America: Land Of The Strategic Default
Amazing times we live in. It seems like more and more people are strategically defaulting on their debt obligations either simply due to being sick of dealing with it or with a larger goal in mind. Allow me to explain.
I’ve been pondering (and many economists have as well) how consumption has been rising in recent months despite stubbornly high unemployment. Most people are starting to point to the fact that people have simply stopped paying their mortgage. It’s commonly accepted that people can live in their home for a year or more after stopping payment of their mortgage before getting foreclosed on. This is due to the banks just being overwhelmed with volume of foreclosures and simply not wanting to add more houses onto their balance sheets.
The beauty of this strategy is that, well, people have more money to spend! So, do you want a new iPad? Just stop paying your mortgage! Sure, your credit score will take a hit, but people are starting to say screw my credit score, what good did that get me? A better rate for my house? Yippee, I’m 100k under water!
Credit Card Default
Slightly more strategic and more insidious is the credit card strategic default. There was a recent fascinating read over at Zero Hedge on a reader who has strategically amassed $100k+ in credit card debt purchasing real assets like precious metals with no intention of paying back the debt. The thread got 100’s of comments with the majority of them either in support of the move or stories of people doing similar things.
What is the cause of such a move in these people? People are sick of the banks having private gains and public losses. People are sick of being beaten down by the system. The system that is fleecing the middle class (suckers) and lining the pockets of the political and business elite.
Where Is This Heading?
The financial system as we know it is continuing to deteriorate in my opinion. Eventually these losses will be recognized whether on the books of the banks, the individuals or the government. Bad debt just doesn’t go away. When it is recognized, there will be a major wake up call to the way of life here in America.
I identify with the individuals that are racking up thousands in debt with no intention of paying it back, although I’m not going to do this myself. But, the reality is that with each passing day of responsibility, living within my means, and paying my mortgage dutifully, I feel more and more like a sucker. The system is rigged against me and against you. The system favors those who live beyond their means (Joe blow who lives across the street from you, has no job, and skis behind his $70k boat every day while you work to pay your mortgage). The system favors those who built the system to profit those at the top with billions in government backed profits and bonuses. The system favors those in power from George Bush to Barack Obama to the lifetime politician who has never worked in the private sector.
So, this is only going to escalate because frankly, it has to escalate. More and more people can’t pay their mortgage and more and more people are realizing that they don’t even need to. More and more people are giving up on the idea that a credit score is important. More and more people are losing faith in the system (as they should) and are instead buying iPads and silver coins.
I could make an honest case for maxing out the credit cards (I could probably get over $100,000 in credit from credit card companies – insane) and buying a bunch of gold and silver and a bunch of food supplies, guns, ammo, clothes, toys, iPads, etc and just saying screw it, then just waiting for the system to collapse. I understand it. I do. Yet, I won’t do it. Why? Maybe I’m not ready to give up on the system which I exist in comfortably (we’re comfortable slaves). Maybe it is because I have a family and I don’t want to introduce such risk into my family’s existence. Or, maybe I’m just scared. Or, maybe I’m just a sucker. Yes, I think the last one is correct. I’m a sucker, and if you’re reading my blog, you’re probably a sucker too.
Welcome to 21st America. Welcome to the land of the strategic default. I hope you enjoy your stay.