I nearly cried (really) when I read Mark Shuttleworth's eloquent and searing analysis of the United States financial crisis. He doesn't necessarily call it such, but he points to my country's failure in economic leadership...and the adverse consequences for the planet.
Underlying it all is a too-easy addiction to credit:
To make matters worse, a series of financial innovations created a whole industry designed to help people go back into debt on their houses. I remember trying to watch TV in the US and being amazed at the number of advertisements for "home equity withdrawals". They made it sound like turning your major personal financial asset - your paid-off house - into an ATM machine was a good thing. In fact, it was a means to spend all of your primary store of wealth. And with inflated house prices, it was a way to spend money that you did not really have. A convenient way to get into a deep, dark hole of family debt.
The result? The average American owns less of her home today than she did 30 years ago - 55% as opposed to 68%. Easy money makes people poorer....
I was not raised to rely on credit and feel fortunate that my only debt is in my house (which I will pay off as fast as I can - I don't like owing people money). But I look around and can't help but be depressed by the mess that Americans have gotten ourselves into. We are addicted to spending far beyond our ability to afford it. Saturday Night Live's skit "Don't buy stuff that you cannot afford" should be required watching for all Americans.
Is the system at fault? Maybe, though I also wasn't raised to blame anyone besides myself for problems. Life happens and people have to take responsibility for how they react to it. But I still get angry when I hear friends or family citing reasons for spending that they clearly imbibed from the television or other clever marketing. ("But it was on sale! I saved a ton of money!" No, you spent a ton of money.)
It is shocking to see how economists and the US government (Democrats and Republicans alike) have reacted. Tax rebates...to get people to spend more. (Fortunately, the evidence on balance shows that people save their tax rebates or pay down debt, which makes them useless for the immediate pain but good for consumers.)
I believe that to get through the crisis we have to learn to save again. This will help to perpetuate the near-term problem but it will save the United States financially in the long term. Spending our way out of a recession, if the money isn't there to be spent, won't help. It will exacerbate the problem.
Maybe there are people who can afford to spend mountains of cash in the near term to stave off the recession. But those people aren't stupid enough to spend in such a fashion. For the rest of us, we need to save more and spend less.
Thanks for writing, Mark.