High Time Americans Came To Terms With Reality

I was watching the Suze Orman Show on CNBC last Sunday. It was just a chance viewing as I was browsing through the channels hoping to spend my time a bit more fruitfully. The show interested me a lot. Suze Orman is an American dial-in show where the host advises callers on the management of their financial resources. As the show progressed, there was one aspect in the contents of all the incoming calls that bewildered me.

All the callers who seemed to be quite smug about their financial status had in fact very little to show in terms of savings. Almost every caller wanted advice on spending amounts on something or the other that cost more than they are capable of paying or are precariously close to the limits. One caller was especially interesting. She (the caller) wanted to buy dog food for her pet doggie at a cost of $600 per month when she was actually spending less towards monthly payout for her car loan. On top of that, she had hardly any savings to justify that kind of expenditure. Suze sensibly disapproved of the idea but it definitely points to a kind of ignorance and nonchalance in American society towards financial security that seems to be the prime reason for the state the country is in now. It gives one the impression that Americans have come to know only one way of life – the prodigal. The faith and belief of the American people in the bountifulness and infallibility of the country’s economy has over the decades created a population of mindlessly splurging, happy-go-lucky citizens who are yet to grasp the real meaning and usefulness of financial security. The depression of the 30’s is nothing more than a fairy tale now. The unregulated housing finance system which gives out loans just on the basis of the perceived value of the property being bought without any regard to the fiscal health of the buyers only reflects the anarchy that had crept into the main street of American economy. It is not that writings were not on the wall before this cataclysm. There have been many instances of companies tampering with their financial reports to project a false image of monetary soundness until the ruse falls flat and suddenly the company goes bust. The Enron and Worldcom disasters should have been enough to jolt the Federal Government to act on the flaws in the financial system. On the contrary, the government chose to ignore these instances as mere aberrations and refused to take notice of the signs of the big bubble bursting.

Now that the damage has been done, the government has no other option but to place the taxpaying American’s money as mortgage in an attempt to pull the nation out of this patch of quicksand. If this attempt succeeds, the US will have breathed a huge sigh of relief for retrieving itself from the very jaws of a terrible depression. For it to succeed, the American people will have to show a lot more patriotism and come out in support of the very institutions that have fed their way of life all these years and show faith in their country’s economy more than ever. Because, if this therapy fails – well, we rather not talk about that.


vipin mittal said... [Reply]

well said Debarath,
"Its not only that the realty loans are getting issued on the preceived value of property & not giving due weightage to buyer financial health and loan serving capacity of individual".

On the contrary in India most PSU banks had already stop giving home loans/personal loans to certain section of professionals cosidering the risk attached and their ability to serve the loan in longer run.


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