Why are You in Debt?
Peter Schiff comes on to CNBC and they all have a good laugh at him. Of course Peter Schiff has a 1 minute 30 second spot to deliver his message of doom and gloom, competing with the idiot host who wants to give you the “THE RECESSION IS OVER, THE RECESSION IS OVER,” mantra they always spew.
Let me explain why we are in this situation, since I [and you] have all the time in the world.
Preparing You for a Life of Debt
Let’s start with you and I’ll get to your parents in a second and tie it all in. Your first taste of true economic freedom is clamped down and you’re straddled with debt immediately. How? College! You take out massive loans, not secured by anything other than your I.O.U. You are then strapped with this debt fresh out of college. You must secure a job immediately to start paying it back.
But, wait! These college loans afford you a lifestyle change unlike, what you would have had, had you paid for college yourself. I’m not talking rich people. I’m talking average middle-class America, paying for college with their own money. “Well, no one would go to college,” you might say. Not true, and this is where Peter Schiff, Ron Paul and the Austrian Economic School of thought come into play. If everyone in America stopped taking college loans, or begging for government grants, college tuition would plummet and we all could afford it. Colleges would have to compete with each other, to offer an affordable price to gain student dollars. Colleges right now are not run like businesses, the are run like governments, wasteful. Colleges rely on the fact that the government is going to continually bailout the students. They no more reign in spending than the city or state or federal government does. If they have waste, they just raise tuition to pay for it. What do they care?
Conditioning You for Debt
The point is, you are now conditioned to accept massive debt, to afford you a certain lifestyle. This is where your parents come in. Instead of them saving, I’m talking on a massive scale, and paying for college out of their pocket, they do stuff like take out home equity loans. It has become to common place,that banks now advertise for it. “Take out a home equity loan for your kid’s college tuition.” 80 years ago, that would have been unthinkable. People would have called you mad. So, immediately, your parents first financial lesson to you is, go in debt to afford you a certain lifestyle. Nice lesson dad.
This lesson is repeated over and over. People were relying on the equity in their home, with the notion that housing prices would continually climb, so they could borrow on it. Now, Barrack Obama and Ben Bernanke, is trying to continue this farce by propping up housing prices. They are fighting the recession with every ounce of strength they have. And, believe me, they have an entire treasury to do it. They have the sheep, that is the American public to give away their money, and no one asks a question.
“More than three-quarters (77 percent) of Americans with pre-college age kids, however, have saved less than $20,000 for their children’s college expenses; 62 percent have saved less than $10,000, and 43 percent have saved less than $5,000. Twelve percent have saved nothing at all.”
Your house is not worth $125,000.00. I’m sorry to be the one to tell you this. Go back and see what your house would be worth in 1970, and maybe then you’ll have an accurate picture.
What people are failing to understand is, housing prices are predicated upon the scarcity of housing. Unfortunately, there was a housing boom in construction. There is an over abundance of housing. So your house is worth far less now, than when you first bought it. There are parts of the country with entire huge condo buildings sitting empty. I don’t have the numbers, but I guarantee there are at least 10% of empty real estate in every city. That means your housing price, should be lowered.
So this notion of borrow on equity… You have no equity. You have nothing. You were being propped up by the government the entire time. Why do you think you can deduct the depreciation of the value of your house annually? The government knew the real story.
So we have a failing economy, lowered housing prices, what’s next? Unsecured debt! Besides all the lending done on real estate, people still took up debt that was unsecured, like college. The lenders knowingly were doing this, but we were still borrowing. No one forced us to sign on the dotted line.
We just had the FBI raid TBW based on fraud. Stories like that should show you. I guarantee the FBI could probably raid every bank in the land for nefarious lending practices.
No one wants to swallow the pill. I bet you’re sitting here muttering, “I don’t want to lose my equity”, “I don’t want the value of my house to go down.” Or, you might be a banker saying, “I don’t want my clients defaulting on their loans.” So everyone is hoping Obama will bail them out, prop up this farce of an economy and keep it, business as usual.
No One Wants to Swallow the Bitter Medicine
This is what Peter Schiff, Ron Paul, and the Austrian Economic School of thought is talking about. Everyone is sitting quivering in their living room, hoping they won’t have to be the ones to pay for all this excess. And, when I say excess, I mean all the loans.
Imagine for an instance, that you had no debt, at all. Imagine the only expenses you had were your power bill. *GASP* I bet for some of you, that is nearly impossible to imagine. This is what the recession needs to cure. This is where this recession needs to go. Not, bailing everyone out. Not, propping up housing prices.
If we could go back in time, I would be for Obama saying,
“Today I’m wiping out all the toxic real estate assets. I am wiping out all current housing loans. I am declaring a banking holiday.”
Housing prices would have plummeted, but no one would care, would they? If your house was paid for, but only worth $10,000 would you care? However, no toxic assets were removed from the system, not a single one. And, you are still in debt.