Crazy for credit. . . .

I got home in time for the last half of a national news program on TV, and heard this very interesting quote:

"Consumer credit helps the economy the way getting drunk helps make a party more fun"

I wasn't quick enough to note the economist who said this, but I thought it was brilliant! It completely illustrates the danger of having a bit 'too much' fun at a party, and having pay for it the next day in the form of a raging hangover. I think we, as a society, are now past the point of partying, and are in the midst of a mighty hangover!

In attempting to track this economist down, I came across an article on MSNBC that discusses the 'American Debt Nightmare'. This article, at the outset, makes two very important points:

1. We rely on consumer credit now more than we ever have in the past. On average, we spend a whopping 14% of our disposable income on credit card payments! That's a huge number! Say your disposable income (what's left after paying taxes) is $2,000 a month; if you're an average American, almost $300 of that would go to minimum credit card payments!
2. Since Americans are clearly living way beyond their means, relying on credit cards to meet basic needs, our savings rate is miniscule. In fact, the savings rate dropped to less than 1 percent last year. How can we ever expect to reach financial independence by relying on credit cards and a savings rate that is flirting with zero percent?

This article continues by presenting 'real person' interviews with Americans who are now beginning to feel the pain, especially since credit is now drying up. One couple had their $40,000 equity line of credit frozen. Granted, it sounds like they're going to be just fine---they simply won't be able to renovate their basement this year---but it must have been quite a surprise to learn that their $40,000 'cushion' had suddenly disappeared.

This story and others simply serve to remind me that credit isn't really money---it's sort of imaginary. If you're relying on imaginary money to shore up your finances during hard times, you're putting yourself in danger. It's a sad commentary on the state of the economy, but I wonder how many of these people will remember the lessons they've learned once we're 'back in the black' financially as a country?