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Jun
10
Culture of debt limiting upward mobility
Filed Under economy
New York Times columnist David Brooks writes that our country’s affair with easy debt is limiting our historically treasured ability to move upward economically and is splitting the country into two classes — those who invest and those who hope to win the lottery.
Writes David Brooks:
Sixty-two scholars have signed on to a report by the Institute for American Values and other think tanks called, “For a New Thrift: Confronting the Debt Culture,” examining the results of all this. This may be damning with faint praise, but it’s one of the most important think-tank reports you’ll read this year.
The deterioration of financial mores has meant two things. First, it’s meant an explosion of debt that inhibits social mobility and ruins lives. Between 1989 and 2001, credit-card debt nearly tripled, soaring from $238 billion to $692 billion. By last year, it was up to $937 billion, the report said.
Second, the transformation has led to a stark financial polarization. On the one hand, there is what the report calls the investor class. It has tax-deferred savings plans, as well as an army of financial advisers. On the other hand, there is the lottery class, people with little access to 401(k)’s or financial planning but plenty of access to payday lenders, credit cards and lottery agents.
The loosening of financial inhibition has meant more options for the well-educated but more temptation and chaos for the most vulnerable.
Maybe it is time to focus on economic education — teaching students how interest works, for example — in the public schools. Knowledge is the key to properly leveraging the many forms of debt that we have available to us for greater gain and future growth — instead of the insurmountable and crushing debt that comes from indiscriminate credit usage.
With gasoline prices going through the roof and more and more people relying upon credit cards to purchase their $60+ tanks of fuel, look for more pain as all of that compound interest continues to accrue.
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2 Responses to “Culture of debt limiting upward mobility”
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Maybe we should also teach them how the dollar becomes worth $0 when the Federal Reserve creates money out of thin air to buy bonds from banks in order to increase their reserve funds. Or how about when they make money out of thin air to ’stimulate’ the economy which will ultimately cause more harm because it brings about hyperinflation. It sort of reminds me of what happened to the Reischmark shortly before Hitler took power….
Hi Dan,
We’re going to have inflation because people are going to demand more pay so that they can continue to buy gasoline, food and other items.
I have a feeling we’re in for a repeat of the 1970s. I was a kid during those days, so I mostly remember the fun times.
But, I’m not so old that I don’t remember save energy stickers on light switches, being told by the president that we should put on a sweater to fight the cold because it was too expensive to use the heat, and waiting for gasoline. Also, I remember the free the hostages stickers the bank gave out to customers.
I don’t think the Fed is just printing money — even worse — they are borrowing from China and Saudi Arabia.