Put It on the Never-Never By Bob Sanders

I was having lunch the other day with a friend, a guy named Alec, also old enough to have lived through both The Depression and World War II. Somehow, the conversation turned to clothing and included memories of first suits bought after being in the service of our countries--Canada for Alec, the U.S. for me.   Alec had been discharged in London and his war weary eyes had settled upon a herringbone beauty.  My friend, who to this day pays cash only for everything including full payments on his only credit card, was challenged back then to, as a buddy suggested, “put it on the Never-Never.”

This credit card world we live in recently celebrated its 50^th anniversary and I’m perfectly delighted we were spared any major celebrations.   Such an observance would, in the general scheme of things, be like declaring Charles Manson’s birthday one of national veneration.  Perhaps the arbiters of good taste, in a severe slump of late, wisely ignored the sad occasion.  It was in 1958 that American Express issued the first full bore plastic card and it didn’t take long to begin acquiring debt now regarded as terrifying.

It was when I went to work in the late 60s as a publicist for Hugh Hefner that I began hearing about the “good life” prompting my dropping the phrase into press releases that further substantiated the suggestion that the leader of the Playboy world was living it.  I used to capitalize World in those days of somewhat flashy flackery but I am fully recovered today.  The credit card was an accoutrement to Hefner’s hedonistic approach to life and, indeed, there was Playboy Club plastic ($50) that opened those always walnut doors to the “good life.”      

Although the concept of credit has been around for 3,000 years, the plastic version really got rolling when other card companies offered us greater leverage in gaining instant gratification.  While American Express had a proviso that the bill had to be paid each month, other companies made it “easier” for us by allowing members to carry over charges for a fee.  That’s where the big money was and remains, a discovery that made Alec and I “deadbeats” in today’s credit card vernacular.  We both have one card and we pay up each month.  We are not liked by the plasticos, but they put up with us.

As we muddle our way through the current financial crisis, it becomes clear that more than Wall Street and government criminality, stupidity and arrogance are to blame.  Similar to athletes quickly going from poverty to big money, far too many people have found it impossible to ease into a better life style without an overuse of the credit card and the humiliation that follows.  More than 800,000 Americans filed for bankruptcy in 2007 and that number is rising dramatically.   Call it a psychological problem while attempting to realize the American dream.

Parallel to the come-on of the credit card has been the role change of the American home.  Fifty years ago, the rule of thumb was you paid no more than 25% of income for the roof over your head.  That doubled a couple of decades ago and with it went a vital rainy day standby: the savings account, replaced by the home whose increase in value kept going up culminating in sub-prime credit eagerly accepted from sellers inclined to talk around or ignore the small print.   Hey, when you’re living in Never Neverland, put it on the Never, Never.  It was a rocket that simply had to come down.  The only question was when?  We are finding out. 

What we don’t know is how much impact our credit card debt will have on Wall and Main Streets as the unemployment numbers grow.  The bare bones of information are staggering.  Three quarters of a trillion U.S. credit cards currently have an indebtedness of more than a trillion dollars.  That’s eight cards per each and every U.S. citizen including babies born yesterday.  Those in debt average $8,000 and those having credit files average $16,635.  Only 45% of us pay every month and Alaska leads states in indebtedness with $7,827, a piece of trivia ignored by Sarah Palin who tossed a lot of Alaska jive at us. 

Those people with credit card problems are paying interest rates of 14 to 36%,--workable numbers in Tony Soprano’s world where the operative word is “vigorish” which, when not met, is often followed by a baseball bat to a knee or two.    A much older term is “usury,” a more sophisticated term conveniently forgotten by members of the U.S. House and Senate unwilling to end the scam.             

If we want, we can play the blame game and there is plenty to go around what with Bernanke and Paulson embracing shades of socialism so offensive to a Wall Street with contrasting loan philosophies: friendly for pals and not nearly so for the common herd.  One aspect not being given nearly enough attention has been the role of our credit card mentality in the horrendous financial hole we have dug.  In truth, it was a long-time excavation.    

As Pogo once observed, “we have met the enemy and he is us.”

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Comments

[g.h.kirsch]

Nicely said, Mr. Sanders. Enjoy your insights. Hopefully as we unwind from this giant credit drunk, it won't just be the little guy who's left with the hangover.

Like you, we clear our accounts every month. Sure hope we can keep doing so.