Cheap Money and American Poverty

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Monty at Ace of Spades has an accurate enough angle on poverty and debt.

Poor people don’t think about money in the same way that more well-off people do. When you’re poor, money — and the lack thereof — informs your every moment, waking and sleeping. You know exactly, at any given moment, how much money you have, down to the penny. How much in the bank, how much in your jeans, how much in the coffee can on the counter at home. Every purchase is a choice — if I buy this six-pack now, that means hot dogs instead of hamburger for dinner tomorrow; if I pay my cable bill, that means that instead of dinner and a movie my best girl and I get to spend a night at home watching the TV. You triage your bills — rent comes first, then heat. Then…you decide: cable or cellphone? Who can you put off the longest? How long can you float things?

You start with the credit cards because you figure you have the right to treat yourself once in a while. If you have to sit at home instead of going out, what’s wrong with having a nice flat-screen TV to watch? And then the car went south, and that blew a $500 dollar hole in your budget, so you had put your groceries and gas on the credit card that week just to make ends meet. The kids needed new clothes and shoes and supplies for school. You’ve got to pay the minimums on the card just to keep things going, and the balance just creeps higher and higher until you’re butting up against the limit. Then you get another card, and maybe the old lady gets one too. And pretty soon…well. You wake up at night in a cold sweat because you know that bankruptcy and ruin are only a breath away. It’s not just a question of if you lose your job or get sick and can’t work; it’s a question of losing the overtime hours you’ve become accustomed to, or if the wife goes back to part-time instead of full time. You realize you’re barely treading water as it is; it would only take a small wave to drown you.

The technical side of this is that American poverty is a pretty strange place. The value of the dollar has been trashed to make Chinese imports very affordable at the cost of American jobs. You have a large population of the unemployed whose lifestyle is subsidized by buying cheap Chinese products, at the cost of having jobs.

And then you have “cheap money” in the form of debt with a structure that punishes savers. The people making comparisons between how poor Americans lived during the time of their grandparents and today are missing the fact that the strategies that worked back then either no longer work or have much higher barriers. Just about any form of business requires jumping through more hoops than ever before.

Interest rates were vaporized in favor of cheap money. We’re living in a debt society where every institution is borrowing money to lend to someone at the bottom of the pile and then reselling that debt to someone else. Saving money by investing it works at the top, but saving money in a bank account provides little except a rainy day fund constantly eroded by inflation at the bottom.

With “cheap money” as debt readily available and little incentive to save money except to deal with the next crisis that you don’t want to think about, the high debt outcome is inevitable.

The real problem isn’t poverty, it’s an artificially subsidized system where the poor can still eat and have cable and even smartphones, but not jobs. These policies have has avoided unleashing the political outrage that would have overturned both parties and instead created a country where a lot of people have trouble finding work,  but don’t hit bottom, where poverty is constant, but doesn’t mean what it did a century ago.

The people who have been hurt the most have been kept pacified even while they were slowly being displaced.

  • Habbgun

    Oh so correct and I see this at play in my own life. Houses, cars, appliances are sky high compared to salaries. Apps are cheap but basically useless as a way to make real progress. The market doesn’t adapt. There is no housing or cars that meet realities. You either make big money or you are out. Big money requires that someone be incredibly successful at all phases of their life. You can’t simply learn from the past and improve which is the path to the middle class. Your past had to be one of winning in order to keep winning. Even the winners fall off and can’t come back. The USA has a stock market mentality. I am rich if my stocks go sky high. Poor if they tank. If you don’t take your money out at some point you are not rich. The board of directors of the company are rich. You are not. If your stock tanks you are not poor if you have been living in your means and kept your investments separate. If you live a life on credit where your stocks are never ending collateral for a destination that can’t arrive you are insane. It is insanity how America runs even on an individual level. We really are all Keynesians now. Pumping money into our own lives to float a rosy economic future in the mind rather than to simply go from point a to point b to point c.

    • Daniel Greenfield

      The linear economic model has been destabilized and we’re left with constant bubbles, which are easier to sustain if you have access to greater wealth or connections. Trying to be poor while living in a bubble is a formula for a disaster.

      • Habbgun

        So true. There were tenements back when and life was not as comfortable but the path out was there for so many and it happened so quick. With advance degrees we are not duplicating it. We are losing ground. One thing to say as things advance it is harder to have as great as an advancement. Another thing completely to say as you have said the linear economy is overthrown. There is no here to there. I know plenty of successful businessman who are baffled. They still know how to make very good money but they don’t know from month to month how sustainable it all is. They’ve notice they don’t get the same response from Help Wanted Ads. People don’t see a future in working, are afraid to spend and are acting irrationally. I’m in sales. I would have saved some people $1,500.00 just by signing and making a downpayment and it just doesn’t close but in a better economy people would buy for $100.00 more if they liked the product and service and they would get right on it. Something important is being lost.

        • Daniel Greenfield

          Degrees have been made more expensive and devalued at the same time so people are spending fortunes on worthless pieces of paper.

          The old days when you could get a quality education at City College and move up are mostly done.

          And everything is, as you’ve said, too unstable. The system is centralized in the hands of irrational people controlled by special interests. The whole thing is a formula for constant uncertainty because individuals now control very little.

  • truebearing

    Very powerful.

    “The people who have been hurt the most have been kept pacified even while they were slowly being displaced.”

    These displaced people have a current political value to the Left, but for how long? When a person’s worth to society, ie. the state, is the determining factor in whether they get health care, what happens when there is a surplus of these voting parasites, and the Party, having already consolidated power, no longer needs them? They become a burden to the system, are deemed “unproductive”, and denied health care, or some other life sustaining essential. It is at this termination of human life that the Left has reached its apotheosis, where its penultimate “environmental” goal of malthusian misanthropy intersects with its ultimate goal of arbitrary, ruthless execution of power. Human beings are then sacrificed to the political gods of the Left.