The United States is a great country, but… Over the weekend I was talking to my two kids about not spending more money than you have. “Neither one of you makes much money, so you shouldn’t go out and buy stuff that you can’t afford – talk to your grandparents who lived through the Depression.” No sooner do I finish my lecture when an ad comes on the TV. “Do you have more credit card debt than you can afford? Eliminate that debt – don’t let the credit card companies gang up on you! Settle those debts for pennies on the dollar…” What are we teaching our kids? And when did “credit card companies” become the bad guys?

How much debt did we, or do we, have? The Federal Reserve puts total household debt, including mortgage debt, at about $13.7 trillion, or 125% of annual after-tax income. This is much higher than the “usual” 100% that is more typical! As debtors default, it causes losses at banks, more foreclosures, trouble for neighborhoods, etc. Will the government programs, such as the “Making Home Affordable” program, convince people to pay their debts instead of defaulting? Stay tuned…

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