Make sense of this...Americans don't save enough money.
Countless Americans live paycheck to paycheck with absolutely no "buffer". An unexpected expense can cause massive problems. One big fat bill can take someone from "barely gettin' by" straight to living in the car or in a homeless shelter. Even those who aren't on the edge have savings issues. Our tendency to save too little encourages overuse and misuse of credit. Problems appear and they're temporarily solved via the credit card.
All that debt has consequences. Overextended borrowers suffer with poor credit scores. They can't get a home or car loan without taking on heftier payments at higher interest rates. Many of those subprime borrowers end up drowning in debt and are eventually unable to make their payments. Foreclosures and repossessions follow. Sometimes, there are bankruptcies along the way. Foreclosures and bankruptcies have an ugly impact on those who extend credit. When unsecured debts are cancelled with a Chapter VII, the creditor comes up empty. They make up lost ground, at least partially, by demanding more of future borrowers. Waves of bad secured debt force creditors to find a way to sell off the reclaimed property to mitigate losses. The key word, of course, is mitigate. Rarely does the subsequent sale overwhelm the remaining debt.
Meanwhile, we have a Social Security structure that carries with it the stink of doom. That makes actually saving money even more important for Americans. Want to retire in a house instead of a studio apartment? Want to eat tasty casseroles instead of Ramen noodles? You better get your shit together. You gotta sock some money away. Don't count on the company pension. The days of gold watches and healthy monthly checks forever are long gone.
I don't think anyone would argue with most of that. It's pretty well-established that savings and investment are muy importante and every reputable expert argues that we don't put enough away. Who doesn't think Americans have tendencies toward overspending and overusing credit?
Eventually, chickens do come home to roost.
Witness the sub-prime mortgage situation. Admittedly, some of that problem stemmed from sneaky sales pitches, poor disclosure and the intentional turning of blind eyes toward marginal loan applications. That isn't the key to the problem, though. The real issue is that people bit off more than they could chew. They took out loans they'd never be able to handle, believing that things "would work out somehow". They made shitty decisions with respect to the loans and they made even shittier decisions before they closed on their houses. That's why they had to shop for lousy sub-prime deals in the first place.
You don't end up with a sub-prime loan unless you have a track record of poor money management. It's also possible to avoid the bad deals if you can put a fat chunk of money down on the home. That, of course, requires savings.
The mortgage crisis is the inevitable result of overusing credit and failing to save money. The lenders were probably dumb to extend the credit, but the folks who signed ARM deals that bit them in the ass did so because they didn't have their financial house in order to begin with. Who would've thought that W's "ownership class" included so many poor credit risks who were set up to fail?
What does the nation do when the shit hits the fan? Worried about constituents who are losing their homes, the government intercedes on behalf of the poor credit risks who screwed up once again. Don't worry, though, Uncle Sam will also cook up ways to take care of the lenders who wrote the dumb notes, too. The government will do its best to fix the whole damn mess.
With a potential recession looming, though, you'd think that the smarter folks among us would realize that the slowing economy is adjusting for unjustified earlier optimism. You'd think they'd realize that the unavoidable meeeting of reality and projection will always produce changes. Sometimes things go up. Sometimes they go down. That's the way it all works. If you took Econ 101, you understand how this shit happens. Obviously, those in governance would recognize that, too.
You'd also think they'd look at the underlying reasons why the economic picture isn't so hunky-dory. You'd probably assume that they'd notice stuff like the bankruptcy tsunami, unsustainable consumer debt, a growing underclass unable (or barely able) to make ends meet and the elephant in the corner--inadequate savings.
Well, you'd be wrong. Instead, washington has another plan. Instead of allowing supply and demand to run its course and somehow trying to encourage responsible use of money, they have a different scheme. They want to avert a recession by tinkering with market forces left and right. And savings? Fuck that. It's time for economic stimulus. How do they plan on creating an economic stimulus? They want to empty the federal coffers (which, the last I checked, already had balance sheets in the red) onto the streets so that non-saving Americans can go out and buy even more shit they don't need. Hey, maybe some of them will even use the money as leverage in financing other stuff they can't afford! Brilliant.
Most of us are going to get a "rebate" check because both political parties want us to run out to the shopping mall to spend, spend, spend. See, we aren't spending enough now. That might be because we're not making enough. That might be because years of spending stupidly have left us with little extra dough after we make payments to Visa, MasterCard and Discover.
Or, maybe we are spending enough and the business world just didn't realize it in time. Thus, it is more important to prop up an economic illusion than it is to allow an organic market correction.
Take your pick, slick. Either way it's the worst kind of government.
You may use your upcoming anti-recession gimmick check in any way you see fit. Maybe you'll make an extra payment to a few of those creditors who loaned you so much money. They'll be okay with that, I suppose, even though they'd prefer you to keep making the monthly minimum payment until you die. They'd like to see you spend it on new toys and useless crap. They know that's what most people will do, too. So does Uncle Sam. They're counting on it.
Even though government analysts been warning us forever that we need to save more money, they don't want you to do that right now. Right now, you need to get that check and spend it. Pronto. It's the patriotic thing to do. Just like right after 9/11. The Bush administration encouraged us to pound shopping mall pavement. A failure to walk out to the parking lot with less than three stuffed bags was nothing short of treason. Our continued consumption was the firewall separating life as we know it from a terrorist victory. Same story today. Spend your check to stave off recession. Worry about the future later, after we allow individuals and businesses who made poor decisions and worked on poor projections to wriggle off the hook.Make sense of it. I dare you.
How do you end up this ass backwards? Is it...
A legitimate fear of a national and global recession creating unbearable economic circumstances for millions and millions of people?
A fear of the very market forces we usually embrace? Do we think it's a good idea to toss free markets out the window every time the graphs aren't pointing toward the ceiling?
A fear of pissed off voters as elections approach?
A marriage between business and government that taints policy decisions? Is it because Washington "owes it" to business?
It's probably all of those to some extent. I have a sneaking suspicion, however, that the first one isn't really the key motivator. I do know that there hasn't been a sudden realization that savings don't matter.
I also know that I might just puke all over my "economic stimulus check" if I hear one more person talk about how we "must do something to get the economy going". The economy is always going. Sometimes, it's going well. Sometimes, it's not. If left primarily to its own devices, it tends to bob up and down a bit. It also tends to find the right place without expert governmental guidance. Unless, of course, you fuck with it to the point that it is completely based on illusions, gimmick payouts and overt manipulations.
I'm sorry some folks are having a bad time these days. I really am. I don't look forward to an economic downturn and I hope it doesn't happen. If it does, I hope it's mild. I hope that those who run businesses look at economic realities carefully and adjust their tacts accordingly. I hope that their innovations, experiments, and smart/hard work allow them to find opportunities in the midst of whatever happens. I hope that individuals make smart personal choices with their money.
I also hope that elected officials can take the time to re-acquaint themselves with the basic tenets of a market economy. I hope they can discover which of their manipulations and interventions helped to create the current economic situation. I hope they can learn a lesson.
In the meantime, I'm a little miffed at how we seem to fight fire with fire; stupidity with stupidity.
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