Weighted Down
More big news that really didn’t make the news was that U.S. Consumer debt has more than doubled in a decade. The debt, which includes credit cards and car loans but not mortgages, translates to $18,700 per U.S. Household. At the same time, the savings rate dropped to just 2 percent of after-tax income during the first half of the year. Americans owe $735 billion in credit card debt alone, and spend a near record 18.1 percent of after-tax income to cover all debts, including mortgages.
The “little people” have a good example to follow. The nation’s current deficit is hovering close to 5 percent of Gross Domestic Product and the joint trade and budget deficits total nearly a trillion dollars. The rest of the world sees what’s going on. International interest in U.S. assets continues to wane, and the dollar continues to tank, falling to levels not seen since 1995, just prior to the dot-com craze – that artificial steroid that temporarily pumped up the doomed-to-sink economy. Gold has made a steady climb, hitting $430 before the big boys drove it down to prop up the diving dollar.
Fixated on the “news” of pop singer Britney Spears’ quickie Las Vegas marriage – nuptials one day, annulment the next – the self-important media boobs didn’t find it important enough to broadcast the warning from the International Monetary Fund that accelerating U.S. debt levels, ballooning trade imbalances, and the running up of foreign debt to record levels threatened global financial stability.
The I.M.F. warned that the U.S. net financial obligation to the rest of the world could be equal to 40 percent of its total economy within a few years – “an unprecedented level of external debt for a large industrial country,” that could also play havoc with the dollar and international currencies.
It wasn’t only the media that found the story unworthy of headlines. The White House dismissed the report as alarmist, saying that President Bush would reduce the budget deficit by half over the next five years.
The gobbling-up-debt syndrome began in earnest back in the 1980’s when, following the tax cuts and military buildup of the Ronald Reagan years, the U.S. went from being the world’s largest creditor nation to it’s biggest debtor. Since then its gluttonous appetite for borrowing has only grown more voracious. Everyone knows it, yet everyone ignores it. America and Americans are addicted to borrowing and nothing will stop them…except a good dose of reality. It won’t before the reality check is in the mail.
