muses of the moment

August 6, 2013

It’s not all about the fiat currency…

Many people point to the Fed’s take over of currency-issuance in 1913 for the decline in the standard of living. This, of course, is a concern. But we have been through 3 economic depressions: two deflationary and one inflationary in the last 100 years. It is a slow erosion.

There are some other reasons for the place families find themselves in today: set up for failure.

Click here for 40 Percent of US Workers Make Less Than What a Full-time Minimum Wage Worker Made in 1968. This state of current US Workers is directly related to deflation of purchasing power of fiat currency and the movement of US jobs oversee without a plan (especially in the higher education industry) to create a new industry to replace medium wage (middle class) jobs.

First of all, thanks to our very foolish politicians American workers have been merged into a global labor pool where they must directly compete for jobs with workers on the other side of the planet that live in countries where it is legal to pay slave labor wages.  This has resulted in millions upon millions of good jobs leaving this country.

Click here for Trying To Stay Sane in An Insane World Part 2. There are several excellent economic charts in the link. But one of the best is the consumer credit chart. Total consumer credit in 1968 was under $2 billion dollars, it is now over $2,800 billion dollars. This is how people are keeping up with the decrease in purchasing power of the US dollar and the decreasing availability and decreasing of wages of middle-America jobs. The most current segment of society to use credit to live, a result of the recent surge on the chart, is the college student.

Debt steals two things from the debt-slave: current spending freedom and future spending freedom:

Must have higher monthly income streams to service (old and new) debt interest payments. You might need to stay in a job you hate, move to an area you don’t like, get into a field that you have no passion for. Recessions, unemployment, and depressions force people down for the count instead of allowing them to just dial back spending for a while. This is a big difference in the long-term health of the economy and health of society.

Debt is not just debt, but negative savings: compound interest makes use that your purchase on credit is at least 2 and a half times the original cost if it is not paid off right away. With payday loans it can turn into 1000% the original cost very fast. Your money is going to interest instead of savings for future needs, like emergency funds, retirement, new car, unemployment savings reserves, down payment on a house, college education, etc.

Debt keeps people trapped long-term. This is the birth of the debt-slave, chained to a cubicle.

Side musing: it is ironic that everyone is talking about taxes (government wants more, people want less). When if people didn’t spend half their paycheck on debt service, they wouldn’t be so upset about current or higher future taxes. Government policies created their own demise.

So what can you do about this? Well, you can’t do much about jobs moving overseas and you can’t do much about the Fed, but…. you do have power.

Pay down current debt and do not acquire more debt. Will it be easy and quick, nope. Will it bring you and your family more freedom, yes!

From the link above:

The citizens, formerly known as the hard working American middle class, must accept their share of responsibility for the desperate circumstances we face. Some are guiltier than others, but we only need look in the mirror to find the culprits in allowing the bankers, politicians, military industrial complex, mass media and vested corporate interests to gain control over our country. The introduction of the credit card by Wall Street bankers as a must have for every citizen in the early 1970s coincided with the inflationary demons unleashed from Pandora’s Box by Nixon and the Federal Reserve, along with the peak of cheap U.S. oil production. Thus began four decades of real wages declining and consumer debt soaring. A nation of people that believed in saving before purchasing were given the freedom to spend money they didn’t have. The statistics paint a picture of a society gone mad:

  • Credit card debt grew from $5 billion in 1971 to $856 billion today, a 17,000% increase in forty-two years. GDP rose from $1.2 trillion to $16.6 trillion, a mere 1,400% increase. Real GDP only grew by 300%. Wages have grown from $600 billion to $7 trillion, a 1,200% increase. Real disposable personal income per capita grew from $17,200 to $36,800, a 200% increase.

  • Non-revolving debt (auto, student loan) grew from $127 billion in 1971 to $1.98 trillion today, a 1,600% increase.

  • There are over 600 million credit cards in circulation within the U.S. and Americans charged over $2.1 trillion last year.

  • Over 40% of Americans carry a balance on their credit card from month to month, with an average balance of $8,200 and an average interest rate of 13%.

  • 40% of all low and middle income households must rely on their credit cards to pay basic living expenses like rent, mortgage, utilities, groceries, real estate taxes, income taxes, along with their “needed” iPhones, HDTVs, bling, stainless steel appliances, and tattoo artwork.

  • Wall Street banks have written off over $300 billion in credit card debt since 2008 (and passing the bill to taxpayers), while bilking their customers out of $60 billion per year in late fees and overdraft fees.


1 Comment »

  1. I agree with the article …. it’s us that is the problem!

    Just a point that always irritates me when people talk about banks, credit cards, etc..
    ” while BILKING their customers out of $60 billion per year in late fees and overdraft fees.” ….

    NOBODY has EVER had a gun pointed to their head to get a credit card or a bank loan. They do it WILLINGLY. When you ask someone for money you should expect that they will want that money back with interest. If you can’t manage your own finances and MISS a payment or if you are stupid enough that you didn’t realize that you took $1000 out of your bank account when in fact you only had $25 in it, then you DESERVE the late fees and overdraft fees!!!

    Whose fault is it for the credit debt? Mine and mine alone!!! I willingly requested the credit cards. I willingly signed up for the % fees. I willingly spent more than I took in. I did it! It’s my fault!!!

    Now, if only we could get 350 million other Americans to say the same thing!

    We live in a society that never wants to take responsibility. Never! We are always looking for someone to blame or to shoulder the outcome of our assinine decisions! Build a $5 million dollar home on a barrier island that is there to protect the mainland from storms … and it gets destroyed by a hurricane and you want the government to help you out? forgetaboutit!

    Comment by MikePhila — August 6, 2013 @ 3:28 pm

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