Debt = Docile Americans
Sudhir Venkatesh nails it in the Sunday Times. I'm not saying it should happen here in the same way, but at least the Europeans are loudly and publicly protesting the bailouts. Executives are held hostage in France. But what about us Americans? Why are we so docile?
We aren't protesting like we should right now because of our personal household debt. Crushing debts kill individuals, families, companies and nations, as John Perkins showed us about the 3rd World in Confessions of an Economic Hitman and we're now seeing in the United States.
Debt also appears to kill the drive to be active citizens. There is a psychology to money and how we handle money that is deeply personal but it has a profound effect on the way power is exerted in our society. If we're in debt, we're told, "there's something wrong with you, and you should take care of your own business before complaining about politics". And if you're worried about losing your house or job, you won't protest or form a union even though our wages have stagnated for the last 30 years under Reaganomics bubbles. They've trapped us into peonage with usurious lending terms, and they now own and control our politics.
Venkatesh says it better than me:
Ultimately, however, what could keep the lid on unrest is the very issue that has pushed us toward the cliff: our high levels of personal and household debt. The average American owes about $9,000 on credit cards alone. Indebtedness redirects an individual's energies inward: failing to pay the mortgage and college tuition can bring up feelings of anxiety, shame and a sense of personal failure.
It's easy to feel that one isn't working hard enough, that one should try harder to save money or take on additional work. To rebel publicly, even to engage politically, would mean exposing your own inadequacies, so most people just hunker down and keep plugging away at those monthly payments.
As our shame grows, we shutter ourselves inside. Afraid of acknowledging our anger and unable to join those similarly suffering, we grow distant. Worse, we judge quickly and harshly the actions of others; we devolve into snark, which will never lead to meaningful change.
Is there hope?
To restore our social bonds, each one of us must overcome our isolating feelings of embarrassment and humiliation and understand that this is a shared plight. We'll also have to accept that anger, real anger, has a role to play in producing collective catharsis and fostering healing.
Well, I say to my fellow American citizens in debt: You are not alone, and it's not your fault! The Credit Card contract is unconstitutional in its incomprehensibility. Cut your cards, stop doing business with these banks, and let's protest!
Good point. I made a similar point here here regarding debt and it's negative effect on dissent. We also have an overabundant labor pool as well, which will silence some dissent as those most in need scramble for the jobs that are available.
March 29, 2009 9:40 PM | Reply | Permalink
The world has an overabundant labor pool. Makes for an unsettlingly volatile geopolitical environment.
March 30, 2009 4:37 PM | Reply | Permalink
There is nothing wrong with material possessions but when we start to define ourselves by these things, we lose all sense of self.
Thanks for posting!
March 29, 2009 9:58 PM | Reply | Permalink
Nice post!!!
To some extent I agree. Our personal debt has many of us feeling our 'options are limited' and rather than calling for expansive reforms to our system that we should try to maintain the status quo. But what the people don't realize is that debt gives us leverage in a sense. If we ever organized and collectively stopped paying off our debt we would bring the system down. We are the ones who hold the cards but we be deceived into thinking we have few options...
March 29, 2009 9:58 PM | Reply | Permalink
Libertine, in theory I see your point but in reality, don't see it playing out.
I think most Americans believe in personal responsibility. If they created they debt, they want to pay for that debt. Not being able to meet that responsibility causes the anxiety the post refers to. Asking millions of people to withhold payment on debt they accumulated, is akin to asking them not to pay their taxes.
March 29, 2009 10:08 PM | Reply | Permalink
I doubt it will play out too and for the reasons you lay out.
The American people have bought the notion of personal responsibility...and it is a good rule to live by. But what happens when not everyone plays by those rules? What happens when 95% of us play by those rules but 5%, who happen to be the wealthiest 5% of Americans, feel they don't have to pay their share? I think this hypocrisy is starting to become evident to the American people. Will we act to change that double standard? And if we do what will be done to change it?
I think that is why many in the upper 5% of becoming nervous and why we see their water carriers in the media denouncing 'crass populism'.
March 29, 2009 10:15 PM | Reply | Permalink
I think we can change it but we have to work together. I'm reading about Glen Beck and how he speaks for Americans who feel disenfranchised. I would think those same Americans are in the 95 percentile. If we continue to allow divisiveness to keep us apart, the 5% will have nothing to worry about. Something tells me, they are counting on it.
March 29, 2009 10:48 PM | Reply | Permalink
Well my feelings on Beck is that he is working to keep the disenfranchised just that way by empathizing with their plight while doing nothing to help them. First and foremost is for the American people to realize that we are no longer in control of our government. Once we can realize that and take control back we can accomplish some good. Now will I agree with people that listen to Beck and them with me? Most definitely not. But the one thing that is agreed on both the left and right is that using our tax dollars to keep the wealthy that way when the mess up is unacceptable. And the last thing the wealthy want is for the parties they want to keep divided to realize they have more in common than they think.
March 29, 2009 11:00 PM | Reply | Permalink
Glenn Beck is the most dangerous man in the counrty today. He's an emotionally unstable maniac with a can of gas he pours on any cinder he can see. It's a deplorable state of our culture that he gets a national platform on cable TV. He is encouraging despondency, tearful, laughing mad, hopeless, nihilistic despondency.
March 30, 2009 1:01 PM | Reply | Permalink
Hey Libertine, they are waiting for you at Fullers:
http://tpmcafe.talkingpointsmemo.com/talk/blogs/timtimes/2009/03/gays-and-pot-smokers.php
They need a lite.
March 29, 2009 11:19 PM | Reply | Permalink
Hehehe...I just drifted over. ;-)
March 30, 2009 12:03 AM | Reply | Permalink
That will change.
There is an entire generation that is being taught as firsthand witnesses that they too can be the richest people in the country just by not paying off their debts on their own.
March 30, 2009 8:15 PM | Reply | Permalink
I think it was Mussolini who said that dictatorship was a lot easier if everyone was in debt. Needing a job to pay the mortgage helped to keep society subdued. Independently wealthy people would be harder to control.
March 29, 2009 10:09 PM | Reply | Permalink
I think secure people are harder to control. If the very people that are having anxiety attacks over their debt would stand up, as well as stand together, they wouldn't need to be independently wealthy to be heard.
We've been brainwashed to believe certain things about ourselves. Money and or material things mean we are successful, the perfect body makes us perfect people, etc. That mindset stems from not having a sense of self, not lack of money.
March 29, 2009 10:20 PM | Reply | Permalink
I really like your post, but I disagree with your conclusion.
"It's not your fault".
Whose fault is it then? Whose fault is it that we smoke, that we take drugs, that we eat junk food, that we spend most of our time watching TV, that the American idea of leasure is strolling in a shopping mall?
It's too easy and too convenient to say that everyone of these and a thousand other things is someone else's fault; and there is something really wrong with the concept of personal responsibility in a country where the majority of people thinks this way.
A friend of mine went to AA for treatment. He told me that the most difficult thing he ever had to do was to admit to himself that he had a problem. Sometimes I feel like our society would be better off if we had a collective AA session.
It's easy to point an accusing finger at everyone else. It's more difficult to admit that we WANTED what they offered us - more clothes, more food, new car, bigger TV, vacation abroad. If we were fooled - we had been ready for it.
The way I would have concluded your post - if you feel tempted by a credit card teaser rate - take 30 minutes instead of 3 to read the terms. Then take the teaser and put it where it belongs anyway - trashcan.
March 29, 2009 11:01 PM | Reply | Permalink
I think it's interesting that you've listed all addictive behaviors, Lalo, and that the example you used to make a point is that of a friend who is an alcoholic.
Addiction is not simply a lifestyle choice that hinges on personal responsibility. Once you're hooked, it literally changes your brain, according to scientists. Even 12 months after quitting, the brain does not return to normal. So the effort of quitting the addiction becomes a battle against your own physiology every waking moment.
Maybe you're onto something, though, L. A little on the unsympathetic side, perhaps, at least from my perspective as an ex-smoker who still dreams about smoking 20 years after I quit. But maybe you're onto something about American culture, which promotes compulsion and addiction everywhere we turn. If we don't have an anchor in our lives, the encouragement to try one addictive substance/behavior or another is incessant. Who can ignore it?
Ties in with the high-stakes gambling addiction by Wall Street that's wiped out our savings, our banks, our home values, our jobs, everything.
We're sick. We need an intervention. But there's no one who can intervene for us but us.
March 30, 2009 12:50 AM | Reply | Permalink
Lalo: Will respond late tonight... Getting hammered at work (lucky to be here; hope it lasts...).
March 30, 2009 11:48 AM | Reply | Permalink
A very wise person, wiser than his years, said to me "The more you have, the more you become slave."
C
March 29, 2009 11:26 PM | Reply | Permalink
If the "average American owes $9000" in credit card debt, then that means the average American household with two adults has an $18000 debt load. That seems over the top. Also, that number is unrealistic because you're factoring in people like the John McCains with a carry of over $100,000 with people at the bottom of the food pyramid, who have a $750 limit on their single VISA card.
The real impact of this debt is on your FICO number and that determines where you go in the credit market. It's the lack of control over how credit rating agencies manipulate your credit worthiness that is the real concern, and what will keep someone up at night. In the modern credit world, you may not miss a payment for years on any debt, and yet be written down because of a missed payment or payment dispute from 5 years ago.
Advice to stop using credit cards is not productive. Judicious use of credit enables us to do things we otherwise would not be able to do and protects us from unexpected problems. When my wife's car unexpectedly needed $1400 in repairs, we did not choose to park it and wait 2 months to save the money for the repair bill. Nor did we forego the serendipitous opportunity for her & my kids to accompany me on a 2-week business trip to London, a couple of years ago. While I worked, they got to see the sights and my company picked up the hotel tab and my meals. And at an exchange rate of nearly 2USD-to-1GBP, that was a sweet deal. Except for the part where I got to Westminster Abbey right at closing time.
Now, running up a $400 tab for clothes at Macy's? That is dumb.
Thanks.
mp
March 30, 2009 2:07 PM | Reply | Permalink
I agree. Credit scores are the real culprit. Credit scores are a social engineering tool that have bypassed traditional lending mechanisms... plus the FICO rules change quietly every so often and shift the behavioral goalposts further out.
March 30, 2009 3:19 PM | Reply | Permalink
MP, you live within your means and you knew you could stretch when you did. For you, and this is how I use my "credit" card, we pay our bills at the end of every month, but at times it might take two or three for as very special something. Kids are young once, cars are indispensable, but we do not let go of the foundation to reach these opportunities, crisis.
We do have to recall though. A serious illness will cost tens of thousands. A lost job will cut off the funds immediately and unexpectedly. Did we do something to deserve this? Not every time. Sometimes good work is simply punished by cheaper labor in another country where, if we really want to take responbsibility, we might demand they get equal wages. instead, we are okay that they live in poverty. It's not our country after all.
Well, whose planet is this anyway, now that the world is flat?!?
March 30, 2009 3:20 PM | Reply | Permalink
I am so glad Wade Boggs started a thread on this. My wife was really heavy into this, had a serious problem with debt. First of all, behind my back the bi**h payed off the house! Do you understand the psychological effects of that? The first month I did not have top write a mortgage check (She lied to me about that, too. I thought we were renting) I became discouraged and dis-oriented. I could only relate to a house you didn't write a check for as a house guest. I am on tenterhooks, waiting for the real owners to get home and kick us out, and bill us for wear and tear. When she could no longer hide this from me, it all came out; she had been moving money around to pay off credit card purchases with almost no interest charges, or delaying purchases until we could pay in cash. Perfidy! Naught but perfidy, I tell you. She has ruined my life! I have no friends, we have no interests in common, and they seem to resent me. And because of her under-handedness, we will never go bankrupt, and we will never get bailed out! Talk about anomie!
It's like my therapist said: "If you can't consolidate your bills, you can't integrate your personality"!
Apparently, my wife's mother never beat into her the home truth of American life: You are what you owe!
Worst of all, my wife has been saving money and has accumulated enough for retirement. And she needs me now for, what, exactly?
Don't worry, I've already seen a divorce lawyer, and he has referred me to a forensic psychiatrist.
March 30, 2009 2:29 PM | Reply | Permalink
Funny!
March 30, 2009 3:34 PM | Reply | Permalink
I believe that our economy would have crashed sooner if it weren't for consumer credit(debt) and bubble inflated home values. How else is the productive output capacity of our economy to be consumed? Workers are not paid enough in actual wages to consume what's necessary. That's what's at the root of our troubles right now, a lack of aggregate consumption power by the working-class.
The working-class had been extracting the equity from their homes to help finance the consumption needed to sustain the economy until the home value bubble collapsed choking off that source of consumption financing. The only other means of financing consumption has been going in to consumer debt.
That is the key systemic flaw of capitalism, in my opinion. It inherently produces an increasing gap between production capacity and consumption capability (I'll leave the explanation for why that is so for another discussion). Consumption gets artificially propped up via an ever increasing consumer debt or via bubble inflated asset financing. In either case, such consumption is not sustainable and eventually triggers a cascade pull back of production capacity and jobs - ta-dah, a recession.
The personal value of increasing the amount of consumer savings is in conflict with the present needs of the economy as a whole. Consumer savings increases the money supply available for capital investment, but, again, that's not the trouble right now. The trouble is a lack of consumption which is triggering a reduction in production. More investment in production capacity won't solve the current predicament.
March 30, 2009 5:10 PM | Reply | Permalink
So, if we can get EFCA passed, lower taxes on the middle class, a better and affordable education, health insurance for all, fuel efficient cars and all the other consumer goods we could buy with all that extra money we would make, problem solved? Makes sense to me!
March 30, 2009 5:31 PM | Reply | Permalink