The US is probably slipping into a recession as I write this, and one of the main reasons for this appears to be the sub prime lending crisis. In layman's terms, this means that banks and other moneylenders have been lending money to people who can probably not afford to pay them back. This has lead to widespread that the moneylenders have overstretched themselves and they way to recover is to withdraw funding from the worldwide investments that they have made. Which would spread the pain all over the world instead of just the US.
Now what did things come to this? The credit history of an individual is a fairly important barometer of his personal future. This is the only country in the world where the following conversation would make sense:
A: I want to buy a car.
B: So you need a loan.
A: No, I have the money. I have saved up for five years.
B: So, now you should take a loan and return it in a year.
A: Why?
B: To improve your credit history, obviously!
A: Why do I need to do that?
B: So that you can get a loan easier!
A: But I don't need a loan.
B: But you may, later.
Right, something is seriously wrong here. Let me try to put my finger on it. I don't think people in this country have ever heard of the word 'austerity'. Simply put, the culture of the US appears to be one of immediate gratification and continuous consumption. The old idea of 'saving up for something special' seems to simply not exist. Hence lending agencies. Hence, people overspending and transferring debt from one credit card to another. And speaking of which, what is the deal with so many different credit card products anyway? I personally think this whole crowded market full of different lending products is just a minefield waiting for the unsuspecting and naive consumer.
Anway, I want to finish with this story about a lady who lives on a 2500$ a month disability payment, and went ahead and leased a 100 000$ BMW with a fake credit application.
Now what did things come to this? The credit history of an individual is a fairly important barometer of his personal future. This is the only country in the world where the following conversation would make sense:
A: I want to buy a car.
B: So you need a loan.
A: No, I have the money. I have saved up for five years.
B: So, now you should take a loan and return it in a year.
A: Why?
B: To improve your credit history, obviously!
A: Why do I need to do that?
B: So that you can get a loan easier!
A: But I don't need a loan.
B: But you may, later.
Right, something is seriously wrong here. Let me try to put my finger on it. I don't think people in this country have ever heard of the word 'austerity'. Simply put, the culture of the US appears to be one of immediate gratification and continuous consumption. The old idea of 'saving up for something special' seems to simply not exist. Hence lending agencies. Hence, people overspending and transferring debt from one credit card to another. And speaking of which, what is the deal with so many different credit card products anyway? I personally think this whole crowded market full of different lending products is just a minefield waiting for the unsuspecting and naive consumer.
Anway, I want to finish with this story about a lady who lives on a 2500$ a month disability payment, and went ahead and leased a 100 000$ BMW with a fake credit application.
3 comments:
While I agree with you on most things, I don't agree with the sentence "The old idea of 'saving up for something special' seems to simply not exist". A middle class family in US will not open a savings account for their daughter's wedding when she is born, but they will open an account for her college fund. I think that counts for 'saving up for something special'. People is US start saving for retirement when they are in their 20's. That should count too. Perhaps you are just referring to buying houses and vehicles.
-Kitty Khat
i am
true, but the kind of people who start saving early are the ones who are in the upper economic bracket in the US.. they are not involved, largely in the subprime lending crisis.
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