United Liberty
American Consumers Finally Begin to Think About Their Finances
Thu, 10/16/2008 - 11:09am | posted by Guy Fawkes
These days it seems there is little disagreement that consumers are over-leveraged and over-consuming, yet few pundits, economists, or politicians are willing to accept the remedies obviously needed to solve the massive crisis. Our culture tells us we must spend everything we make, and then more, and not only keep up with the Joneses, but to kick their ass or go down in a sea of debt trying. Our media warns us about the sickness (to boost their ratings), but when it comes to time to take the medicine, they turn their heads and make excuses about why we shouldnt take it. Our politicians tell us we are in crisis (to stimulate an atmosphere of fear), yet they are unwilling to tell those in trouble that they need to bear a burden for their lack of prudence.
The “what” of the problem, over-leveraging, is clear. Even if the “why” or the “how” are still being debated, there is only one way to solve our over-leveraging problem: through painfully tightening our belts in the areas that were overextended. Unfortunately, it so happens that most all areas directly or indirectly controlled by the FED were overextended, including our corporations, our government, and our consumers. Put simply, our nation has built up too much fat and it needs to go on a serious, sustained, diet.
So who is the first to recognize this necessity?
Well of course it is not the government - they will never recognize it under the current political environment. That leaves corporations and consumers, both of which have recently looked at themselves in the mirror and found what they saw as unsustainable.
Corporations are changing their fiscal habits in order to stay alive, while individual consumers are changing their fiscal habbits in order to prepare for what 60% believe is an upcoming “depression”. For example in the month of September American consumers spent 1.2% less than they did a year ago on a nominal basis, and nearing a double digit drop if inflation is accounted for in this statistic.
It is the meager remains of freedom, which includes freedom to suceeed and fail, that is making the hard decisions that will lay the foundation for a future of more sustainable growth. Now if only the government had the guts to do the same.
Nice article, Austin.
“Timid men prefer the calm of despotism to the tempestuous sea of liberty.” - Thomas Jefferson
You’re unquestioningly accepting the premise that competitive, conspicuous consumption is truly the reason behind American citizens’ “over-leveragedness.”
The leading cause of bankruptcy is medical bills. Real wages have stayed constant or dropped while less-regulated utility and financial institutions have drastically increased their rates, among others.
You might want to check your facts more closely before fingering individual consumers’ debt as a cause and not a symptom, and advocating less regulation of industries that have proven again and again their profligacy.
Though the writer believes so, he did not argue for deregulation in this article. He specifically stated “Even if the “why” or the “how” are still being debated”. It is the liberal contention that deregulation caused the over-leveraging, while conservatives contend it was the injection of liberal social policy into business regulations that caused the over-leveraging, while libertarians contend it was mainly the FED that caused the credit boom and its inevitable crisis. The common factor here is that all major thought processes do recognize over-leveraging as the main culprit.
Personal bankruptcies do not explain this situation, especially not bankruptcies due to medical bills. If medical bills were the reason then this problem would have come a long long time ago. If medical bills were the problem then the Britain, Germany, Japan, and France would not be involved. Such is not the case.
The sad part is people are going to equate what happens the first of the year as a depression. Those first few months of the year are notoriously slow for retail and other types of businesses.
The best thing a small biz person can do right now is secure the business they have right now. That way if there is what is known as a so called depression at least some people are prepared to ride it out.
Great article. We need more solutions or to change the system entirely.
The real problem for homeowners is that in most areas, homes are so grossly overpriced that most families have committed nearly all of their disposable income toward recurring, mandatory expenses such as their mortgage. There’s very little fat to trim from the family budget. That’s why no one can save. All it takes is one lost paycheck, or one big medical bill to bring your whole life crashing down.