Debt, the Engine of Prosperity, is Out of Fuel
If we break out the strategic reserves, $700 billion may keep the engine running…but for how long? Where will the fuel for debt come from after that?
I understand that businesses rely on banks from time to time for short-term funds to keep operations going and people employed. But why are American consumers (with “consumer” a synonym for “citizen”) constantly encouraged to go into debt?
Whether it is a new pickup truck, a home entertainment system, or a major appliance, your retailer has a financing plan for it. The product of this strategy is debt. The engine of our economy is debt.
The strategy is a failure and the engine is sputtering as home equity plummets and and easy credit dries up.
Why, if people are losing overpriced homes to foreclosure, should the government try to game the system? Shouldn’t home prices fall to affordable levels, allowing buyers to assume less debt? Why is our government’s solution a plan to rescue debt holders and provide more debt? I’m guessing there are reasons we would be frightened to know.
As Ken Blackwell’s editorial lamented today:
We have become a culture addicted to debt. It starts with 18-year-olds, where everyone getting a job is offered a credit card and everyone going to college is offered several, with the expectation of profits from interest accruing on balances.
The economic expansion of the past fifteen years has been built on a mountain of debt. Millions spend today with no thought of how they can pay tomorrow. Whereas you used to save and invest and wait for big purchases such as a new car, now you get it today and pay massive sums in interest as you finance it.
Our representatives in Washington haven’t admitted that leadership at all levels of our society has not just allowed, but encouraged banks, manufacturers, retailers, marketers, and salespeople to push debt on customers. Debt that is threatening to bankrupt our country.
Irvine Renter observes, “you can’t take it with you” is a rational argument for abusing home equity lines of credit. Why not just pull out as much cash as possible to finance the lifestyle our 24/7 marketing culture is selling? How’s this for an answer: Its unpatriotic!
There’s my rant. Thanks to Mene Tekel, who titled this post’s photo “Get in Debt, Get Fat, Die.”
For those who have been patriotically saving up for the bubble to burst, these attractive properties in north central Pasadena are already nicely renovated, whether paid for by home equity line of credit or other means:
1508 Sinaloa Avenue
$755,000 (originally $899,000)
3 bed/3 bath
2,196 sq.ft.
$344 per sq.ft.
On Redfin 199 days
This is a lender-approved short sale reduced three times. It last sold in July 2006 for $840,000.
745 E. Rio Grande Street
$749,000
3 bed/2.75 bath
1,550 sq.ft.
$483 per sq.ft.
On Redfin 142 days
A City of Pasadena Landmark Property, this looks charming. It last sold July 2005 for $685,000
965 E. Howard Street
$998,000
3 bed/2 bath
2,120 sq.ft.
$471 per sq.ft.
On Redfin 29 days
This 1909 Craftsman looks completely restored and sits on a large 13,000+ sq.ft. lot. It last sold in June 2004 for $811,000.
