We should begin to stabilize our debt dilemma by first assessing where we are, how we got there and determine the way forward to navigate the “messy situation”.

Some time ago, some of us we were led to believe that the matter of debt burden is a problem of the economically impoverished. Not so. In fact both rich and poor, lower and middle class, not only have strenuous debts but are weighed down so heavily by it that many are breaking or going “under”.

And even whereas once upon a time, in the international market, the unequivocal guarantee of a country’s government would be enough to close any deal and secure a loan. These days that guarantee might not be worth a “hill of beans”. Dozens of countries, and rich developed ones too, are so burdened by debt that they are about to go “bust”.

Phew!!! Isn’t that something?…Where does that leave you and me.

According to the Organization for Economic Cooperation and Development developed countries like, Belgium, Greece, Iceland, Italy and Japan among others are looking at a debt burden that far exceeds the total value of the goods and services that they produce for the year (or Gross Domestic Product – GDP). With many more like Canada, France, Hungary Portugal and the United States of America are not too far off from joining those ranks.

A lot of what has been perceived as essential or viewed as a mark of achievement has to reevaluated. We need to change our taste and habits. The timing for acquiring certain assets or pursuing certain pleasures may have be altered drastically. No longer do we need to rush to drive a certain type of car to demonstrate that we are doing well… live in certain neighborhoods to symbolize progress. Nor should we need to pamper ourselves outside of the limits of our wallets.

I am well aware that as I write this article there are many who will strongly disagree as well as those who will side with me. In fact I welcome the comments of those with the strong views, Let us have some good discussions and conversation on this. Because we are all being affected in one way or another.

It has been said in several quarters that the law in a democracy, such as ours, was designed to bring order and balance to the society. It works for the benefit of all, irrespective of your station or persuasion in life. It levels the playing field and it is “blind”.

It somehow seem as if the language of the law operates on a different plain and appears to be some type of a special “code” used by those who sit at the top our society. It appears it neither serves the consumer nor the common man. And the vast majority are oftentimes confused or at a loss as to its meaning and interpretation.
Your knowledge of it either makes you an expert or your lack thereof land you in major problems, which most of the time is felt immediately in your pocket.
What a dilemma.
So how do we fix that?
Well, go hire an attorney… a personal one at that, Who will now join the family doctor as an integral part of the family circle. Not just a part of the extended family, but is up “front and center” in your life.

So prominent is that position, that we often drop the issues on the attorney and get his/her opinions and “counsel” even before the spouse gets a chance to weigh in on the issues.

So not only do we have to relate to the ever increasing demands of family but we have an expanded circle that includes the spouse, the children, the dog the cat and our faithful Counselor-at-Law and Counselor-At-Medicine. There you go a new definition for the nuclear family.

And make sure that you can afford this addition to the “family”.

Now I am not railing on my friends in the legal fraternity, oh no. I have many friends who are very eminent attorneys and my own beloved sister has been one for twenty or more years. They are a part of my own life as much as yours in one shape or fashion.

The truth, for me, is the the family circle has changed.

Of course we could just become some renegade and revolt against all this new trappings of our modern society or we could head off into some deep back woods and get lost into “ruraldom” only to make a guest appearance for the children or grandchildren.
But maybe we could just decide to live with it and make the best of our changing world.

“The enemy of the truth is very often not the lie (deliberate, contrived and dishonest) but the myth (persistent, persuasive and unrealistic)” - John F. Kennedy
Gosh, what a profound statement. What an astounding piece of logic delivered with such a monumental blow to our long held conventional perception that direct and barefaced lie are the enemies of “right doing”.

Perhaps one of the the most prominent component of this myth is the whole false sense of security. We engage in this almost unwittingly. Everyone one of us at some time or the other comfort ourselves with this false state of belief.

Several years ago I was running a small computer business and shipped some equipment on credit to a a small retailer, who admitted, after weeks of dodging our accountant’s collection calls, that he was broke and could not pay the bill.  After a lengthy conversation with him, that seemed like it was going nowhere but to the small claims court, I decided to call it quits.

This retailer then proceeded to do something that baffled me and set me up for this this “diatribe” I am about to unleash in this post.

He pleaded with me to part with him on a good note and leave him with a good feeling going through his weekend. By the way, this was a Friday evening. He continued with this pleading for nearly half of the time that we were on the phone. It then struck me that he was more concerned about getting a feeling for that moment rather than facing the reality of his situation.

What he desires is what a lot of us engage in daily. A false sense of something to avoid the reality of our present situation. That deception of our reality is one of the arch rival of the truth of our circumstances. It is persistent, persuasive and unrealistic.

We believe that we have money when we exist for the next pay check. We parade an up-to-date car, house and all the paraphernalia of a successful persona but owe more on those “assets” than we have yet paid to date on them.

We cannot do anything without the next major windfall. So we live for the upcoming tax refund. In fact the refund is already committed and, by all intents, fully spent. And if the refund comes a few days later than it should we are on IRS site and “burning up” the phone because it should have been here already.

No, we cannot live like this. This is not living this is even worse than existing. You have got to move beyond where you are. There is an abiding false sense of… something.

Debunk that myth and face your reality. If you have, then you have. If you have not then you need to get busy. “To the degree we are not living our dreams; our comfort zone has more control of us than we have of ourselves.” - Peter McWilliams

Are you facing your reality? Do you want to feel good going through the next weekend or do you want to feel sure about what you have to deal with on Monday morning?

Indeed, the enemy of the truth is very real. It is a myth that is persistent, persuasive and unrealistic.

So deep is this new fashion conscious state of mind that corporations have gotten caught up in the “fashionista” euphoria. And as the corporations, armed with this philanthropic zeal, open their coffers to poorly funded public schools, little known community groups and inconspicuous organizations, corporate leadership begin to bask in tremendous personal satisfaction and good corporate PR. A double whammy for the corporate “guys”.

Now, as that trend gained traction and attention, just like the world of high fashion, another trend breaks the horizon. Corporations have now begun to immerse themselves into the growing trend of coaching good corporate governance through embracing integrity as the basis of their everyday business practice. In other words the new corporate dogma is, tell the truth even when it is going to cost the company money, do the right even when it makes the customer angry (at first), accept responsibility for mistakes and do it quickly!Now we are not suggesting that any of these entities have been engaged in any unbecoming behavior. But these companies believe that this new “honest and upfront” posture can give them a competitive advantage.

Whether or not it does, engaging in these noble activities is admirable and is worthy of commendation…and certainly will redound to the benefit of the consumer and society at large. Atleast we hope so.

President Woodrow Wilson once eloquently opined that :
“You are not here merely to make a living. You are here in order to enable the world to live more amply, with greater vision, with a finer spirit of hope and achievement. You are here to enrich the world, and you impoverish yourself if you forgot the errand.”

Or perhaps we may remember the dictum of of Calvin Coolidge:
“No enterprise can exist for itself alone. It ministers to some great need, it performs some great service, not for itself, but for others…or failing therein, it ceases to be profitable and ceases to exist.”

It seems that whichever motive is behind this new “fashionable” trend it might augur well for consumers. But alas, did we say fashionable? Oh, but therein is our dilemma because when we operate on the “axis” of a fashionable trend then the good that we may see now is, at best, a passing phase soon to be succeeded by the next trend. Fashion comes and is with us but for a moment…we hope this moment last and lasts…and does not quickly vanish with the next new trend.

Indeed, corporations, and big ones too, are in on this trend. When we say big we are talking about really huge ones like Walmart, Proctor and Gamble, BAE Systems, Citgo, Comcast, Motorolla, Panasonic, Raytheon Siemens and of course who can forget Toyota…These are among an enviable and growing list of such corporate giants. A trend that seem to have been catapulted by what appears to be a crisis in our economic system brought about by an indulgence in greed and self interest by corporate leadership all over.

“Let us not look back in anger or forward in fear, but around in awareness” – James Thurber.
If there is never a statement that has an appropriate application and usefulness in today’s experience, it is this one. Indeed, many of us have found ourselves looking back with regret or  looking forward with trepidation, wondering at our new found predicament. Somehow the late James Thurber with all his visual impairments seem to have had phenomenal foresight in offering this advice for many who are under the yoke of our current economic burden.

Many of the expenses we encounter today we did not have as part of our lives 25 years ago, like Internet access or cell phone charges etc. These days they are not just optional items on the monthly budget but have even become staples of our everyday existence.
Now add these to the overwhelming debt burden that many are buried under, especially after “cashing out” during the head-spinning days of soaring house value. Looking back with anger and bitter disappointment as well as forward in fear and despondency is as real as getting up to a cup of coffee or a glass of orange juice…if we can even afford that these days.
And even for those who may have been forced, under the pressures of a certain financial ruin, to off-load their debts through some bankruptcy filing or Creditor settlement, they might not yet be out of the proverbial “woods”. Because for those debts that have been written off through a settlement, even if you qualify under some type of tax exclusion, there is still the real possibility of a tax problem looming, if you have not yet received notice from the IRS by now.
But we are not here to preach doom and damn. In fact, Thurber actually suggest that we should look around with awareness. There is no better wake up statement for a person wallowing in the pit of debt and overwhelming expenses that have been accumulated through the pretensions of pursuing the “American Dream”.

Whether you think current predicament is the result of mistakes, poor judgment, bad luck or providence, you are now at this point. And no real progress can be made with your head in the sand. And certainly cursing the stars will not make night turn to day.
I am not sure I agree with Bill O’Reilly completely here but I will borrow his statement because it has some pragmatism in it…
(This system) “…For all of its faults, it gives most hardworking people a chance to improve themselves economically, even as the deck is stacked in favor of the privileged few. Here are the choices most of us face in such a system: get busy or get bitter. “ [parenthesis is my insertion].
Throwing blames around will not get us anywhere. In fact a resentment of the state of things is understandable and perfectly appropriate. But throwing all the blame at any one group is nonsensical and only serves to be foolhardy. Government was lax and stimulated some irresponsibility, lenders threw caution to the wind and individuals engaged in a free spirited orgy of consumerism. And even when things get better, for a while we are going to be struggling to catch up to where we were.
The world around us has changed and during the period of high consumerism, and seemingly plenty, everybody talked about the inevitable “Bust” but very few paid attention to the writings on the wall and even fewer made preparation for it.

Get bitter or get busy is a call to action for every consumer. Know where you are and what is happening around you. There is a new economy that many have embraced and a few got a head start with and are reaping great rewards.
Embrace and prosper or curse and dissipate. More Anon.

The Automated Teller Machine has outgrown its name. Even the very title of “Teller”, which is what the consoles were attempting to replace, is tantamount to going to the store and asking for a soda pop. In fact,  a bold and smart move by Wells Fargo, in the mid 1990s, to start selling stamps through their ATMs is now being looked upon as visionary and trail blazing. Because today the ATMs are not only one of the largest outlets for stamps but is an access point for utility bill payments, gift cards, cell phone time, concert tickets etc, etc, etc.

The Automated Teller has become the Automated Vendor and even a highly valued marketing and multi use console! Out goes the ATM and in comes the Kiosk (an unmanned, free-standing interactive terminal), the big brother to the ATM, making many new services “automatable”. And leaving the personal contact of past decades in the dust.

A novel introduction into our lives, nearly 40 years ago, has become so much a part of our existence that it seems awkward now when we can’t find an ATM near enough when we need it. In fact Americans visit the ATMs more frequently than they visit their local banks, averaging more than 10 times in a month. Wow, there might be an even greater opportunity here than is even being exploited. Especially given the experience of the bankers with a consumers’ response to an ad on the ATM being 3 times that to a regularly mailed flier of the same ad.

For those of us who grew up in the era of personal contact, a weekend trip to the store was an occassion,  a routine visit to the post office or the bank was an event. For us types there is much adjusting to get up to speed with the New Economy where that personal contact is fast disappearing. Right now tests are being conducted to offer coupons, money transfers, check cashing and even make a regular everyday purchase such as airline tickets on these big boxes.

There is no doubt that these consoles have gained acceptance by most and notoriety by the others, like the clerk who has been sidelined as  a result of its intrusions into our daily commerce.

I am not sure where this is going but I get the distinct feeling that the innovation may have only just begun. It is not too hard for me to imagine walking up to what was once a bank, now a big ATM (a la console) and doing some transactions then quickly going over to another console to get stamps, deposit my mail and overnight a parcel and drive up to another console and grab a cup of coffee on my way home.

My only conversation for my entire trip may be with the ATM or the Kiosks? Hmm… seems rather lonely…Who knows, we might be able to equip our motor vehicles for some virtual conversations to fill that void.

America can shop its way back to prosperity. If I did not know any better I would think that this statement is an oxymoron. It somehow reminds me of a bumper sticker I saw several years ago…“The harder I work the behinder I get”.

Apart from the Politicians and their noble school of economic advisors there are a few others who genuinely believe this to be the gospel for this time. Among this group of thinkers is Lee Eisenberg author of the book “Shoptimism: Why the American Consumer Will Keep on Buying No Matter What” – a former editor-in-chief of Esquire magazine and an executive with Lands End.

He believes that shopping is deeply rooted in our psychology, we are why we buy and what we buy. He further contends that the current economic downturn has altered the attitude to spending but has not removed the appetite. The habit is now being driven by our head and not our emotions and the right kind of buying can bring happiness and happy memories like a great family vacation, a romantic getaway, a journey to a place that feeds the spirit etc.

While the debate may rage about the fallacy or practicality of this theory, there is that one simple condition that makes this notion impractical as a solution for our current maladies…where there is no spending power, that is disposable income or available credit, there is no ability to purchase. So whether I want to create memories, purchase a car that I really need or visit my mom that I have not seen in more than 2 years, I cannot do it if I do not have the financial means. Which is the current dilemma of a growing throng of disenchanted consumers desperate to take a psychological boost at the nearest mall.

Out of a job for months (or years in some cases), way past the last Unemployment check and surviving on the occasional odds and ends that come by way of the benevolence of friends and family members, “Shoptimism” is as foreign to this group as a Titan from Mars.

For many the reality is Shopophobea: Why the American Consumer Will Not Keep on Buying No Matter What”.

As Americans change their orientation towards debt accumulation and credit card spending their seem to be a change in the instrument being used at the cash register.
Credit card debts are coming down…and no, we are not dumping the plastic but changing the type of plastics that we pull from our wallets and pocket books. Under the scissors or knives go the credit cards and out come the debit cards.
MasterCard announced that its fourth quarter (2009) reflected a 13% drop in credit card usage while its debit card jumped 10.5%.
Consumers have decided that they will no longer live beyond their means…but they still want to enjoy the convenience that spending with plastic brings. They are doing this in a more common sense way  that is reflecting their new financial realities.

In our last post we unveiled some “excitingly” positive data about the persistent decline in consumer borrowing. Of course, depending on which side of the fence that you are on, you may view it differently. We like to consider it to be positive because the current economic woes have provided some first hand experience of the devastation that can result from a spiralling expansion in credit…with no real income to support it.

In any event the Federal Reserve Statistical Release on Feb 05, 2010, revealed that consumer debt fell by a whopping $8.5 billion for the month of December! In other words Americans shed about $1,700 per household off their credit card, car loan, student loans, boat loan, RV loan etc etc etc. This marks the 15th straight monthly drop in consumer debt. All of this is happening when we are in the midst of one of the lowest interest rates in the history of this country.

One of basic law in Economics (law of supply and demand), teaches that as price falls then demand will rise. In this case the price of money (i.e. interest cost) has fallen but the demand is also falling . Somehow there seem to be other factors at play that are causing people to not want the burden of credit anymore and are even bailing out of what they have like a rat departing a sinking ship.

Families have decided to just live within their means and shed the stress that comes with keeping up with the “Jones”. In fact, 54 million householders with a credit card debt have shed approximately $2,022 of their balance while at the same time personal savings rate climbed to 4.8%. I feel like I want to call this a “watershed” period in our economic history and a leap forward in our consciousness of what is important versus what is desirable.

Whether it is the threat of unemployment or the the harsh realities of our situation that is now igniting a light bulb in our financial senses, we are clearly moving in a different direction. Now, our politicians might not like this for the stimulus and our economists may dismiss it as a flirtation that is simply part of the typical economic cycle. Whichever way we see it, this seems to be a good habit even if it is for a moment.

There is an old proverb that says, “one man’s feast is another man’s famine”. As the jittering and stuttering in the economy continues we might be in for quite a lot of proverbial “famine” while others try to recover after their “feast”.

The Federal Reserve reported recently that for the month of November 2009 Consumer spending dipped very sharply. In fact the decline was beyond the expectations of our professional pundits on Wall Street and in Washington, DC. It continues a trend in consumer activities of record levels that are alarming but not exciting – the largest drop in consumer borrowing in seven decades, the most consecutive drop in consumer borrowing ever (10 months in a row) and the longest period of decline in credit card borrowing (14 months).

But what does all this fall in people trying to get loans or take out credit cards mean for most of us who might not even have any credit?

Well here is what I understand. More spending means increased economic activities. Simply put, as more people buying stuff and more companies start selling more stuff then more companies begin hiring more folks to produce more goods to sell more and it goes on…On the other hand, less spending translates into less economic activity, more layoffs and the reverse of the spending boom outlined above.

But Americans have been spending at record levels for years and have been borrowing to finance that habit, at record levels too. Where has that gotten all of us and our now floundering eceonomy? Surely all of this spending from borrowing had to catch up.

I learnt in school that the basic rules of Arithmetic teach that as we spend more than we have then we will have to borrow, cut back or go bust. Common sense informs us that the more we save the better our chances of surviving a “rainy day”. Not so in economics…the more we save the less our chances of surviving. Wow, what was that! I think I am lost here and I am not alone. With this type of contradiction this economy might be in trouble for some time.