Busting the Bank

By Brenda Farrell, 10.11.2006

Consumerism is America is busting the bank and weakening our national economy.

Watch the news on any given morning and you’re likely to see a segment on the latest trends in giant plasma screen television sets, restaurant quality appliances for the home kitchen or mini-vans that come better equipped than most urban apartments.

It’s natural to want things that make life easier and more enjoyable. However,it is unrealistic to think
that material excess will actually improve the quality of life.

For the average American, the prices of these items far exceed the household budget. Stores and dealers, realizing this lack of funds, entice shoppers to buy anyway with their promises of easy credit.

“Buy now, pay later,” the ads say.

“No payments for the first 12 months.”

“No credit or bad credit – no problem!” The temptation is too great for many to resist. And so credit card debt is gained and home is lost. Then the bills come in and saving becomes much harder.

Individually, we understand the need to save for retirement, college tuition and emergencies. But what many people do not realize is that our collective habit of spending too much and saving too little has a negative impact on our nation’s economy.

Nicholas S. Perna, chief economist for Webster Bank in Waterbury Conn. explained that our collective personal debt makes our country more financially dependent on other nations.

“Failure to save by a large number of Americans means we have to borrow even more from foreigners to finance our trade deficit. At some point, this growing reliance on foreign funds can and will lead to a big spike in interest rates for the U.S.” And that, he said, will make it more difficult for the majority of Americans to finance our most important large purchases – homes of our own and college tuition.

The burden of debt makes the economy more vulnerable to recession. Even those who save wisely aren’t immune.

“The problem with people running up excessive debt is that it increases the risks for all of us,” Perna said. A weak national economy puts my job at risk even though I'm a prudent person who saves.”

So, the next time you’re tempted by the sight of something shiny and new that you know you can’t afford, walk away. You will be helping your self and, in the long run, your fellow citizens.