Debts beyond our means

The loan industry has put the U.S. financial system at risk.

Students who learn to manage their money will build more happiness than those who are unable to manage. But costs are rising much faster than income. This trend suggests we have been living beyond our financial means.

The U.S. Department of Commerce reports that our national savings rate is negative. Our future depends on savings., but we have learned to spend when we have no cash.

As a consequence of this dangerous trend, U.S. bankruptcies are growing. The credit card industry is the most profitable portion of our financial sector. Bankers live on tight profit margins, but they apply entirely different rules to consumers who want to live on plastic. The subprime loan industry dramatized how risky that market has become.

The sad news is we “brand” kids with TV and media ads. And America’s best marketing execs get paid very well to perform “psychological operations” on the unconscious minds of our children. This produces affluenza, the social disorder characterized by the compulsion to shop – even when items are not needed and when there are no savings.

Risks associated with marketing unnecessary goods and financing with poor credit might be considered a necessary evil associated with the invisible hand of the marketplace. But today digital dollars move around the world in an instant. This magnifies our risks, since our economy is currently running on energy, climate stability and financial resources we do not support. We have been living beyond our means in energy, climate and finance.

Three factors indicate how debts are accumulating. In the U.S. total consumer debt is close to $2.2 trillion dollars. Second, the administration has spent more money than we have had for six years. The federal budget has become a mockery with the national debt climbing to $9 trillion this year. Today’s students will pay the debt service for that “fuzzy math” – as well as their kids and grandkids.

Our trade deficit is worse. Imported oil from the Middle East and manufacturing from China are pushing our national account imbalance to more than $800 billion this year. Peak oil will explode our national debt to other nations. The correction of this imbalance will cause the dollar to drop in value, meaning our kids will work longer for less.

It is clear we need to save and have a regime change.

Bill Mittlefehldt is a University alumnus. Please send comments to [email protected]