Living on credit equals living in danger

Will we ever learn, for crying out loud?

We’ve got so much used to living on credit, we can’t fathom any other way.

And if we manage to ruin our credit standing with responsible financial institutions, there’s no need to worry. The number of outfits willing to help you out is mushrooming beyond belief.

They are drumming up custom in a pretty straightforward manner: if the ugly bankers say no, we’ll say yes. We’ll help you buy yourself a new car even if the bill collector’s banging on your door. You know the drill: the cruel and irresponsible banks won’t let you spend yourself into a financial abyss, but we will do whatever pleases you. Naughty, naughty banks.

A look at a bit of a somewhat distant history, and another look, this time, at history much more recent, will not hurt. It should not.

There used to be times when people wouldn’t buy things they couldn’t afford. Yes, you could borrow, but it was expected of you to pay your debt off before incurring a new one.

Then, along came a U.S. president by the name of Franklin Delano Roosevelt. Using the Great Depression of his time as his reason, he put a disproportionately huge part of his country’s economy under government control.

His actions also helped develop what is now known as the “atmosphere of entitlement.”

What? My neighbour has got himself a new swimming pool? Not fair. If he’s entitled, then, so am I. Doesn’t matter one iota that the neighbour had been saving for years, while you were spending your money on frivolities. You’re entitled, and a government that begs to differ faces losing your vote come next election.

Being entitled to things makes living a pretty easy proposition. Especially if you know where and how to demand stuff. And governments, pretending it’s all about fairness (read: fearing losing your vote), have been making it easier and easier to get whatever you fancy. That you’ve never earned it? I’m paying my taxes, am I not? The government are my employees, dammit, and they’ll dance as I whistle or else.

Twisted logic, that, but it would lead to a history that’s much more recent.

Remember James Earl Carter, a.k.a. Jimmy? That peanut grower from Georgia who (nobody really knows how or why) made it all the way to the White House?

This is the guy who railed about the long-accepted policy of financial institutions not to lend money to people who couldn’t show at least a semblance of proof they would be able to repay it. These institutions were known for balking in situations like this. Especially when it was a mortgage that they were talking about.

Discrimination! cried the former president. This is unacceptable! It’s every red-blooded American’s birthright to own a home, he implied.

Let’s be serious here: indeed, it WAS discrimination. Just as it is discrimination when you’re selecting a partner to live with. You (more often than not) select one. What about the others? Let them eat cake. When you’re applying for a job and the potential employer selects somebody else, it’s discrimination, too. In most cases, the employers’ choice is based on qualifications. Skills that you are expected to bring to the job, as well as skills that might make you a valuable member of the team.

Do you see anything wrong with that?

But, so far as Carter was concerned, demanding a proof, or a semblance of one, that those asking for loans would be able (and willing) to repay them constituted unacceptable discrimination. Luckily, he didn’t get his way.

This perfectly illiterate idea had to wait until the arrival of William Jefferson Clinton (a.k.a. Bill) to the White House. His crew had been in perfect awe of Carter’s idea, and they went ahead to implement it.

Here are the results: financial institutions ended up trading in loans, bonds and debentures, presenting them as redeemable assets, knowing perfectly well they were nothing but. To put it simply, they would present as actives money that not only never existed, but that, if they had any sense of reality, they must have known would never exist. Strangely enough, most of the financial institutions dealing in this minefield were strong financial supporters of the Democratic Party.

It would take one, count him: one, mid-ranked banking official to blow it all up. Working on his bank’s annual report for shareholders, he asked a simple question: where is the cash, anyhow? That simple question that had no realistic answer would eventually trigger what we now know as the financial crisis of the last decade.

Financial institutions that should have known much better (and didn’t give a hoot) would feel the squeeze and start yelling that government got them into it, and government should get them out of it.

Was it logical? In a twisted way, it could have been. Except: these financial institutions could have opposed the demand, and they could have exposed the demand. They did neither. And now, the taxpayer is paying. The taxpayer is paying like crazy for the foolishness of making living on credit almost a law of the land.

Where did it all begin?

Why, it started with the introduction of the atmosphere of entitlement, something nobody, including the government, could afford.

There’s one additional risk: if the government is taking care of its citizens to the extent that it covers almost everything, it feels that, in return, it can demand your perfect loyalty. Meaning, for example, that you do whatever you’re told, or else.

Individual responsibility for your actions? What’s that, pray tell? So you, say, gambled away all the savings you inherited from your grandparents. How frightful. It’s the government’s fault because it allowed you to gamble. But you need a car, a good, reliable car, and you need it now. Financial institutions, frightened by their recent memories, start asking you perfectly uncomfortable questions such as: how will you pay for our help?

Companies (or individuals) willing to take the risk enter the fray. One wonders what they are going to do if you tell them: ooops, dreadfully sorry, I can’t pay, but it’s been definitely a pleasure knowing you. If you think they’ll take you to a small claims court, think again.

But, in any case, events will go full circle. Somebody’s going to be out of luck.

That’s something we all should have learned from the recent financial crisis. Unfortunately, most of us haven’t.

As a society, we’re in for frightening times when the time comes to pay up.

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