Do we really want to be an indebted society? Is your goal — the goal you have for your children — to make America the world’s largest debtor nation?
Consider for a moment that commercial that proclaims that “they” don’t want us to get out of debt. Is it true? Is there a great plot to keep us in hock up to our ears? Or are we just too accustomed to believing the sweet nothings our salesmen politicians whisper lovingly into our ears?
Perhaps there actually is a plot. What lunatic was responsible for all those subprime loans? Does this article in the Wall Street Journal have the answer?
Historically, few lenders would make subprime loans—that is, mortgage loans to borrowers with poor credit. The risk of default was simply too great. For a variety of reasons during the 1990s, however, major institutional players became more willing to purchase subprime loans as investments. Those loans would be pooled with similar subprime loans, and slices of that pool would be bought and sold as mortgage-backed securities. With the rise of this new secondary market, a lender could issue a subprime loan and immediately sell its interest in that loan for a lump sum. The ready flow of capital from the secondary mortgage market led, predictably, to an explosion in subprime lending. Unscrupulous lenders could reap the greatest profits by issuing subprime loans packed with unfavorable terms and subject to exorbitant interest rates, and only then selling them for cold, hard cash. A rash of borrowers found themselves saddled with predatory loans they had no hope of paying off.
Then consider this commentary which finishes with this thought?
(4) Finally, we must view our present economic challenges in a larger philosophical and ethical framework — and redefine success as being able to pay off what we owe, and spend only what we earn.
Who knows? Knowledge that we live in a nation with a strong currency, no annual deficit and no aggregate debt to be passed on to our children might bring Americans as much pride and joy as the next iPhone or trip to Vegas.
Have you been living beyond your means? Why not? Have some of your less disciplined neighbors been living beyond their means? What idiot thought their credit was good to lend them all that money? Was is it your government?
