Since the early 1970s, American attitudes towards debt have dramatically shifted. We progressively morphed from a culture that avoided debt, to one that accepted debt but managed it with a healthy fear, to one completely maxed out on debt. Now we have an entirely new phenomenon—a culture that uses even more debt to dull the pain of the debt we already have.
The charts below reflecting federal and consumer debt can be roughly divided into four phases that clearly show we are living in a dangerous economic stupor, not unlike that of a drug addict who uses more and more drugs to dull the pain.
Phase I – Debt Avoidance (1940 – 1975)
Phase II – Acceptance with Healthy Fear (1975 – 1990)
Phase III – Maxing Out on Debt (1990 – 2008)
Phase IV – Debt Used As Painkiller (2008 – Present)
The critical Debt as Painkiller Phase began at the federal level in 2008 when our elected leaders convinced us that it was better to avoid the pain of the collapsing housing bubble—itself the result of excessive spending and borrowing. That ushered in the Troubled Asset Relief Program (TARP) by which the federal government bailed out everything from banks to insurance companies and auto manufacturers. The Federal Reserve had its version of Debt as Painkiller as well called Quantitative Easing or QE I and II—basically creating money out of thin air.
We as individuals, families and college students had already gone on a debt binge, buying on credit everything from college degrees to houses, cars, the latest gadgets and even Netflix subscriptions until 2008 when we all began to feel the pain.
Many then began to cry out for help from the government to modify our mortgages, increase welfare, reshape our student loans and overhaul the consumer credit industry. Others became angry that the “1%”—our wealthy citizens—were “not paying their fair share in taxes” that would enable more government bailouts and handouts to kill the pain.
“Give me the relief I need now no matter what it costs down the road!” is the financial fix being demanded by the debt addicts. Those who want to be anesthetized by the government’s out of control, debt-fueled spending even now refuse to look at the dire implications of our “drug of choice.”
It reminds me of a joke told by an anesthesiologist friend. “I’ll put anyone to sleep for free; I only charge for waking you up.” We’re asleep now, but the costs of this pain avoidance will most certainly have to be paid when we wake up.
CNBC’s Larry Kudlow interviewed U.S. Sen. Tom Coburn (R-Okla.) on his show this week. His questions garnered a seldom-expressed admission of the very real danger of living in Phase IV:
“But the real question is: What is the greatest threat to our national security, is it al Qaeda or is it our debt? And I would proffer that it’s our debt. In terms of the thing that will take this country down, it’s not al Qaeda. It is spending money that we don’t have on things we don’t need and creating a debt that will totally shackle our children,” said Sen. Coburn.
I agree with him; we are flat on our backs, ignoring a threat as deadly as the most radical terrorists and we must wake up from our stupor now.
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P.S. Last month, Dr. David Jeremiah, promoted my book, The S.A.L.T. Plan, How to Prepare for an Economic Crisis of Biblical Proportions. Since its release in December of 2011, over 35,000 copies have been distributed. It makes an excellent gift for college graduates.
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