Are You Drowning in Debt?

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A new report says that 35 percent of Americans have debt that has been reported to a collection agency. This debt is non-mortgage debt, or debt related to paying for a house. So why so much debt?

No one should be surprised that Americans are in debt. Debt is what Americans used to buy things that they don’t have the cash to pay for. And the reason for the lack of cash has everything to do with low wages. Starting about 30 or so years ago, Americans started using credit card debt especially to make up for the short fall in monthly income. Even though Americans were working harder and longer hours they were just treading water when it came to income. While corporations have gotten richer, and along with it, the richest one-percent, the average American’s income has remained stagnant. In fact, accounting for inflation, Americans have lost ground when it comes to income.

Credit card debt can best be described as “near money.” This near money was offered to Americans like turning on a water faucet. There was a time when it was not unusual for people to get 10 to 20 credit card offers in the mail. And, some people took the offers. Some people were walking around with 10 or more credit cards. This was no accident. The credit card companies were gaming Americans then, and they still are. They entice you to take their credit card offer with all sorts of introductory offers knowing that they have you literally over a barrel when it comes to repayment. Credit card interest is the highest around, often going up to 21 percent—after the introductory offers expire.

The American economy is consumer driven, meaning if we don’t buy stuff, the entire economy suffers. We know this by the number of sales ad on televisions—Macy’s, Kohl’s, Wal-Mart, Sears, Penny’s, Men’s Warehouse—you name it, companies want people to buy their stuff. And they don’t care how you pay for it—cash or credit card. In fact, these same stores will issue their own company credit card to further entice you into spending money you don’t have. And what happens when credit card bills come in the mail? You make a payment, but often not the full balance. Very few people can pay off the balance of credit card the month after the purchase. But, this is what financial consultant- talking heads tell consumers. And with each credit card used, there are payments with high interest, and after a while a consumer can easily end up making payments to 5, 6, 7, or even 8 credit card companies—often making the minimum payment. Some people even take cash from one credit card to pay off another credit card. This is the classic trap. If you make the minimum payment on any credit card you will never pay it off. You will only enrich the credit card company, which is what the credit card companies actually want anyway—they want never ending payments of high interest that just barely reduce the balance due.

So now a new report tells us that 35 percent of Americans are not only in debt but in collections. And referring a debt to a collection agency is what happens when you don’t pay off unsecured debt such as credit card debt. Some of the debt is also medical and hospital related, but credit cards are the main culprit. And with collections activity your FICO score tanks—on top of the harassment by the collection agency. Things can soon spiral out of control where you are stressed out over your household debt, the lack of income to pay your debts, the cancelled credit cards that you can’t use any more, and the collection activity.

So what is the solution? The solution was for American workers to have been paid a living wage commensurate with the excessive profits made by corporations that got filthy rich. Some corporations are now flush with so much cash they don’t know what to do with it. But they are adamant about paying workers a living wage. These corporations still don’t understand what Henry Ford understood back in the 1920s. Henry Ford raised assembly line workers to $5 a day so that workers could afford to buy the very product they were making. The middle class took off when corporations paid wages that allowed workers to buy the same consumer goods they produced. But things took an “ugly” turn when American corporations found a way to get even richer by outsourcing relatively high wage jobs to countries where workers were glad to work for a dollar day. The end result was that American workers got the shaft, lost those good paying jobs, but were still expected to pay the same high prices for consumer good cheaply produced in third-world countries. Enter, credit card debt—near money—that Americans have used for the past 30 years to try to stay afloat. And the consequences have been disastrous for too many Americans who cannot now pay off those credit cards. Still, Americans don’t understand the game being run on them by the banking and financial sector. This financial near-slavery, low wage American economy is running amok. While the rich get richer the poor get poorer. The American economy is a ticking time bomb that will implode if things continue as they are.

Copyright 2014 – L. Arthalia Cravin. All rights Reserved. No part of this commentary may be reproduced, stored in a retrieval system, or transmitted by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the author.

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