Personal Indebtedness, Literacy & Families
Many Americans live in homes beyond their means, they buy cars and boats they can’t afford, and family indebtedness has hit record highs.
In 2016 the average credit card debt for balance-carrying households is $16,048. The ‘mean credit card debt’ of U.S. households is approximately $5,700; this considers balances that Americans above the age of 18 have on average, throughout the year.
FACT: the average U.S household with debt owes $130,922 — including credit cards, mortgages, auto loans, student loans, and other forms of debt. Some EU countries have even enacted laws that limit cash transactions! So that tells you that these governments are the prime beneficiaries, not the people.
The first plastic card came out in 1955. Today there are about 20,000 different cards available in the U.S. and plastic has virtually replaced money, even though a typical credit card purchase ends up costing 112% more than if cash were used because the average interest rate on credit cards is 18.9 percent.
FACT: we are rapidly becoming a cashless society. In 2012 cash accounted for just 40% of payments and that figure has been dropping ever since. Governments love electronic payments because it is much harder to hide those payments from the IRS and other data collectors.
A good 40 percent of American families annually spend more than they earn. This massive amount of debt, falling house prices, and job losses are bringing these families to the edge of financial ruin because of bad choices they have made.
Let’s take a closer look
In an ideal world consumers are prepared for those times when the economy takes a turn for the worse for whatever reason. They have money in the bank and a cushion to ride out the difficult times. In crisis times they spend wisely and live more conservatively, knowing not what tomorrow may bring.
Most importantly, they take personal responsibility for the actions they take to improve and enhance, or diminish, their lives.
Spending beyond one’s means is the antithesis of preparedness, whether we are talking about Congress or the typical American household.
Yet as we speak, our leaders are adding trillions more of taxpayer indebtedness on top of the trillions it already spent to help stabilize a floundering economy and to pay the interest on our international indebtedness to China, Japan and elsewhere.
This is atrocious modeling, regardless of how many people support this kind of federal spending. It teaches the public nothing about personal responsibility. And all stimulus packages reward the impoverished decision-making on the part of individuals and economic collectives that sent us all into the current economic tail-spin.
A History of the Panic of 2008
To understand today’s financial crisis you must also understand the long history of government interference and subsidies for housing and housing debt.
Since the New Deal, according to Empower America, the federal government has passed law after law attempting to shape U.S. housing markets. It compelled banks to lend to risky borrowers, it skewed the cost of housing debt and housing-related capital gains through the tax code, and it operated several enormous government lending programs and taxpayer-backed corporations. That’s before the crooks even jumped in to take advantage of things.
The net result has been a “multi-trillion dollar over-investment in housing, the encouragement of dangerously over-leveraged consumers and banks, and a massive new tab for taxpayers.”
See this interesting timeline of the actions that led to the current crisis.
But that’s still not the whole story
Things are bad right now and for sure there is plenty of blame to go around. But we have to stop looking ‘out there’ for the demons that plague us. The demons are us. And the family is at center stage in all of this. Crony capitalists and Congress and corporate CEO’s and economic wizards, yes even clergy, teachers, athletes, lawyers – these and more all come from families that instilled a certain set of values in them, or not.
No one is immune to dysfunctional ploys that their own upbringing unwittingly encouraged.
Families for generations now have (obviously) been producing economically illiterate children who grow up to be economically illiterate lawyers and accountants and merchants and chiefs. Not only that, but our schools have also been failing to teach students the economic facts of life. They assume ‘reading, writing, and arithmetic’ is all that it takes to PREPARE STUDENTS FOR TOMORROW’S JOBS.
But it is not. Schools are not preparing students for LIFE. Teaching students ‘what to think’ is a far cry from teaching them ‘how to think.’
Everyone in public life today, including the President, was once a child, and the majority of them are post-WW II babies. They are as spending-focused as the rest of us and we are collectively spending ourselves into oblivion.
Long gone are the days when Americans lived off the land and lived within their means.
I remember my physician father taking the time to bring me to his medical office on a Sunday morning to show me how much it cost him to run that office for the prior week. I saw the books. I saw the incoming and the outgoing revenues. I saw how much he paid his office staff and how much he brought home after taxes were paid. I saw that it took hard-earned money to do all of those things, money that was sometimes a scarce commodity.
My father clearly lived within his means. He disliked credit cards and to this day I use credit cards sparingly. I do use them but I always think of my father when I charge something to a card. His words, “Live within your means,” have stuck with me.
He used cash for purchases which is something that all of us today should do as well. Sure, there are times when using credit is good but it is not something that should be done for ordinary life expenses like groceries and gasoline for our cars. But tell that to most Americans who are using credit for everything today without giving a thought to the consequences.
We have become a credit-crazy society.
Do you know?
Illiteracy in America has been growing at an alarming rate, causing millions of Americans to reach the 12th grade without knowing even the essentials of American history. Kids from grade school and up report history as their least favorite subject. Yet without a substantial knowledge of history there is no way to learn from the past, financially or otherwise.
Clearly we have not absorbed the lessons of the past.
Many people can’t even remember two Presidents back! You only have to watch JAY LENO when he interviews people on the street — some don’t even know who the current President is and most folks cannot name anyone in the President’s Cabinet, nor can they identify well-known public officials, or even world leaders in the 8×10 glossy photos that are shown to them.
Many people do not know why we even celebrate the Fourth of July!
FACT: an adult is considered functionally illiterate if he or she has a comprehension level equivalent to the sixth grade or below.
According to the Heritage Foundation, functional literacy refers not only to a persons ability to read and write: it is a broad term covering an individual’s basic reading and writing skills, and their ability to process information and apply it to daily tasks.
Empower America tells us that our 12th graders rank 19th out of 21 industrialized countries in mathematics achievement and 16th out of 21 nations in science. Millions of Americans cannot read at a basic level nor can they do simple mathematical computations. And we expect them to manage money responsibly?
If you wanted to sabotage America, this is the way to do it.
Schools cannot do it alone
NO CHILD LEFT BEHIND and the later COMMON CORE CURRICULUM are legacies that put entirely too much emphasis on the role of the school, and not enough on parental input or involvement of parents in their childs’ learning experiences in and out of the home.
The fact is, parents model everything to a child: how to talk, how to feel, how to express oneself, how to take care of self, how to have a happy marriage (or not), how to manage money, how to live life in general. The impact of the school pales by comparison.
The best test of whether a child will pursue advanced education is whether his or her own parents did so also.
No wonder our indebtedness soars.