General Gau’s Chicken

From Bad to Worse: Television, Debt & Credit
by Nudge

According to any number of news articles, Americans in record numbers are turning to short-term credit card monies for the means to cover essentials like mortgage payments, groceries, monthly bills, and fuel for the vehicle(s).

It’s worth repeating that the crisis of the 1920s & 1930s was a credit crisis (not a liquidity crisis) and that we’re now in another such crunch.

The fact of the crisis itself is nowhere near as distressing as the fact that millions of Americans, faced with the spectre of declining real wages, substantial cost inflation, and more, are in effect turning to high-interest short-term loan sharks to maintain the perceived entitlements of the American lifestyle.

The single thing most responsible for millions of Americans getting used to acquiring debt for all the wrong reasons was the expansion of phony real-estate equity that began in the latter half of the 1990s and is just now in its downward arc from the peak — and the ability to borrow money against this phoney equity. No one should doubt that this so-called equity is completely hallucinatory: after all, it came from nowhere and emerged out of nothingness, and it is to never-never land that the stuff is now returning. Any old-fashioned banker (or your own parents or grandparents) can tell you that equity is built up by paying down the mortgage, and not by imaginary RE fairies sprinkling the deed with pixie dust.

What’s far more real than the imaginary equity, of course, is the debt left behind that was leveraged against it. Appalling numbers of Americans fell for the scam, drank the Kool-Aid® , and are now stuck owing the pied piper ~ whose only known forwarding address is a numbered account in the Cayman Islands.

By the tens of millions, Americans bought oversized gas-guzzling “lifestyle accessory” vehicles (Harleys, giant turbo V10 pickups, jet-skis, snowmobiles, powerboats, RVs, and more); tattooed themselves in ways that surely seemed oh-so-unique at the time (despite the tens of thousands of young guys out there whose shoulders are now decorated with the random compass points and the Oriental characters reading “General Gau’s chicken with white rice”, or the hundreds of thousands of gals with identical tramp stamps & ho tags); beautified themselves with plastic surgery that had hitherto been unaffordable to them; “upgraded” their dwellings with the now-pedestrian stainless steel appliances, granite countertops, and traventine bathroom tile, all on the supposition that the value of their dwellings would appreciate far beyond the costs of these cosmetic fixings; signed up for multi-thousand channel HDTV subscriptions and purchased enormous flatscreens for every room because, gosh, the worst possible thing in life would be a deficit of leisure-time entertainment choices; and had a spending party the likes of which has never before been seen.

Like a night of hard partying buying rounds for everyone at the bar, that wild orgy of spending is gone. What remains, though, is the pounding hangover and the mess and the mountains of debt that remain behind.

The good folks over on the housing bubble blog (the HBB) have affectionately labeled the abovementioned type of living as the “thousandaire lifestyle”. The label fits beautifully. Ordinarily sane adults acted as if they just found a bag of cash that dropped off the Brinks truck in front of them on the road, and were somehow allowed to keep it.

Here’s what the abovementioned spending spree seems not to have included: sensible investment for the future; paying for education; investment in the nation’s manufacturing or transportation capacities.

Were there some kind of higher court into which the pied piper could be dragged, I would have to name the people of the television industry as one of the main groups of malefactors. It was from television that so many people picked up their behavioral cues about living far beyond their means. A particularly fine example of the kind of show meant by this is “The O.C.”, in which everyone is rich, happy, well-fed, well-groomed, living in big expensive clean houses, without a trace of real-world worry ever entering their pretty little heads. An older example, from closer to the beginning of the abovementioned spending spree, is “Friends”, which showed a bunch of young people (supposedly working ordinary jobs) enjoying a marvelously large and well-located apartment which, in the real world, would have required raiding the trust funds just to afford.

Real life is not so nice and pretty and well-appointed. Perhaps this is why millions of Americans turn on the boob tube every night to enjoy their serialized “stories” so that they can identify with these people who seem so much like them but enjoy such nice lifestyles by not working very hard and by spending a whole lot of money.

When given the opportunity to borrow against the phantom equity caused by booming (yet fully imaginary) home values, Americans jumped on the opportunity to comport themselves as if they were extras on Friends or the OC.

One would hope that the closure of the window of borrowing against [imaginary] home equity would send a wake-up call to all the debt-infected zombies out there in dittoland, but no, Americans just flip from plan A to plan B, with the latter being a matter of maxing out the credit cards to continue to afford living beyond their means. This is going from bad to worse. Our collective savings rate has been negative for awhile.

What comes next is neither unknown in history nor hard to imagine. Refer to previous examples of crushing inflation plus crushing national and personal debt. If you are in doubt as to what to do, go read the free advice of “Red Baron” over on the HBB (he usually posts it daily in the bits bucket) or the Mogambo Guru.

This entry was posted by JR.

22 thoughts on “General Gau’s Chicken

  1. But if everything collapses, who cares about some electrons in a computer? There won’t be electricity to run it anyway.

    Debt, schmedt. Put some solar panels on a CC and get on with it.

    ;-)

  2. FAR, must be nice to live in a place where PV solar panels might be of use. The solar insolation numbers are so low for this part of New England that it’s practically worth relocating to property with running water on it. Like Asoka pointed out, there is weak indirect solar energy available here in the form of critters that can be harvested for meat, firewood, plants, etc.

    If you’ve ever tried to power your home with PV energy, what happens is that you end up finding ways to reduce your demand, since PV energy is so darn expensive. Can the food and use a root celler for much of the rest; dig a hole, line it with hay, cool it with big blocks of ice brought in during the wintertime. Food refrigeration is a huge energy suck on a household. Use a clothesline instead of the electric clothes dryer.

    Uggh, yesterday one of my coworkers told me she had looked at a “nice” half-million-dollar lakeside home with a 6-car garage. I was besides myself imagining the heating/cooling costs of that monster, let alone wondering who the F would need that much garage space. And would they fill it with crap quickly, making it necessary to park the luxo-barge SUVs outdoors all the time?

    It seems “The OC” is alive and well. :(

  3. Heh, I’m actually working on a homebrew wind turbine, even though Planet Georgia isn’t really a good place for it (at least May-Oct or so). It’s going to take a while to complete, though — I need to get me some good strong magnets for the generator. So far, I have a total of $12 in it, not including junk bin stuff that I had laying around.

  4. Who’s the poster masquerading as JHK? OEO? Asoka and I are politically incompatible anyway.

    Actually, Dale is my real sweetheart, he just doesn’t know it yet :)

  5. Nudge

    You underscore well how completely out of it people are on “lifestyle” and the financial purgatory they’ll endure to obtain it. I’m so sick to death of hearing people and advertisers chunter on about lifestyle – it’s positively vomitish.

    My brother calls all the new oversized housing developments golden ghettos and I can’t think of a more apt description. Fuck the granite countertops or even my plasticized countertops over MDF, chipboard or whatever gunk is material of the moment. I’d kill for a decent stainless steel countertop that was standard in most homes here right up to the 70s as they can handle a fair amount of wear and tear and best of all don’t warp or disintegrate if one of the kids puts a hot pot on top.

    It seems that all the simplest, most well built things have been thrown on the scrapheap just to enable someone to flog an inferior product for the old quality price.

    As for TV I don’t much bother unless it’s a news program or documentary. Sometimes the BBC does good historical dramas like Henry VIII or Elizabeth I (with Helen Mirren) and they’re worth a look. I could never watch Friends, the O.C.or anything of that ilk because like you say, who the hell lives like that? I did enjoy Six Feet Under as it showed how sometimes we can all be deeply flawed and not very likeable along with the odd Kodak moment.

  6. Fuck them Granite countertops is right! Damn expensive things give off lots of radioactivity!

    Stainless steel, Brass, Cast Iron and wood are the only things a modern kittchen really need.

  7. Thanks Mary. Uggh, yes, the consumerism cues in advertising are enough these days to induce hurling. I so don’t miss television or being bombarded with ads. It is always very strange if I’m visiting friends and they’ve got the tube blaring away like everyone else. They may say they don’t pay attention to it, but the sad fact is that they’re nonetheless receiving (and being affected by) the nonstop exhortations to consume more and more.

    Mary, I know a number of people who will be horribly upside-down in just a few short years, all because they’ve been spending like mad these past 10 years or so and have not yet noticed how fundamentally the economy has changed. I suppose it helps if you keep the tube on and the happy news flowing about how alt-E stuff will rescue us (like Dale keeps reading) so we’ll be driving hydrogen-powered Yukons from the house to the mailbox and back anytime we feel like it. Other bits of feel-good news say that the continental shelf is full of oil and that those evil politicians are conspiring with big oil to keep the prices up by blocking the drilling.

    I’m with Doom on the idea of how lots of people here will someday have a most rude awakening, and how they may not be so well-behaved when reality gets to them. How and when this will happen, though, is the source of much debate.

    Did anyone catch the Mogambo Guru’s post about silver this week? Great stuff:

    http://www.dailyreckoning.com/Writers/Mogambo/DREssays/MG082008.html

    MOU, if you’re reading, this has some bearing on the issue of the differences between spot prices and what dealers will actually charge for PM coinage.

    How to survive the mess better than the herd:

    – Get out of debt quickly, at least to the point where your savings could easily cover your remaining debts if necessary. If your debts are at fixed low interest rates, pay them off at leisure, since inflation will render tomorrow’s payments worth that much less than today’s.

    – Get a steady job you can keep for the long term if necessary.

    – Reduce your living costs (and especially your energy costs) mercilessly. If it costs money and it doesn’t provide food or shelter, lose it ASAP. If it’s cheap/free and provides entertainment (like reading at the library) do that if you’re bored.

    – Save like crazy .. like 1/3 or more of what’s left after taxes. Buy gold (or other things that will retain value) with some of what you save ~ it will not lose value like UPL dollars or anything denoted therein.

  8. Next time I’m drunk and gonna throw up I’m gonna use that phrase..
    “I shay, old chaps, I’m feeling poshitively vomitish”
    I can taste the carrots now…

  9. Nudge,
    BTW, never mind my smart arse comments, keep up the good work. I don’t reply much because you’ve pretty much said it all already – I do read though.

  10. >one of my coworkers told me she had looked at a “nice” half-million-dollar lakeside home with a 6-car garage.

    Um… 6? WTFGDH is that for? I mean, seriously, we have a 2-car and it feels totally huge. Does she have a baker’s dozen of kids?

    OTOH, I still see the other mentioned phenomenon around here, if to a lesser extent. A neighbor lives by herself in a place of similar design to ours, but with a few extra hundred square feet. Ours is 1200 sq ft, which seems gigantic for 2 people but was one of the smaller places when we were looking. If it weren’t for our books lining so many walls, it can have a semi-empty look. Hers is about 1600 sq ft, and yet her stuff spills over into the garage such that she needs to park her luxobarge outside. She actually has a hard time getting her garage door closed or negotiating her way through the piles.

    Me & our 98 yo neighbor have commented about how weird it must be to be attached to so much stuff, and still adding to it all the time. I feel like I could lose half (even some of the books, most were bought 2nd hand anyhow) and still be fine.

    I just don’t grok mindless consumerism…

  11. AB, she has two adult kids, but one of them has his own place. Her husband has no kids. When I asked her about the dealership-sized garage, she shrugged and said her husband has lots of toys. I can only imagine the arrayed Harleys, jetskis, a powerboat or two, the gas-powered snow thrower, the riding lawn mower, and maybe another spare vehicle or two. She commutes to work solo in an 8-passenger SUV getting around 12mpg in local driving.

  12. “People tend to surround themselves with things”–Thoreau

    …..encourage them to open a small lawnmower repair shop

  13. “I just don’t grok mindless consumerism…”

    AB-

    IMHO, a lot of it is more about hoarding… it’s got it’s own mental disease classification related to depression.

    You should catch a look at a lot of the homeless folks–most of whom are mentally ill and/or substance abusers–in my neighborhood. There’s this one guy who has a Safeway cart with one home-made wheel and full of crap three or four times its capacity that he has been rolling around for years.

    He limps from an untreated injury and he won’t panhandle or accept money. On occasion, he’ll take food. Talk about having a tangible burden.

  14. Is it just my imagination or is Nudge actually reading this blog and responding to things people say about stuff she wrote? Please, tell me it’s true. I need a vacation.

    I guess I have dale to thank. He finally convinced her it is pointless to argue with him. Dave is right . He is … well, I think think Dave puts it best.

  15. What you believe Dave?

    But he suffers from emotionalizm! Its one of those new meta-physical ailments cured only by singing cuem by yo! (modern street version) while haning from your toe nails.

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