The Price of Toys


Of the Sunday news programs the one I have always enjoyed the most is George Stephanopoulos. The roundtable discussions on the show facilitated by Stephanopoulos are some of the most politically informative and balanced news sources available.

In this week’s “Green Room” discussion. George Will, along with Peggy Noonan, Cokie Roberts, and Sam Donaldson give some very interesting opinions on the global fiasco we find ourselves in. George Will lays a lot of the blame on the American people, much to the chagrin of Donaldson. He mentions that 25 years ago Americans saved 9 cents of every tax dollar whereas today we save less than a penny, “they stopped saving, they ran up their credit card debt, they treated their homes as ATMs, and then they (the American people) look around and say, ‘gosh, we’re innocent'”.

For years I have been saying, “When did our homes go from being places we raise our families and shelter us from the elements, to investments in our portfolio?” People always are complaining, “Oh if you put up such and such a place, that will decrease my home value.” I respond, “Will your house protect you any less from the rain?” Now we have the term “starter home”. You start as a young couple with a 1200 -1600 sq.ft house and then in 3-7 years when the second kid comes along we’ll move up to a 2500+ sq. foot house. As if the first house was not big enough for a family of four.

Why do house sizes get bigger in America as our family sizes decrease? Greed. As houses grew and technology increased the number of “toys” that we now seen as needs , grew dramatically. Second incomes went from being an option to make life easier to a necessity to feed the machine. When the economy hits a blip, as it has now, and one spouse loses a job, the results go from being an inconvenience to catastrophe.

Some time ago a friend of mine who is a financial planner told me a lesson she learned quick. She said when she first started, she’d go to a client, see the big house, fancy car and high end furniture and think, “Wow, they will have a lot to invest.” Then find out that everything is a smokescreen. All of it is bought on credit and they are spending all they have just to pay it off with little to nothing to put towards investment. On the flipside, she’d go to a modest home with a Ford Tempo in the driveway and discover they are sitting on a hoard of savings they needed help investing.

When I was a kid growing up in 1970’s Detroit we had one car, one phone, and one TV. The programs that came on the TV were free and the single telephone line had a modest charge. You know what… we enjoyed life. Now there are cell phone bills, cable bills, and internet bills. We are so desperate to keep up with the Joneses we’ll max our credit cards beyond what we know we could pay back…and then declare bankrupcy.

We have president who in a time of National crisis basically says, “OK we’ll all get through this, just keep spending”. We get a tax credit from the government (that is in huge debt itself) and told not to save it, its to stimulate the economy so be a patriotic American and spend…spend…spend.

As bad as the Great Depression was it produced a charecter in that generation of Americans that has become all but a shadow now. I think that ultimately this financial crisis could be good for America if we can learn our lesson.

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  • Hear!Hear!

    I do think it is a lender issue as well, but overall it becomes a chicken and egg argument.

    I particularly resonate with the house issue. Americans don’t know how to have neighborhoods anymore. We see it all the time. A family can love their neighborhood, church, school, town, etc.. but if the Dad gets offered a 15% more paycheck with moving expenses thrown in to take a job out of state – they are outta there. Cash trumps quality of life issues the majority of the time. If you can take bigger… ya just do!

    More telling, is that the American church (generally) is not presenting an alternative to this cult of consumption in any way what so ever. Our stories should be different… but they really aren’t.

  • Personal responsibility — what a concept!!!!!

    “What? I signed a promissory note for that amount? Oh, the bank made me do it. They should have known I couldn’t pay that back. Here, Government, make that mortgage go away and give me one that I can handle.”

  • Bob, I dont think it is solely a matter of “the bank made me do it”. If your implication is that it is entirely the consumer to blame, then I think you miss half the argument, and a car with only 2 tires doesn’t make much progress. It is not either or, it is both and.
    Americans have been junkies in their spending, but lending institutions have been the dealer and promoter.
    I can fix and diagnose my computer with ease, but when it comes to my car, there is a certain level of trust I put in my mechanic. If he says I have to get something replaced, I am going to be inclined to do so. If he is lying to me, I may be called ignorant but he is a thief. When I was home shopping, banks were telling me I could mortgage significantly more that I felt comfortable with. I am fairly money savvy so I could confidently say no. But what about the person who is with money the way I am with cars? Everyone cannot be proficient with or have ability in all areas… we assume specialists in their field are being straight with us… or they are a thief and need to reap the consequences of their behavior (or lending practices).
    This does not mean I am letting the borrower off the hook. I think it was a fairly even synergy of greed and irresponsibility on both sides. To assign blame primarily to one side pretty much gurantees we are going to do this routine again somewhere down the road.

  • Point well taken. Plenty of blame to go around. Hopefully we will all learn from this.

    BTW, glanced at your blog and love what you wrote about Dobson. I respect his right to say what he says but it drives me nuts when he purports to speak for the whole of Christianity.

  • Thanks for your comments Bob. Andy, I could not have said it better. Although the focus of the entry was on American consumerism, lenders share much of the blame.

    Who is guilty in a three card monte game? The guy running it who knows its a scam, or the player who thinks, “This time I KNOW where the Queen is”? Both!

    It just shows also where our education is wrongly focused. Everything is geared to prepare you for college and completely lack life skill courses. Yes, you could take accounting, but what about just a home budget class. A car repair class etc. But hey, no lets make sure little JR has Calculus so he can…what? My wife cares if I can fix a light fixture not that I can rattle off the Periodic Table

    We are so out of whack…ahhh don’t get me started

  • Bob – I agree. Dobson can have an opinion, but when he speaks for Christianity… or even God… he is so, so out of line.

    Steve – I agree with your take on education. We have this twisted notion that everyone needs to be an academic, and that only academic intelligence counts. It drives so many talented kids into frustration and failure by spending 12 years forcing their square pegged intelligences into round holes. I want to blog on that whole notion soon.

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