Deflation, Inflation, Stagflation maybe Biflation or Agflation (or both!)… all the ‘flations (as Bill Bonner puts it) are up for grabs though the real tussle appears to be over those who believe the general price level is in decline versus those expecting prices to abruptly start (or continue) to rise.
Whether the result is a dollar buying more things or dramatically less, these two groups are united by the fact they both see a pretty dire future and worse yet… they may simply be independently dwelling on two different aspects that will together materialize in sequence from this sorry economic period, one leading to the next. This situation that we are now in did not happen overnight, in the years leading up to the crisis, significant amounts of foreign money flowed into the U.S from fast-growing economies in Asia and oil-producing countries. This inflow of funds combined with low U.S. interest rates from 2002-2004 contributed to easy credit conditions, which fueled both housing and credit bubbles. Loans of various types (e.g., mortgage, credit card, and auto) were easy to obtain and consumers assumed an unprecedented debt load.
I recently read a story on CNN's website about a woman who had a job making a $70,000 a year, got laid off in February, and was having to go to the food bank in March. But where was her savings? She didn't have any because, like many other Americans, she was living way above her means and therefore was unable put anything away for a rainy day. Like many others, she just assumed she would always have a job and never planned for the possibility of not having one. While she was working, she made the mistake of thinking that things would always be as they were and the skies in her world would always be blue. No consideration was ever given to the prospect of a coming storm.
Everyone has his and her own standard and quality of living. Be it a comfortable home, a magnificent wardrobe or that fancy car, we each have desires in the materialistic world. However it seemed like “for the American public, it's been okay to live beyond your means for too many years," asserts Singletary, the author of 7 Money Mantras for a Richer Life: How to Live Well with the Money You Have. "The number of personal bankruptcies is up; unemployment for African-Americans is way up--it's double what the national average is for others. When you look at the statistics about how Americans are handling their finances, you realize it's not okay to continue to live an inflated lifestyle with other people's money. if and when you've established financial security, then you should enjoy the fruits of your labor with that dream vacation or dream car. However, if you have a closet full of designer clothes and shoes, but have to juggle your bills, or you own a $70,000 vehicle, but you're renting an apartment, you are living above your means and should examine how you can better spend your money. Its high time that people stop showing off to their neighbors with money that is not theirs in the first place.
The biggest culprits that aided people to live beyond their means are the banks on High street and wall street. Loaning people money to buy big fancy homes and luxury cars when their annual household income was $30k or less was like a bomb just waiting to explode – and that it did with the mortgage crisis.
The subprime mortgage crisis is an ongoing real estate crisis and financial crisis triggered by a dramatic rise in mortgage delinquencies and foreclosures in the United States, with major adverse consequences for banks and financial markets around the globe.
Approximately 80% of U.S. mortgages issued in recent years to subprime borrowers were adjustable-rate mortgages. After U.S. house prices peaked in mid-2006 and began their steep decline thereafter, refinancing became more difficult. As adjustable-rate mortgages began to reset at higher rates, mortgage delinquencies soared. Securities backed with subprime mortgages, widely held by financial firms, lost most of their value. The result has been a large decline in the capital of many banks and U.S. government sponsored enterprises, tightening credit around the world, thus the financial crisis.
To top this off, did you know that Wells Fargo was acting just like mafioso’s? Even so I would give the mafia more credit than the banks because when you borrow money from them, they tell you straight up what the interest will be(even if its ridiculously high) and when you have to pay, but the banks do not tell you a damn thing!
A landmark court ruling on Wells Fargo's outrageous overdraft scam has the potential to return hundreds of millions of dollars in stolen funds to consumers all over the country. But like many of the banking scandals from the past decade, there's more to the story than simple bank predation. When banks devised this new program to swindle their own customers, bank regulators did not merely look the other way, they actively encouraged the behavior by writing a new rule approving a practice that courts now believe to be unfair and deceptive.
Say you've got $80 in your checking account, and you decide to pay some bills and run some errands. You spend $30 on gas and another $20 on your water bill. Later, you head to the grocery store and spend $81—oops!—on groceries. To reasonable people, it looks like you're going to get hit with an overdraft fee. That last purchase put you over the line. But instead, the banks reorder your transactions, processing the groceries first. Now you're below zero, and they can charge additional fees for your gas and water bills. Wells Fargo charged up to $39 per overdraft. This one mistake cost you $117. "The bank's dominant, indeed sole, motive was to maximize the number of overdrafts and 'squeeze as much as possible' out of customers who spent more than they had in their accounts," Judge Alsup wrote in his ruling.
People please, stop the banks from squeezing and bleeding you dry. Take control of your finances, your life. Stop the greed and buy with cash, buy only what you can afford. Live life for you and your family and not for others!
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