Economic Distress and Fear

This was the Quotation of the Day from January 12:

Part of the debtor mentality is a constant, frantically suppressed undercurrent of terror. We have one of the highest debt-to-income ratios in the world, and apparently most of us are two paychecks from the street. Those in power -- governments, employers -- exploit this, to great effect. Frightened people are obedient -- not just physically, but intellectually and emotionally. If your employer tells you to work overtime, and you know that refusing could jeopardize everything you have, then not only do you work the overtime, but you convince yourself that you're doing it voluntarily, out of loyalty to the company; because the alternative is to acknowledge that you are living in terror. Before you know it, you've persuaded yourself that you have a profound emotional attachment to some vast multinational corporation: you've indentured not just your working hours, but your entire thought process. The only people who are capable of either unfettered action or unfettered thought are those who -- either because they're heroically brave, or because they're insane, or because they know themselves to be safe -- are free from fear.

Quote is from The Likeness, a novel set in Ireland, by Tana French.

Posted on January 15, 2009 at 6:14 AM • 61 Comments

Comments

sbrJanuary 15, 2009 7:00 AM

So true...

So guys, get your asses up and start paying of those pesky credit card debts!

GingihanJanuary 15, 2009 7:05 AM

Wonderfully clear.

I am not so sure if I subscribe to the notion of some authority doing this to civilians to control better, but I echo the "living in fear" theme.

The vicious cycle of consuming more then necessary definitely adds flammable material to this modern life weird homeostasis.

BrettJanuary 15, 2009 7:09 AM

The funny thing about this (o.k. not so funny) is that a large part of the reason for the tanking of our economy currently is that people are not spending. They are not using credit as much and are saving more. I don't remeber the numbers but the ratio has changed dramatically. In the past we were told, save more. Now that we are saving more they word is spend more.

Unfourtunatly our economy is based on the consumer using credit to purchase things. In large part because it has worked that way for a long time. We didn't save and then purchased, we borrowed and then purchased.

Clive RobinsonJanuary 15, 2009 7:34 AM

It's a not unreasonable description of a "wage slave"

The thing is that a slave has a considerably more certainty about their existance than an eployee.

To be free frome wage tyrany you need to be self employed or in some other way financialy independent.

With that comes a level of self assurance that radiates in a way that is easily recognisable from a distance.

AnonymousJanuary 15, 2009 8:04 AM

Its not about financial independence. Its about living within your means. Americans have the idea that somehow they deserve a better lifestyle than most can afford.

Remember that new, bright, and shiney isn't as good as familiar and paid off. Save up for purchases, don't charge them. Spend a little less than you make every month. Use the surplus to pay off debt or increase savings. The chains will melt away.

Cannonball JonesJanuary 15, 2009 8:13 AM

Fantastic quotation, going to have to send that around my compadres. I've recently stopped feeling the fear as I've broken through my old habits of living beyond my means and striving for material possessions and social acceptance. It's amazing how much easier life is once you just stop giving a shit about such trivialities and focus on what's really important to you. Consumerist society is headed for the dustbin, I reckon it's best to get out of it while you can.

MattJanuary 15, 2009 8:18 AM

An astute observation on the part of that Author. Many years ago I worked for a company that had that attitude. They had the mistaken opinion that nobody in the community offered better opportunity than they did. Threats of firing were used in place of team-building, training etc. They got really, really pissed when I left after 7 months to a better paying job (vastly) with a better company. I have made it a personal goal since then to free as many people from that company as possible.

Trichinosis USAJanuary 15, 2009 8:19 AM

A corporate feudal state - once only a facetious line out of a DEVO video, now it's the sad reality. The US is a democracy? Don't make me laugh. Or cry.

Corporations are treated as individuals with rights in the US legal system, but they are NOT treated like individuals when it comes to tracking their actions to get around that legal system (mergers/acquisitions/shell games/relocation overseas) or when holding them responsible for their actions (discrimination, pollution, malfeasance, etc). Military/industrial complex members are traditionally the worst offenders and have been for decades.

There is a huge discussion going on right now about this on change.gov.

Garrett GJanuary 15, 2009 8:22 AM

A bit hyperbolic, methinks. But good left-wing fodder for people who despise capitalism (or at least corporatism). The solution is to take accountability for one's finances (save) and to change jobs, if necessary.

HJohnJanuary 15, 2009 8:31 AM

@Clive: "To be free frome wage tyrany you need to be self employed or in some other way financialy independent."
_____

Self employment provides more freedom, but also entails more responsibility. Part of the trade off of being employed is you have less control in exchange for less responsibility. Both have their benefits and pitfalls.

JJoensuuJanuary 15, 2009 8:39 AM

TWO POINTS:

POINT 1, REGARDING:
"most of us are two paychecks from the street"

In fact most of people are likely one paycheck from the street. And that is not the whole problem - another, related, issue is NOT wage income BUT wage uncertainty. Many people - waiters, self-employed, and even those recently laid off from large corporations, know what this is and how it affects e.g. the ability to plan for the future.

POINT 2, REGARDING:
"Its about living within your means. Americans have the idea that somehow they deserve a better lifestyle than most can afford."

We have been moving towards the sort of situation you advocate. Banks and other institutions are lot less eager to lend than just a year ago. You are seeing the end results of this in the closures of stores and offices. Part of the reason? American income is not sufficiently high for people to actually save and buy without credit. Perhaps you have such income - majority in the US does not.

The TrapJanuary 15, 2009 8:57 AM

Probably a bit redundant but, Adam Curtis' documentary "The Trap (What Happened to Our Dream of Freedom?)" is worth a look on this topic. The whole thing is on Google Video I believe.

Ward S. DenkerJanuary 15, 2009 9:03 AM

Self-enslavement is probably the worst kind of all. I think it's because, in the back of our minds, we know who it is that we really have to blame for it.

StudentJanuary 15, 2009 9:03 AM

@JJoensuu
"American income is not sufficiently high for people to actually save and buy without credit."

Correction: American income is not not high enough for people to buy all the buy. The only difference is that credit makes it possible to overcharge for a while and build up a large disaster.

You don't believe people get more money to spend if they happen to have credit, do you?

papa zitaJanuary 15, 2009 9:12 AM

It certainly is hyperbolic. I had this very thing happen to me, and I wouldn't work overtime. It didn't cost me my job, either.

kangarooJanuary 15, 2009 9:15 AM

Gingihan: I am not so sure if I subscribe to the notion of some authority doing this to civilians to control better, but I echo the "living in fear" theme.

It's not "an authority". It's a system of power, a machine composed of human beings. We've long gone past the point of there being some kind of cabal enslaving the human race -- that enslavement has taken on an independent existence.

Garret: A bit hyperbolic, methinks. But good left-wing fodder for people who despise capitalism (or at least corporatism).

That's as empty a statement as I've seen in quite a while -- congrats! Is there any word in there that means anything other than "people I don't like"?

Student: American income is not not high enough for people to buy all the buy.

Once again, fairly empty platitude. Most people lack the skills necessary to repair goods properly, and the labor structure of the country makes it difficult to find the time. Most goods are designed as disposable -- from washing machines all the way down to ipods. This is not necessary, but "leasing" goods is more profitable than selling them, and the producers are much more organized than the consumers.

On top of that, most people have a lifetime of addiction that has been deliberately inculcated by producers -- some times even literally to addictive drugs.

"Some" may be due to innate greed and cultural dysfunction -- but once you step past "some" to a universal generalization, you've stepped into the same vacuousness of a Marxist who claims that "everything is class conflict."

bobJanuary 15, 2009 9:16 AM

@JJoensuu: Your statement makes no sense. If you are able to buy something with credit then you would be able to buy the same thing WITHOUT credit by simply saving up for it (and pay less for it that way).

"Income level" has NOTHING to do with it. If you can afford to pay $300/month on a loan for 12 months to buy a big TV then you could just as easily save for it and buy it in probably 10 months for cash.

if you CANT afford to pay for it with cash then you -DEFINITELY- cant afford it with credit - because it will cost you more in the long run.

The only time credit is useful is if you are willing to pay MORE in order to get something SOONER; it has an INVERSE relationship to affordability. For example if you are not sure the car you can currently afford will last for 4 years while you save up for the next one, then it makes sense to get a loan to save the maintenance expenses on your current one. Likewise with your primary residence, you will probably want to be living in the place you are paying for rather than rent and save for 40 years to get the place you want.

Other than big ticket items like cars, house, planes, boats - if you cant come up with the cash within 30 days then dont buy it. Putting it on a credit card that you will not be paying off at the end of the month just makes it worse.

paulJanuary 15, 2009 9:19 AM

In the US, it's even worse than this. Young adults enter their working lives already owing the equivalent of several years' wages, and most people know that accident or bad luck could at any time leave them owing far more in medical bills than they can repay. So even if you exercise the utmost probity in your personal expenditures, the fear of debt is still pervasive.

MilanJanuary 15, 2009 9:27 AM

This reminds me of a quote from Richard Feynman, about when a bit of bravery is necessary in a professional environment:

"I say that’s also important in giving certain types of government advice. Supposing a senator asked you for advice about whether drilling a hole should be done in his state; and you decide it would be better in some other state. If you don’t publish such a result, it seems to me you’re not giving scientific advice. You’re being used. If your answer happens to come out in the direction the government or the politicians like, they can use it as an argument in their favor; if it comes out the other way, they don’t publish it at all. That’s not giving scientific advice.

So I have just one wish for you — the good luck to be somewhere where you are free to maintain the kind of integrity I have described, and where you do not feel forced by a need to maintain your position in the organization, or financial support, or so on, to lose your integrity. May you have that freedom."

FPJanuary 15, 2009 9:35 AM

This mechanism is most exploited in start-ups. You spend all your waking time at work because you want to be around when the IPO comes.

Here's another twist: a friend of mine is terrified to lose his job because that would mean losing health insurance. His wife is getting cancer treatments and needs regular check-ups that they wouldn't be able to afford otherwise.

BTW, saying that all americans live beyond their means is an overgeneralization.

@bob: Buying an expensive item now instead of in 10 months time has value. For some, this perceived value exceeds the extra cost of the credit. There's nothing wrong with that, but of course it rides on your assumption that you will be able to continue paying off the debt.

Never mind that with 0% financing it is cheaper to buy on credit than with cash: put the amount in a high-yield savings account and pocket the interest.

Pat CahalanJanuary 15, 2009 9:48 AM

@ Clive

I'm not self-employed, and I'm free from wage slavery. I have a fairly firm job, earning well below my maximum potential, employed in a position that is not entirely immune from market forces, but it's pretty damn close :)

My wife and I bought a house we could afford on one income. She works part time to keep a hand in, and could switch back to full time if I lost my position.

Unlike a lot of people in my job, this gives me a lot of leeway to be more politically work-risky.

I pay for this by living in a tiny house, watching television on a TV I bought in 1995, and generally living with some frugality.

I'd argue that I'm much more insulated from the tyranny of the employer than most self-employed people.

@ Ward

Hey, there! Blogosphere is a small world.

SteveJJanuary 15, 2009 9:53 AM

"[Mr. Micawber] solemnly conjured me, I remember, to take warning by his fate; and to observe that if a man had twenty pounds a-year for his income, and spent nineteen pounds nineteen shillings and sixpence, he would be happy, but that if he spent twenty pounds one he would be miserable"

Quote is from "David Copperfield", a novel set in England, by Charles Dickens :-)

nickJanuary 15, 2009 9:54 AM

I have managed to avoid all debt, I have a large "safety net" cash cushion, and my income is supplemented somewhat by the dividends from my stock and bond investments.

But still, I know that I could lose everything I saved if I happened to lose my job and get sick. CURSE THE US HEALTH CARE SYSTEM.

DavidJanuary 15, 2009 9:57 AM

@Clive: Self-employment is not a panacea. If the problem is that you live in terror of offending your boss, living in terror of offending your customers is no improvement.

Having enough savings to last for a while, regardless of employment, is better, when you can manage it.

My wife and I both earn a fair amount of money, and we keep trying to arrange things so we could get by on one income only. Just in case.

AppSecJanuary 15, 2009 10:10 AM

@nick: My concern with the health care industry is the lack of communication between specialties and the lack of common data store that all can talk to in order to gather your health information. As much as the security risk is with that type, the benefits greatly outweight the risk -- cheaper health care costs, more efficient data transfer (results), a greater sense of the overall picture.

But I digress -- the bigger issue with the US is everyone wants things done easy as opposed to right. That includes a lot of corporations. It has nothing to do with economic beliefs, it has everything to do with the commulative effect of technology -- can't everything be done quickly and easily?

bobJanuary 15, 2009 10:16 AM

The economy is based, not on the AMOUNT of money; but rather its VELOCITY or how often it changes hands. Perception plays a huge (if not the only) role in this.

The biggest problem with the US economy right now is all the media figures who are on TV every couple of hours telling people how bad it is - which makes them stay home and not spend ANY. Which causes people to be laid off and reinforces the self-fulfilling prophecy.

If instead they would go on TV and radio and say something along the lines of "Holy CRAP, the economy has turned around overnight, there is not enough production to meet demand, everyone go out right now and buy everything you can because otherwise you wont get it at all" then the (whatever you want to call the current doldrums, probably varies based on your politics) would end in about 15 minutes.

@FP: Stipulated. I frequently use credit to move things from the future to the present. I buy practically everything with credit cards; because they refund me 1% and actually decrease my cost, give me (a tiny amount of) leverage if the goods or services dont perform as promised and reduce my need to visit banks for checks or cash.

However JJoensuu said that they could AFFORD to buy things because of credit and credit does -NOT- move something from unaffordable to affordable (rather the reverse).

Ron MorrisonJanuary 15, 2009 10:19 AM

The servitude is actually to the lender, rather than the employer. The employer is just used by the debtor as a means to service the master.

As mentioned, I think most are closer to one "paycheck from the street."

Tangerine BlueJanuary 15, 2009 11:08 AM

@Trichinosis
>Corporations are treated as individuals
> with rights ..., but ... NOT ...
> responsible for their actions

Interesting point.

LovedJanuary 15, 2009 11:20 AM

It is interesting how few people recognize how not to be terrorized (by economic conditions, terrorists, etc). The best book I know on the subject is by Henri Nouwen - Lifesigns: Intimacy, Fucundity, and Ecstacy, a Christian perspective.

It is a book about living life from a fearful perspective, or from the perspective of being loved. I read it at the most fear-filled time of my life. I was a contract worker, a new and first-time dad (of a 3 year old), my wife left me, and we had a huge amount of debt from all the counseling that we did, so I was facing bankruptcy in addition to paying child support and maintenance. And I was clueless about cooking. I never knew that the opposite of fear was love.

HJohnJanuary 15, 2009 11:21 AM

@Garrett G: A bit hyperbolic, methinks. But good left-wing fodder for people who despise capitalism (or at least corporatism). The solution is to take accountability for one's finances (save) and to change jobs, if necessary.
_______

Garrett, it is true that a majority of the people here, based on my observation, seem to be left leaning. Me, I'm more right-leaning, and I am a fan of capitalism (although, I don't believe in letting capitalism and its pitfalls go unchecked).

That said, your comment really does not contribute much, except perhaps to start an argument. You can make your point without referring to the other's points as "fodder." I suspect they don't like it any more, or react to it any better, than we do if someone calls anything right of center "fodder."

I agree that people should have personal accountability. I further believe that being an employee, rather than self-employed, is a trade off, and people should not demand the benefits of both without the incurring the costs of either. However, many are critiques and concerns we see here are legitimate, and while we may disagree from time to time, the concerns warrant dialogue, not dismissal.

Best regards.

HJohnJanuary 15, 2009 11:21 AM

@Garrett G: A bit hyperbolic, methinks. But good left-wing fodder for people who despise capitalism (or at least corporatism). The solution is to take accountability for one's finances (save) and to change jobs, if necessary.
_______

Garrett, it is true that a majority of the people here, based on my observation, seem to be left leaning. Me, I'm more right-leaning, and I am a fan of capitalism (although, I don't believe in letting capitalism and its pitfalls go unchecked).

That said, your comment really does not contribute much, except perhaps to start an argument. You can make your point without referring to the other's points as "fodder." I suspect they don't like it any more, or react to it any better, than we do if someone calls anything right of center "fodder."

I agree that people should have personal accountability. I further believe that being an employee, rather than self-employed, is a trade off, and people should not demand the benefits of both without the incurring the costs of either. However, many are critiques and concerns we see here are legitimate, and while we may disagree from time to time, the concerns warrant dialogue, not dismissal.

Best regards.

Andre LePlumeJanuary 15, 2009 11:36 AM

70% of the world is two "paychecks" closer to squalor even than this. It'd be a higher percentage, but for those who die of diseases that a dollar could prevent.

Pat CahalanJanuary 15, 2009 11:44 AM

@ Bob

> The economy is based, not on the AMOUNT of money; but
> rather its VELOCITY or how often it changes hands.

Not entirely true, but a somewhat valid point.

> Perception plays a huge (if not the only) role in this.

In the immortal words of our wikipedia friends, "Citation needed".

> The biggest problem with the US economy right now is all
> the media figures who are on TV every couple of hours
> telling people how bad it is - which makes them stay home
> and not spend ANY. Which causes people to be laid off and
> reinforces the self-fulfilling prophecy.

Again, citation needed. I'll grant you that your line of argument has at least some sort of theoretical ground to stand on. Certainly it is the opinion of many. But I doubt you'll find that this is a universally accepted (or even regarded as acceptable) position among economists. Bad news can contribute to making a bad economy worse, but this is a compounding factor, not a causal one.

If your premise is correct, a complex economic engine could exist if a bunch of happy enthusiastic people were standing in a field trading pieces of paper for goods that magically appeared due to the fact that pieces of paper were being traded back and forth :)

Petréa MitchellJanuary 15, 2009 11:47 AM

It's a fair description of part of the thought process of many people in debt, but I object to the claim that it's all a plot on the part of The Man to keep people down. Circumstance and plain old normal psychology are sufficient to explain how most people get into the situation-- no evil conspiracy is necessary.

As to the last sentence: no, there's *lots* of other stuff that can screw up your thinking just as badly, though some of it is harder to recognize-- or admit to-- than fear. It's when you think that you're exercising truly unfettered action and thought that the trouble really starts.

TJJanuary 15, 2009 11:51 AM

Reminds me of another quote, for slightly different reason -

"To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical." - Thomas Jefferson

HJohnJanuary 15, 2009 1:05 PM

@CH: "wow, that is a terrifying truth of our western world. well put."

With the flaws, and every nation and commuity has them, I'm glad we are free to talk about our government they way we do. In other parts of the world, things like this blog are not allowed to exist.

Happy New Year.

Ward S. DenkerJanuary 15, 2009 1:21 PM

"Hey, there! Blogosphere is a small world."

Indeed it is.

I have to say that I wholeheartedly agree with Bob, but not so far as to support Keynesian economics. A slow rate of money changing hands is no excuse for growing the government to facilitate it (and especially not inflating the value of currency by printing more of it).

Consumer confidence is at the bottom of many economic models. It's also one of the biggest X factors because it's such a fickle thing. It may not be the actual cause that the dog went down, but constant negative media coverage certainly does seem to keep kicking the dog while it's down.

This all goes back to what Bruce said, though. Americans don't save, we indebt ourselves to others. In times like these, we have no cushion to protect ourselves from layoffs and stagnant hiring. It forces us to put up with a toxic relationship with our employer.

It becomes a truly vicious cycle, repeatedly locking us into a state of fear. We can't spend, which doesn't stimulate the economy, and because the economy isn't being stimulated companies can't hire. In the current economy, it's harder to borrow too, because the industry is too shell-shocked to take risks.

AnonymousJanuary 15, 2009 1:22 PM

@ kangaroo

"Student: American income is not not high enough for people to buy all the buy.

Once again, fairly empty platitude. Most people lack the skills necessary to repair goods properly, and the labor structure of the country makes it difficult to find the time. Most goods are designed as disposable -- from washing machines all the way down to ipods. This is not necessary, but "leasing" goods is more profitable than selling them, and the producers are much more organized than the consumers."

You make Student's point without noticing you're making it. The devices you cite - iPods and washing machines - are luxuries.

Many direly indebted Americans have a perfectly adequate income to keep them in a radio, a laundry sink and clothesline, a good quality bicycle and transit tickets, and have some left over for savings. The problem is that they buy an iPod every two years, a washer and dryer every six, and a car every eight, in part because those things are advertised so heavily on the widescreen television they're still paying off.

AnonymousJanuary 15, 2009 1:58 PM

I do find it an interesting paradox. People can only indebt themselves with things they don't need and complain about their lack of freedom, when they have enough freedom to do so.

Personally, I'll be more afraid of my government when the day comes that am no longer allowed to complain about it, or when I no longer have the freedom to make bad choices that wreck my finances.

fidelisJanuary 15, 2009 4:18 PM

@Loved I never knew that the opposite of fear was love.

Animals know this instinctively. Look at your world from the eyes of a dog.

AnonymousJanuary 15, 2009 5:10 PM

My wife and I, fairly young still since we're just now going to 10 year HS reunions, have made getting out of debt a high priority. Except for vehicles and a home, we almost always pay cash (ie: debit) for purchases and we're set to have all student loans paid off this year.

Next goal (after student loans) is to have a healthy 3-6 month savings so that if the rug gets pulled out from underneath us, we'll have time to get back on our feet before we have to dip into credit.

Thomas JeffersonJanuary 15, 2009 5:13 PM

Obligatory Thomas Jefferson quote comes to mind:

"We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty or profusion and servitude. If we run into such debt, as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our calling and our creeds...[we will] have no time to think, no means of calling our miss-managers to account but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow-sufferers... And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for[ another]... till the bulk of society is reduced to be mere automatons of misery... And the fore-horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression."

MarkJanuary 15, 2009 7:18 PM

"That is why I have laid so much stress on money and a
room of one's own." -- Virginia Woolf
(http://gutenberg.net.au/ebooks02/0200791.txt)
On why a reliable income is necessary for writing with emotional detachment.

Mark J.January 15, 2009 8:13 PM

"The only people who are capable of either unfettered action or unfettered thought are those who -- either because they're heroically brave, or because they're insane, or because they know themselves to be safe -- are free from fear."

Tenure is a wonderful thing. :-)

Johnny2BadJanuary 15, 2009 8:47 PM

@Thomas Jefferson
I love his quotes. Here is my favorite one in regards to the totalitarians known as the Federal Reserve Bank:"The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered."
And the lambs get led to the slaughter so willingly......what ever happened to questioning the establishment?????

another bruceJanuary 16, 2009 1:24 AM

tana french is a good writer, i read her "in the woods" a month ago and now will be sure to read "the likeness".

i have a rant i've been delivering for many years that would be the longest comment in the history of this blog if i shared it in full, so i'll just give you some bullet points:

-planet earth is a cage being overrun by the rats on two legs who, being a competitive species, will behave much as the rats on four legs do when they overrun their cage.

-we are the modern rome, and we can expect a similar fate.

-america has become fat, lazy, dumb and spendthrift. it pays more attention to american idol than to the government.

-american society's two greatest enemies are multinational corporations and organized religion.

-karl marx had the right diagnosis, but the wrong prescription.

-a major die-off to get our population back below the carrying capacity of our territory is not only desirable, it is inevitable.

-as superficially attractive as the new boss appeared to be when i voted for him, he will turn out to be no better than the old boss.

i feel and express gratitude every day that i live in a nice part of the cage and that i am not one of tana french's desperados.

A nonny bunnyJanuary 16, 2009 3:58 AM

@bob
"I frequently use credit to move things from the future to the present. I buy practically everything with credit cards; because they refund me 1% and actually decrease my cost, give me (a tiny amount of) leverage if the goods or services dont perform as promised and reduce my need to visit banks for checks or cash."

You don't have to pay interest on your credit card debt? With an, unfortunately, not uncommon 15% interest rate, you lose that 1% refund in the first month. The only way I can imagine benefiting is if you pay off the debt before interest is charged on it, but that means you must already have the money (which is not the situation people are talking about here).
Somewhere someone has to be making money off the scheme; and somewhere it has to cost someone.

bobJanuary 16, 2009 7:47 AM

@A nonny bunny: Yes I always pay off my credit cards before they generate any interest, and yes that is exactly what I was talking about. I dont buy something that I dont have money for. It lowered my "standard of living" for the first 15 years or so, then leveraged it above my peers because I am not burdened by debt. And my point is still that giving (whatever percentage) of your money to a lender DECREASES your buying power, not INCREASES it. So again, if you cant afford something WITHOUT credit, then you cant afford it WITH credit either; you need to change your goals, lower your expectations or boost your earning power. Credit merely swaps money for time, it does not expand your horizons (unless you plan on declaring bankruptcy or dying while still in debt and thereby not having to pay it back; even then you'd have to die young to come out ahead with credit card interest rates)

When I took out a mortgage to buy my house, I paid extra every month (doesn't take much, $38 extra on the first payment will eliminate a complete $700 payment 30 years down the road) and paid off a 30 year loan in

And its not because I had some sort of "unfair" head start. My father dropped out of high school and went to sea during WWII to help feed his brothers and sisters, then became a soldier until he retired and became a teacher. I went to public school, my first job was delivering pizza, I put myself through the local college. Nothing there anyone else couldn't have done.

@Pat Cahalan: Citation about velocity of money being the lifeblood of the economy? Its my opinion, no citation needed; but I was taught that in college and have seen nothing to disprove it. Surely you dont disagree that when people get nothing but bad news on TV day after day after day it causes them to be more fiscally cautious? (I know, don't call you Shirley) And if they (hundreds of thousands of people) stop spending then OTHER people are put out of work by not being able to provide any services or goods to them?

If people dont believe what they hear on TV, then why are they putting up with all the security theater in airports? (my corollary here being that the government keeps telling them over and over and over and over that this makes them more secure so they believe it because they have heard it so often without contemplating that it is a single source repeating the same information without backing it up with any examples.)

But your straw man oversimplifies the situation. Any number of people standing in a single field could see each other and know exactly what the state of their "economy" is directly, no other parties involved and I HOPE they would not believe a news anchor in the middle of the field telling them something that they can see is not real. In the real world it is not possible to know directly even a tiny fraction of what other people are doing. So we turn to the "news" to find out. And the mass media always has an agenda to present the worst possible scenario because that draws the most eyeballs. This is exactly what Bruce has mentioned many times in that humans cannot assess risk to themselves correctly. I hear on TV that (currently about) 10% of the US is out of work. I should instead hear that 90% of the US is working hard, and further that it is physically impossible for more than 95% to be working at any time (something I was taught in economics class). So the economy right now would score an "A" in any school I was ever in. But that is NOT the message that the media is presenting because they dont make money presenting good news.

FPJanuary 16, 2009 10:11 AM

@A nonny bunny:

"You don't have to pay interest on your credit card debt?"

By law, all credit cards offer a grace period in which you can settle a bill without being charged interest. IIRC, it's at least 20 days after the bill is mailed.

"Somewhere someone has to be making money off the scheme"

Credit card issuers charge retailers a percentage of the retail price for every item that you purchase.

To be sure, they make much more by charging interest. That's why defaulting customers are credit card companies' best customers, right up to the point where they go bankrupt.

CosJanuary 16, 2009 11:32 AM

When I saw this on the Quotation of the Day list, my first reaction was how apt a parallel it is to th fear of terrorism as it relates to building national loyalty in support of objectively-crazy national security policies and wars: People who support those things out of fear, grow to identify with them, and believe they're supporting them (Patriot Act, Iraq war, etc.) out of higher principle.

I'm somewhat... disappointed? That most of the discussion in the comment threads here focuses entirely on the surface of this quotation, the apparent critique of an aspect of the economy & labor relations, rather than the deeper significance.

Noble-SerfJanuary 16, 2009 1:50 PM

I think money goes where it is well treated and stays there.

That's why I'm a serf. But I'm noble. That is to say I'm self-aware and fine with my situation. I can't pay cash for a house and two cars. I can pay cash for most everything else. The result of this is punishment of high interest rates on the things I have to finance.

I would rather live like this that live on a small plot of land, growing food for my own support and trade, in a house I built myself out of material I found or harvested.

I'm not saying there's no middle ground, but if there is one, I've not found it.

Kevin JohnJanuary 16, 2009 7:40 PM

Hey Bruce,

As a self-employed person,money comes from ordinary people that can afford what I offer. At this point in time there are massive amounts of people that do the same work I do who are younger, unmarried, less bills, everything that I don't have, that will do it for a less and less. Deflation?
You bet your ass. Quality? Yea, as if they care anymore.
Who cares if they can "Get 'er done"?

It has gotten to the point where I seriously wonder about the longevity of our country at this point in time.
I have never seen anything like this before.I have seen slow, but I have NEVER seen DEAD.

At least the yellow page advertising companies that I owe thousands to have lost interest...

Thank God for a nice cold beer at night to numb the pain.

PhilJanuary 17, 2009 3:41 PM

I guess I see this quote to be more about debt than about fear. If indeed you have a large amount of debt and little or no savings then yes you should be afraid at this point. It's not about bravery, it's about saving and planning ahead. If you have no debt and you have enough savings so that you can live comfortably for a year or two, then you don't need to be afraid.

DAVEFebruary 18, 2009 7:19 AM

I totally agree with u on the issue. i love your write up and will like to have any article that talks about economics being the engine house of the nation

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