I remember the day I officially became “old.” Visiting southern California in the 1970s, I heard a radio commercial for home equity loans. Being raised in the culture of middle America, I’d never heard them.
“That’s stupid,” I said out loud. “Who’d fall for such a thing.” I was wrong—starting in California (and probably New York) a lot of Americans “fell” for it. In the short term they reaped lower interest loans (compared to credit cards) secured by the equity they’d built in their homes.
That bit about equity, of course, was the Achilles’ Heel of the scheme. It only worked as long as your home value increased. But that was the 70s, prices were going up—often fast.
We had just bought our first house. I paid a crushing (then) monthly payment of $327. But I was already paying extra to pay the loan off early. So, I could really own the house. Why, I wondered, would someone sell their hard-earned equity? What would happen when they retired and were still paying the mortgages?
As a student of history, who also aced all his college economics classes, I could see where those instruments lead. Money is the crack cocaine of American culture. We’re obsessed with getting it and spending it—even spending what we don’t have nor have a reasonable expectation of getting … if we can con some bank into loaning it to us. Except that we are the ones being conned.
These consumer financial instruments, like credit cards, don’t make money for us. Banks take advantage of our greed and stupidity to help us get and stay in debt. (Consider the insanity of buying pizzas on credit cards, much less on student loans.)
History provided several correctives, starting with the savings and loan crisis of the 80s and later the 2007-08 meltdown, but most people—certainly Americans—have an attention span defined by hours, if not minutes. To expect us to remember, much less heed, the lessons of our own history is naïve.
We mortgaged our future, literally as well as metaphorically, on banking instruments designed to let us spend money now which we may never have. And most of us, frankly, don’t care—so long as we get what we want today.
And that’s what marked my passage out of youth: the recognition that just because something could be done didn’t mean that it should be done applied to me.
Ask yourself, what has really changed since the implosion of 2007-08?