Third World America - Arianna Huffington [30]
“We have more debt than we can handle now, no savings, a house going back to the bank. All I hear is people saying that people in my situation ‘are just bad with money’ or ‘overspend’ or ‘should never have bought a house if they could not afford it.’ I do not want a handout; I do not want to file for bankruptcy. I make less money now, my husband makes less money now. I am getting pretty fed up with people who judge us like we are of a lower class due to circumstances that really were beyond our control. Meanwhile, the banks get bailouts and pay large bonuses.”
Credit card experiences like Janet’s contribute to the growing anger, as well as to our economy’s downward spiral. Many experts feel that as more and more Americans default on their credit card debt, banks will find themselves faced with a stomach-turning replay of the toxic securities meltdown from the mortgage crisis. In another example of Wall Street “creativity,” credit card debt is routinely bundled together into “credit card receivables” and sold to investors—often pension funds and hedge funds. In 2008, securities backed by credit card debt added up to a $365 billion market.125 It motivated credit card companies to offer cards to risky borrowers and to allow greater and greater amounts of debt.
As these borrowers continue to default, banks and the investors who bought their packaged debt will take a serious hit. So how are the credit card companies trying to offset the rise in bad debts? By raising rates and fees for the rest of their customers, causing more of them to fall into arrears. And round and round and round we go.
Americans are encouraged to spend in order to help get the sputtering economy humming again. But the problem is, many Americans are broke, or barely scraping by, so the only way they can spend is to charge it, running up balances on credit cards that are structured in a way that makes it harder and harder to pay them off. Getting dizzy yet?
Elizabeth Warren worries that the credit card crisis “could be the knockout blow to the middle class.”126
FEAR, ANXIETY, DEPRESSION, ANGER … OTHER THAN THAT, AMERICA, HOW ARE WE DOING?!
Americans everywhere are anxious.
In March 2010, a FOX News poll found that 79 percent of voters—including the vast majority of Democrats, Republicans, and independents—think it’s possible the economy could collapse.127 An April 2010 Gallup Poll revealed that only 41 percent of Americans think their financial situation is “good” or “excellent”—the lowest percentage in the past ten years.128 And 21 percent of workers think it’s likely they will be fired during the next year.129
This pessimistic outlook can have a profound impact on the American psyche, shaking our celebrated self-confidence. As reported by Don Peck in the March 2010 issue of the Atlantic, University of Warwick economist Andrew Oswald believes that “involuntary unemployment lasting six months or more is the worst thing for a person’s mental health—just as bad … as the death of a spouse.…130 And the psychological effect is lasting—lingering even after a new job has been found.”
Researchers at Rutgers University interviewed one thousand unemployed people in the summer of 2009.131 By the spring of 2010, 80 percent of them were still out of work. Of the people who did find work, only 13 percent had landed full-time jobs. To deal with the extended unemployment, “70 percent of the people dipped into retirement funds, 56 percent borrowed money from family or friends, and 45 percent turned to credit cards. Forty-two percent skimped on medical care, 20 percent moved in with family or friends, and 18 percent visited a soup kitchen.”
“The cushion’s completely