1/05/04
Americans as a people and as a nation are pursuing a short-sighted policy which will endanger their long term well-being. Quite simply, Americans are deep in debt, as evidenced in the following excerpt from a recent Knight Ridder article:
Source:
Knight Ridder
U.S. consumers living dangerously close to edge with high debt
Knight Ridder Newspapers
By Susan Tompor
DETROIT _ … We've seen another
holiday orgy of spending by U.S. consumers. Everywhere we look, we're
encouraged to spend, spend, spend. Budgets are being squeezed by mounting
credit-card debt, student loans, mortgage borrowing and, increasingly, by
rising out-of-pocket health care costs.
The big question is: How much longer can we keep this up? Experts have mixed views. But a few things
are clear.
"A lot of people are
dangerously close to the edge and any minor setback could push them over,"
said Amelia Warren Tyagi, coauthor of "The Two-Income Trap: Why
Middle-Class Mothers and Fathers are Going Broke," ($26, Basic Books).
And everyone should reassess his or
her financial condition for the new year and cut back wherever possible.
Unlike in past recessions, consumers
kept borrowing during the last downturn, which began in March 2001 and
officially ended in November 2001. The
recession would have been far worse if consumers didn't opt for zero-percent
financing deals and didn't keep pulling out credit cards. But all that spending _ on top of a
three-year downturn for stock prices _ hurt household balance sheets. We only
started seeing stock gains in spring of 2003.
That was after the ratio of household liabilities to net worth hit an
all-time high of 22.6 percent in the first quarter of 2003. Outstanding consumer credit, mortgage debt
and other debt hit $9.3 trillion by April 2003, up from $7 trillion in January
2000. No doubt about it, we're stretched. We've cut our monthly mortgage payments by
refinancing _ sometimes more than once. We've used our homes as piggy banks by
taking out whatever home equity we've got to pay down credit card bills. A few
of us are even dragging out payments for new cars and trucks to seven years
instead of the traditional four to five years…”
CBS News has reported the following
data relative to debt levels:
Consumer debt per capita, adjusted
for inflation-
1943 $457
1953 $1,533
1963 $2,534
1973 $3,845
1983 $3,479
1993 $4,362
2003 $6,799
(Source: BLS, CBS)
As with all short-sighted practices, this one will have its own long-term costs.