Tag Archives: debt

in which i make a stir…

I seem to have touched off quite a mini-storm on the Occupy Wall Street forum — you can read my post and the fascinating responses here.

Here’s what has happened:

I have stopped paying my credit card bills.  All of them.  Just stopped paying them.

This wasn’t initially my plan.  I mean, yes, I sort of threw up the idea for argument’s sake over the summer.  But I never took the idea too seriously.  I’d been thinking for some time about how to tackle my credit card debt more aggressively (transferring them to a zero-interest card, taking a debt consolidation loan, &c) because, frankly, I simply don’t make that much and, being self-employed, my income is incredibly variable.  Thus, throwing four to five hundred dollars a month at balances that simply refused to go down —  due to obscenely high interest rates and my inability to make more than the minimum payment — was quickly becoming unsustainable, and just plain stupid.  My intention was still to pay down the debt I had accrued, just hopefully on better terms.

Occupy Wall Street changed all that.  It became clear that it was time — past time — to start thinking more creatively about how to reclaim my — our — financial future.  So I decided, after much discussion and with the support of my spouse, to deliberately default on my credit cards and let the chips fall where they may.

I should reiterate, I did not take this course lightly.  Taking into account the impact on my credit rating, our ability to borrow in the future, and the sheer aggravation of collections calls, we still decided it was the best way to go.  If my goal had simply been greater financial flexibility, I probably wouldn’t have come to that conclusion.  I can’t deny that the extra four hundred a month has made it easier to meet our household expenses, and I don’t regret having the ability to put money into the local economy.

But it’s about more than the money.  It’s about protesting a fundamentally unjust system that I, and millions of other Americans, have become completely fed up with.

As I have argued on many, many occasions, it is simply absurd that American taxpayers essentially fronted seven-hundred billion dollars to the banking industry so that it could clear its books of bad assets while at the same time those same taxpayers have been left on their own.  Banks have been all but washed clean of their reckless behavior, but individual Americans are expected to nobly suffer the consequences of their own.

When I say that, am I implying that individuals engaging in reckless behavior should face no negative repercussions?  Quite the opposite.  What I am saying is that is absolutely intolerable that we must watch while the industry that drove our country to near-ruin has not borne its share of the punishment.  And if they are getting off scot-free, then why, in any sort of just world, are Americans not offered at least some shot at redemption?

We live in a two-tiered world, where a class of people (by which I mean corporations, who are considered people in the eyes of the law) are able to engage in practices so risky as to bring the economy to a screeching halt, and then essentially be rewarded for those practices with bailouts, while the rest of us are left no option but to suffer not only for our mistakes, but for theirs as well.

I have argued in the past, and will continue to argue, that across-the-board debt relief is the surest route to economic recovery.  Unleashing the consumer potential of the American middle class is an option that remains untapped.  And why?  Because there is simply no political will to force the banking industry to take a loss.  No political will to do this, in spite of the fact that, to put it bluntly, the banks owe us one.

There is a way to do this — simply, orderly, and responsibly.  I would much prefer to do it that way.  But in the absence of any assistance offered to individual Americans like myself, I am declaring my own debt-relief program.

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default for the masses…

Of all the debt ceiling antics that have drifted into the absurd — the incessant posturing; the frightening lack of maturity; the fact that a passel of fanatical “conservatives” can hold the nation’s credit hostage in their single-minded attempt to deny the president a second term — it has still remained largely distant.  Infuriating, yes.  But far, far away, out in that cesspool called Washington, where looking for evidence of common purpose and higher patriotism only reveals one to be hopelessly naive.

But today it got personal.  I don’t know why I hadn’t thought about this before.  I’m sure I could have come to this conclusion had I followed the logic.  That is, it has been said repeatedly that any delay in the government’s ability to meet its obligations would result in higher borrowing costs for the government.  Which would then, of course, be passed on to the corporate, and individual, borrower.  Or, as Nicholas Kristof put it in Sunday’s Times

Yet even that brief lapse [a technical default] in 1979 raised interest payments in the United States. Terry L. Zivney, a finance professor at Ball State University and co-author of a scholarly paper about the episode, says the 1979 default increased American government borrowing costs by 0.6 of a percentage point indefinitely.

Any deliberate and sustained interruption this year could have a greater impact. We would see higher interest rates on mortgages, car loans, business loans and credit cards.

So here’s where I get confessional.

I have a terrible credit history.  Pretty abysmal, really.  It all started when, during my freshman year at IU, I got myself a CapitalOne card so that I could purchase a cell-phone.  The card, however, quickly became an enabler of many, silly little trips to the mall and too many nights of eating out.  It was soon followed by another card.

Clearly, I had ignored all the advice given to us at orientation (ie, when the orientation leaders pulled the credit card offers from one student’s “welcome bag” and ripped them up for all to see).  Clearly, I believed myself to be more capable of handling the responsibilities of credit than my peers.

Clearly, I was mistaken.

To keep a long story short, it didn’t take much time for me to fall woefully behind on payments, to the extent that, between over-credit and past due fees, I had no hope of ever crawling out of the hole I had dug.  Finally, by the spring of 2004, CapitalOne had given up on me and offered a charge-off settlement, which I gladly accepted.  Yes, it killed my credit rating.  But that’s life, right?

After taking a credit break, and living cash-only for a few years (which was made far easier by the fact I worked mostly for tips waiting tables), I took a chance and applied for another card.  This time, I pledged, I would stay far below the limit, and charge only as much as I could pay off within a month… or two… well, I’d do the best I could.  And I’d slowly repair my credit history in the process.

Surprisingly enough, this went pretty well — until the fall of 2008.  Incidentally, it had very little to do with the economic nose-dive, and everything to do with the fact that a particular source of my income — a retired professor I assisted — passed away, leaving me few options but to stretch what savings I had and live on borrowed money until I could secure new employment.

I’ve never quite rebounded from that glut of necessity-driven credit spending.  I’ve dutifully kept up payments — if not always on time, and more often than not it’s only the minimum payment.  But I’ve committed myself to paying back the debt I’ve accrued.  And occasionally I’ve even paid off a card in full — only to come upon an emergency situation where I have to put a balance back on the card to get by.

So, yeah.  Not an entirely stellar credit history.  But I would wager my experience with credit cards is not all that uncommon.  Am I proud of it?  Hell no.  I take it as no small disappointment that I couldn’t exhibit more self-control when I was younger.  I mean, sure, I agree with those who would say “what company in their right mind would give a credit card to an eighteen-year old with practically no income?!?”  And that’s a fair point.  But that’s water under the bridge.  I screwed myself, and my low credit score, and high interest rates are simply what I have to deal with.  I accept that, because it’s what I did to myself.

Now back to the debt ceiling…

I accept the repercussions of my own actions and poor decisions.  But I will be damned if I will put up with an interest rate hike simply because a few jackasses in Congress are so myopically focused on reducing federal spending that they’re willing to kill the country with the cure.

So here’s what I say to them:  if the federal government defaults, so do I.  I have a hard enough time keeping on top of the bills I’ve created for myself.  If my (already usurious) rates are raised even more because of the lack of sense in Washington, D.C., I’m just going to call it quits.  I will let my lending institutions know, and they can deal with it as they please.  Damn my credit rating — it’s been in the toilet for years and isn’t going anywhere anytime soon.

Do I expect this will matter in the long run?  Other than actually getting rid of my debt, but in the most irresponsible way possible, probably not.

I imagine the only way it would matter is this:  if enough people sent the same exact message to their lenders, and if those lenders took the threat seriously enough to (maybe, possibly) pledge to withhold all campaign donations to any member of Congress with their head too far up their ass to accept a deficit-reduction package that includes revenue increases.

Any takers?

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