| oct 17 2007 | | Gimmee Gimmee. | A report out from Reuters makes it official. Americans would rather miss a mortgage payment than a credit card payment.
At first glance this is crazy. Why would you risk losing your home, compared to getting a reminder from your credit card company? However, behind the scenes what is happening is that the days of using your home as an ATM machine to cash out the increase in house values with Home Equity Plans is over. There is no more increase in house values, in fact house values have declined and will decline a lot further and for a lot longer than the experts would have you believe. Even more disturbing is that as people took cash out of their houses the portion of equity that they owned decreased to the lowest level historically. You don’t own a house, your bank does. You may never pay it off. Your bank loves that. Pro vided you are a credit worthy prospect the interest stream will never end. If you die your estate may not get any equity from the house. You spent it on stuff.
So what are you buying that is so vital. Are you bulking up your savings? Are you whacking it away into the pension fund you are going to rely on when you retire? Are you buying bullion in case the fiat monetary system suffers a melt-down? No, people are buying stuff. Granite counter tops for their kitchens, home theatres, wide screen HD televisions, RV’s, ATV’s, SUV’s, all varieties of other initials. Essentials? No! Just stuff, an endless gorging of materialistic wants. Blame it on the Generation Xers who want it all, and want it now but don’t forget it was the boomers that brought them up and pandered to their wants. We have trained a whole generation of Me’s.
So now you don’t own your house and your credit card is maxed out. Where do you go for cash? I know, do you? You start raiding your 401(k) pension. What me worry about tomorrow? Let tomorrow take care of itself. Americans are now making major ‘distress’ withdrawals from their pensions to finance their day to day spending. Is the picture becoming clear yet?
Now before you get the idea I have a down on Americans let me make clear that this is happening in most of the western world. Although the American Empire is shifting dangerously towards a dictatorship and the people spend, just like bread and circuses at the end of the Roman Empire.
Meanwhile in the emerging nations the people are working and saving and their countries are building Sovereign Wealth Funds that will have a major impact on world’s finances in this century.
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