Many of us have watched friends speculate on homes and land when interest rates were low. We’re glad we resisted the temptation now.
David Brooks describes the problem of indebtedness and the contributing factors in The New York Times. Excerpts below.
The social norms and institutions that encouraged frugality and spending what you earn have been undermined. The institutions that encourage debt and living for the moment have been strengthened. The country’s moral guardians are forever looking for decadence out of Hollywood and reality TV. But the most rampant decadence today is financial decadence, the trampling of decent norms about how to use and harness money.
The agents of destruction are many. State governments have played a role. They aggressively hawk their lottery products, which some people call a tax on stupidity…. Aside from the financial toll, the moral toll is comprehensive. Here is the government, the guardian of order, telling people that they don’t have to work to build for the future. They can strike it rich for nothing.
Payday lenders have also played a role. They seductively offer fast cash — at absurd interest rates — to 15 million people every month.
Credit card companies have played a role. Instead of targeting the financially astute, who pay off their debts, they’ve found that they can make money off the young and vulnerable. Fifty-six percent of students in their final year of college carry four or more credit cards.
Congress and the White House have played a role. The nation’s leaders have always had an incentive to shove costs for current promises onto the backs of future generations. It’s only now become respectable to do so.
Wall Street has played a role….what message do the compensation packages that hedge fund managers get send across the country?
The Federal government loves debt. (Associated Press "Stimulus Plan Pushes Deficit to All-Time High.")
The U.S. government says a flood of economic stimulus payments pushed the federal budget deficit to an all-time high of $165.9 billion in May.
The Treasury Department reported Wednesday that the May deficit was more than double the imbalance in May 2007.
That reflects some $48 billion in payments as part of the government’s $168 billion effort to give the economy a jump-start and keep the country from falling into recession.