By Mark DeVolder
Los Alamos

I wrote the following Feb. 5, 2024, “After pondering a wide spectrum of issues in America today, I can’t help but think that everything is broken.” (link)

What prompted my initial writing was a report I saw on the internet where Jerome Powell indicated that the American debt level and the interest on maintaining the debt are not sustainable. Furthermore, Jeremy Grantham has been indicating for a long time that we are living on a financial bubble. And finally, I am getting sick and tired of hearing about how the US Government may get shut down tomorrow or three months from tomorrow.

One day when I was sitting in my college-level Chemical Engineering Economics class, the professor walked in with a sheaf of light-green, ditto-copied sheets of paper and promptly distributed them.  The first sentence indicated the following: “95 percent investors in the stock market lose money, 3 percent break even and 2 percent make all the money.” Did I take that message to heart? No. Some of the companies I worked for had a profit-sharing program and I accumulated a small amount of stock. The value of the stock over a period of about 3 years remained relatively constant. I eventually liquidated those stock holdings. I also remember getting out of the stock market in December 2007 after losing some of the value of my investments. My financial consultant was upset. Then came the 2008 recession.

Ever hear of Enron or Evergrande?

I have constantly read about problems associated with consumer credit card debt as well as minor and major disturbances in the banking industry. I was surprised while reading to find that banks were extending credit to “at-risk” customers. Why would banks do such a thing? It resulted because of    double-digit interest rates on credit card debt. The rates are still at those levels. Perhaps it comes as no surprise that banks used to contribute 40 percent of the income going to the IRS.

Have you noticed that automobile loans have been stretched out to 7 years?

When VISA cards were developed and issued during 1959, the intent was to provide a convenient way to make purchases. A purchase would be made with the credit card and the customer would repay the “loan” at the end of the month. Then the basic concept got all warped and twisted as banks discovered that they could make interest on any outstanding credit card balance. Then they found that double-digit interest rates contributed even more to a bank’s bottom line. The banks also planted the seed that, “Money grows on trees. You can have anything you want. You can have it now.  Americans went to the moon; therefore, the sky is the limit.”

A few years ago, I found that my automobile insurance rate was not the lowest. It turned out that if you consistently repay your credit card “loan” at the end of each month, you pay a higher automobile insurance premium (rate). So who gets the lowest insurance rate? The folks who have accumulated credit card debt. And the reader might wonder why I think everything is broken.

I have also been disturbed by internet advertisements shoving this-and-that credit card at me. I reckon that credit cards are nothing but financial heroin and they are being “pushed” at me.

As a result of accepting credit card purchases, retailers, restaurant owners, manufacturers, etc. have all profited by selling what you as a consumer may or may not really need. Credit cards purchases basically expand the money supply and that contributes to inflation. You might have also noticed that your waistline has also expanded commensurately. Authors of diet books have profited, medical professionals have profited (with surgeries for heart attacks and replacements for worn-out skeletal joints), manufacturers of home entertainment equipment have profited (selling various pieces of equipment with a remote control so that getting up to change the channel is no longer necessary).

Manufacturers of home exercise equipment have profited although the exercise equipment typically ends up in the garage after a few months, goes outside on the curb with a “Free” sign after a few more months or gets dragged off to the Los Alamos Ecostation. Oh, let’s not forget about gym (“spa”) owners who have also profited. I guess consumers think it is trendy to drive their cars down to the gym (creates pollution) and sweat along with their friends doing aerobic exercises. Manufacturers of plastic water bottles have also profited. Of course, many of the water bottles also end up going by the case to the Los Alamos Ecostation.  

I have noticed a few intelligent folks who have chosen to take a walk instead.  

If credit card debt becomes a problem, you can drown yourself with your favorite beverage. Or you can get a reverse mortgage on your home, go on a nice overseas cruise and lose your home.

So what should be done about something like credit cards that seem to profit everyone – consumers, manufacturers, retailers, and the government?  Pay off credit card debt? Buy a pair of scissors and start cutting up the credit cards?  

I think the best solution is to limit credit card debt to $100 ANNUALLY unless you have a proven 5-year record of paying off your credit card “loan” on a monthly basis. Ack!  However, there is no law or no incentive for doing such a thing. I am not sure if “peace of mind” counts for anything in our world today.   

Well then there is the story of Greece. The government decided to deal with Greek financial woes by implementing austerity measures. The resulting outcome was simple, the populous got rid of the austerity government.  

This is all well and good – I hope everyone enjoys our inflated economy until the bubble bursts and US government really does shut down. Unfortunately, I am going to get sucked down the drain along with everyone else.