Your Money Map

Howard Dayton, the author of “Your Money Map”, assumed that over 40% of American families spend more money than they earn. (C). On average, each American spends $1.2 for every dollar earned.

The average American is a target of more than 3 thousand advertising and marketing offers. National Foundation for Consumer Credit showed that 89% of Americans believe that they have proved easy to become over-indebted because of the availability of credit. Average person in the U.S. has 13 credit obligations: it is on the mortgage debt, trade (for example, getting a car), educational loans, and credit cards.

The average debt oldest is 14 years, but one out of every four people in the U.S. is an adult of 20 years of age or more. Only one out of every 20 Americans has a credit history that is lasting at least 2 years. At the end of 2010, the volume of the U.S. consumer debt (all outstanding loans, excluding mortgage loans) reached $2.456 trillion (The Weekly Focus 8). For comparison, at the end of 2006, it stood at $2.42 trillion.

Demos Research Center

According to the Demos Research Center, the average American high school graduate leaves his alma mater not only with a diploma, but also with debts (Demos). Moreover, 66% of the graduates start an independent life in debt. In 1993, the figure was less than 40%. Over the last decade the size of the student debts for education has doubled. In addition, students actively go into debt in other ways, a year on year increase of credit card debt. Moreover, there is no evidence that young Americans learn their lessons from this situation: instead of paying a loan obtained for training from the employment, the graduates rather continue to increase the size of the debt.

The U.S. Treasury estimates that an average American household has deferred (i.e., save, not to spend on servicing loans and purchase) on average 8.5% of their income in 1980s; while in 2008, the figure was only 0.2%. In 2005, the situation was even worse; the first time since the Great Depression when the savings rate was negative. Most of Americans are not able to save enough money for a comfortable old age. The total debt of all Americans is over $6.9 trillion. Approximately, the U.S. lost 35% of its capital reserves in the period between 2007 and 2009 (Gilson and Perot). About 15% of the U.S. households (or rather, the owners of the residential property) that received loans, invest the loan servicing half or more of their income. Traditionally, the size of the housing loans in the U.S. is determined in the following way: the size of monthly payments should not exceed 30% of the income of the potential borrower. Approximately 10 million of the U.S. households (51 million holders of mortgage loans) now have mortgage more than what the market value of their homes and apartments is. More than 4 million homeowners are late with the required payments on the mortgage, and for 500 thousand of them, the process of expropriation of property has already started. About 70% of all marriages in the U.S break up because of the financial problems.

Americans, going to retire, become financially dependent on the state, family, or charitable organizations. Nearly 75% of the retirees have not saved enough and said they would save more if they could do it all again (Reeves). The Association of Professionals in the Finance Million Dollar Round Table (MDRT) conducted a survey, which showed that the financial problems are rarely being discussed in the American families. Before the wedding only half of the prospective spouses (53%) discussed their own spending and saving habits, they also did not talk about the debt or the ways to rationalize the use of the financial obligations. 48% of respondents do not discuss debt problems, while 24% do not talk about financial matters. A quarter of couples do not make financial plans for the wedding. There is even less interest in their long-term prospects: seven pairs out of ten do not discuss plans on how they will ensure their life after retirement. The most popular topic of discussion are who and in what way has spent the money. Most Americans consider their primary financial objectives to be the following: reducing the overall size of the debt (from 73%), reducing the debt on credit cards (61%), and checking the credit history (50%). The U.S. national debt is more than $16 trillion 692 billion (US Debt Clock). If split that amount to the approximate U.S. population, which is about 310 million people, as estimated by the Census Bureau, then it turns out that every American, from infants to the very old men, is responsible for approximately $52.9 thousand of the public debt.

In early 2007, in the hands of the Americans were more than $1.3 billion credit cards. More than 22 thousand different credit cards are available to the consumers in the U.S. Over the past decade, the U.S. has been marked by an unpleasant process: the relatively high rates of economic growth have not been accompanied by an equally remarkable pace of growth of material well-being of the population. Since 2000, many families have been trying to solve their financial problems, especially using credit cards to make urgent payments or purchases. In particular, according to the company MasterCard, 29% of the low and middle-income credit card owners pay their medical expenses with cards. In the short-term, this scheme works; however, in the long-run the debts begin to grow. Sometimes, for example, if any of the family workers gets out of work, the family’s debt increases at dramatically faster pace. According to the American Bankers Association, about the three-quarters of all personal payments are now made with credit and debit cards. According to the company VISA, out of every $100 spent by the average consumer, $60 are spent through the credit cards. The Federal Reserve System in 2006 estimated that 74.9% of the American households have credit cards (Woolsey and Schulz). Company Harris Interactive poll gave different results: in 2007, 95% of Americans used credit cards (51% in 1970). The survey also found out that only a third of cardholders fully pays the bills and supports a zero balance on the card account. In 2007, according to a credit bureau Experian, 51% of the U.S. residents had two or more credit cards (Bank of America). The distribution of credit cards among Americans is as following: 20% do not have them at all, 35% possess 1-2 credit cards, 23% possess 3-4, 11% have 6-7, and 8% of Americans are keeping more than seven credit cards in their wallets.

The National Center for Education Statistics estimated that average American high school graduate has at his/her disposal six credit cards; one out of seven graduates owns to the underlying company more than $15 thousand. According to the Organization of American Retirees (AARP), the U.S. residents older than 50 years old have more credit cards than the younger citizens have, but use them less frequently. In order to get a new customer, the U.S. bank spends on average $62. These investments are justified: in 2007, the issuing company earned $92.3 billion in interest on the cards, and another $ 57.4 billion by penalizing careless cardholders. Fines are usually levied for overspending or late payment of the bills. The statistics is as following: the majority of American households (family or group of people living together and having a total budget) had no debt on credit cards. 8.3% of families owe the credit card issuing company $9 thousand or more. Gallup services other evaluation: 40% of the U.S. residents do not have a credit card debt, 17% have the amount of debt of less than $1 thousand, 20% owe between $1 thousand and $5 thousand, 16% - more than $5 thousand (Rheault). Card addiction in the U.S. is directly related to the level of income. The higher the income is, the more credit cards one possesses, the more debt is accumulated, but those debts are also paid in a more careful way. For example, the annual income of the 40% of the U.S. population is less than $30 thousand; among those, who earn more than $75 thousand a year, 2% have no credit cards. On average, people with the low income possess 1.7 credit cards, with the average one2.9, and with high 4.2 respectively. The lower the income of Americans is, the more often it gets difficult to maintain their card debt. According to the loan service Trans Union, at the beginning of 2013, the average debt of the owner of the credit card was $5,122 (TransUnion). Nine out of ten Americans believe that their card debts cannot be a cause for concern. At the same time, almost half of the respondents refused to tell a friend about the size of their debt. Federal Reserve statistics of the Federal Reserve System shows that from 1989 to 2006, the total debt of the U.S. population on credit cards rose by 315% (from $211 billion to $876 billion; the figures were calculated at the rate of the dollar in 2006). In 2007, it reached a record of $943.5 billion in the period from 1989 to 2004. The number of cardholders, who were late with payments and, therefore, were subjected to fines, for a period of 60 days or more, has almost doubled: from 4.8% to 8%.

Brookings Institute Research estimated that in 2004, the family, which had debts on the credit cards was spending on service of its debt 21% of income; on the contrary, the family, which did not have debts on the credit cards, only 13%. The poorest residents of the United States spend on credit cards even more: 40% of their income. From 1989 to 2004, gambling debts of the poorest Americans increased four-fold (from an average of $622 to $2750). According to the Economic Policy Institute, now, three out of every five American households having a credit card spending on average 112% more money than the consumers buying similar products and services, but paying by cash. Approximately 60% of the credit card holders do not pay the full monthly balance. The study of marketing agency Polaris showed that visiting the "fast food" restaurant , which accepts credit card payments, one will spend 50% more money than another buyer, who chose to pay in cash.

According to the finance company Fair Isaac Corporation, the average American has access to approximately $19 thousand. Such aggregated limit is provided by issuing credit cards. Only one of seven owners of the credit cards uses 80% or more of the released limits. More than half use less than 30% of them. Study by the Consumer Protection Consumer Action found out that 77% of issuers of the credit cards are able to change the terms of the card (for example, to raise interest rates) at any time and without much warning.

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Jacques Jaikaran in the book with "speaking" name Debt Virus: A Compelling Solution to the World's Debt Problems, argues that the global economy now rests on the shaky foundation of the mutual debt (14-26). This economy is far from reality. Jaikaran illustrated it by the following example: if a businessman owes to the $1, then there is no actual transfer of money; then the bank simply increases the limit that this businessman accounts for the appropriate amount. That is the bank simply creates new money out of the air. Moreover, these "air" above the original amount of $1, is the bank’s expected profit. As a result, for every real-life account for one dollar, there is a "virtual" dollar debt. This pyramid cannot survive for the long time. Andrew Yarrow in his book Forgive Us Our Debts: The Intergenerational Dangers of Fiscal Irresponsibility argues that many foundations of the modern state are based on the work of the debt or the life of a loan. For example, social services contributions are taken from the working people's money (pension contributions); in fact, it is a loan, promising to pay them a pension in future. However, the lender does not know how much money the borrower will return: that is, what the size of the pension will be, and which purchasing power that amount will possess in a few decades. Consequently, all the power of the state is aimed at supporting the current system; although, it is clearly inefficient and unreliable. Ellen Hodgson Brown in her book Web of Debt: The Shocking Truth About Our Money System and How We Can Break Free proves that the debts are so entangled the whole world that virtually all governments, financiers, businesses, and people have to rely on debt, as the only landmark in the world . According to Brown, the logic behind this judgment is the following: a businessman decides to invest on the basis of how quickly he can give all the credit for this purpose to a much lesser degree of interest, such as the public interest. The government was forced to expand energy on the public debt service, and not on the development of the society, etc. Brown argues that the world must go through the radical reform that would allow one to get rid of the web of debts and start to develop normally. Robert Manning, author of the book Credit Card Nation: The Consequences of America's Addiction to Credit, asserts that the debt problem is compounded from generation to generation. The main cause is human psychology: people are convinced that the future promises them only success, that human progress cannot be stopped, and that they should have a better life than the previous generations. It is enough to take a loan, which would allow the higher standards of living. In turn, banks and other financial institutions had interest in this: they actively provide loans even to the borrowers, who did not have a chance of getting a loan a decade ago. This has led to a vicious circle: the more loans were given, the more "bad" loans appeared, and the more bankruptcies were files as a result. James Macdonald in his book A Free Nation Deep in Debt. The Financial Roots of Democracy proves that living in debt becomes possible only in the free societies (277-289). According to him, the fundamental reason for this lies in the relations of power and society: debt (loans) are a part of life, where lenders are credited to feel their equality before each other, the law, and the state. In addition, democracy is much more able to successfully use the borrowed funds. They go to the development of the economy and society, and not to finance the whims of rulers. It is no accident that the time when the citizens began to lend their state was in the 18th century, in the period of the struggle for their rights and freedom.

Economist Rodrigue Tremblay in his book The New American Empire, in particular, is trying to summarize the experience of the empires of the past and present. He comes to the interesting conclusion: the United States were the first empire in the world history, which has the world's largest public debt. According to his work, until now there were no examples of how a state with the enormous political influence was a subject to the so significant debts. Tremblay (and many other authors) argues that because of debt, the U.S. will no longer be the sole superpower.

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