Friday, June 04, 2010
Thursday, June 03, 2010
WASHINGTON – The economy trudges ahead yet debt dogs many Americans, stressing them out even as they firm up their own financial foundations. [...]
So why aren't the stressed — and the not-so-stressed — feeling better?
For starters, it just doesn't feel much like a recovery to many people.
Unemployment is stubbornly high — 9.9 percent. The jobless face fierce competition for work. Those with a job are watching their paychecks shrink.
A growing number of people are at risk of falling into foreclosure, and only those with the most stellar credit probably can get a new loan. AP-GfK polls show that only 20 percent say the economy is good, compared with 15 percent last year.
Going into 2008, the total amount of consumer debt-- mortgages, car and student loans, and revolving credit-- was roughly equal to the national debt. The bailouts changed that.
I felt the mortgage crisis would trigger a consumer debt crisis for a couple of reasons:
1) A mortgage crisis shakes the very foundation of the American Dream-- to own a home and to maintain and grow equity in that home as a long term investment that will fund your retirement.
2) A mortgage crisis would automatically force banks to tighten their lending to consumers. Since Americans had been outspending their incomes by sizeable amounts and borrowing against their homes to do so, forcing them to rely on savings they were using to pay down debt would tank the economy. There would be panicked borrowing, refinancings, and even full-on foreclosures as people just gave up. Mitigated, of course, by the awful bankruptcy reform of the Bush years. Consumers are now looking at decades of debt piled up ahead of them and no easy solution to shift the burden away from higher priced debt to lower priced HELOCs and mortgages.
3) In addition to tightening credit to consumers, banks would pressure consumer debt by imposing more fees, higher interest rates and tightening rules, all designed to make debt less convenient. And more profitable, of course. But given that the banks had to scrape knees to get past the mortgage crisis (which by all accounts could have been much worse), its understandable they wouldn't want the other shoe to drop, and so would discourage consumer borrowing.
The reflex response would be that consumers had this coming, that instead of buying $150 Nike sneakers and $200 iPods, they should have been working to firm up their own houses.
That's partly true, but is a far more marginal factor than many would admit. Elizabeth Warren, Harvard professor and currently the Congressional watchdog on the bank bailout, has studied consumer debt and finds there are three major contributing factors to why people load up: divorce, job loss, and long term health care costs.
Often, two of those three hit the same family at the same time, and in a number of cases, all three swamp a family. That's not to say that there isn't an awful lot of ridiculous spending going on. An entire marketing sector of the American economy thrives on selling us shit we don't need but must have.
But as with fast food and obesity, there comes a point where even the most ascetic among us finds themselves grasping that iPad off the shelf. It's easy, its a quick fix, and most of all, it gives us the illusion of satisfaction. It is disingenous on the part of those who would blame the broke not to fess up to the fact that the entire consumer economy revolves around being made to look foolish if you have the wrong car or wrong hair color or wrong shoes.
And there is the malevolence of America, and now of the west (seeing as we've infected the planet with our Buymore virus): two sides of the same corporatocracy vying to see which can bankrupt us faster, only we can't file bankruptcy, so we'll be indentured slaves for the rest of our lives.
The fear they should have, the fear I do have, is what happens when the shit hits the fan?
Wednesday, June 02, 2010
If a bank is too big to fail, it’s way too big to exist. If an oil well is too far beneath the sea to be plugged when something goes wrong, it’s too deep to be drilled in the first place.
When are we going to stop behaving so stupidly? We nearly wrecked the economy and we’re all but buried in debt. But we can’t break up the biggest banks, and we can’t raise taxes. Now we’re fouling the magnificent Gulf of Mexico and ruining entire communities along the southern Louisiana Coast.
[...]For a nation that can’t stop bragging about how great and powerful it is, we’ve become shockingly helpless in the face of the many challenges confronting us. Our can-do spirit was put on hold many moons ago, and here we are now unable to defeat the Taliban, or rein in the likes of BP and the biggest banks, or stop the oil gushing furiously from the bowels of earth like a warning from Hades about the hubris and ignorance that is threatening to destroy us.
"BAM!," as they say.
There is a moral underpinning to the story of America in the 21st Century, one that ties in the hubris of the Bush wars with the hubris of the Gulf disaster with the hubris of the bankstas.
We just ain't all that. Our reach has more than exceeded our grasp, as Herbert points out. I think that's because somewhere in the late Twentieth Century, we became enamored with the idea that America can do no wrong, that we can never be evil, and that we can do anything.
We're fucking human, folks, not supermen.
There was a time not that long ago that the spirit of "more, more, more" was understandable, as nonsensical as it was. We had seemingly unlimited resources and unlimited space and time to waste them in the pursuit of, well, anything, but especially the almighty dollar. In the Fifties and Sixties, we started to wake up to the horror of our behavior. We started to acknowledge that prices had been paid in this country by innocent people and the very resources we used so wastefully.
And now, we're scrambling. We've given up trying to come up with the richer bounty of our nation in an effort to gather the bits and scraps of what we used to be able to do. We don't want progress, because that's scary. We want what we had, and we want more of it. It's comfortable. It's a known evil. We're used to it.
The problem is, of course, it's running out, and so is our time, unless we change course and start looking forward. We're so desperate to reclaim past glories that we'll build monuments to our greed and stupidity, like 5,000 foot deep wells that no one can fix and banks so big that their income could stabilize Greece inside of three months.
It has to stop. We have to have a meaningful dialogue, one that doesn't involve what we can do, but what we should do. Not what we can accomplish, but why.
Tuesday, June 01, 2010