Those Unpatriotic, Debt Free Americans

Posted by Jason | Posted in Economics | Posted on 23-10-2011

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With the economy in the crapper and possibly heading into a double dip recession, the Wall Street Journal did some brilliant journalism this weekend pointing out who is at fault for this economic malaise.

American consumers’ long-running love affair with debt is on the rocks. And as they repent for their credit-driven Bacchanalia, the foundering U.S. economy is left to pick up the pieces.

Ah ha! The American consumer is repenting from their “credit-driven Bacchanalia”, and those bastards are destroying Obama and Bernanke’s economy.

I’m not the only one who had to Google Bacchanalia, am I?

Anita Bullock-Morley, a 36-year-old speech therapist in Atlanta, is one who talks about her old borrowing habits like a recovering drug addict: “My life is so much better not having that haunting debt.”

Well, we obviously know how selfish Anita is. That’s great your life is so much better Anita. What about the rest of America who is suffering because you won’t enslave yourself to the bankers.

Jason Jacobs and his wife Kathy Jacobs, at home in Richmond, Va., are among those who are reducing debt.

She used savings to help pay for her wedding last year. And after wiping out the balance on two dozen credit cards—and swearing off boutique-label purchases and fancy vacations—she is working her way through $50,000 in student loans and the $215,000 left on her mortgage. Ms. Bullock-Morley is among a generation of Americans who were taught the value of saving as children but had to learn the hard way how to spend wisely.

I guess her paying for her wedding from her savings doesn’t help the economy. It would have had she borrowed it though. As far as paying off $50,000 in student loans. She apparently didn’t go to school long enough. Maybe that’s why she is so ignorant about the benefits of borrowing.

Since the financial crisis erupted, millions of Americans have ditched their credit cards, accelerated mortgage payments and cut off credit lines that during the good times were used like a bottomless piggybank. Many have resorted to a practice once thought old-fashioned—delaying purchases until they have the cash.

I can’t believe these people are going back to the stone age. Next they’ll want to go back oral communications instead of texting.

As a result, total household debt—through payment or default—fell by $1.1 trillion, or 8.6%, from mid-2008 through the first half of 2011, according to the Federal Reserve Bank of New York. Auto loan and credit-card balances in August had their biggest drop since April 2010, the Federal Reserve said.

But doesn’t that mean as a society, we have actually become wealthier? I mean, if I’m trying to figure out my networth (wealth), I take my assets minus my liabilities. Doesn’t this mean that households have increased their networth $1.1 trillion in the positive direction? I would think that would be a good thing for the economy. Then again, that’s $1.1 trillion in future labor that the banks no longer get first dibs on. People will actually get the fruits of the labor.

The national belt-tightening, known as deleveraging, comes as the U.S. economy struggles to fend off a double-dip recession. Paying off bills slows consumer spending on appliances, travel and a slew of other products and services. Home sales, the engine of past economic recoveries, remain depressed.

Yes, but doesn’t it free up capital to be lent out elsewhere? If the problem is lack of credit being available, people paying off credit should free up credit for others to borrow. Also, it should lower interest rates, which in turn would increase borrowing. Of course, it’s hard to lower interest rates when the Fed has print so much money that interest rates are at historic lows.

Deleveraging should help the U.S. economy in the long-run, putting households on a sounder footing and easing the nation’s reliance on the savings of Chinese and other foreign nationals. But there are short-term dangers.

Yes, there are horrific dangers that Obama’s cronies over at Goldman Sachs will not have enough people enslaved to them. They won’t be able to earn the interest off money that was printed, given to the bank as bailouts, and then lent out to consumers to have to pay back through future earnings. This danger is almost as dangerous as the Iranians who have yet to start a war with anyone and all the sudden they are going to nuke us.

During the Great Depression, economist John Maynard Keynes warned of a so-called paradox of thrift: When everyone turns frugal, everyone suffers. Synchronized thrift slows the economy, according to Keynes, which hobbles income growth and makes people even stingier in a pernicious cycle.

Some experts worry that is happening now. Since the recession ended in mid-2009, the U.S. economy has expanded at a 2.5% annual rate, far slower than the average growth of 4.3% during the first two years of the previous four recoveries.

Let’s not even mention that the last four recoveries where no where near as bad as this one, which might explain why we’ve only had 2.5% annual growth. They aren’t calling it the Great Recession for nothing. I also don’t recall a world-wide collapse and debt crisis during the last four recessions.

No, let’s not mention any of that. No, let’s talk about John Maynard Keynes. I mean, who cares that the government was following Keynesian economics when this economic disaster occurred. Just ignore that and say, well what does Keynes say about this. If everyone turns frugal, what they are doing is saving. What happens when the banks are flush with savings? Do banks, especially under fractional reserve banking, like having everyone’s savings just sitting there? No. They want to lend it out, but if no one is borrowing (basically buying the banks goods) at the interest rate (price) the bank is offering, the banks will lower interest rates. Lower interest rates will eventually entice business investment and spending.

“Folks aren’t borrowing,” said Jim Ernest, executive vice president at Provident Credit Union in Redwood Shores, Calif. “They are paying down debt and continuing to save.” Since January, 12% of the credit union’s mortgage customers have made at least $1,500 in extra payments.

via Americans Debt Cutting Hampers Growth – WSJ.com.

Well, as you can see, the American people are a bunch of unpatriotic idiots haplessly destroying the economy because they refuse to enslave themselves to lenders. If you are one of these Americans, quit being selfish. Go down to your local bank and borrow as much money as you can. Then go buy a house you can’t afford. It worked so well last time.

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