It's becoming clear (to me anyway) that "easy credit" is the major player that led up to the current financial mess. It goes way beyond home mortgages. I'm thinking that our whole economy's "strength" has been a mirage, built on people spending their futures today and paying dearly for it. The complex financial infrastructure that arose to hide the resulting enormous debt while rewarding senior execs of lenders is a result not a cause.
Looking for the "root cause" of this, I'm led to only one conclusion: irresponsible personal spending habits. The right-wing says "tough s**t, you should have known you couldn't afford it" and the left-wing says "the government should have protected you from your own irresponsibility with laws" (prohibiting businesses which prey on the irresponsible). Neither outlook is useful.
Once again, I'm looking for a root cause: Why did people become so much less responsible in the last 10-15 years? Credit cards with teaser rates, payday loans, balance transfer promotions, pre-approved credit card offers, "selling cash" (a la MBNA before they died), "no interest till 2012!"... all that stuff naturally flourished in an atmosphere of irresponsible spending. I keep thinking of the theme song to that old TV show Good Times, which contained "easy credit ripoffs"... In other words, I'm looking at the demand side of the equation while others look at the supply side.
Stay tuned, I'll write next about my answer.
Easy Credit and Irresponsible Spending
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