Are you over-extended? Are you paying someone else interest for money that you borrowed? If you’re like most Americans, the answer is yes. The news broadcasters would like to pin this entire financial crisis on Wall St. and our banking system, but the reality is that it came down to each and every over-extended person. WE as a collective created this problem. It may be a hard pill to swallow, but it’s true.
Let’s take a second to think about this concept. My spending habits aren’t terrible, but still more then I can afford. If I continue to put those beloved thingamabobs on credit, I dig myself a financial hole until I pay off those debts. Say I choose to believe that those fancy heels are just to die for and I make some argument to myself that I deserve to buy them on credit. “I’m getting air miles for it, so what’s the harm.” The store, the credit card, the media, and our national leaders do nothing to prevent me from buying those shoes. We have been told that spending fuels our economy, so we have been encouraged to continue this bad behavior. President George W. Bush after 9/11 called it “continued participation in the American Economy.”
So, imagine nearly 1 in 5 people seriously overextended by $15,000 or more, with the rest overextended by just a few thousand. Then spread the message that they can still qualify for a home loan and the dream of home ownership has come true. “No money down,” they said and with low interest rates locked in for two years. Again, no one stopped us. As a collective, we used our “purchasing power” to give a sign to the free markets that we deserved to all own homes, even though we really couldn’t afford it. In order to make even more money off of us, the banks decided to wage bets on how many of us would actually pay off our mortgages.
In the meantime, our country is overextending itself too. We started importing much more then we were exporting. Americans weren’t manufacturing – we were consuming. To get those low prices that we felt we deserved, items had to be manufactured overseas. In 1971, Richard Nixon changed our monetary system so that $1.00 wasn’t backed by $1.00 worth of precious metals anymore. Our money became I.O.U.’s called Federal Reserve Notes (check your greenbacks right now).
“Today, the U.S. is the largest debtor nation in history due in part to this change,” Said Robert Kiyosaki, author of “Rich Dad Poor Dad.” We have borrowed money from France, Japan, China, the UK, and Brazil to name just a few. After decades of this trend, our funds were spent. Money that should be for Social Security ends up paying the interest on our debt to China. I don’t blame Bill Clinton for doing it; it was like tapping the last jar of coins in the bedroom after the bank account runs dry. Our budget surplus from the Clinton years was only starting to pay off our debts, before WE as a collective demanded military action for 9/11. Now, our spending is out of control – personally and collectively to the tune of $10 Trillion.
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