot DSL(internet connection)

[flashl]

29. These are the Americans with that luxury to live beyond their means n/t

[DaveJ]

22. Even if failure is a possibility

Sometimes personal borrowing is necessary.

I see a lot of people coming out against any borrowing, but it's a part of taking risks, and when people take risks a lot more gets accomplished, at least that what many of the most successful entrepreneurs say.

For instance, getting a student loan is expensive, but it happens when someone wants to accomplish things in life that they would otherwise not be able to do. That person instead could decide to just work at McDonalds as a career, take no risk, and be of less benefit to the world. Also, taking a business loan is a risk, but if nobody ever did that, there would be fewer small businesses and a lot more corporate control. People get car loans so they can work, make money, and support their family. A good cheap used car is hard to find, and even then people can't afford to pay out of pocket.

So, the blame the borrower mentality does not really take into account the complexities of the real world, IMHO.

[jdlh8894]

27. "Take no risk and be less benifit to the World"

I hope you never need a plumber,carpenter,electrician,mason,UPS,Fed EX,FOOD!!!(that is brought in on Trucks!) You need to get some of your brain cells in line! These people that "take no risk " Take care of your ***!!!!!

[DaveJ]

37. Wow, way to really take something out of context

You are behaving as though the theme of my post was specifically to bash the labor force. Did you really not understand the point of my post, or just pretending?

Most people in the workforce obviously are valuable. Take one kind of worker, say, a computer programmer. Yes, he (or she -- don't want to get flamed) is valuable, but probably would not have a job if someone had not invested, educated themselves, probably borrowed, and taken some sort of risk to create that job. Same goes for almost all jobs.

[CTyankee]

36. Some things are, to put it quite simply, just the "cost of doing business" which

was one of my father's sayings. Whenever I consider making a purchase that involves some risk of income I ask myself if that saying applies. Of course, it often does, more often does not, tho. At least that is my experience!

[Mutineer]

39. No shit.

Tell us something we didn't know! Now how do we convince Americans that they really can't afford two brand-new SUV's in their two-car garage, 3000 square foot plus homes? That not everyone is meant to wear designer clothes or carry expensive pocketbooks? Tell me how do we do that?

[riverdeep]

45. It's a house of cards

I feel our economy is a shell game. It constantly pushes growth, growth, growth by any means necessary. Americans in particular are fed at a very young age the idea that consumption is good. That study that showed kids prefer a hamburger wrapped in a McDonalds wrapper vs. the same hamburger in plain-we're taught early and often.

When we get to be adults that craving turns into consumption of all kinds of items that we don't really need, can't really afford, but everybody else has an iPhone, so why can't I?

And without this craving on the part of Americans, we're told our economy would collapse. Maybe, just maybe, an economy like this SHOULD collapse. One with less growth, and more stability with an eye for long term interests would not be such a bad thing.

What I'm really afraid of, this is the exact same mirror we're doing with our environment. Spending like there's no tomorrow, i.e.- cutting down old growth, cutting down rain forest, contaminating oceans, pushing the rate of extinctions ever higher, etc. When THAT bill comes due, there's no running from the collector.

[renate]

99. just wanted to applaud your comparison of voluntary debt with the the environment

That seems absolutely spot-on.

Have fun today, worry about tomorrow later. And you're right about how this is one bill we can't run away from.

:applause:

(edited to add "voluntary" to "debt," because sometimes people are cast into situations in which they have to choose between food and medicine. When I say "fun" I'm talking about frivolous debt, not survival.)

[Beaverhausen]

46. The insensitivity in this thread is mind-boggling

Some posters here obviously haven't known anyone who has suffered a catastophic medical problem while having no insurance.

THey also don't know anyone who's been laid-off or who's job has been outsourced.

And just what are you supposed to cut out of your expenses when your pay alone doesn't cover your rent, your gas, your food and your medical expenses?

[LondonReign2]

49. No, that's not the point

Medical bills and loss of jobs are one thing--and no one on this thread is rediculing those situations. It is the people who insist on spending 120% on their income on houses, cars, lifestyle that they can't afford that are being ridiculed.

[Gormy Cuss]

55. The real question is, just how many of those silly people are there?

The article doesn't stipulate that the measurement is limited to those people who are living beyond their means because of discretionary spending. In fact, the framing of the argument directs the reader to think that it's about frivolous spending. "Living beyond their means" sounds more like they're irresponsible, doesn't it? If the framing was instead that more Americans are taking on high debt, rather than living beyond their means, it would leave open the thought that something other than selfish or naive behavior is behind the rising debt.

Sure there are some people in that category, but how many of those in the aggregate stats cited are living beyond their means because they have no better choice? How many are using their house equity to pay off medical debts, or as a cheaper way to finance a car or house repairs rather than using other higher interest options?

Just a thought.

[midlife_mo_Jo]

60. This isn't exactly the answer to your question

but it's some very interesting stats, nevertheless, on subprime loans.

http://www.americanprogress.org/issues/2007/03/foreclosures_numbers.html

And look at the stats on minority sub-prime loans at the bottom of the page. Sickening.

However, according to this website, only one in five subprime borrowers could have qualified for a lower-cost conventional loan. This is definitely a lot of people living beyond their means. They got caught up in the "American dream" that you buy a house and it rises quickly in value. sigh

[riverdeep]

62. It should also be mentioned, fraud occurred in some cases

Sometimes, the lenders purposely either reported a higher income than the buyer had to make sure the loan went through, or they told the buyer the fixed rate would be for, say two years, and two months later the new rate kicked in. It doesn't account for the masses, but that did occur.

[midlife_mo_Jo]

64. Yes, I've seen that on tv

That's going to be hard for those poor folks to prove.

[Gormy Cuss]

65. Thanks for the link

Note however that that's only subprime borrowers, not all people who are swimming in debt. There are many people with conventional mortgage products who have been using equity to finance other debts. In fact, I'd hazard a guess they are the ones who are doing it the most because many subprime borrowers have never had any appreciable equity in their properties in the first place.

As for the subprime borrowers getting caught up in the dream, I agree except I think that for many it was more a case of believing that they could have a place of their own more than cashing in on the increasing values. The marketing of subprimes to minority neighborhoods was calculated that way, IMHO.

[Katherine Brengle]

72. Financial difficulty from healthcare costs is not the only kind of financial difficulty.

And yes, a lot of the rest of it is self-inflicted.

[AX10]

53. This should have been obvious to all,

but I guess not. All of these new stores and banks have suddenly popped up since mid 2004. Why, people are spending themselves into a huge hole to buy stuff they don't really need. Yes, there are millions who live paycheck to paycheck, but still, there are too many who are living beyonf their means.

[flashl]

56. Have anyone in this thread professing the self restraint pathway ...

read anything in the news lately about how the average homeowner got roped into subprime mortgage?

Or, the reason why mortgage companies needed warm bodies to sign worthless mortgages so they could create money? Banks bottom line increased 10:1 or 20:1 for the worthless paper. Using these ratios banks created subprime derivatives in the trillions.

Over the past few weeks, the Federal Reserve poured billions into the marketplace to save BANKS.

or,

Have you read the Federal Reserve Bank of Philadelphia's April 2007 Working Paper No. 07-13, 'A comparison of poverty trends and policy impacts for working families using different poverty indexes'?

It seems that you can with great certainty make arguments that the Federal Reserve Governors will not make about the economical conditions that most Americans are facing.

This economy operates from the creation of debt.

[Katherine Brengle]

73. It absolutely does -- the system requires us to be in debt in order to

function. Even to have a "good" credit rating, one needs debt. It's utterly nonsensical.

[hfojvt]

75. debt is not an evil thing

it is just about the only way to buy a car or a house, unless you are super-rich.

[OzarkDem]

69. Blaming the victims n/t

[Katherine Brengle]

70. Almost everyone I've ever met lives beyond their means.

I try not to, because it's a trap.

[Raine]

79. It used to be shameful to be in such debt

now it's not only the norm but it's encouraged (such as chimp's telling everyone to "go shopping" after 9-11). :-(

Corporate America loves it I'm sure. When you have a debtor society people will work till they drop and have to accept shitty pay and shitty working conditions, just what big business loves. :thumbsdown:

[killbotfactory]

81. If Americans don't continue consuming as much as they do now

Our economy will collapse. Who's fault is that?

[riverdeep]

93. 70 percent of US economic activity comes from consumer spending

Yeah, you better believe they don't want anyone living a simpler or more responsible life!

[goodgd_yall]

96. Exactly n/t

[flashl]

82. Do anyone other than me remember * encouraging Americans to come out of their homes to shop

shortly after 9-11?

I thought that it was a very strange thing to say at the time.

[Raine]

97. I sure do

chimp telling people to go out and shop is something I'll never forget, it was disgraceful. What a difference between saying that and the inspirational things that Roosevelt and Kennedy said.

[flashl]

104. Actually, * was being truthful

We had to come out to spend to save our country.

[earth mom]

100. Americans are "consumers" -not "citizens" these days.

:(

[flashl]

103. That's it!

After 9-11, not only was the hub of our financial sector in disarray, the CONSUMER was sitting at home.

Some Americans were so terrified they wouldn't come out as they watched the colorful lights of DHS and suffocated in their ductaped homes.

* was encouraging us to come out and spend because the economy took a BIG hit. The debt system that greases this economy had stopped. Every now and again, they do something SO obvious and the public just don't get it.

[joe_sixpack]

83. And when the government tries to bail us out

of this mess, I'm afraid it may cause more long term harm than good. It may sound uncaring, But sometimes these economic cycles need to run their course. If there is a constant cushion for risky behavior, then more money will flow toward the risk.

[Coyote_Bandit]

90. There's a big difference between rich folks and folks that

want other people to think they are doing well.

Folks that are really rich don't need to prove it. Folks that want other people to think they are doing well live lives that are measured in consumption and appearances.

We have lergely become a nation that values perception more than reality.

[Rosa Luxemburg]

92. but the government wants you to consume as much as possible

credit cards are full with debt as the government wants spending to keep the economy boyant.

Perish those who actually save?

[mentalsolstice]

95. It's an attitude started during the Reagan years. n/t

[earth mom]

101. The biggest problem in this country is that wages/salaries are WAY less than they were

10 to 30 yrs ago. Sure, lots of people overindulge, rack up the debt, dig into their home equity, but the real culprit here is that wages and salaries in 2007 do NOT buy what they could by in 1977, 1987 or 1997. The greedy bastards that pay everyones salaries have methodically made sure we are all making WAY WAY WAY less than we used to. :grr:

Some people on this thread really need to read the book Nickled & Dimed by Barbara Ehrenreich to figure out how much American workers have been screwed over.

[flashl]

105. Exactly!

When I read some responses, the arguments strongly suggest to me that there is rejection of factual realities such as wages and cost of living to hoist up some false premise. That was the reason why I offered the Federal Reserve working paper. If the Federal Reserve understands that wages are being consumed by rising costs, thereby, creating the working poor, then why would a rational soul profess that restraint will set you free?

Being thrifty or frugal with stagnant wages is not enough.

I am not surprised that large numbers of Americans without rent increase protection made a decision to buy a home to stop the hemorrhage in their budgets. Now the same people who sought to secure a basic necessity, shelter, are admonished for over extending themselves.

[CTyankee]

106. As I understand it, it's health care costs that hold down wages.

So I am hopeful that SOME business interests in this country will lobby for single payer universal health care spread out across the tax base. But given the excessive CEO pay, it makes me suspicious when I hear that statement.

[Beerboy]

102. I read just the OP, not the article linked,

but this doesn't seem a problem particular to America. Yeah, there's lots of people living beyond their means all over the world.
I'm sure Kasriel is doin OK, he's a tenured prof FFS.
Bookmarking for later, as it would be fun to look at Kasriel's fisk of Greenspan on economics.
Thanks for posting R99.