That's Not A Monkey On Your Back... That's A GORILLA

Can average Americans borrow their way to prosperity? The answer is no. Years ago, America was based on strong family values. We were a "pay as you go” nation that learned the value of incomes and savings. Today, America has become a nation of consumers that has attached liens and promissory notes on much of its future income. Debt ratios of the average-American household have reached record highs. This is far different than the Founding Fathers of our nation could ever imagine. In the future, there will be unintended consequences in paying for the debts we carry.



Household debt ratios in the United States have increased almost 90% faster than the growth of the economy since the late 1960s when real median family incomes stopped rising. This suggests that real equity and savings have not been the driving force for economic growth. The growth of the economy is driven by debt.


More American families’ futures are now at the mercy of available credit and interest rates. Many households are more dependent on debt than the incomes they earn and the cash flow they have. In the past 30 years, inflation-adjusted incomes for males in the United States have dropped about 9%. Personal savings during that same time frame have plummeted 114% to its lowest level since 1934, during the Great Depression. All the while, Americans have been on a spending binge well beyond the growth of their incomes. Economist Ludwig Van Meses stated, "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit (dept) expansion, or later as a final and total catastrophe of the currency system involved.” This refers to the end results brought on by reckless expansion of credit (debt).


Controlling and reducing debt is very important. Some in Washington would have you believe that increasing prices dramatically will help control and reduce our use of energy. That increasing the taxes on energy will make us conserve more energy. If that is the case, then solving personal debt in the country will be easy. Simply raise the price of everything, so no one can afford to buy anything and give credit to only a very few. Makes sense, huh!?


What is true is that spending, whether excessive spending by the government or excessive personal spending, is something that we will have to deal with... sooner or later.


-Leonard Renier

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