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Jewish World Review Sept. 22, 2005 / 18 Elul, 5765 The national grasshopper mentality By Froma Harrop
http://www.JewishWorldReview.com |
"Be prepared" is the Boy Scout motto.
"Be prepared for what?" someone once asked the Scouts' founder,
Robert Baden-Powell.
"Why, for any old thing," he replied.
For a people raised on that motto, Americans do remarkably
little preparation. This is a nation of grasshoppers, not ants.
As the fable goes: All summer, the ants worked hard, busily
storing grain. The grasshopper just played. Come winter, the grasshopper
begged the ants for some of their corn. The ants asked him why he hadn't
gotten ready for winter. He responded, "I was so busy singing that I hadn't
the time."
When it comes to money, many Americans routinely don't think
past the next paycheck. They're unprepared for things that are utterly
predictable, much less the bolts from the blue.
Recent headline: "Consumer spending rises, savings rate dips."
The U.S. personal-savings rate in June was the lowest on record. In fact, it
was minus 0.6 percent. That means people are not only failing to save,
they're dipping into their reserves to spend money — or just borrowing
more. Which brings us to the next headline:
"Debt load makes Americans vulnerable." Outstanding balances on
credit cards now average $7,200 per household. That's more than double the
level of a decade ago. And that doesn't include car loans, or mortgages.
For the past year, you couldn't pick up a newspaper without
reading about the absurd housing prices in much of the country. Ignoring the
alerts about a bubble soon to break, people continue to buy in risky
markets. And to pay these high house prices, they are taking out risky
mortgages.
Over a third of new or refinanced mortgages are the
adjustable-rate type. The monthly payments in such mortgages are tied to
changes in various interest rates. They are exactly the kind of mortgage you
don't want when interest rates rise, which they will surely do.
As a come-on, lenders offer very low initial rates on these
mortgages. The temporary low rates let people borrow more money than they
ordinarily could or should. What will happen when their mortgage costs go up
and housing values go down? Let's just say that it won't be pretty.
The banks pushing these mortgages are also not prepared.
Mortgage-related loans now account for 61 percent of bank credit. Banks are
in the bubble big-time. Despite these rising risks, banks are setting aside
little money to protect themselves against a tide of bum loans. In 1992,
their reserves against losses from bad loans were nearly 3 percent. Now,
they're 1.2 percent.
A personal finance rule of thumb is to save six months' worth of
wages. The object is to protect the family against the loss of a job. How
many of you out there have six months' worth of savings? Don't all raise
your hands at once.
President Bush inherited a handsome budget surplus. It could
have served as a cushion for the near future, when retiring baby boomers put
extra strain on the Treasury. But as the swingers say, "Cash is trash." Our
so-called conservatives slashed taxes and spent wildly, turning the surplus
into a deep deficit.
Bush apologists like to blame "unforeseen events" for the
spending: 9-11, the war in Iraq and now New Orleans. How could Bush have
known about any of this?
Of course, he didn't know — but doesn't "stuff happen"? When in
history hasn't it?
The Bush administration may be Bible-friendly, but it learns not
from the Good Book. It certainly didn't take anything from the story of
Joseph — the government adviser who urged setting aside grain during the
seven fat years to feed people in the seven lean ones.
Frankly, the "events beyond our control" excuse doesn't float.
"Even after excluding spending on defense and homeland security," a Cato
Institute report says, "Bush is still the biggest-spending president in 30
years."
The report adds, "Since Bush took office, domestic spending has
shot up by 36 percent." And that doesn't include the enormously expensive
new Medicare drug benefit that will kick in next year.
Be prepared for an economic meltdown — as rising interest rates
sink a people floating on debt. This grasshopper mentality is a plague upon
the nation.
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© 2005 Creators Syndicate |
Arnold Ahlert | |||||||||||
