The high cost of a credit-based life

Okay, it's a bit off the topic of birding. But an article entitled "10 Shocking Money Facts" on AARP's website got me to thinking again about how much of a negative impact the easy-credit environment of the past few decades has completely changed the fabric of our lives ... changed for the worse for most of us, but I suppose for the better if you make your living in the finance so-called "industry."

(I say "industry" because, like virtually everything else in our lives, this term has been bastardized of late. Traditionally, "industry" meant "economic activity concerned with the processing of raw materials and manufacture of goods in factories." But since the arbitrage financiers have pretty much killed off that kind of productive activity in the U.S., the term "industry" has been subverted to include lots of non-productive activities like high finance, and purely consumptive activities like tourism and fast-food. I guess they just like the dynamic sound of the word?)

1. Let's start with an easy one.  Americans now spend more than $110 billion annually on fast food. What's that got to do with a general rant on the evils of a credit-based life? Well, a study by BankRate.com found that when people use a charge card to pay -- which they increasingly do -- they tend to buy about 50 percent more of this vile crap per meal than when they pay with cash. And that's not good for anyone but Col. Sanders, Ronald McDonald ... oh, and your cardiologist.

2. CNN reports that thanks to rising tuition and a tough job market, college seniors graduated with an average of nearly $27,000 in student loan debt last year, and one in every five families is now saddled with education debt.  In 2012, the total amount of outstanding student loan debt hit the $1 trillion mark for the first time in U.S. history, according to the Consumer Financial Protection Bureau.  And according to CNBC and the the Federal Reserve Bank of New York, the proportion of U.S. student loan balances that are in delinquency — that is, unpaid for 90 days or more — surpassed that of credit-card balances in the third quarter for the first time.  And believe me, if things go badly with your ability to "service" (another great Orwellism!) your student loan, they go really badly.  They're one of the few debts where you pretty much have to die to discharge them.   Bankruptcy sure won't get 'er done.  Finally, aside from saddling our next generation of would-be socio-economic self-improvers with crushing debt right out of the chute, it would be hard to argue with a straight face that an educational "industry" awash in easy credit money  (at least easy to get, if not to repay!) isn't the foremost reason education fees and tuitions have skyrocketed since this particular loan racket was turbocharged starting in the 1990s.

3.  The average amount of a new car loan is now more than $30,000 — a 40 percent increase over the past 10 years — and about 45 percent of those loans are now longer than six years.  But back in 1950 when most folks paid cash, an average new car ran about $1,510, and average household income was about $5,000.   In other words, in 1950 an average American worker could by a new car with just 3.6 months of earnings.  But by 2010 an average car cost $29,200, while average household income had only grown to about $67,300.   In other words, after 60 years of "progress,"an average American worker now has to work 5.2 months to pay for an average car.  What's changed?  Well, lots actually.  But the ability to bury such price increases in the "easy monthly payments" scam certainly can't have hurt car makers, can it?  Starting to see a pattern here?

4. According to the website CreditLoan.com, the average American will now pay more than $600,000 in interest over the course of a lifetime.  Think about that for a minute.  That $600,000 is the price of your instant gratification -- of being able to have RIGHT NOW what you want and/or "deserve."  Moreover, as I've been trying to explain above, that $600,000  is just the tip of the iceberg.  The whole "easy monthly payments" scam has also enabled all kinds of "industries" -- from car makers, to realtors and house builders, to education providers, to fast-food purveyors -- to increase their prices and profit margins whenever the average American consumer is willing to look no further than what it'll cost per month to pay for their latest prize acquisition.

5. If that doesn't make you feel like a chump, consider that Creditloan.com says the typical American now first takes on debt — usually a credit card and/or car loan — while still in high school!  When I was in high school, my folks thought it was a big deal when they got their first BankAmericard (but I recall it also scared my mom shitless).  But now we're teaching our kids to be good little debtors before they even get out of high school.  Yay wage slaves!  Way to go, America!!