Coming to Grip With a Nation Built on Lies

Did anyone else see Suze Orman on the Oprah Winfrey Show this week?

Suze was PISSED!

She was going off on one couple on the show that has $90,000 on their 29 credit cards and no way to pay their mortgage.

Basically- her view was that that couple, plus most of America, has been living a lie.

A Nation Built on Lies

This has been going on at least a decade- but probably more. I trace it back to the early 1990s when Americans, who used to save about 8% of their salaries in 1990, started a downward slide into debt and endless use of plastic.

The bull stock market of the 1990s “saved” many people from the abyss (as long as they cashed in some gains before that crashed in 2000.)

Then, it was housing to the rescue. People gave no thought to taking out a home equity loan for $50,000, $100,000, or even $200,000. It was like winning the lotto.

Remember the radio ads from the banks? They said things like, “let your house work for you.”

Except houses don’t “work”- humans do. And it was debt that had to be paid back.

That was Suze’s point this week. Americans are overextended and most are living a lie. They can’t really afford those houses they bought in the last 5 years.

They lease their cars because they trade them in every 2 years.

Clothes, purses, sunglasses and other status symbols are bought on credit cards and, in some cases, won’t be paid for for 10 to 20 years.

None of it was real. It was bought with play money.

And now we’re going to pay the price for the illusion of wealth. We’re going to have to make some cash and save some cash instead.

Welcome to the new reality!

The Bailout Isn’t Just About Wall Street

Look in the mirror. What have you bought on credit?

The $700 billion is a way of paying for the excesses that all of us entered into. This wasn’t just a Wall Street problem.

Look up and down your block. How many people on that block have savings to retire? How many have significant equity in their homes? How many can pay for their kids’ college education?

A few can. But most can’t.

Debt isn’t freedom. It’s the opposite.

This credit crunch will not end until the excesses are purged from the system. As Suze Orman said- we have to face the truth. We can’t afford these things in our lives. We must turn to a different way of living.

And America will do so. It always has in a crisis. A strong economy will result, in the end, but not without some serious pain first.

We must all look in the mirror.