Financial literacy is an issue that should command our attention because many Americans are not adequately organizing finances for their education, healthcare and retirement. -Ron Lewis (1946-), 7 term member of the US House of Representatives.
Okay everyone…hold on to your hats while I give you a few staggering Federal Reserve Statistics about what is really going on with average Joe and Jane consumer:
Consumer debt in the United States is approximately $2.6 trillion or $8,500 for every man, woman and child that lives in the U.S.!! By the way, that does not even include mortgage debt!
37% of consumer debt is revolving/credit card debt, 63% is non revolving/car loans/boat loans/student loans!
The Federal Reserve’s financial obligations ratio, a measure of how much after tax disposable income goes to paying off mandatory financial obligations, as of June 2008, stood at 17.82% for homeowners and 25.98% for renters!
The number of credit card holders is projected to grow to 176 million by 2010!
Americans own approximately 1.4 billion credit cards or 9 cards per cardholder!
Credit Card debt is expected to grow to 1,091 billion by 2010!
All right enough! I can’t even take it as I’m writing this…it’s completely staggering and unnerving and I’ll tell you why! Our Gross Domestic Product is comprised primarily of consumer activity! I know I have written about this before (See: http://freethinkingtools.com/?s=Sharpen+Your+teeth) but we have only scratched the surface! While talking to a local business owner the other day it hit me! Forget about the Bernie Madoff Ponzi scheme! What about the big one being perpetuated by our whole economy! Like Bernie’s victims, we have fallen completely under the ether with all of our financial thinking! Our desire to consume leads us to clamor for more credit availability…how will we be able to start our businesses without a loan we cry?! How will the underprivileged and uneducated survive without a loan?! If we don’t bail out the financial institutions that helped us get out of control then all of this credit will be gone and we’ll stop consuming…then what? Or how about just printing a whole bunch of paper money and putting more of it on the street so we can keep on spending!
The family wage has been eroded by the same developments that have promoted consumerism as a way of life. -Christopher Lasch (1932-1994), American historian and social critic.
At this very moment it appears that the US economy is in a tailspin…Wall Street has seen the collapse of several companies that have been fixtures for a long time followed by a $700 billion bailout intended to restore economic stability. Following closely behind is the discussion of a secondary bailout for the failing American auto industry. Something has clearly gone wrong here but is it really that complicated? NO! You see what the government is really trying to do is stimulate average Joe and Jane to run out and keep spending money by making credit remain accessible. Certainly I understand that businesses can always make proper use of credit to smooth the ebbs and flows of cash flow or even push innovation by financing research and development efforts, but let’s focus on what really drives any economy: PEOPLE! That’s right it’s us! Consider the fact that the US Gross Domestic Product is comprised primarily of “consumption” and guess who does that…you do! So the incredible irony is that our money (taxes) funneled through the government back into the economy is ultimately there to bait us to buy MORE! Crazy really when you look at it that way!
