A tornado of foreclosures,
bankruptcies, missing money -- now arriving on the world stage as a
housing bubble, soon devolving into a credit bubble -- is ripping through
the United States economy and world markets and will ultimately
shatter, splinter, and shred, not only the fiscal fabric of America but
is likely to catapult the global economy itself into massive meltdown.
Carolyn Baker -- World News Trust
March 8, 2007 -- This
week the Senate Banking Committee has begun an investigation of credit
card companies and that industry’s lending practices of which Chairman,
Carl Levin of Michigan said,
“Millions of families … are kept in debt and are in over their heads not
just because of their own purchases … but because of the abusive
practices and excesses of the credit card companies.”
Simultaneously,
MSN’s Money Markets Editor, Jim Jubak, published an enlightening piece “Debt Pyramid Threatens To Topple Markets”
in which he analyzes the gargantuan Feb. 27 sell-off in world
markets and its continuing reverberations throughout the global
economy.
Whether personal or planetary, a tornado of foreclosures,
bankruptcies, missing money -- now arriving on the world stage as a
housing bubble, soon devolving into a credit bubble -- is ripping through
the United States economy and world markets and will ultimately
shatter, splinter, and shred, not only the fiscal fabric of America but
is likely to catapult the global economy itself into massive meltdown.
Consequently, I’m not holding my breath that Levin or his committee
will have any influence on the debt cyclone and the industry that has
set it in motion.
An extraordinary and timely documentary “In Debt We Trust”
written and produced by Danny Schecter, is a most illuminating -- and
chilling -- must-see exploration of the debt issue. Starting from the
standpoint that our society is set up to keep us struggling for our
entire lives, saving almost nothing, and remaining in perpetual debt,
the documentary proceeds to reveal the impossible shell game that is
perpetrated on players in the debt game by a credit industrial complex
which cannot exist or profit without debt, and specifically, losers in
the game.
Debt
doesn’t “just happen”; it is consciously, carefully engineered by the
debt industry to begin in childhood with the Saturday morning cartoon
consumption-fest of products aimed at children, including “Credit
Barbie Dolls” and “Shopping Barbie Dolls” that make the sounds of
credit card transactions when they complete their imaginary purchases
in “Barbie Land.” A few years later, the same child, now
in college, is deluged at freshman registration with a plethora of
credit card offers which although they may begin with only a $500
limit, are soon increased if the student makes regular payments.
While
as a college professor I have long been aware of the financially lethal
consequences of college students holding three or four credit cards at
a time, I was unaware that the average
college student graduates with $20,000 in credit card debt. I am well
aware, however, that the same student is likely to graduate with an
additional $30,000 + debt in student loans. Thus, it is not unusual for
a college graduate to commence his/her career, in debt to the tune of
$50,000. Still more frightening is the reality that for that graduate,
and indeed for most of the working and middle-class U.S. population,
indebtedness never ends! As credit card customers get older, their
diminished consumption needs must be replaced by younger customers
whose “buy now, pay later” illusions are unchallenged by life
experience.
In
the documentary, Schecter reveals that the debt industry sets up
consumers to be in debt from cradle to grave by getting them dependent
on credit cards, carrying student loans, making car payments, and
buying a house which then necessitates myriad additional purchases,
leading in a majority of cases, to re-financing or the proverbial
turning of one’s house into an ATM machine. Whereas in the old days, a
“deadbeat” was a person who never paid his debt, in today’s debt
industry, the term means just the opposite.
In fact, what lenders hate
more than anything is the consumer who regularly pays off her debt -- so
much so that within the industry, these people are called “deadbeats”
because they are of no value to the industry. Only those consumers who
perpetually carry debt have value for the debt industrial complex. In other words, from the standpoint of the debt industry, risk equals profit.
Not
only does perpetual indebtedness serve the American financial system,
it serves the political establishment as well by making it exceedingly
difficult to protest that establishment when one is over one’s head in
debt. As a matter of fact, perpetual indebtedness serves to make the
consumer subservient not just because his credit rating might be used
against him should he choose to organize politically, but to a certain
extent, the consumer, particularly if he/she is uninformed, often feels
a certain sense of “gratitude” for those pieces of plastic and the
“privilege” of owning one’s own home.
Debt industry propaganda markets
not only the very expensive use of someone else’s money, but an idea,
an image, and philosophy -- that is, the notion that this is America, and
where else in the world can one have what one wants so instantly?
Notice Mastercard’s use of the word “priceless” in many of its
commercials that depict families enjoying an expensive evening at a
restaurant or baseball game courtesy of Mastercard. What’s “priceless,”
of course, is not what is consumed, but sacred family time.
The logic
of Mastercard’s ads communicate the message that since no price can be
put on family time, why would you not want to charge the expenses of
that time with Mastercard? You may be in perpetual debt, but wasn’t it
all worth it to have those priceless moments with family? Whether by
way of playing on “family values” or using some other manipulative
tactic, all debt industry marketing strategies are
designed [in the words of that industry] to encourage consumers to
“accept more debt.”
The
collection industry, which thrives on confusion, issuing reams of
unintelligible instructions with its credit cards, and essentially
builds it industry on lending to poor risk customers, is hugely
profitable. This astonishingly de-regulated industry has created a
no-win set up for consumers with steadily increasing interest rates and
a dizzying array of fees that Curtis Arnold,
founder of cardratings.com, says can very quickly mushroom into
unmanageability for even the most conscientious card holders who use
their cards responsibly and pay off their balances monthly.
Our
national personal debt at Christmas, 2005 was hovering somewhere around
8 trillion dollars and is now rapidly approaching 10 trillion which
amounts to nearly $30,000 per household. A number of experts in the
banking/credit card industry in Schecter’s documentary unequivocally
assert that the debt industry functions as a group of loan sharks who
use threat and scare tactics to demand payment from those consumers who
are falling behind or are in over their heads.
In fact, one banking
executive stated shamelessly that the industry functions exactly like
organized crime. Moreover, debt and debt collection are hugely
profitable, especially when banks sell hundreds of billions of dollars
worth of loan packages to larger banks and those assets are traded on
Wall Street where obscenely wealthy CEO’s further gorge on the interest
and finance charges of unpaid loans, and if those loans are insured or
guaranteed, their feeding frenzy is further enhanced.
What
makes the industry’s policies not only egregious but in fact, illegal,
is the reality that by and large, it lends to people who it knows
cannot repay their debt. In the world of finance, this is known as fraudulent inducement
and is punishable with fines and imprisonment. Although difficult to
prove in terms of motive, the debt industry’s behavior is replete with
millions upon millions of instances in which poor risk consumers are
deluged with pre-approved credit cards.
The
industry’s argument, of course, is that people are not well-informed
about their financial responsibilities and options. Just a little more
financial literacy is needed, they assert, and people wouldn’t get
themselves in dire financial straits. But consumer counseling experts
contest that massive personal debt is not about information or
education and that people who are drowning in debt cannot educate
themselves out of it.
The
U.S stock market has recently been reeling as a result of a colossal
sell-off by Chinese markets and the bursting of the U.S. housing bubble
which is essentially the illusion of wealth in that market due to
over-inflated prices. Recently, several top mortgage lenders have begun hemorrhaging red ink
which is likely to result in bankruptcy for them and increasing numbers
of foreclosures for borrowers now squeezed between the costs of a
mortgage payment, childcare, car payments, credit card debt, and health
insurance benefit payments or medical emergencies not covered by
benefits -- all of these costs being worsened by inflation. Curiously, one
of the major lenders is GM, already edging ever closer to bankruptcy with steadily decreasing auto sales.
Within
the next months and probably no longer than two years, millions of
American’s will be forced to say goodbye to the American dream of home
ownership. I have argued for some time that this may be a fortunate and
necessary step in downsizing and de-consumption which, while it is
unlikely to enhance the nation’s economy, may well augment the personal
resources and savings of those families and individuals who opt for
renting. I highly recommend Matt Savinar’s excellent article “Who’s The Real Idiot?” which analyzes the pros and cons of renting vs. buying, as well as Michael Hudson’s May, 2006 Harpers Magazine article, “The New Road To Serfdom” which compares home ownership to debtor’s prison.
The
next bubble to burst after the housing bubble may well be the credit
bubble, and if the housing bubble initiates a financial bloodbath, a
credit bubble burst is likely to be an economic Katrina unlike anything
the American people have ever witnessed. Worse than the Great
Depression? Unquestionably.
While
“In Debt We Trust” ends as most documentaries and exposes usually do
with “What is to be done?”, the reality is that very little can be done
collectively, but much can be done individually and within families.
Schecter’s interviewees clarify that few politicians can get elected
without the full support of centralized financial systems and the real
estate industry. Politicians from both parties are bought by them and
make deals with those industries in the restaurants, bars, and private
clubs of Washington and elsewhere.
I am no trained financial advisor, but those individuals I know who have familiarized themselves with Tapeworm Economics
as clarified by Catherine Austin Fitts, seem to discover a clearer map
for navigating the perfect economic storm which we have only begun to
enter. Likewise, Matt Savinar’s Life After The Oil Crash
site offers a treasure-trove of information and options, none of which
rely on politicians or government to fix an economic system that has
essentially devolved into a criminal enterprise.
At
the end of “In Debt We Trust”, an African American woman is asked if
people sometimes laugh at her for cutting up her credit cards and
refusing to use any form of credit. Her response:
“Yeah, well who’s laughing now? I’m out of debt!”
LINK: CarolynBaker.org -- Speaking Truth To Power
{mosimage} CAROLYN BAKER, Ph.D., not only manages her website but is a professor of history and author of a book in press, COMING OUT FROM CHRISTIAN FUNDAMENTALISM: Affirming Life, Love, And The Sacred. Her recently published book U.S. HISTORY UNCENSORED: What Your High School Textbook Didn't Tell You may be purchased at her site. She is available for speaking engagements and author events and can be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it..