Easy Credit Equals Debt America: Why Americans Easily Fall in Bed with Debt
by Mogamahttp://mogama.info
Before “the credit revolution” (prior to 1980), the personal savings rate of Americans hit a high of 14.6 percent; even the low savers saved 5.4 percent of their earnings.
How times have changed! By May of 2009, the highest savers in America kept just 6 percent of their income. The low savers came in at negative 0.8 percent rate of savings.
The dramatic drop in Americans' tendency to save money is perhaps the most devastating damage the credit revolution has done to the nation. The debt revolution gave Americans the green light to borrow at any time for any reason. In short, it changed the thinking of the masses about debt and borrowing.
Here are some of the ways easy credit has transformed Americans' attitude towards debt … for the worse.
Banks and other lenders have turned debt into a “financial product” . As such debt can be packaged and sold like any other commodity, merchandise or service. Lenders sell debt, and consumers buy debt just like we buy food, clothing or hotel room service.
As a society we've turned greed into style . In fact, covetousness, once frowned upon, has become a virtue that motivates us to accumulate things. Craving stuff, stuff and more stuff has become normal, acceptable, even praiseworthy and commendable.
Americans replaced simplicity with the convenience of buying on credit . Wanting what we have gave way to having what we want when we want it. Our impatience demands not only fast cars and short church services but also quick grabs of houses, cars, shoes, vacations, whatever. And borrowing made it a matter of minutes to “own” what it took our foreparents years to buy with cash.
A monthly payment mindset has taken over the need to know the total cost of owning most things . Once we decide we can afford to make the monthly payments, we pay little attention to maintenance cost, not to mention the cost of borrowing (interest payments).
Few savvy, skillful , successful borrowers have persuaded us that debt is the path to becoming or looking wealthy . We are deceived into embracing a loan life because few Americans have used debts to operate businesses, fund real estate investments, and even invest for returns in the stock market. The few people, who have succeeded in using OPM (Other People's Money) to become rich, have convinced us with their publications, TV shows, board games, websites, and extensive advertising that borrowing money is actually the smart thing to do.
It's similar to how Americans fall for fab diets. Just Subway Guy lost 50 pounds, dropping his pants size 40 to 32, does not mean most obese people will see a similar result. Subway Guy is the exception, not the rule. In the same way, gurus like Donald Trump and Robert Kiyosaki, who have successfully used debt to grow immense wealth are in the elite minority. Unless you have the combination of their financial skill, business knack, and unique personality to build wealth, it is not likely that you will build the next Trump Tower just because you took his course, read his book or learned his board game. The typical American's chances of building a Trump-like empire from borrowed money may be close to one's chances of playing in the NBA or winning the Kentucky Lottery.
More needs to be said on Americans' easy credit thinking, but that will take another blog.
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Sources: Household Savings Rate by Country; The Collapse of Personal Savings Rate in America
Article submitted Thursday, January 07, 2010 & read 9 times.
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