Tuesday, May 15, 2012

Debt Slavery - Revisited

Suppose you could create a financial system whereby people would willingly enslave themselves in exchange for trinkets, beads, and drugs?   You could make a lot of money, to be sure.  How do you go about doing this?  Our old friend, normative cues.

A lot of electronic ink is being spilled in the press these days about student loans and OWS protesters.  People are waking up, as if from a long dream - or more precisely a nightmare - and realizing that they sold their souls to Satan, or perhaps more correctly to Bank of America, and now are virtual slaves for the rest of their lives.

These modern-day debt-slaves have so much debt - at such high interest rates - and such low economic prospects, that they will likely never dig their way out of it.  And these are the people who are angry all the time - the folks who seem in a hurry whenever they drive anywhere, tailgating you and speeding.  They are trying to rush through a botched life, hoping that maybe if they go faster and faster, they can somehow get ahead.   But like a hamster on a wheel, they never do.

And traditional relief from such onerous debt is no longer available.   Student loan debt survives bankruptcy, and even credit card debt is hard to shake - it is "worked out" rather than "wiped out".   And many folks took these debts and folded them over into home equity loans or refinances, and are now "upside down" on home loans.

And some folks are in the sad situation of having all three kinds of debt - Student Loans, Credit Cards, Over-mortgaged houses, as well as car loans and other consumer debt, and are basically insolvent.   But since their job pays them enough to make the minimum payments on all these loans, they keep paying on them, but never seem to get ahead.

We are talking hundreds of thousands of dollars in debt.  And I know this firsthand, as I used to be a debt slave, as recently as a few years ago.   And in the mid-2000's I probably had over a million dollars in debt, in the form of mortgages, student loans, and credit cards.   Fortunately, most of this debt was for investment properties, and I sold them before the market collapsed.   I was fortunate - or smart.   Others were not so fortunate.

The questions remain, how did we, as a County, get this way?  And what will happen to this new generation of debt-slaves?     As many as 1/3 of the country is "upside-down" on their home loans.   And many students graduating today are finding employment difficult (unemployment rates as high as 25% are being bandied about) while their loan debts are starting to kick in.

Well, how we got here was we voluntarily signed up for it.   And this is the part that no one wants to confront.   After all, if something bad happens to you, it has to be someone else's fault, right?   It is like the weather.   Sometimes it rains money, and sometimes there is a drought.   Right now, we are in the middle of a desert.  And what little water we have, we owe to the bank.

But we chose this desert, whether we want to think so or not.   And the key to finding our way out is not to seek out more mirages in the sand dunes, but to see them for the false images that they are - the enticing visages that got us here in the first place.

Normative Cues - that is what got us here.    We watched the television and read the papers (online or whatever) and bought into the idea that houses were worth their weight in gold.   And we bought, and we mortgaged and when President Bush said that more consumption was a Patriotic Duty, we all went out and bought a new Tahoe that got 15 mpg.   Why not?  It was what the media was pushing on us.

And throughout the 2000's, the amount of credit the average American took on, started to skyrocket.  Savings went down, and then went negative, as people started spending more than they had.   You did it.  I did it.  We all did it.

And realizing this and realizing it was a mistake we all made to listen to the media so closely, is the first step toward getting out of the desert.   We won't find our way out by listening to deceptive and tricky Genies, who tell us what we want to hear - that debts will be forgiven, that you can "get out of debt" easily, and that the government should bail us all out.

That Genie is the one who sold us the whole bill of goods - that we could get something-for-nothing.  And look where it took us.

Similarly, with student loans, we first have to acknowledge that by taking them out, we made a mistake - a huge one.  I took out $38,000 in student loans - and paid them off, thank you - but they were loans I likely didn't need to really take out in the first place.   I could have lived a more frugal lifestyle and borrowed less.   At the same time I took out those loans, I remodeled my kitchen.   A decade later, that house was sold to a developer, who drove a bulldozer through it.   Was that a really smart use of my money?  How much more wealthy would I be today, if I had not borrowed that cash?

We live high on the hog today, and then pay for it tomorrow.   And it is a false set of values, and one that gets everyone in trouble.   But everyone does it.  Why?  Because the television said so.  Borrow money.  Obsess about your credit score.   A new car is fun!   Have lots of things - that is what the meaning of life is.  Go to an expensive school - you will get a high-paying job when you graduate, and then be able to buy that luxury SUV!!

All of these, in retrospect were lies.   And yes, it was wrong for schools and banks to lie to 18-year-olds.  But then again, it takes two to tango, right?   You can see through the lies, if you start to think rationally and logically and not emotionally.

And that, in short, is the very hardest thing to do on this planet.   Why?  Because you will be continually shouted down by the rest of humanity.  The reason why I write this blog, is not for your amusement, but to reinforce in my own mind what is really true and what is just bullshit promoted by the media at the behest of their advertisers.   If I type up this stuff every day, it counteracts the barrage of negative messages I get, even though I don't watch television (at home at least, it is in every restaurant, bar, and even on billboards these days).

* * * 

Debt-Slavery.  Science Fiction, or present-day reality?

I imagine a Dystopian future, perhaps not too many years from now.  Perhaps it already is here.   In High School, slickly dressed recruiters come to class and encourage the kids to join their company.   As a signing bonus, they will get four years of partying, drugs, sex, and a fancy new car.   And at the end of that four years, it will all be taken away and they will then be sent to the Cobalt mines on Ganymede to work to pay off the debt incurred for all that partying.  Of course, they also have to pay their fare to and from the mines, and pay for their shovels and oxygen.  So basically, they end up working in the mines for the rest of their lives at a subsistence level.

The recruiter hands out slick brochures that show happy teens in fancy cars, drinking beer and smoking pot and having wild sex.   Immediately, half the class signs up.   But one guy in the back says, "But you only get that for four years - the rest of your life, you have to work in the ice-cold mines on one of the moons of Jupiter!"

And of course the rest of the class shouts him down.  "It is a great deal!" they say, "A friend of mine did it last year, and he has a new Acura!  Wicked!"   And they all sign up, laughing and talking excitedly, while making fun of that guy in the back of the class who dared to question a societal norm.  "Weirdo," they say, "He just doesn't get it!"   Another whispers, "I hear he doesn't even watch the Tri-D reality shows!  That's just sick!"

And for the next four years, they all drive around town in their fancy new cars, and show off their designer clothes from Aeropostal and Fitch, while getting stoned at raves and rock concerts put on by their future "employer".   And when they see that fellow who questioned it all, they say, "Idiot!  Look at him, walking for chrissakes!  Hey dude, check out my new Lexus!  Ha-Ha!"

But at the end of the four years, the company comes and takes away all the toys, and the kids are rounded up and placed on the massive slave ship bound for Jupiter, never to be seen again.  "It was totally worth it!" one of them says, "Otherwise, I would never have been able to afford such luxuries in my life!  Sometimes you have to live for the moment!  YOLO!!!!!"

But of course, a year later, he is singing another tune - and wondering why he was so foolish as to agree to such a scheme.  It was the company's fault, of course, as they unfairly took advantage of him.   And as he hacks up yet another glob of congealed Cobalt dust from his lungs, he wonders why the government doesn't do something to stop these companies!  There has to be some way out of this trap!

But there isn't.  He signed a contract that is legally binding - he was 18 at the time, after all.  And the company has good lawyers, and moreover, has better lobbyists.  And the government isn't going to do squat to save him - other than make some headline-grabbing statements and some token gestures, every time there is an election.  "Prez say relief on the way for Ganymede Miners!" but of course, not much ever comes of it, particularly once the election is over.

Meanwhile, back on Earth, the fellow who refused to sign up whistles as he walks down the now-empty streets.  Good jobs are in abundance, for folks who stayed behind.   And when he sees young people, he tries to warn them about the dangers that lie ahead in their future - if they choose poorly.  But they just laugh, and toss a beer can at him, from the window of their shiny new Porsche - which they have three years left to drive.

Debt Slavery.  Yea, if you made it legal, most people would sign up, willingly - and fully knowing the consequences.  They would rather have a little fun now, and suffer later.  And today, that is pretty much where we are.    People want a lot of crap, and are willing to sell themselves to get it.

Yea it is a rotten system.  But it is a voluntary one. You have to sign those papers, before they ship your ass off to the mines.   It is a choice you can still make.  Make a wise choice!