A former student recently asked me to write about the Occupy Wall Street (OWS) movement. Today’s paper reported our own OWS march in College Station though, admittedly, it consisted of only about 60 people. I read an interesting article the other day in The Wall Street Journal that focused on the legitimacy of concerns that college is overpriced, one of the causes of debt that has led OWS supporters to argue that the American system is unjust. The link between quality and price in American universities is worth a column, but I will save that for another day.
What I would like to focus on instead is a common thread in many problems today—our addiction to debt. There is a proverb that says, “The rich rules over the poor, and the borrower becomes the lender’s slave.” In my view, this has always been true. I find it humorous that people protest “greedy bankers.” It is like protesting hot summers in Texas. Bankers are greedy because they make money off their money. Ethics and banking are the lubricants of the capital markets, as we teach in Mays Business School. Only one is free and the other is a $500 oil change. Bankers do not produce anything; they enable others to produce things. And their goal is to make as much money off their money as possible.
All the big banks recently decided to raise debit card fees. Since it included bailed out banks, many people objected strenuously. The main problem I had with the policy change is that banks have spent the past ten years offering incentives to addict people to their debit cards, and then they turned around and charged for the behavior they incentivized. But how is that different from almost all marketing ploys, like satellite TV services offering me a twelve-month entry price and then continually increasing my bill once I am addicted to ESPN? Airlines have used checked bag fees to become profitable. But the master of this technique is the federal government. Just read your cell phone bill for all the fees they have dreamed up to charge you.
We still have control of the situation. Debit cards are broadly available from other financial institutions, and for most people a credit union will do everything a bank can do. And my biggest problem with Occupy Wall Street is that it implies that we have no choice in matters that lead to bankers being the master and borrowers being mistreated. Most debt is volitional, whether we admit it or not. Even where it is necessary, the amount of debt is volitional. If you speculatively borrow to buy a bigger house than you can afford because you think its value will increase, or because you want to live a certain way, you expose yourself to risk. I know, because I once bought a house that I could not afford. When I finally sold it, I walked away with $400 of my equity and the charred smell of the flame that almost consumed me financially. But it was my choice to do it.
In contrast, my son, who has had a good job for five years and is wealthier than I am, lives in a 500-square-foot apartment. And that is a step up. He used to live in somebody’s basement. If you use your student loan to fund a Starbucks lifestyle or an apartment in one of the high end complexes with all the amenities, you are presuming your ability to repay. And you have put yourself in a position that you may seriously regret one day.
There was a time when people saved to go to college. People argue all the time that the cost of college has escalated so fast that there is no way for most people to do that anymore. I empathize, as my fourth child is in college, and my fifth is a year and a half away. But my father fought a world war, and worked, and saved, and scraped to get his bachelor’s degree at age 31. He did not feel he had the inherent right at age 22 to become the research physicist he eventually became. He was convinced he had other duties, and he fulfilled them. He was a mechanic, and a bus driver, and a Marine before he was a white-collar worker. And while he was in college, he lived with my Mom and my brother in a small trailer that they pulled behind the car.
The debt that homeowners and college students burden themselves with is no different than Greece borrowing itself into oblivion to finance a welfare state. People riot rather than give up their benefits and say that their treatment is unjust. But Greece is a slave to their lenders, whether they are French, German, British, or American. And if they will not adjust their behavior, their economy will collapse completely. Even now, consideration is being given to their ejection from the European Union.
We are well on our way in the U.S. to doing the same thing. We are continuing to run obscene deficits that are unnecessary because we are addicted to our lifestyle. Serious discussions of how to cut are dismissed, and state-level cuts are objected to as cruel and unjust. We can yell all we want, but this will not go on forever. There is a day when you have to pay. And our “bankers” are not letting us borrow with our best interests in mind. They are doing it to make a buck. And when they can’t, they will call that loan.
So occupy Wall Street if you must, but you can’t change the proverb. The borrower is slave to the lender. What I plan to do is figure out how to eliminate my remaining debt and determine how much extra work my kids and I need to do to pay for their college.
And when it’s all paid off, I’ll get my lawn chair and come out to watch the protests.
There is one thing the US Government can do that Greece or we individual debtors can’t do to repay debt. Since all US Government debt is denominated in US Dollars, and the US Government can print US Dollars at will in cooperation with the Federal Reserve, the US Government will always be able to pay off its debts. Granted, this will result in a huge loss in the “value” of a US Dollar in international currency markets (a hidden tax on savers holding US Dollars), but the debt will be repaid. It’s already happened, since a US Dollar today is only worth 1/20th of a historical gold backed dollar. If you agree with the author, as I do, you must invest accordingly. Remeber the golden rule: “The man with the gold rules”.
My grandparents started their family during the Korean war and managed to send their five children to college. [Unlike now, Korea was in a severe poverty during and after the war.] So, there are quite a lot of people who didn’t go to college in my father’s generation. Back then, you could get education if you had savings and student loan was rarely an option. But now, you have the opportunity to get higher education regardless of your economic condition with student loan. I have few friends who had difficult childhood but managed to go to law school and become lawyers with student low. They are now diligently working and paying off their loans.
As you mentioned in the earlier article about coming over your circumstance rather than do nothing and complain about it, I think that student loan has broadened the opportunity to many people. But the difficult part is not getting used to living on “other people’s money.” I agree with you that the problem is not that “we have no choice in matters that lead to bankers being the master and borrowers being mistreated.” I believe that debt is not the problem to everything but rather how we treat the debt is.
As I watched the new about OWS, I wondered if they want bankers to work less and be paid less or if they want to be paid like the bankers while complaining.
One of my classmates in high school secured a student loan of $150,000 in order to study abroad. He is really smart and hard-working, and he has the dream of being admitted by a top US university for graduate study. However, as the scholarship budget has been tremendously cut and the college expense went up, his family can not afford that much and they decided to borrow money from our national bank with a relativly low interest rate. I think one must has sufficient courage and self-confidence to do so. After all, $150,000 is not little amount of money and no body can gurantee that he will successfully find a job that can make so much. I think this is a true reflection of the OWC article’s arising question: whether we are paying a reasonable price for our education and whether we should borrow money for our education. Althought this question remain debated and unsolved, there is one thing for sure that people in debt expose themselves into risks.
I agree the argument that “the rich rules over the poor, and the borrower becomes the lender’s slave.” It is people’s addiction to debt that makes people can not live without debt. At the very begining, when we had little credit, we carefully pay off our credit cards every month to establish our credit records; however, as our credit went up and we are granted higher limit amount of credit cards, we began to become out of control. When we found we couldnot pay off our credit cards any more, we were in trouble. This is a real life-cycle for most of debt slaves. Also, this is the point that most bankers and lenders have known very well about the borrowers.
This is such a great reminder to not get caught in the trap of materialism. We live in a world that is feeding us a lie that “if only you had this new car” or “if only you lived in this neighborhood” and “if only you had this pair of designer jeans,” then you will be satisfied. The problem with this train of thought is that most of us can not afford this desired level of luxorious lifestyle or the interest on our credit card bills to pay it off later. Just as the proverb says, we will be slaves to our lenders until we can repay them. 2 Corinthians 4:18 says, “So we fix our eyes not on what is seen, but on what is unseen. For what is seen is temporary, but what is unseen is eternal.” This verse nails it. I want to live my life knowing that only eternity with Christ will satisfy the void in my heart, not success that is defined by the world.
After reading this article I would have to agree with some of the comments posted earlier and their comments on the materialistic culture we live in. I find that this issue easily ties into the greed class discussion we had. I would broadly define greed as a growing behavior of wanting more than what is needed to achieve your goal til it ultimately becomes your goal. While there many exceptions to my definition based on perspectives and point of view. Based on my definition those who argue that it is unjust for them to be in so much debt as a result of striving for their goal, like getting a college education or owning a nice home, are just a greedy as those well off individuals they are complaining about. I am by no means saying that it is justified for people large amounts of debt and do agree that there should more affordable methods to get a higher education and the like. What is to say that just because you are less greedy than another individual your are more entitled. That makes no sense to me when there are so many much worse off.
I recently discussed a similar topic in another class. We talked about the debt crisis in America, how credit card companies, bankers and cash advance companies are charging exorbitant user fees. People that get caught up in the debt cycle are the ones that can afford it the least. Is it ethical to take advantage of the low income population? Well, like Dr. Shaub said, that is the trade of bankers. Personally, I don’t support the concept, but the responsibility falls on the one incurring the debt. People need to take responsibility for their decisions. Our generation feels heavily entitled and is “addicted to our lifestyle.” Just as Dr. Shaub said, “We can yell all we want, but this will not go on forever. There is a day when you have to pay.” That day is here. We cannot ask the government to provide programs and free hand outs, yet refuse to financially support the system. The responsibility does not fall soley on the 1%, but rather on entire 100%. .
I agree with the stance you take in your article, it’s troubling that a good portion of Americans rationalize their excessive borrowing and then ask the government how they are going to help them out of the hole they dug.
Last week, I saw in the news that outstanding student loan debt was over 870 billion, which is greater than the balances of credit card and auto loans. The troubling fact is that congressional members are looking into a student loan forgiveness program, which will ultimately affect our already nauseatingly high national deficit. The fact is that too many students have agreed to loans based on future hopes, and have used the student loan money to fund lifestyles that they wouldn’t be able to sustain on their own. I’ve seen this personally here at Texas A&M, I know several acquaintances who have used their federal loans to pay for new car notes and luxury apartments while not even carrying a job throughout college.
As you mentioned the debtor becomes slave to the lender, and the viscous cycle is hard to stop in today’s society. The issue I have is that too often the public casts blame on the banking institution, when the debtors are to blame.
I believe that colleges and even legislators are also partly responsible for the skyrocketing cost of education. Legislation was introduced to make borrowing for education easier for students. This is a prime example of an action being taken and unforseen consequences occuring. With the cost to gain more credit for school so low, colleges had incentive to raise tuition and other rates because the average student was now able to raise that much more debt and was willing to raise the debt to get their degree.
I also believe that there are a multitude of factors that have led to Greece’s troubles. Inclusion within the Eurozone is a major factor. The inability of Greece’s currency to depreciate against the rest of the world (and the rest of the Eurozone) has led to it becoming uncompetitive due to the strong position of the Euro. This causes their exports to not be as cheap as they should be. It is almost the counter argument to the Chinese Yuan- their currency is being held artificially high. Furthermore, Greece has always been lacking in performance and should not have been allowed into the Eurozone in the first place because it did not meet the requirements. The Greece government also has terrible problems collecting taxes from its constituents.
Fun fact- the average Grecian worker works hours in a year than any other country in the Eurozone and is one of the highest in the world.
I think it is too easy to place the blame solely on unethical borrowers in this situation and shift the burden from the banks when both sides willingly engaged in market transactions. A borrower cannot spend money they do not have. The borrowed money they spent had to come from a lender, who owes a duty to the bank or company to spend that money wisely. What has become clear in the wake of the mortgage crisis is that lending standards were relaxed to unsustainable levels.
While I agree that “bankers are greedy because they make money off of their money,” and that “their goal is to make as much money off their money as possible,” bankers have to loan their money within certain limitations. Lending is not as simple as giving away money and telling somebody to repay slightly more at a certain date. If that were the case, banks could just give away money to anyone who wanted it, secure in the knowledge that the money will came back to them with interest. This is not the case, however. Bankers have to establish strict criteria for lending that will enable them to profit from it. This includes forecasting rates of default, which is an issue that has plagued banking since the creation of banking. Regardless of the ethics surrounding the circumstances of default, banks have (and will always need) to address it in their lending policies; it is a cost of doing business.
Faulty assumptions led banks to give out what banks’ customers wanted – larger loans at lower prices. As books like Michael Lewis’ “The Big Short” describe, banks and the financial industry believed that they had engineered away enough risk to make many formerly unattractive loans financially sound. They believed that these loans were reasonable, when in reality many of them were doomed to fail. A bank selling loans with low potential for repayment is essentially selling a defective product, and selling defective products is not a sustainable business strategy.
Also, as we learned earlier in class, many people are not particularly good judges of consequences. Many borrowers undoubtedly borrowed more than they could ever likely repay to sustain a lifestyle they could not afford. For an individual, this can result in severe consequences such as poor credit and bankruptcy. For a bank, the stakes are higher; it is an issue of survival. But just like those extravagant borrowers, the banks had bought into their own unsustainable lifestyle. Banks chased these short-term returns as well, and many banks bet their futures on the prospect that they had triumped over risk. As the saying goes, “If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” Banks must manage their money effectively or face the prospect of failure.
This article really hit home for me. I agree that sometimes college can be more expensive because students choose to live a certain lifestyle, going out to eat every day, Starbucks, and over priced drinks at Northgate every weekend. When you choose to live a certain lifestyle it becomes difficult to feel bad for that person because they put themselves in debt just to live way more comfortable life than they need. College will be expensive, but it doesn’t have to cost someone an arm and a leg. If students choose to live within their means, such as your father did, then yeah you might still end in debt, but not as much debt. So often I hear students bragging about their lavish vacations or crazy shopping sprees, but then turn around and complain that they don’t have money for food or utilities. I have very little compassion for people who misspend their money and then complain about it. On the other hand, I know of many individuals who make self sacrifices to attend college, including working multiple jobs and being full-time students, or in other cases delaying school to sign up for the military so that they can use their Hazelwood act and other benefits to pay for their school. I have so much respect for these individuals that work hard. In my opinion, if you know that you will have to take out loans because you can’t afford college, which is fine, be frugal with your spending and don’t try to live a lavish lifestyle.
I agree with the materiality world in which we live in and how hard it is to stray away from the confines of that. We see it everywhere; people idolize the stars for their lavish lifestyles and want to do the same without every realizing that those stars worked hard to get to where they are today and didn’t just ask for a handout. I know all too well your plight of putting your kids through college since my father has had to do this with my two sisters and 2 other brothers. However, he was enlisted in the military before he went to college and upon exiting, he worked multiple jobs to put himself through college to obtain a double major in accounting and finance. Nothing was handed to him and I beleive that this is exactly why America and much of the world is in the state that it is in.
We are all looking for a handout instead of trying to work hard for what he want. People first look for the easy way to mkae it happen and then have to come to the realization that nothing worth while comes easy. I read an article today that showed the salaries of actors before they became actors and the job in which they held. Most were waiters who were paid a measly $15,000 a year and because of their hard work and dedication they are now making well into the millions in a year. No one told them right away they were going to make it, but they believed in themselves and continued to fight for what they wanted. America and much of the world needs to realize that hard work gets you to where you want to be and not the extension of credit that becomes unbearable when it is abused.
This discussion really isn’t about seeing the lavish lifestyle of celebrities, it’s about the feeling of entitlement being pushed on America by President Obama and the liberal media. They has forced entitlement in the minds of so many Americans that they now believe that it is the only way and that the conservative side is against them. I think class warfare throughout the Obama administration has led to a majority of the contempt seen with the OWS movement today.
Looking back on the OWS movement, I remember seeing posts on Facebook of friends posting for and against this issue. I think one of the main takeaways I had from protests based off of social issues is that there are extremes to both ends. Each side will use their extreme interpretations of the issue to argue their points. The main argument against the OWS movement was that the majority of these protesters were college graduates that majored in weak areas like liberal arts. They blamed their difficulty on finding a jobs on big corporations. They believed these protesters wanted a handout rather than educating themselves further to reach success. The counter argument was that corporations govern America and have control of the nation’s money, and that the majority of the public has no voice.
Dr. Shaub shared his family’s back story and his upbringing, and it reminds me of how my parents came to where they are today. They lived through far more difficult times and overcame obstacles I’ve never faced in my lifetime. Part of me believes that our generation has had it too easy and in the face of struggles, we break down too quickly. But I also don’t dismiss the fact that times have changed. There are more people in this world, there are more college graduates than before, and the economy has become more global than it has ever been. This is why I find it hard to take a side in the OWS movement.
One last note would be that everyone should remember to not spend money that they don’t have. This is the main root of our problems as individuals and as a country.
This is a really interesting blog to me, because I was in New York City during the heat of all of the Wall Street Protests. My office was in downtown, so we had to have our office secured by the police several times during the weeks that I was there which hurt all of the shops and restaraunts in the office building. Also, there were people who would be late to work every day, because they were not able to get through the traffic that the protests were causing. Obviously, this left me with a bad impression.
I feel like the protests are a result of a lot of misunderstanding and anger. Everyone has the ability to change their situation, but most people do not understand the business world. My brother works in construction and has a business background and told me that the reason so many construction companies fail is because the people do not understand the business side of the company even though they might be great at the construction side. I believe that people need to be more educated when it comes to financial matters. Budgeting is an important part of every day life, and you shouldn’t be putting more on a credit card than what you have in the bank. People have the tendency to act as if a credit card is basically free money, and this thinking gets them into debt. A credit card, however, can be a great thing if you use it wisely. A bank can’t “own” you if you are paying your bills and spending withing your means.
This is extremely evident of our society that right now is getting everyone used to the immediate gratification/want it now mentality. The idea of waiting until someone has enough money for something is preposterous in the eyes of many. These people are those who continue to rack on debt, and increase their fees that they must pay because they don’t have enough money to pay right now. In a sense, it is a form of greed, the continuous desire to want more and not be satisfied. The problem with thinking you will be happy “once you get there, to that level”, there’s always going to be another level. This envy can lead to an obsession with money. When money becomes an idol, eventually, he will be unfulfilled. I agree with Dr. Shaub’s belief that eventually you “will have to pay” for the things that are purchased. For some, this is a scary thought. I hope I never get in a situation like that.
With regards to companies like cell phone providers charging random fees, it seems to be “not that big of a deal” because the fees could add up to be less than $1.00. However, when you add up 500,000 people who are paying for these fees, that is $6 million dollars per year…and that’s a significant amount of money, one I would definitely consider materlal.
I believe the protests are people who view that they are stuck and do not have any other option. I believe people CAN do something- they just need to have the courage to figure out how. They can change their situation by taking a leap of faith themselves, instead of finding that their only option is to blame other people.
Borrowing money should not be taken lightly. I once heard someone in their mid-20s mention that they were considering applying for a credit card to buy a $200 video game console. The comment alarmed me. Apply for a credit card to finance a game console? Credit cards should not be used to finance everyday life and it seems like society has a false belief that because they can’t afford something now means they can put it on a credit card and pay it back later. However, there are consequences attached to this. As you said the borrower becomes slave to the lender. Not only does the person have to allocate future earnings to the lender, but they also pay more for something that’s still worth the same amount. The option with fewer consequences is to save and budget. Hard work goes a long way and struggle is a great teacher.
I really agree with this article. Too many people are living beyond their means, trying to keep up with what their neighbors and friends have. Almost every store you go to now offers you a credit card, which is very dangerous. It is so easy for our generation to fall into the trap and get a credit card because we are addicted to instant gratification. If we want something today, we will buy it even if we cannot afford it. A simple solution is don’t spend money that you don’t have, but that is a very hard lesson for some people to learn. I am lucky to have great parents and teachers that teach me how to make financially smart decisions, so I do not end up on the slippery slope.
My grandfather paid for everything in cash. When I say everything, I mean everything. He saved up for his car and purchased that in cash, he saved up for my father’s college and paid for that in cash, and as ridiculous as it may seem these days he saved up for his house and bought it in cash. He didn’t believe in the idea of a loan. To owe someone else money just didn’t compute with him. He didn’t want to become a “slave” to a lender, he didn’t want to live beyond his means, he just wanted to provide. He wasn’t a rich man by any means, he was just smart and knew that if he wanted soemthing for his family in the future it wasn’t going to take a loan, it was going to take hard work and sacrifice NOW. His logic, unfortuntaley now, is twisted and flipped into immediate gratification NOW and payment later. Its a mentality that while it may seem crazy these days, kept him out of debt and he was never a “slave” to anyone.
While this may be the extreme side to debt, its a side that i beleieve we all could pay a little more attention to. If we just slowed down and thought about what we will want in the future and what the best way to get there is, instead of having a new desire and drawing up a loan agreement on the spot, we could change the face of lending in America.
The one line you said that stuckw ith me the most was, “And our “bankers” are not letting us borrow with our best interests in mind.” Bankers can be the nicest, most convinceing people in the world, but at the end of the day, they have to make a profit and that profit will come at our expense if we aren’t careful.
I think materiality is the main cause of debt. There is always a newer version or a newer style of a product that comes out, making your version that you had purchased 6 months ago “less cool”. As a result, you buy the newer version, even though you do not have the money to do so. This is especially true with college students and apple products. Most students are purchasing these unnecessary products with their loan money/debt which they are supposed to be using for rent and food.
I do not believe the banks are evil. It is your decision to borrow and if you do not think you are capable of controling your spending with a credit card, then dont apply for one, or dont borrow money. I am fortunate enough to not have to worry about loans when I get out of college. My dad recently told me a story about how his friend who is a dentist and in his 40s is still paying off student loans. If you are not careful you could get yourself into serious trouble.
Crippling debt from student loans, irrational purchases and “$40,000 Millionaire” syndrome is just simple entitlement driven by the need for instant gratification. Typically, these are mediocre individuals who feel as though they deserve great rewards for a lesser achievements and are simply unable to comprehend why they should have to wait to reap their rewards.
I believe this entitlement is probably rooted in our country’s continued prosperity over the last few generations. People have just began to expect that they will have as much or more wealth than their parents. The fact that our internet generation has become accustomed to the instant gratification offered by the internet only compounds this issue. We are entitled and impatient.
I think that it is very true that we, as a country, are obsessed with debt. I think we live in a culture that is completely fine with buying something today that they “think” they can pay off tomorrow, but any time you add that future payment variable into the equation, you add risk. I don’t completely agree with the ways banks/bankers make money, but I’m not the one to have an answer to a system that is not perfect. This world has seen everything from a free market economy, to a communistic society, and we have had thousands of years to perfect a system, yet we still don’t have an answer. In my opinion, we won’t ever have a perfect system. As long as we have the “human factor” in our markets, we will have an imperfect system. There is a reason for the saying “I’m only human”. Therefore, I agree, that we are to take responsibility for our own spending, as well as educate others on their spending habits.
I was told that Texas A&M had one of the best college education for your money. So I decided to go look up this statistic and I came across this article: http://www.kiplinger.com/tools/colleges/index.php?state_code%5B%5D=TX&id%5B%5D=none&table=public#colleges. While college education is expensive, I think we should all be thankful that we go a college that offers us an excellent education for a reasonable price.
I wholeheartedly agree with this column. People today are addicted to materiality, and they will do anything to satisfy it, including burying themselves in debt.
I too was susceptible to this when I was looking to trade in my truck for a car for better mileage. In the beginning, I was looking small. However, during my search for a car, I started to get a thought in my head that I could afford a nicer car than the one I purchased. I was willing to sacrifice how new the car was, the mileage, and even considered purchasing a car without a clear title.
I believe this materiality is due to pop culture today, telling us that we deserve the best and biggest things. Only until we reevaluate our spending habits, America will continue to spiral into even more debt.
I was fortunate enough to be born in the family I was that my grandfather paid for each of his grandchildren to go to college by setting up a fund with a program called “Texas tomorrow.” I do not think many funds like it exist today because of the steep rise of costs as mentioned, but I still do not know if this is a wise investment. I have seen my cousins attend maybe one year of college and simply drop out to go work. They are squandering the gift that was given to them. For this reason I do not support bail outs, many times they take place on emotional reasons alone such as “too big to fail” when in reality the economy is going to suffer either way. If the week are allowed to rise again to further weaken the economy what is the point. After billions of dollars already spent to help Greece they are no closer to fixing their problem than California with the some of the highest taxes in the US. If we do not hurt some feelings by letting the failing expenses fail, then our country as a whole will suffer greatly and then what will our options be?
I was actually in New York City, on Wall Street, during the peak of the protesting. I struggled as I observed. I understand confronting injustice, and I understand frustration with corruption – we have seen the consequences of these things in huge corporate buckles such as Enron and WorldCom in which the public interest was compromised. However, in an agreement to your point as well, I do not understand the OWS movement as it does not seem to have a valid standing nor wheels with which to obtain results. The protesters I witnessed were unfriendly, angry, and ignorant to the real issue at hand. I am a believer in each individual’s equal opportunity to work and improve their status in life, all the while maintain wise financial decision-making.
It is sad how materialistic we have become today but really our society has advanced so much. It’s easy to say that our grandparents paid for everything in cash, because that was basically the only option. With the increase in technology across the globe, we have gotten accustomed to this technology and its hard to remember what we did when we didn’t have an Iphone or direct TV. I am thankful that my parents are able to afford to pay for my tuition because I would probably live a different life style if I was taking out student loans. I think its hard when we see other students who do have everything, so we feel the need to spend to do the same even if we don’t have it. I think it is harder to save today with all the temptations to waste money on material things, which is why our generation is continuing to drive up the national debt. As we start our careers next year, I think the most important lesson is to learn to save some of your paycheck for the future and not blame someone (OWS) for your own problems.
Signs of our materialism are everywhere. Starbucks is everywhere. Whenever I’m on the bus, I see all these people on the latest iPhone, when a simple phone would work just as well, without internet capabilities maybe. I see lots of people with iPods. There are a lot of reality shows where people are seen with expensive cars and money although they don’t seem to have any real income, with the exception of the money they received from being on the show. I once saw a World War II short with Ann Miller on the evil of buying with credit and how it was somehow linked to Hitler. Oh how times have changed.
I do believe this movement is based on a change of times through generations. The earlier generation was plagued with fighting for a bigger cause: Vietnam, equal rights, WWII. Our generation is fighting against student loans.
Recently, society has portrayed college as mandatory if you want to live a life worth living, which is not true at all. So students are withdrawing money, they don’t have, in an overly optimistic belief that they will be making highly competitive salaries after they graduate. Then, when the future approaches and they cannot find a “good” job, they again look for instant gratification and fight for their idea of a “bigger cause”.
In the past, college was an experience you went through if you have the means to do it, not because everyone else did. The past is filled with people who took time off to work for a couple years to afford college, my dad being one of them. Society needs to portray this lifestyle as an alternative to student loans instead of quitting whatever job you might have now to join the 99%. People should work with what they have, not what they want.
I am very thankful to attend the university voted top public school in Texas based on bang for its buck majoring in a degree that has already provided future job opportunities.
I think another oft overlooked culprit in the OWS movement is the way our generation was (in general) raised. The most common environment in which we were raised was filled with people who told us that we were exceptional and can do anything we want. Which is nice I guess, but then folks are shocked when their degree in Neo-Classical Cryptozoology doesn’t lead to a six-figure job with health benefits.
Many accounting students don’t choose that degree because it’s really fun. Job security almost always plays a role in that decision. So when, a few months ago, my friend asked “would you really tell someone to pick a certain major just because of demand for a job?” My answer was no, but that I would tell someone to not pick a major (or go to college at all) because of a lack of job demand.
Talking with my grandparents, it’s easy to see that their generation was much more inclined to believe that they were responsible for their well-being. The Occupy Wall Street movement seemed to be fueled by an overwhelmingly external locus of control. People aren’t sure why they don’t have their job, but are certain that the blame lies with some party far-removed.
After trying to critically evaluate the actions of Occupy Wall Street, I feel that members of the group are very naïve of reality. I would feel frustrated if I couldn’t get a job, but the truth is that many degrees do not prepare people for any kind of white-collar job. I hope this is not too offensive to those reading, but many philosophy, history, and English majors just do not gain practical business knowledge from their degrees. I have talked to a few of these recent graduates, and they are astonished that a year or two out of college that the creative essays they wrote are not making them a viable candidate at an investment bank. They are bitter that their only job has been at the Genius Bar at an Apple store or a waitress at Chili’s. Again while I would be bitter about all the money and time I spent getting a degree, some amount of forethought is expected in life. Jobs do not just come to people; people must prep and plan and remain realistic of the opportunities available. If anyone is to blame for the flood of jobless college graduates, I feel the blame should fall back on the universities that lied to students. They told them that the degree would prepare them for life; they told them that if a bachelor’s degree doesn’t do it, then a graduate degree of the same kind would. Maybe colleges should be forced to be more transparent about expectations because some students will always be gullible when dealing with institutions of authority.
Additionally, I agree that people can greatly limit the amount of debt that they enter into. Most people get into debt because they feel entitled to a new car, a big house, and fancier toys. I know one couple that currently is struggling on $130,000 a year. You could ask how that is even possible, but in the last 3 years, they seem to just drain money. They financed four new cars, an enormous house, all their furniture, and even financed an $800 paint job for one room in their house! Even with all that, they complain that they are not given enough in life. This could just be the accountant in me, but I say that they need a good, hard look at a spreadsheet. They need some realistic numbers to get a reality check. I feel in many ways that the Occupy Wall Street people could be a version of the aforementioned couple, just without jobs to help them scrape by with their lifestyle. Maybe America needs some serious, mandatory personal finance classes in high school.
I agree with your sentiments, Dr. Shaub. It seems that most people are consumed with the desire to accumulate more things, which leads to increasing debt. Most people view credit cards and debit cards as just “pieces of plastic” and try to live above their means. Sometimes it is unavoidable to take on some debt, but one must be careful to not take on more than he or she can handle. As you said, “the borrower is a slave to the lender”, and the more debt one accumulates creates more “slavery” to lenders. Ultimately, it will be my responsibility to take on and relieve myself of personal debt, so I don’t see the point in “occupying” College Station to voice a frustration I originated. As I approach my own financial independence, I hope to make wise decisions regarding my expenses and how much debt I should take on.
I agree with Dr. Shaub’s point of view. Nobody points a gun to your head to force you get a credit card or buy a bigger house. It is all a matter of your own personal choice. The most important thing is that we need to be responsible for the decisions we made, such as do a good job at work, be committed to your spouse and family, and pay off your debts. I have seen two ways of spending. Where I grew up, the culture is to save enough money until you can afford buying something. So you often see people saving for so many years then pay all cash to buy a car or a house. Whereas over here in the United States, people borrow money from banks and live on two plus credit cards. It is not perfect in either case. We need to find a balance between these two.
I believe that it is the American culture to use credit cards so frequently, no other country in this world uses credit cards like we do here. In my family, my Chinese parents hardly use our credit cards, and even if they do, they pay off the debt right away. I was not allowed to have a credit card until age of 21, because they believe that “a man in debt is as far a slave”.
Dan, I agree with you that many Americans abuse and overuse their lines of credit. It all boils down to being responsible and not spending more than you have. This sounds like common sense and is obvious, but what’s even more obvious is that so many people just don’t get it. This might sound crazy, but my parents forced me to get a credit card when I was in high school as soon as I got a job so that I could start building my history. It was a “Platinum” Capital One with a $750 limit, and neither of my parents co-signed or even looked at the paperwork. I still have that card in my wallet today, along with 2 others, and for the past 5 years or so, every balance I’ve ever had has been paid off on time and in full. In fact, one of my cards requires that I pay in full every month, no matter how much is charged to it. The key is to use these things like cash, and to only spend what you have – not what you’ll be getting next month or next week. It sounds simple but it’s the truth, and so many people get into big, big problems because of it. Opposite of your parents, I buy everything using primarily one credit card, and it’s because I want to continue to build my history and because I get rewarded with points/miles. Looking at some of the comments on here, a lot of you probably think this sounds ridiculous, but it works for me because I know how much I can spend, what I can and can’t afford, and have been “trained” to do so ever since I opened my first account. If used properly, credit can open a world of possibilities for someone. If it’s abused and overused, then unfortunately you end up playing the role as “lender’s slave.”
I believe our culture as Americans has been bread from the top, and as we all know our leaders have not been the wisest budgeters. Citizens see the national government accumulating debt at an exponential rate with little real responsibility to the people in which the funds were procured from. They also have the influence of the media telling them the next best thing to buy and teaching us to look up to those who throw money around for amusement. I believe this influence and leadership coupled with the enticements from credit companies has fostered an American addiction to spending beyond our means. All around me I see people who feel entitled and feel that they deserve the same belongings as others. They do not consider what the other person had to do in order to EARN those items. All they see is the end result, that person has things and they do not. I agree with previous comments that allude to Americans feeling that they are owed something. Why shouldn’t they? Everywhere you look from our government on down perpetuates a society of hand outs. I know that many organizations give handouts in good spirit and this is not to say some people do need occasional help. However, I recently watched a news cast that followed a young able-bodied man on his way to collect his monthly food stamps. When asked why he did not hold a job and relied on food stamps, he answered, “I deserve this, I am an American!” Sadly, many people feel this way, and too soon we will have too many people in the wagon and not enough pulling.
I agree with Dr. Shaub’s points. We as a society need to learn to live within our means. For some reason we all think that once we graduate college we will be making the money our parents currently make and so we should immediately be able to live like they do and have everything they have. It’s silly to think we are entitled and deserve a lavish lifestyle just because we were able to attend a great university and earn a college degree.
I think (myself included) we need to be more humble and thankful for the things we do have and the opportunities we have been blessed with. I am learning that it doesn’t take six figures, a nice car, and nice things to live a content life. Money does not ensure happiness, and blaming others for our financial problems won’t solve them.
One of the most important points to make here is to live within your means. People are getting into trouble because they are making purchases they cannot afford. They are not being held accountable for their bad decisions and sooner or later it will come crashing down on them.
Also, those who are Occupying Wall Street are doing nothing productive to eliminate their problems. Standing outside with signs is not going to change the situation the are in. If they are complaining about the debt they have accumulated: 1) they should have been more conscientious of their purchases and live within their means, and 2) they need to start doing some type of actual work to pay back what they owe.
College is expensive and I thank my mother everyday for saving the social security income I received as a child to pay for school. Because of that money and working part time, I will be able to finish school in August without only on loan. This loan is to my grandmother who helped me pay for my study abroad. I don’t typically count that as an official loan because my grandmother is willing to work with me as I slowly pay her back. I feel so blessed that I will not have to worry about school loans.
The biggest goal for me is to make sure I live within my means. This is very important as I start out on my own. I know people who do not live within their means and have thousands in debt, but in loans and credit cards. I believe if people learned how to budget when they were in college rather then relying on their parents, we would have less people in trouble with debt.
The OWS movement is honestly one of the most embarrassing things that has ever occurred in our country. I wish I had the means to go to NYC for a few weeks and hangout. It sounds nice. The incredibly low interest rates we have had since the dot.com bust and 9/11 have acclimated people to the idea of quasi-free money. Now that times are tough, rather than buckling down and making lifestyle changes (like getting a degree in a value-adding career), we all look to blame others, especially the ones who are better off than ourselves.
What is interesting to me is my personal experience with the OWS protestors. During my internship last fall, I was traveling to a client based in Oklahoma. We stayed in the same hotel every week. From the higher stories, you could see a park that was filled with “Occupy Oklahoma City” protestors. One night after dinner, I was walking with my team back to our hotel. A handful of the protestors were walking along beside us on their way back to the park. They began a conversation by asking if we would like to join them which, of course, we declined. It started a conversation though. They wanted to know who we worked for, how many hours we worked, if we liked it and mainly why we did it. They were very interested in our answers, but it was easily inferred that they did not agree and would never be in our shoes. It really made me think about why they were out there. They basically told us they were just out there because they wanted to be “a part of something” and it was “fun”. Is that really a good reason? It was an eye-opening walk back to the hotel that night and something I won’t forget.
I agree with this blog, a lot of Americans don’t think about the future when running up huge debts. They run up credit card bills in order to have things that they want today. Thought is not always given to how they are going to pay it back. As Americans, we are not known as savers these days. When did this change? Like the blog said, we now feel entitled to things that, years ago, people knew they had to work for. I’m no different. I never questioned that after high school, you go to college. So does the benefit of education outweigh the cost of running up a debt? I think education is extremely important, but student should not go into it willing to accept huge amounts of debt. And not everyone does. Plenty of student work, thousands of people apply for scholarships, and tons of grants are given out. But this is only a small part of the debt problem in America. I think the people running up bills for things like apartments they can’t afford or cars they don’t really need are in serious trouble. If they don’t change their mindset, they’ll never get out of debt.
Thank you for writing this blog. One of my 10 Principles is actually “living within your means.” Debt has always been an important topic within my family. My parents always tried to live debt free. It hasn’t always happened as circumstances do come up, but it was something very important to them. Because of this they have instilled in me that I should strive to owe no one anything. It has been difficult for me throughout college as I have had to take out loans. This in part led me to pick a major that was in demand and provided tangible skills, as it is very important to me to get a job that would be able to pay off my loans as soon as possible. It is difficult not to want a life defined by your possessions, even if that means you take on some debt, but I have learned that the benefits of staying debt free far outweigh the costs.
I enjoyed this blog. It is heartfelt and well written. I agree with most of what you have said. I think the worst thing about debt is its risk and should be avoided, but debt can also do good things for people. Right now our collective debt burden is too high to be a good thing, but as a society I think that our ability to borrow makes us stronger. We can do more things, better seize opportunities, and pull ourselves out of a bad situation more easily. While the majority of people who pulled equity out of their homes before the financial crisis did it to increase or maintain their current levels of consumption (not a good idea), a significant portion did it to start their own businesses, pursue their dreams, and to invest in new ideas. The ability to get our hands on cheap capital quickly without a doubt makes us stronger as a nation and as a society, but you are right we cannot become its slave and we are risking doing that.
Although the OWS movement has been focused on greed I think there is more to it than that. Income inequality is the highest it has ever been due to the bush tax cuts and lowering of the capital gains rate that disproportionately benefited the top 1%. Trickle down economics do not work, middle class wages have not risen at all in real terms since Clinton left office, while the top 1% claimed around 60% of the gains. I don’t think that is fair, we are losing the middle class that made us great.
I wholeheartedly agree with the sentiments in this blog. The federal government’s justification for their recent increase in prices continues to confound me. Originally, I’m from Houston, which arguably boasts one of the best welfare systems in the country. Since the 2008 recession, there has been a constant barrage of stories on the local news about possibility of reducing the city’s expenses by cutting the welfare programs.
One story stuck out to me in particular. The cameras went on a shopping trip with a man who had been unemployed for several years and was living off welfare. He made a particular point of stopping in the freezer section of the store and noting that his food stamps didn’t allow him to get anything from those aisles; that all he could buy was fresh fruits and vegetables. He then lamented the fact that this meant he had to cook and prepare his meals on the stove every night. He then took the cameras to a street corner and complained about having to ride the bus to get from ‘Point A’ to ‘Point B.’ For him, public transportation was virtually free but, he seemed to think it was a god-given right for him to own a car and he thought it was the taxpayers’ responsibility to provide him with that right. He said that it was a right on par with the rights of life, liberty, and the pursuit of happiness.
To get our nation’s debt under control, rather than protesting prices or raising taxes, I believe it would be more prudent to take steps to reshape the consumer viewpoint on what qualifies as necessities and what qualifies as amenities.
This was a great blog to read and a reminder of how many people are spending money they don’t have and most of the time it is for things they want and do not even need. These days its seems like everyone is competing to be the best and a little competition never hurt anybody, but it’s the mind set of HAVING to keep up with the Jones’ next door that all too often gets people into financial trouble.
It seems like in this generation of America has the idea that debt is normal. This idea of debt being normal has caused millions of people to be in the troubling financial situations they are in today. In order to reduce the amount of consumer debt in America, we must first change the way we look at debt. It needs to be seen as a crutch holding us back, not a tool moving us forward.
I never thought about how we have become addicted to our lifestyles and how it has become a problem for our nation. You were right when you say that protesting the rich greedy 1% is like protesting warm weather in Texas. Of course we wish things could be different but protesting will never change anything for you. In fact, that time could be used working to pay off whatever debts they have. People need to try to have an internal locus of control rather than external and they will be happier in the end.
I agree that the uproar of debit card fees is ironic. The banks are using the same tactics as other business; however, everyone is upset because it’s working. More importantly, I agree with the idea of an obsession to debt. I am absolutely guilty of spending my paycheck before it’s even deposited. It’s easy to rationalize the spending, but it has the potential to get out of hand very quickly.
I believe many high school graduates believe college is a right, rather than a privilege. In this way, they justify their view on tuition amounts. Yes, college is expense, but the cost is not unfair. And yes, some colleges are more expensive than others. Does that mean I should be upset about having to shop at Target rather than Neiman Marcus? I don’t think so.
The debt I feel is a surface issue of a much deeper problem. I feel our sense of entitlement has run rampant.
When I was a child after I got a shot at the doctor, my mom would allow me to get one toy from Walgreens if I did not cry. When I was sprinting down the toy aisle, proudly sporting my band-aid, I often would ask if I could get several toys. Unfortunately, my pleas fell on deaf ears. She never said no because we couldn’t afford it, but because I only needed one.
It was a powerful lesson to learn for me. Now I feel many (including U.S. Congress) go down the aisle getting every toy they want. I know it’s a gross simplification to a complex problem, but humility is a simple idea.
I am very fortunate to be going to Texas A&M. My father did not go to college out of high school. He got a degree from the community college many years later. We have never been strapped for cash on a firefighter’s wages for a family of four. The idea you must put yourself in a mountain of debt to attend the most prestigious school to be successful in life I feel is a myth. The harsh fact is many are incapable of living within their means.
You are absolutely correct in stating that we still have a choice. Living within one’s means is the first step to combating the issues addressed by the Occupy Wall Street movement. America has been moving towards the trend of spending money they don’t actually have and becoming upset when left with the associated debt. Consumers have lost the essiential idea of rights verses privileges. Many take on massive amounts of debt for material items they either can not afford or feel they must have to maintain their desired lifestyle. To fix the issues our country is currently facing, we must alter our own viewpoints and begin to exhibit financial responsibility.
There is a lot of truth to this article that it is actually very frightening. We have all grown up in this materialistic society and the day will come when our actions will come back and bite us. Buying houses that we can’t afford and clothes that we don’t need just comes from pressure from society. We want our friends to notice the nice house and our new car. We all want to grow and get something bigger and better. I ask myself, why can’t we be conformist when it comes to debt? I am guilty of this just like anyone else, but I feel we should all start asking ourselves “Is this something I really need or is it just something I want?” Yet I think that it would be really hard to change the way our society thinks of spending until something really bad happens. Only then will we realize how important today’s actions are to our future, until then, I think it will be hard to change the way our society thinks about overspending and excessive debt.
People assume they are owed things like convenience of a debit card from their bank and they’d rather make a fuss rather then look for other options available in the market. It’s disgusting what some people feel they are owed and how they plan their lives around those assumptions. Seeing other people live above their means does not justify you trying to do so as well, it’s this entitled mass mindset that that’s driven our economy into the low levels it’s reached in recent years.
Debt hits pretty close to home with most students, myself included. But, if one wants to go to college and graduate before getting married and settling down, debt is a must. That is, unless you are fortunate enough to come from wealth, which I am certain a large number of A&M students do. This is especially true in Mays Business School. I, for one, would not been able to attend Texas A&M and do so well in my studies, if it weren’t for student loans. Yes I could have gotten a full-time job and tried to work my way through school, but this would undoubtedly have a negative impact on my academic performance. Debt is evil; but, it is a necessary one.
The thing I question is whether the media is a contributing factor to the youth of today diving deep into debt. When you watch TV shows such as “How I Met Your Mother” or “Friends” you see characters you seem to be living very comfortable lifestyles, lounge around at coffee shops/bars all day, and financial woes are barely an afterthought. I know that when I was younger, I thought the shows portrayed adulthood exactly as it would be. It makes me think if people believe they are entitled to the exact same lifestyle portrayed on these shows. The unfortunate reality is that most people have to work to support a lifestyle half as good as this.
Great article. The overarching theme I took away from the reading was “personal responsibility”, or, lack thereof. In my opinion college students, young professionals, families, ect. going into massive amounts of debt is but a reflection of a deeper flaw within society. It is a flaw that stems from enjoying one of the highest standards of living in the world, and benefiting from an elder generation that strove to provide their children with a better standard of living then their parents gave them. This altruistic desire by the elder generation, led to the development of an entitled generation which damns creativity, inovation and dedication, while accepting a welfare doctrine. A doctrine that says I am owed something by society, purely due to the fact that I exist. In my opinion it goes back to the saying “give a man a fish, feed him for a day. Teach him to fish and feed him for a lifetime.” On a daily basis I am surrounded by individuals who have been given “fish” their entire lives and have not the slightest clue what living a self sufficient, responsible lifestyle entails. It is a sad but true reality that in cases such as this, it usually takes a society hitting rock bottom before corrective action is taken. I pray that we right this sinking ship while we still have the opportunity.
I think one of the biggest mistakes students make is not calculating the long term effects borrowing too much money may cause. A lot of students prefer to take loans out now and not work because they assume they will be able to find a job easily out of college and can deal with “the problem” later. I have heard and experienced with my own parents that the majority of the fights in a marriage are related to money. The stress of having too much debt can really put a strain on a person’s marriage. Like the famous expression says “if you fail to plan, plan to fail.” I am just as guilty as the next and I truly believe the root of our debt problems is a failure to plan. Like Dr. Shaub said parents are no longer planning for their children’s education funds. We have seen a shift in retirement as well. People are not saving as much money as they should be because they prefer to live life in the now. I also believe that the problem with our country is the lack of competence with loans. People should be aware of their loan terms and the impact high interest rates and minimum payments can have on their end balance. The accessibility of loans in this country is also a huge problem. There needs to be more controls set in place so banks can’t lend to people who have a very low chance of being able to repay the loan. It isn’t fair to entice people to borrow money when the loan officer knows they can barely afford it.
The most facinating part of OWS is the fact that the top 1% of income-earners account for 17% of gross earnings (nation-wide), but pay 37% of the federal taxes. With that in mind, it is hard for me to understand the inequality that the movement object to.
We, as a society, are in desperate need for a “revival” surrounding personal financial responsibility. Dr. Shaub, this might be a great start for that book you are thinking about writing! It is certainly a critical time for the American people to realize our path toward financial ruin.
I think stores or banks use credit card to stimulate the desire to buy and it is a way to stimulate market demand and economic growth. The economic growth is not only based on demand, but also on supply which means people are willing to work hard and increase the productivity. It is supposed to be the healthy cycle, but the reality is not always running the way it is planned. When people are addicted to consuming over their means, something is on the way to be paid off.
I’m originally from China and lived in the U.S. for nearly 4 years. I travelled to big cities like New York City, Chicago and DC but spent most time in some towns like College Station. I have to say the average level of American lifestyle is way better than in China, especially suburban ares, maybe big cities like Beijing, NYC are in the same level. From the point of debt, it is a little controversial that the U.S. has a large debt deficit but the life here are not impacted a lot, and China lends out tons of money but the life in the suburban are not improved. Of course, there are many other reasons such as political, history and so on. I just want to point out that the right of addiction to their lifestyle should be based on what people contribute.
“The rich rules over the poor, and the borrower becomes the lender’s slave.” I believe that this sentiment is becoming more and more applicable to the borrowers of today’s society, who see their friends’ successes and want to do anything to replicate that level of success (material possessions) now.
Delayed gratification and suffering have become as repulsive and taboo in our society as adultery once was. There are too few who, like Dr. Shaub’s son and father, are willing to live below their means and sacrifice the near-term for the long-term benefits (which are seen not only within the family but society as a whole).
A reversal of this trend will only be possible if there is a shift in the mentality of the American population. I believe that a Christian view that suffering is good and brings you closer to the Passion of Jesus is needed to achieve that. Getting the American population to believe that, in this secular world we now live in, is another story.
This is completely true. I am an international student, and I remember seeing a report on ABC (which we do get in Saudi Arabia) talking about the average debt held by a family, which was around $100k if I am not mistake, and my only thought was “how do they get to that point?” Keep in mind that the environment I grew up in was not accustomed to credit cards or buying anything on a payment plan. My father bought his car with cash after we had saved up for it. As you said, we are getting accustomed to the comfortable lifestyle, but if we want to avoid what happened to Greece here in the US, people need to start living within their means.
The one problem I have with this is the use of college students wanting an education and not being able to afford it. A house or car they can’t afford? Sure. Those are luxury items. Education? Not so much. Too many people don’t want to be successful because they see it as unattainable. It is a goal that cannot be reached no matter what. How is someone supposed to set aside and save money for college when they are already living paycheck to paycheck? The problem with debt is that it has found a way to target youth and exploit it to make more money. I know there is personal financial responsibilty. A student should be educated of the risks and costs of student loans; the issue I have is they are not. Our schools do not go over how much a loan will cost. The system focuses on getting high test scores, not on nuturing youth to enter the adult world.
This is a meaty post, and I found myself both nodding and shaking my head at various points in reading it. Nowadays OWS doesn’t represent even a blip on the radar of relevance, but there will always be these kinds of movements as long as income inequality continues its ominous trend in this country. Hard-working people will look at the opportunities available to them, compare them to those available to others, and inquire about the variance.
“Most debt is volitional.” While true, it dangerously shifts most of the burden in a debt transaction on the borrower. “Volitional” suggests that the borrower makes a conscious decision about all terms of his/her debt, but what if the originator is not completely forthright? When originators are predatory in their lending practices, from where do the incentives come? The latter two-thirds of the “OWS” acronym.
Fiscal responsibility is imperative to one fully embracing their natural rights, and movements like OWS tend to misguidedly label the imposition of budgets of any kind as austere. Yet the radical resolutions of these movements should be tolerated for the sake of paying at least some attention to the issues they raise. Higher education is billed as an unquestionable next step for many middle-class-and-up high school students. For lower-income schools, getting their students to any college is the ultimate goal (besides getting their students to pass standardized tests, but that’s for another day). If such an importance is placed on a college degree in our society and economy, which direction are students being pushed? The result is a growing debt burden for most students before they can earn a cent to pay it back. Even many smart kids aren’t mature enough to foresee the fiscal reality that awaits them after getting a borrowed diploma.
Tightening the belt doesn’t work the same way for everyone. People such as those who give themselves fully to causes like OWS may look and act kooky, but the valid and disturbing trends on which they shine light are worth the debate.
This is probably one of my favorite topics to hear commentary on. The consumers say the banks tricked them, the banks say they were the ones who suffered. The truth, as is usually the case, is somewhere in the middle. Both parties are just as guilty of being greedy. The word greed is defined as an intense desire for something, this is not strictly a bad thing. We all have intense desires, whether it be to help others, seek justice, or build personal wealth. Greed is also not a new concept, people say we suffered a recession because banks on Wall St. got greedy. Have they not been greedy all along?
The problems we are facing are not a result of greed, but rather by a lack of responsibility. As for the consumers, when taking on a loan they could not afford, could they really not understand the concept that what they were doing was creating an incredibly levered investment portfolio for themselves? Is this not the same thing they criticized the banks for doing? They blame banks for repossessing “their” house when they did not make payments on their loan. But they made a promise to someone who trusted them and expected they would keep their word. By not paying they were causing pain to the one person who let them borrow money. And as for the banks, should they have stopped these people from making these stupid mistakes? Is it their duty to decide for the customer what they need, or are they servants who respond to customer’s demand. Would they even have been making sub-prime loans if it were not for the government’s encouragement of home ownership? Would there have been a willing buyer for the sub-prime Mortgage Backed Securities if Freddie and Fannie were not required by the government to hold half of their portfolio in sub-prime loans?
It seems that everyone wants to point fingers, but the financial crisis occurred because of all of us. Especially us who made promises that we could not keep. Personal accountability goes a long way in situations like this. What we really see here is a nation that insists on living beyond its means.
Thank you for such an honest and “against the grain” point!! Speaking as someone who will be graduating with a large amount of college debt, I have thought long and hard about the role I want debt to play, or not play, in my life and in the life of my family.
I have been reading Dave Ramsey’s book, “Complete Guide to Money” and it highlights the freedom of making sacrifices to live debt free. I think is is a concept our culture believes is nearly impossible because we are so unwilling to live a simpler lifestyle or make short term sacrifices. If I’m being honest, I have been guilty of thinking that debt is a quick-fix or an easier route because you can always pay it back later. But what it really ends up being is a burden that holds you back in the long run. I hope that as I become financially independent in the next few months, I will place a high priority on savings and planning ahead so as to make investments or large purchases with wisdom and peace of mind.
In my opinion, the basic concept of debt is not innately negative. If handled properly it allows us to seize opportunities that we would not otherwise be able to take. However, I believe the productive use of debt has been virtually destroyed and exchanged for an excuse to be greedy and irrational with what little money we do have.
I believe one of the most common stories is about how “I had it harder growing up than you do now.” Sometimes this sentiment can stem from mere jealousy of how “cushy” we have it today. For the most part though, I think this idea comes from a very scary truth. Today we are more spoiled as children. Most parents want to give their kids the childhoods that they never had. To make their kids always feel like they are a winner. That mindset is very noble, and to be honest, I’ll probably do the same with my kid. The problem comes from when this is taken to extremes, and they don’t know what it is to lose. So, most kids don’t get taught accountability and humility. Instead, we are taught to expect to get everything in life, and it comes easy. Most importantly, we are rarely shown the full consequences of our actions. As a result, most children don’t know how to react when they are told that something won’t come easy, so they look for the a easiest way to get what they want. In general, I think it is this mindset that has caused most of our problems, and it would take a huge event in order to make people realize what it means to struggle.