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May 21, 2009

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Isn't this post another in the line of blaming the "other:" All those darn credit card cheats who just wanted the latest whatevers? A lot of people in credit card debt are there not for convenience or for wanting things but simply for trying to pay bills in this economy.
When we put such disparate value on different services (i.e. my admin. skills just aren't worth as much as those Wall Streeters who proved so invaluable in wrecking the world economy) we're gonna end up where we are now, with people turning to credit cards for things like medical bills and groceries.

Also, can we get a little disclosure here? All of your current bills are paid by you, yes? With cash and without any other assistance? Rent, food, gas, the symphony, etc, all done on a Starbucks salary?

Glass houses and all of that.

The specifics of my financial situation - or yours - is really not the point here; I was making a generalized observation about excessive use of credit, without really judging people's choices or motivations. I certainly get that, for many (me included) using credit to cover basics is sometimes a necessity; from an objective, planning your finances standpoint, that's not a good thing (because, basically, it's taking an enormous loan with a high interest rate for basic living). Those who can make changes to avoid such a situation, I'd suggest, should. Those who can't... are certainly not bad people, and in no way was I trying to suggest otherwise.

My larger point was that the problem with the "credit reform" plan is that it makes modest changes to business regulations, but doesn't ask, as you suggest, basic questions about why people rely so heavily on credit; and without making policies that actually encourage less reliance on credit... you won't necessarily stop people chasing bad deals... and worse, you won't save people when banks decide, as they are and probably will in increasing numbers, to simply cut off the option for many. When I say "people have lived beyond their means" I'm not saying people want to live like rock stars (though some may); what I'm pointing is basically simple math: if you can't cover your basic expenses with your salary, you're not existing within your means. That's a problem. We should - I agree with you - be doing more to address it.

"if you can't cover your basic expenses with your salary, you're not existing within your means. That's a problem. We should - I agree with you - be doing more to address it."

I don't have as strong a reaction to this post as Jim (Hi Jim!) but if what I just quoted back to you is your point, then perhaps you should be talking about the stagnation of wages over 3 decades as the cost of living - particularly in terms of housing, education, & food prices - has risen, rather than about how we all need a "come to Jesus" about our spending habits. You do suggest a sort of national frivolity without raising the issue of real costs vs. incomes.

"perhaps you should be talking about the stagnation of wages over 3 decades as the cost of living - particularly in terms of housing, education, & food prices - has risen, rather than about how we all need a "come to Jesus" about our spending habits. You do suggest a sort of national frivolity without raising the issue of real costs vs. incomes."

That's why I have you. :)

Seriously - I don't use the word "frivolous" anywhere, and it's because I'm not judging the spending of others (as J says, I have, really, no right to do that). My point, as I said to him, is simpler: we are a nation living beyond our means. Is part of the reason for that wage stagnation? Absolutely. Is it also overzealous consumerism? Sure. The point of this post, really, is what has fueled our ability to ignore wage stagnation, and to pretend we have a problem, any problem - it's banks and their bad ways! - other than a problem with overuse of credit. If we plan to solve the credit "problem" by forcing banks to cut people off (which is the likely result of the bill), we will, as you suggest, put a number of other issues into stark relief. All I'm suggesting is... perhaps we'd have a better chance of addressing the income problem and the over-reliance on credit, if we actually discussed them. Instead we're punishing banks, and the net effect will be to punish ourselves, with few options for relief.

I guess I'm not part of your collective "we," because in my circles it's all about wage stagnation and the rising cost of living.

it makes me wonder if there really is only a finite amount of money, and if there is a direct link between the excessive compensation of some and the stagnant wages for others.

We could call ourselves "wii-less we?"

This lively discussion - which, honestly, I never anticipated - tends to lead me back to my conclusions about the problems of credit that much more strongly. I think there are some interlocked problems here, which go to the increasing use of debt and credit to fuel the American way of life. I don't think you can, as Leigh suggests, make this simply about "wage stagnation and the rising cost of living" and ignore the credit card problem, or treat credit card debt as somehow merely a part of some larger problem; it IS the larger problem. Our debt, banking and foreclosure crises all stem from a culture that encouraged excessive debt. Had we not, as a society, encouraged ever increasing reliance on debt, issues of wage stagnation and ability to manage costs of living would have become an issue years (and years) ago, on a national level. That didn't happen - and still hasn't happened, really, I'd argue - because we came up with an artificial fig leaf - massive use of credit.

Then ttoo, I think the feedback is a reminder, to me anyway, that when we talk about financial troubles we do tend to review people's choices on a subjective scale; and the effect is to isolate those with serious financial issues as having "failed" or "messed up". We can't do the kind of foreclosure relief that's really needed, in large measure, because we're too busy picking who's in foreclosure for the right reasons, or the wrong ones. Arguably, tthe relief we'll need to provide in credit cards is even larger than foreclosure, certainly more widespread. And though I don't do it here, I do understand the visceral reaction to suggestions that saying "consumer debt is a problem" is somehow a judgment about the consumer or consumption hangs over it; that's a lot of what's out there, now. I don't like it either. But we can't begin to unwind the problems of excessive credit use until a) we can admit the enormity of it as a problem and b) we can stop judging people over it. I don't care why people are in debt or what hey bought... what I care about is... how do we change things?

My point remains, even in the face of the friendly blowback, that we don't have a good cultural answer for excessive reliance on debt. Without that - in other words without better education for consumers about the problems of taking on too much debt, better financial management and planning - we're really not changing behavior. People will continue to use credit, where they can, either out of perceived necessity or out of continued pursuit of consumerist goals, without a lot of concern for the consequences. And it's likely that many people will move into the category of too much debt.

And, still, rather than deal with the debt crisis - which is the real drag on our ever recovering out of the economic crisis we're in - our government tinkers, on the margins, with everything else. We expect banks, somehow, to forego a profitable business out of some moral appeal to decency; it's not in their financial interests to discourage credit card spend, nor is it in the interest of retailers to discourage purchasing on cards. That's our culture... and unless we change it, on a fundamental level, we're not changing anything. And while banks may use the "reforms" as an excuse to scale back credit somewhat, that doesn't address our larger problems... which is the point that I keep coming back to... because it seems like the important one.

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