But hey, that's just me.
Families, Deep in Debt, Facing Pain of Growing Interest Rates
With the Federal Reserve about to raise interest rates for the first time in four years, Joyce Diffenderfer is beginning to wonder how she and her husband, Curtis, will deflect the growing cost of their $16,000 in credit card debt.Hey, remember all the Kool Kidstm telling us that humongous federal deficits wouldn't do jack to the interest rates? Myself, it still brings a tear to my eye to remember hearing Greenspan telling the poor saps to go for adjustable rate mortgages just mere months ago.Not that her concern is a pressing issue yet; it is more like a fire drill in anticipation of a fire that she is still not convinced will occur. The Diffenderfers figure that a modest rate increase would initially add only $35 to their monthly card payments, which now total more than $600. Still, they have run out of ways to sidestep the cost of borrowing, and if the rates keep rising, as the Fed's leaders suggest they will, then the only alternative, Mrs. Diffenderfer said, will be to seriously cut family spending.
The Diffenderfers are among the millions of American families who rode the recent wave of low interest rates to home ownership and the rapid accumulation of debt, and now they must cope as rates begin to swing upward. The process is almost certain to begin at a meeting of the Fed's policy makers on Tuesday and Wednesday. They are widely expected to raise rates a quarter of a percentage point and follow that with similar increases periodically over the next 18 months.
Priceless.
I'm not sure what you're advocating, Hal. Interest rates should never fluctuate, or only go down?
While I don't know for sure, I'm supposing that you don't believe that Bush's tax cuts were even partly responsible for mitigating the depth or duration of the recession. On the other hand, the premise of this post is that the Bush tax cuts gave people so much extra money that they decided to go deep into debt that can't be sustained once interest rates rise. I have to admit that my head is spinning trying to work my way through that one.
It appears that the Diffenderfers made some mistakes which generated their overwhelming debt. I'm not chastising them or looking down my nose at them, for sure, since I've gotten myself into financial binds over mistakes and misjudgments myself, too many times to count.
But I've never blamed tax cuts, rising interest rates, rising property taxes or anything else for my mistakes. That responsibility was solely mine. As, I believe, the Diffenderfers' problems are of their own making.
Hmmm. So taking the advice of the Federal Reserve is irresponsible? I'll keep that in mind.
Also, the point is not that interest rates are going up - although Herr Greenspan's irresponsible advice right before they do certainly is one of my points - the point is that anyone who pays interest is going to pay MORE interest because of the massive federal debt that our brilliant, theoretically conservative administration has endowed upon us.
That means higher interest rates on credit cards, house loans, car loans, student loans, you name it.
And yes, this is all (31%), undoubtedly, due to the tax cuts.
So, not only are we saddled with paying off all the money given away - the vast, vast bulk of the tax cuts going to the top 5% income earners, not the lower income earners - we will have higher interest rates to boot!
Brilliant plan.
Hmm, you seem to have digressed from the point of my comment, and misrepresented the Fed's advice to boot. Either that or I missed their news conference where Greenspan advised Americans to max out their credit, so they'd be overburdened when interest rates eventually climbed.
Gotta link?
P.S. Sorry for the long delay in responding.
Actually, the second link in the post has the Greenspan quote
If you want to debate the rapacious credit card industry, that's another conversation (18% when the funds rate is at 1% is simply criminal). Sad fact is that household debt is at an all time high - due to people using their credit cards to tide them over during the Bush economy.Now, one can make the personal responsibility argument - and believe me, I have. But I've also grown up in a family where this was a painful reality of my youth. My parents were hardly living the high life and this stuff was overwhelming. I think unless you've actually experienced this, it's incredibly easy to "tut tut" it away. Which is part of the problem - empathy seems to be a quality that has long since left the public discourse. . .
But, bang away and give the standard Calvinist line - it's not like I didn't grow up with it. :)
How about this, Hal: we can both agree that most folks who rack up huge debts bear the major responsibility for their situations, and the credit industry makes a habit out of raping the consumer. Oh, and Greenspan's remark was incredibly stupid. Now that you mention the specific quote, it brings a faint glimmer of memory.
Next thing you know, he'll be recommending that folks who put 20,000 miles a year on their personal cars should be leasing them instead of buying them.
And trust me, I didn't grow up wealthy by a long shot. My father was a country preacher, and my mothers long (and ultimately fatal) illness put my dad in the situation where, as he once told me, if someone had handed him a $100,000 bill, it wouldn't have been enough to pay off his debts, and this was back in the '60s.
Just so you'll know that I'm not one of the snobby elite you refer to. But I still view much of the "empathy" you say we've lost as really just letting people not take responsibility for their actions.
:) Good to hear. I grew up with a strong religious background, too, but not that strong. Must have been an interesting life.
The problem I have with credit in general is that it's exponential. Right now, most people have more credit card debt than they have in their 401k. All of these people can't be irresponsible. The exponential nature of 18% - plus interest is truly mind boggling, and we must admit that most people haven't a clue how to manage their finances - even during the best of times.
Given the strong pressure to get a house for your family - one might say "overwhelming" pressure, given our society - it's easy to get tempted into ARMs. The other day I heard the absolutely astonishing fact that people can now buy houses without any money down. Given Greenspan's boneheaded remark, I can hardly blame these people. Like my family, they'll be on the razors edge and any fluctuation up of interest rates will send them teetering. . .
So, my post is about two things. The first is that the tremendous deficit we're running will push up interest rates higher than they would have been otherwise. And the reason why we're running huge current and, more importantly, future deficits is undoubtedly the Bush tax cut. Since this money is going to have to come from somewhere, this really means the tax cuts are a tax shift to future tax payers. A really sleazy way to give money away to the rich.
Second, the post was about the amazingly boneheaded remark by Greenspan and the unbelievably bizarre housing loan market where people are tempted - despite them being otherwise responsible - into ARMs which are just about to go up and up and up and ream them a new one.
Two bad things that are really bad, together. And I blame the Bush tax cuts for both. :)
But that's just me. . .