Some thoughts on the current US Financial Crisis – Who is to be blamed? PART-1
Americans have been quick to blame the ‘Greedy Wall Street Executives’ for the current crisis. Given that the elections are just around the corner, the congress members are quick to take-on a populist stand and side with the people. ‘Wall Street’ is an easy target! [These congressmen conveniently forget that the same Wall Street is often times their biggest contributer…!]. However are they the primary cause of this mess?
I contend that the average American consumer is the biggest culprit. Now, I doubt if any elected official would ever show the fortitude to make such a call! The reasoning is simple – The American consumer has been living beyond his/her means for a long time. Credit has become a way of life. Its not just the struggling lower middle class with incomes under $50K who are stuck in deep debt. Debt has also become a way of life in the suburbia as well.
Consider this – a highly paid executive couple with combined earnings of over 300K should be financially very secure, right? Wrong, in many cases! Here’s the problem. This family could live a very comfortable life, buying a nice house in a suburb for say 300K and a couple of nice cars. But in reality, they end up going for a 700K (or maybe even a 1M) mansion..buy expensive luxury cars..modify their lifestyle to resemble that of the ‘super rich’ in most other parts of the world. How do they achieve this? By taking on debt!
The above is just a representative example. Having lived for 13 years in the US, I have always wondered how so many people can routinely live beyond their means. Some people consider debt and deficits as good things. They spur consumption and drive growth. I am not an economist and won’t get into the economic debate here. But the first principles of common sense warn us that something is terribly wrong regarding perennial deficits and debts!
Why blame Wall Street? Isn’t it the consumer who wanted to buy a huge mansion instead of a decent house? Isn’t it the person who wanted to shop like crazy like there is no tomorrow? Or the person who didn’t have money for his children’s college, but still took on debt to build a fancy swimming pool in his house? Or the recently graduated college student who got her first job at a hitech company, and went and bought a 35K Audi?
I think its about time that America realizes that the root of the current financial crisis is the average American consumer who thrives on debt! Wall Street was merely an accessory! I am not saying that the greedy Manhattan executives don’t carry any blame..they do. But they were like any good business – supplying the ‘products’ that the consumer ultimately wanted.
[Continue onto Part-2: ‘US Financial Crisis: Role Of The American Consumer’]
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