Wednesday, February 06, 2008

"Who-da thunk it?"

Economy Fitful, Americans Start to Pay as They Go
By PETER S. GOODMAN
Published: February 5, 2008

...Millions more exuberantly borrowed against the value of their homes.

But now the freewheeling days of credit and risk may have run their course — at least for a while and perhaps much longer — as a period of involuntary thrift unfolds in many households. With the number of jobs shrinking, housing prices falling and debt levels swelling, the same nation that pioneered the no-money-down mortgage suddenly confronts an unfamiliar imperative: more Americans must live within their means.

“We don’t use our credit cards anymore,” said Lisa Merhaut, a professional at a telecommunications company who lives in Leesburg, Va., and whose family last year ran up credit card debt it could not handle...

...The shift under way feels to some analysts like a cultural inflection point, one with huge implications for an economy driven overwhelmingly by consumer spending.

While some experts question whether most Americans, particularly baby boomers, will ever give up their buy-now/pay-later way of life, the unraveling of the real estate market appears to have left millions of families with little choice, yanking fresh credit from their grasp...

...“For them, that game is over,” said Mark Zandi, chief economist at Economy.com. “They have been spending well beyond their incomes, and now they are seeing the limits of credit.”

4 comments:

Garnel Ironheart said...

Finally we agree!
(Good morning, by the way)

When I went to buy my first house back in the late 1990's I sat down with the bank manager to negotiate a mortgage. She asked me what the balance was on my credit card and I told her I didn't know. When she pressed me, I said I didn't know how much I'd used it this month off the top of my head. She went pale and whispered: "You mean you pay it off every month?" And I felt confused. Whadday mean? Doesn't everybody? I mean, with 19% interest rates, why wouldn't you?

I have little sympathy for people who live on credit. Staying within one's means is a discipline that protects from almost every financial crisis. It's about time the average North American figured that out.

Hey, we agree. I knew it would happen sooner or later.

Ahavah said...

Good afternoon to you! We had tornadoes all night, and I didn't get to sleep until the kids left for school this morning. No real damage here - just debris blown in by the wind. I haven't heard from the farm yet, but I presume if the cows had been hurt or the barns damaged somebody would have called me by now. We're going to drive up late saturday and have a look around anyway, though.

Garnel Ironheart said...

I heard about some place in Kentucky getting blown away and 50 people getting killed. Rachamanah Litzlan! And to think I've always wanted to see a tornado.

Ahavah said...

Yeah - my husband is originally from Kentucky and we're now living in Fayette Co.. The farm is north of us, between Lex and Cincinnati. The Town you're referring to was south and west of us. One of the tornados passed through the southern end of our county about 8 miles from where we live. B"H, that's as close to danger as we personally got, but as you said, some other places weren't were hit hard. I have never personally seen a tornado, either. I'm from the DC Metro area, Northern Virginia, originally, and lived in the Boston area afterward, and also spent a year in Columbus, OH (I don't recommend Ohio). The east coast does rarely have tornadoes, but nothing like they do here. Considering how much excitement there is here in the spring and fall, I can't imagine why anyone would ever want to live in Kansas. I wouldn't want to live in California, either - knowing the house can fall down on you at any minute is more stress than I care to have.