Lessons in The American Lifestyle

Wednesday, July 23, 2008
For the past couple of decades, Americans have always been able to satisfy their wants no matter how excessive, without thinking about the consequences to the rest of the world or to their own bank account. Example number one: while many parts of Europe paid $8 per liter for gasoline, we built enormous gas guzzling SUVs, laughing at the rest of the world all the way to the gas pump. We bought these super sized SUVs because the advertisements during the football game said we had to have it. So we traded the economically minded car and bought the Dodge Ram, because it was the “American” way.

When we want a newer 60-inch television to replace the old 59-inch, we buy it and throw the old one in the trash. While many parts of the world are starving, we are over eating at buffets as our kids vomit to be skinnier. We shop with forklifts. We might buy something today and then throw it away tomorrow still in the unopened package because we no longer like the color. Our houses keep getting bigger, while our families and our wallets keep getting get smaller. If our neighbors buy a newer, bigger toy then we have to have it too. The world is our oyster.

How did Americans pay for all of this junk? We didn’t use cash because we didn’t have any. No sadly, we run our households like our government is run. So we either put it on the charge card at 30% interest or, even worse, refinanced the house and paid for it with our future.

Within the past 7 years a caldera was forming in the heart of the American way of life, like a volcano ready to blow its top. And finally, several weeks ago, driven by overextended credit and a lack of equity, the bills finally came due for many Americans and the American economy erupted like Mt. St. Helens did in the eighties.

The collapse of the subprime mortgage markets have sent ripples throughout the financial world. Already two major banks have collapsed with more surely to follow. Not since the 1930’s has our financial markets taken such a beating. Now the government is giving billions of our tax dollars to stop the bleeding by bailing out Freddie Mac and Fannie Mae; money which could be used for healthcare, better roads or an economic stimulus package.

The primary cause of this disaster was the deregulation of the banking industry spearheaded by Phil Gramm and his big banking buddies. These regulations were in place since the Great Depression to prevent another economic failure like the banking collapse of the 1920’s. But Gramm and his cohorts quickly eliminated every regulation which not only protected the consumer but also protected other banks, clearing the way for banking institutions to grow even wealthier by allowing predatory lending practices to endure in the mortgage markets. We’ve seen other popular Phil Gramm deregulations bring us four dollar gas prices.

Although predatory lending practices have stolen the homes of many hard working Americans, some people should rightfully take responsibility for their own financial tragedies. The American lifestyle needs an overhaul. Fueled by over -commercialization, over-indulgence and the need to “keep up with the Jones’s"; many Americans have dug themselves into financial ruin in which they have no one to blame but themselves.

Let me give you even more examples of things I’ve noticed about the typical American. I have a friend who works in a dollar store who has a cell phone. She can’t afford this phone so her mom pays the bill. I have used cell phones in the past but they have always been bought by my employer as a tether for them to use when they wanted me after hours. So if my job ends so does the cell phone. But why does somebody who works in a dollar store need a cell phone? In my opinion this is a classic example of over indulgence. Does every American really need a cell phone? You can save up to $100 per month by eliminating it.

Another example was when I was pumping gas one day back in 2003 and noticed the house next to the convenience store. I remember this guy washing his super sized SUV in the driveway. This SUV towered over his house. He could actually drive over his house, crushing it entirely. I chuckled to myself and thought why own a car that is more expensive and bigger than your house? For that matter, why do Americans buy huge houses when they have small families or no families at all? I’ll bet this idiot spends more to fill up his gas tank per month than he spends for his house payment.

A contributing factor to the economic collapse of our country was Americans willingness to refinance their house and then use the equity to take a vacation or to support their over indulging lifestyles. Another mistake was to charge their lifestyle at 30% interest. People have to realize when income ends or stagnates then the lifestyle has to change, get smaller. The only necessities which are needed are food, water, housing and the utilities associated with housing. Everything else is a luxury and can be eliminated. The 60-inch plasma TV can wait, the cell phone can be cancelled, and the Blu-Ray DVD player is not a necessity. This is a simple lesson our grandparents learned which they have not passed down to the next generations.

I have been unemployed twice in the past ten years and both times I cut spending and changed my lifestyle until I gained employment. I did not refinance my house to take vacations or to buy a new plasma TV, nor did I max out the credit cards. It sucks but this is what is necessary to survive. I do not understand how people can survive without this basic understanding of financing.

The problems of financing are not limited to a certain group of people either. Across all classes of people from all nationalities, mistakes are often the norm and not the exception. After 2001, record numbers of families choose to refinance their home and then promptly took the equity and blew it. When the reality finally catches up with the irresponsibility, families suffer.

The victims of this behavior are the children who now have to live with their parent’s mistakes. They are the ones who bear the humiliation of these misfortunes because they do not understand what happened. Many times their education is interrupted while they are forced to change schools and change friends. This is very disrupting to a child’s development because kids need stability. Another tragedy is these kids will probably use the same financing skills which bankrupted their parents, and thus another generation of economic idiots graces the United States.

Maybe there is one positive thing which might come from these foreclosures. Maybe the children will learn from their parent’s mistakes, since they now have to live with the result of fiscal irresponsibility. It is just a shame their grandparents did not teach these lessons to their parents. They have to learn, and this lesson is best learned younger, that you can’t always get what you want.

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2 Comments:

Blogger Kim said...

Hey Darth! I have missed reading your blog. I am happy to see that you still have a link to my blog. I have been absent due to a computer crash and lost links. When I save something, I forget how to get there on my own.

I love this post. I understand 100% and I agree. My husband lost his job in 2000 leaving us with no income since I am a SAHM. While we did not run up credit or refi our house, we did have to use his 401k to survive and we did get in to financial trouble due to credit we already had. It took a long time to get back from that hole, like just this summer. But, our credit was reletively small compared to some. Our home was and still is our largest debt, and it is less than $70k. We really didn't have a lot of debt, but what we did have cost us.

We are now living credit card free. We are teaching our children that you cannot have what you want when you want it, though we were teaching them that when we were in debt. Our hard work allowed us to be able to borrow for things that are really important - like central a/c when ours went out since we live in Southeast Texas.

We did not have any help getting out of debt. We worked real hard to keep our house when we couldn't afford to pay the note. I don't think the government needs to bail out those who are in the situation they are in re the housing problems. No one made them take out loans they could not afford. Bush and his policies on this just don't make sense.

Keep up the good blogging. I will be an avid reader again.

8:57 PM  
Anonymous Anonymous said...

I don't think people need a cell phone with a monthly plan but you do need a cell phone no matter where you work.

I tried to be cell phone free but I discovered many gas stations no longer have pay phones.

Prepaid phones are great because you can pay for more minutes when you need them.

7:17 PM  

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