Thrifty Americans

Since 2008, American household debt has fallen $1.1 Trillion.  Great news!

Unfortunately the fine print reveals that only one-third of that is due to responsible people paying down what they owe.

The other two-thirds ($695,000,000,000) is due to banks writing off debts owed on mortgages, plus credit card, student, auto, home equity and other loans as “uncollectable”. (Translation: a lot of people made out like bandits, mostly by just giving the finger to banks.)  This trend is on-going.  This is why banks pay almost no interest on savings accounts while government keeps urging Americans to save more.*

But, have no fear, American households still owe $6 Trillion MORE than they did just ten years ago.  American household debt is still a truly astounding $11.7 Trillion.

And that’s just commercial bank debt.

The government debt is even more humongous, of course.  It currently sits at $14.7 Trillion.  It will top $18 Trillion in just four more years.

That $14.7 Trillion is equal to the nation’s annual Gross Domestic Product (GDP) – the total value of all goods and services produced by all Americans over one full year.  A third of that GDP is the “product” of government, paid for by taxes, leaving only $10 Trillion produced by the private sector.  The nation’s debt increases by huge amounts every day.

If you earn $50,000 a year (after taxes), how long would it take you to pay off a $50,000 loan, a loan that increases all on its own every day – a loan that rises faster than you can pay it down?

And one country, China, is sitting on $1.2 Trillion (27%) just in US government bonds – which is drawing interest.**  Other countries holding BIG bundles of US bonds include Japan (20%), United Kingdom (5.5%) and Brazil (4.5%).

The US government debt jumped an incredible 40% in just the last FOUR years.  And that’s just the beginning of the astounding known debts that lie ahead.

What are the chances that Japan, which already has a debt-to-GDP ratio higher than the US, will have to cash in big piles of those US bonds in order to rebuild its own economy?

Does anyone know how long we can keep borrowing from our kids and grand-kids to pay our debtors before the Money God shouts, “Not Credit Worthy!” and shuts down the whole shaky house of cards?

Aren’t we just “The Greatest”?

No wonder the politicians are so anxious to divert public attention to ever more expensive wars, which, of course, ADD to our debt in Really Huge Chunks.

It’s another case of ‘All rights, no responsibility’.

It’s all about finding “someone else” to pay the bills, take the blame and do the hard stuff for “very special me”.

And, quite often, that “someone else” is the kids.  And their kids.  And their kids.

Unfortunately, we’re not having and raising nearly half the number of those kids that we need to become taxpayers.

The women author of a recent book on contemporary collectors of disappearing treasures made the observation that the male brain is predisposed to collecting, even at the expense of an emotional connection, but she didn’t bother to contemplate what to her was just another snide sexist comment about “that other gender”.  For millennia men had been responsible for providing for their families, even in times of deprivation, and tried to meet that responsibility by planning ahead, by appreciating the wisdom of saving for rainy days.  How well they met such responsibilities was how others judged them.  Women depended on that responsibility while they focused on caring for the children.  How well women met that responsibility was how they were judged.  Now that women, especially that majority of mothers who are now “single mothers”, are transferring their dependence from husbands and fathers to Big Daddy Government, and teaching their young of both genders the same governmental dependence, it’s easy for the careful observer to see that the brains of both genders still have pretty much the same wiring.  But women are doing their best, by their own “uni-sex” example, to change that.  American women have rights; they do NOT have responsibilities.  It’s the responsibility of “someone else” to ensure any rights women decide to claim for themselves – including someone else to pay the bills, take the blame and do the hard stuff for “very special me”.

(For the record, I happen to be a collector of classic literature books with a decided preference for premium leather-bound gilded-edged editions, and I have never in my life accepted an unearned dollar from anyone or failed to meet an obligation of any kind which I assumed.  But I must admit to a certain emotional connection to much of the contents of my books, to the brilliance that preceded me, that made all this possible, that got us this far.  And, yes, my collection does have re-sale value.  I just can’t imagine selling them.)

November 2013:  In a sterling example of childish delusion, even after wasting trillions of taxpayer dollars, mostly borrowed from China, to bail out people with mortgages they couldn’t afford, which led straight to the financial implosion of 2008, consumer debt is nearly back to its astronomical 2007 level of $13 Trillion, of which $3 Trillion is high cost credit debt and another $1 Trillion is student loans.  After five years of American consumers climbing out of a massive hole, they’re already digging it deeper.  There’s only one word for such stupidity – mass addiction, to dependence on “someone else”.  It’s just incredible the number of morons in this country who think “someone else” can be held responsible for the choices they make, for their own freely elective behavior.  But, as long as our majority women keep whining exactly that, they’re probably correct … until it all falls right through the floor, of course.

.

During the rise of the Greatest Generation, from 1945 to 1975, 40% of corporate profits was reinvested in the company before returning the remaining 60% to investors (stock holders).  Reinvestment involves putting the money into corporate facilities, research, new hires, new ventures, expansions and increased employee compensation – all intended to foster future growth.  During the rise of their Baby Boomer children, from 1975 to 2010, only 10% of profits was reinvested, and the remaining 90% went to pay investors wanting more money for “me”, now, damned the future.  Economist J.W. Mason of CUNY:  “Finance is no longer an instrument for getting money into productive business, but instead for getting money out of them.”  A lot of those corporate shares are now held by a lot more Americans, including in IRA mutual funds, but the practice overall is just another reflection of our narcissistic instant gratification society effectively undoing the broadly shared prosperity that Americans enjoyed for much of the post-war era.

.

(See also “The Most Important Import”, posted separately.)

________________________________________________________________

* Incredibly, Americans have been saving more, about 5.5% of personal income.  This is an increase from 0% ten years ago.  With little or no interest or dividends being paid, however, this is possible only if the rate of inflation remains close to zero.  If inflation rises above interest or dividend rates, it no longer makes sense to save.

For the record, the Greatest and Silent generations saved on average between 10% and 13% of annual income (and their charitable giving was significantly higher, too).  Such adult savings (and charity) built the modern America.

** And, using the playbook written by America’s Greatest Generation for the last century, the Chinese are using big chunks of that mountain of US dollars to not only build up their military forces, but also to wisely invest throughout the Third World, in everything from farming aid to major construction projects.  Many of these strategic investments will serve them well through the 21st century, by ensuring them sources of resources (including food) needed for their economy, markets for their products, and political-military friends.  Childish Americans living way beyond their means are serving the interests of China very well indeed.