It's the Economy

No ... it's not as bad as some people would have you believe ... but we do have a correction due and it's going to be a biggie, and I doubt that who we put in office is going to do much to help.

As a country we have, for the last 9 or more years, spent more than we make. I myself can attest to that to some degree.

According to one report, since 1990 the number of people who held credit cards grew 75% (from 82 million in 1990 to 144 million in '03) while the amount charged to those cards more than trippled from 338 billion to 1.5 trillion dollars over the same time period. This means that people have charged more and more on their credit cards ... and while Bureau of Labor Statistics reports show that aggregate U.S. personal income in that timeframe did increase roughly 188 percent that doesn't nearly cover the additional spending.

In fact the report shows that the average carried ballance rose from $2550 in 1990 to $7520 in 2003 approximately a 200 percent increase. (Keep in mind, however, that this is average carried balance so anyone that paid off thier credit card bill every month was not accounted for in this figure.)

That figure, of course, is an average ... meaning that a few people on the extreme ends can really skew the numbers. What isn't skewed, however, is that of those that carried more than $10,000 in debt, 36% of them made less than $50,000 a year ... and 13% of them made less than $30,000 a year.

All of this is, of course, on top of car loans, home mortgages, and home equity loans. The average debt in this country has skyrocketed in the last 20 years. Sooner or later the books are going to have to balance out ... at some point all that debt must be repaid ... and when you have people sitting on debt equal to 20 percent or more of the annual income sitting in high interest credit card accounts ... well it's not going to be a pretty sight.

Bankrupcies have hit record numbers the last two years at least ... and the number is expected to keep rising ... foreclosures are at an all time high ... more and more people have borrowed a lot more than they can afford to pay back ...

So what needs to be done? People need to get back to basics ... learn to live within what they can afford. Learn to spend money on what they NEED and to save money again. No ... we don't need the government to step in and 'fix' the situation either to protect the consumer or the banks ... either method is only going to prolong the issue rather than fix anything.

To an extent people NEED to have thier spending habits snap back and slap them down hard, and the banks and credit companies need to take those losses and learn to better manage thier risk. Who is to blame when someone making less than $30,000 a year is carrying a credit card ballance of over $10,000? Both the person buying items that they can't afford to pay for ... and the bank that gave him a credit line of over 33% of his annual income ... and yes I think that blame falls in equal measure.

Credit card companies and banks have a solid idea of an individuals debt to income ratio .... and yet they consistantly choose to continue to extend credit well beyond the 'safe' ratio in the pursuit of the potiential revenue that can be generated before the individual collapses under the weight of bills ... hoping that they can collect enough in interest and fees before the individual folds and is forced into bankrupcy.

And the American consumer thrives on it all ... buying expensive cars and houses well beyond their 'need' in order to appear wealthier than they are. Buying luxury goods and services beyond their means not out of any 'need' but out of a desire for something 'more' than they have now ... until the time comes to pay the piper.

Out of control governmental spending ... however ... is a topic for another time.