Financial Debunking – The Real Story About Debt in America

Posted on November 1, 2008

How the media portrays American spending and saving habits may have little to do with the statistical truth. Let’s take a realistic look into how people manage their credit cards in these United States.

I probably scared many people in a recent article by discussing the use of credit cards for paying bills and using them as a tool to control both spending and cash flow. This made me want to dig a little deeper into the misinformation floating around concerning the uses and abuses of credit.

When we hear reports from financial reporters (most notably from the major networks and CNN) concerning the growing debt and credit crisis, one is left with a deep fear of the future for both our country and the world. The EVIL credit card companies, hand in hand with rogue Wall Street derivatives traders (who use massively leveraged positions to control global commodities markets (another misuse of credit)) are destroying the global economy. Or so the media would have you believe.

The story goes that credit card debt is soaring…a commonly used statistic states that “Average credit card debt in the US hovers at about $9,000 per household”.

Liz Weston, at MSN.com recently wrote a piece about credit card debt and how the numbers are being manipulated by the media to both shock and confuse us.

After hearing these numbers our initial reaction might be: “Oh, I’m not doing so badly, I only carry $6000 in credit card debt, how about those poor saps that are paying out the nose with $10,000 to $20,000 and more, I heard the average is $9,000 per household.” The real danger is that this information might be lulling us into a false sense of security.

Let’s take a closer look at the numbers to learn what is really happening in “spend thrift” America:

“According to the Federal Reserve about 43% (note: less than half) of households carry over credit card debt from month to month and about half of those owe less than $2,200 (that’s 21%of American households). Only one household in 14 (a little over 7%) carries over $10,000 on their credit cards, and only 2% of households have more than $20,000 in credit card debt.” (www.MSN.com)

In another article about the level of credit card debt in the US, Alaska was named as the home of the highest credit card debt in the nation, with an average debt level of $3384. New Hampshire was next with $2109 and Connecticut came in a close third at $2039 per credit card owner. (www.ConnPost.com)

Hmm, now that’s not nearly as bad a scenario as the recent news stories would have us believe. Less than 10% of households are causing most of the problems by mishandling credit card debt (I wonder if these same people are currently behind in their mortgages too?). While I’m sure the actual number of people in crisis is quite large (we live in a country of 300 million people after all) the actual percentage of people in crisis is much smaller than we are being led to believe.

Personally I have found that there is just so much bad news floating around that I have begun to question if America can even survive another decade. Is that what big media wants us all to believe? When I look deeper into the actual statistics and find that the numbers tell a very different story, and are no where near as dire as they are being spun by the so called ‘experts’ I am left with a feeling of being manipulated.

In the rush to create a crisis mentality they (meaning the mass media) negligently fail to mention that 90% of the people in America are doing a pretty good job of keeping themselves under control. They don’t overspend and they haven’t grown any credit card debt, but maybe that’s just too boring to report. Kind of like being the weatherman in Phoenix, AZ!

I’m not saying that American’s save enough, I’m not saying that we don’t overspend and overextend. The recent tightening in the credit markets has the potential to unbalance the global economy…I know that, but beating us about the head with this information does little to help the problem.

Anyone who has been run off the road by speeding SUV’s knows the solution to the oil crisis…People around the world need to stop spending money for big fast cars that drink gas by the pump full. If you want to save money then save money, quit buying Big Mac’s and Double Cheese Whoppers, quit buying useless junk that serves no purpose…do you really have to renovate your bathroom again?

And stop having children…the are by far the biggest money wasters of all, and they are so demanding they “need” their Sugar Pops or Captain Crunch or new bike or faster car (depends on how old they are) or bigger stereo speakers… ad infinitum..etc..etc.etc…

The take away from this is: Question everything you’re being fed by the news media, and when it comes to the doom and gloom nay sayers: do your own math. Don’t blindly believe the experts. They are only experts because they are put on television to scare people to keep them glued to their TV’s by filling up their given airtime …which is what all of this nonsense is….air.

Wayne Silverman (me) currently lives outside Phildelphia with his wife and a cat named Angela. I’m a jack of all trades having worked in Real Estate, Finance, Marketing, Construction, Massage Therapy (certified Shiatsu Therapist), Holistic Healing (Reiki Master)( I like to think I’m a jack of all trades master of SOME!) and recently began a masters degree program in Accounting. Currently I have a day job at well known financial services company… And I still find time to enjoy a good bottle of wine every now and then (read: at least once a week!)