Here's my take on the average American's thought process regarding the economy.

[Flying Squirrel]

And I recognize that I may be dead wrong. It could just be my own sick thinking. :crazy:

Ok. So as most of us know, the powers that be have been squeezing us to death. The specific example I'm gonna use is credit card debt. Real wages have been stagnant, healthcare costs have gone through the roof while premiums and co-pays skyrocketed, or coverage was denied, or insurance was eliminated altogether. Meanwhile credit card lenders have been allowed to change terms constantly, bury consumers with fine print, change payment due dates, raise interest rates based on missed payments to other creditors or even a late payment to your cell phone provider - anything to bring it up to the default rate at which no human could possibly pay off the debt which they've been forced to rack up since their wages weren't keeping up.

And then:

The government bailed us out.

Oh, wait - they didn't. They bailed out Wall Street. And we were left wondering, "Where's my bailout?"

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=389&topic_id=4129249">In The Beginning Was The Bailout Plan

Well, things went from bad to worse and people now realized that in fact we were all screwed. That being the case - why bother to even pay off those credit cards? It wasn't possible anyway. Furthermore, with so many people being so much in debt, losing jobs and homes, etc., it was becoming a moot point if your credit got shot to hell; because everyone's credit was going bad at the same time. So it's not like you'd be one of the only ones with bad credit if you decided to walk away.

Besides, the Bailout had not produced what it was supposed to produce; namely a loosening of credit. The banks had taken the money, but had not loosened up any credit. If anything they'd tightened it.

Which, in reality, was probably a good thing - because this insane idea that we should be building an economy based on borrowing money that we couldn't afford to pay back, rather than by producing goods and being paid decent wages (and being able to SPEND those wages on something other than health care which other nations were essentially PROVIDING to their citizens), well this idea was toast. Might as well let it die the ignominous death it deserves.

But back to the point: The average American had just seen the banks get bailed out, ostensibly so that they would start lending again and the average American could therefore fill out that new credit card offer which had just arrived in the mail and get another shiny new card to continue the cycle they had been accustomed to (complete with the outrageous interest rate increases, but that wouldn't have stopped them because they were flat broke and had few other options). But instead they filled out the credit card offer, and were denied.

So, now what? Well, they were out of options. They were now maxed out on all their cards which were themselves maxed out at the highest interest rate possible, the rent was due, and they finally realized that there would be no bailout for them this time. So they did the only thing left to do: Since they were already paying the "default" rate on their cards, they went the next step and actually defaulted. Why not? Their credit was obviously not good enough already, they couldn't get any new credit now, and if this huge bailout hadn't been enough to get the banks to start lending again, what would? So what difference did it make if their credit got even worse? And besides, there were bills to pay. Hospital bills, maybe.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x560702">Debunking The Great Myth Of US Consumer Deleveraging, Or Why The US Economy Will End Not With A Whimper But A Bang

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x82205">American Businesses and Consumers are NOT Deleveraging ... They Are Going On One Last Binge

Bottom line, here's what the Average American is thinking now: Eat, drink and be merry, for tomorrow we die.

[Mimosa]

1. Mostly a good take.

People still have a lot of anxiety.

[Hannah Bell]

2. I think there's some fallacy of composition in that. 1/3 of consumer spending is done by the top 5%

they may be dumping their underwater properties & spending the cash, but the bottom 80% isn't, if our local mall (now practically a ghost town) is any indication.

[Flying Squirrel]

5. Ya, I'm not sure I completely buy the article at second link

But the mentality "Eat, drink and be merry, for tomorrow we die" is really more aimed at saying, people are focusing on very near-term needs and ignoring long-term credit needs right now in favor of just getting by in this near-dead economy... meanwhile hoping for some economic miracle to be delivered by the government - whether they are people who support the current Democratic administration, or Teabaggers hoping to gain control and expecting their misguided principles to save the day. (I have no idea what mainstream Republicans who aren't rich could be hoping for - maybe God will drop some money down to them from the sky.)

[sandnsea]

3. Yes and no, I think

I don't think the banks were bailed out entirely to begin loaning to people again. The credit tightening was banks weren't even extending the necessary credit To Each Other so that transactions could be covered and money wouldn't just stop moving altogether.

I do, however, completely agree with the need for an economy based on higher wages. Dependence on credit cards has really created a false sense of financial well-being in this country.

"because this insane idea that we should be building an economy based on borrowing money that we couldn't afford to pay back, rather than by producing goods and being paid decent wages (and being able to SPEND those wages on something other than health care which other nations were essentially PROVIDING to their citizens), well this idea was toast."

[Flying Squirrel]

4. Not entirely, no. But that seemed to be the way it was being sold

to the average American, at least in part. Maybe it was a two-pronged strategy - to those with the intelligence to grasp it, they talked about banks lending to each other. To those who only understood more primitive lending practices (particularly those that had to do with them personally), they sold the idea that this plan would make it possible for them to get the credit they needed.

[sandnsea]

7. They said your credit card wouldn't work

You'd go to the ATM to get money out, or go to put something on credit, and nothing would work. The banks were ceazing up, stopping to do business with each other. That was the crisis in September.

AFTER that crisis, the need for the stimulus, was to try to help loosen up lending credit. Providing various mortgage assistance strategies was also supposed to help loosen up lending. I remember last summer a friend had a boat for sale and people who had never had a credit problem couldn't buy. Or, the banks were lending such a small amount that the loan wouldn't cover the cost. But these were problems addressed with other legislation, not the original TARP program.

[Kringle]

6. the depression was caused by the housing market

the crooked banks were only a side show

[Flying Squirrel]

8. Crooked banks were the reason the housing market went bad