Comments on: Stop Saving Now and Spend Those Rebates! The Home Refinancing Well Has Run Dry.

By: kd

kd — Mon, 30 Mar 2009 05:40:15 +0000

I am guessing the fact that our local after school care centre is thriving so much is an indication that a lot of people are turning to having both partners working full time – my version of hell! To me it looks increasingly like “wage earning” is a fools game. That has got to be an indication that the economy is going badly wrong

By: Rycoka

Rycoka — Wed, 07 May 2008 12:27:18 +0000

Hi,
I am an Australian but I have to say my experience has been an absolute object lesson on how the debt was sold. Like our hypothetical $100,000 p.a. couple my wife and I also found ourselves going steadily backward to the point where in December 2004 the AMEX came due and we could not make the full payment. Stung by the excess fees we ran straight to the bank who were delighted to extend our line of credit on our home loan on the basis of our equity gained. We were encouraged to borrow more for an investment property – an offer we (rather foolishly as it turns out) declined. Since that time I have attempted to keep a rein on expenses but we are generally lucky to break even in any given month. On average we have been heading backwards at a rate of 2 to 3 thousand dollars a year. I would like to stress that we earn pre-tax around $140,000 per annum, send our three kids to public schools, we brought our house in 1998 when prices were approximately 1/3 – 1/4 of what they are today. If we can end up in this situation, I really cannot imagine how people on lower wages who bought later van possibly be coping. I am guessing the fact that our local after school care centre is thriving so much is an indication that a lot of people are turning to having both partners working full time – my version of hell! To me it looks increasingly like “wage earning” is a fools game. That has got to be an indication that the economy is going badly wrong

By: CathyG

CathyG — Tue, 06 May 2008 05:49:07 +0000

I don’t believe the middle class wiped out their savings and took on trillions in debt out of some suddenly perverse desire to owe more than they could ever hope to pay back. I think those actions are symptomatic of the increasing economic distress most ordinary Americans have been under as real wealth and income has flowed upward from the production of the workers into the hands of the richest investors over the past three decades.

I think it’s more about grotesquely skewed income inequality than it is about senses of entitlement. There’s a great lecture available on this subject by Robert Reich at:

http://youtube.com/watch?v=QCu-XnVxhfk

Since the 1970’s, so much of this great nation’s great wealth has been funneled to the richest 1% that everyone else has had to run faster and faster just to stay in place.

Sending women to work bought us some breathing room. Having fewer children bought us some more. We quit saving and got another short respite. Finally, the only way that the bottom 90 to 95% of the country could postpone a serious drop in the standard of living was to use home equity and credit and hope and pray that things would somehow get better before the bills came due.

Well, dang it, it didn’t turn out that way. I wonder what’s next – rescinding of child labor laws?

There is nothing wrong with the American worker, nothing wrong with the middle class. There is something terribly wrong with a democracy that allows a tiny but increasingly powerful, privileged elite to take for itself such a disproportionate share of the nation’s wealth.

By: PissedOff

PissedOff — Tue, 06 May 2008 04:30:46 +0000

Dr. – Fantastic post (as usual)… thank you for bringing out so many important topics and making them understandable. This situation of punishing savers is clearly forcing the “consumption” and further fueling the “empire of debt”. The situation is appalling… it is absolutely unbelievable how the government has allowed the credit industry, etc. to run absolutely rampant over us. Shame on our government for allowing corporations and the credit industry to take advantage of the foolishness of the herd. They sure are making it more and more difficult for anyone to ever save that 20% down payment, unless you want to risk it on wall street… good luck with that… better save it for that $6 per gallon gas that’s coming soon to a street corner near you.
p.s. nice link doug!

By: cindy

cindy — Tue, 06 May 2008 02:40:43 +0000

Maybe I am missing something, but when the Fed lowered the prime interest rate, who exactly did they help? The only winners seem to be the banks who are still charging whatever rates they want for mortgages, credit cards, car loans and the like while anyone with money in the bank is being royally flushed.
Folks living off small fixed incomes rely on the interest to help them survive. Now with prices soaring and interest income drying up, what will they do?
As long as the government is focused on saving the corporate interests at the expense of the people we will never see the end of this kind of mess. Low interests rates encourage people to gamble with their savings since they can’t get a decent return – think bubbles – first tech stocks, then housing, now commodities.