Dr. Housing Bubble 07/21/08

[Crewleader]

American Savings: Americans Save an Average of $392 Per Year. Total Consumer Debt is over $2.5 Trillion. The Dark Knight of Debt.

I’m going to tell you something that you probably already know. Americans are horrible savers. In fact, this trait has provided the perfect breeding ground for credit products that provide the illusion of real wealth. I’ve been hammering away in article after article going after the big players on Wall Street and also going after unscrupulous lenders that have been the pushers of the credit products for this past decade that have led us to this current economic cliff. Yet there is sufficient blame to go around and one is the psychology of the American consumer.

As of 2008, the average household debt is $117,951 and this includes credit cards, installment loans, home equity loans, and mortgages. The New York Times has an excellent series regarding the “Debt Trap” and below is a graph that I will be talking about in great detail. If you are interested, click on the image to go to the New York Times interactive chart:

http://www.doctorhousingbubble.com/american-savings-americans-save-an-average-of-392-per-year-total-consumer-debt-is-over-25-trillion-the-dark-knight-of-debt/

[CrispyQ]

1. Great article -- K&R

snip...

"This idea that access to debt is equivalent to access to wealth demonstrates the profound lack of financial knowledge from many in our country."

The evil dick has told us that "deficits don't matter" but we know he doesn't run his own finances based on that philosophy. I would love to add a few more snips from the article, but would prefer that everyone read it.

k&r

[enid602]

2. low side

Where I live, I would think that $117,951 is a bit on the low sde.

[Crewleader]

3. A CREDIT TALE

Once upon a time, a young man and a young woman met and fell in love. The man proposed to the woman and she accepted. They were married in 1993.

In 1995 they bought a modest house. The man lived within his means, and over the next 10 years he made the mortgage payments on time every month. Their equity grew until they owed 25% of what the house was worth. During this time the man and woman conceived two wonderful children.

One afternoon in December 2007, the wife came to her husband with a strange look in her eyes. She needed money in a bad way. She was in debt. The husband didn’t understand. They both had good jobs. He had money in the bank and for the first time in his life felt secure that their retirement needs would be met. Why was she in debt? How much money did she need?

The wife told her husband that she had $20,000 in credit card debt. The husband was shocked. The husband was angry with himself for not monitoring his wife’s spending habits. He wondered where the $20,000 went. “With all of that debt, why don’t we at least have nice leather furniture and a plasma TV?” he asked himself. He paused to consider the annual trips to Europe his wife had been taking over the past few years with her friends. She never asked, she just told him that she would be doing it (”You only live once!” were her exact words.) The husband gave her the $1,000 budgeted for Christmas, plus another $2,000 in cash.

One day in January 2008 the wife came to the husband again. “I’m screwed,” she said.

Checks had bounced. By this time the husband was paying all of the bills, including the utilities. All of the wife’s income was going to pay off the credit cards. “I owe $30,000,” she told the husband. “I went to the bank and they said we could take out a home equity line of credit.” The husband refused. The husband said she should talk to a debt counselor because there are things she could do to reduce the amount owed. When the husband told his wife “no” she had a desperate, feral look in her eyes. The wife didn’t want to do this because it would damage her credit rating. Her credit was the most important thing.

The wife shut off the husband. She became distant. No longer did she snuggle up to her

husband. She took a second part-time job and rarely saw her husband or the children. She worked the second job for 5 months. When the couple’s economic stimulus check came, the husband gave it to her.

One morning in late June, the wife announced to the husband that she was filing for divorce. She had used the economic stimulus check to hire an attorney and file the papers. She already had a new apartment lined up. The wife wanted the husband to give her half of everything that he had worked for. The husband didn’t take expensive vacations to Europe. The husband drove a beater car. The husband didn’t have the latest expensive cell phone. But that didn’t matter, and the husband was soon presented with the divorce decree. The husband was shocked to discover in the decree that the wife didn’t owe $30,000 to the credit card companies. In fact, she had over $50,000 in credit card debt.

Now the husband is forced to sell the house in a depressed market and he is very, very upset. No longer does he see the children every night. All of his plans for the future have been torn to shreds. He is a grown man who cries every night in an empty house, pining for the life he once had.

THE END