It was the consumer. The masses leveraged their income to purchase items that were unbelievably expensive in comparison to their income. And those purchases, generally, brought no return on their investment.

They leveraged their homes.

They leveraged their cars.

They leveraged their remodeling projects.

There was a lot of pressure to buy these goods. Advertisers. Social status. Tradition. No real financial education. But, society did not make those purchases. We did. And we’ll be the ones left with the debt.

The American dream wasn’t built on the strongest of financial principles.
Also, the calculations made were based on the assumption that all things will continue at the same rate.

The difference between the consumer and the financial investor is that the financial investor leverages his principle to buy financial products that lead to a return on their principle. Consumers leverage their principle to buy products that generally not only do not have a return on their principle, but their original principle value amount goes down as well.

Will this be the end of income leveraging for the American masses?

What will happen to an economy where 70% of it is based on consumer consumption?

What will an economy with trillions of dollars in debt do in the future?

I think the solution will be a return to the nuclear family organization. Less cars. Smaller families. More education. Eating much cheaper food. Buying fewer clothes.

In other words, a non first-world economy.

But maybe there will be less junk, slower cooked meals, more time for friendships and family, more music. Maybe we’ll have less things, but enjoy life more. Who knows?

I’ve known of families in France that have lived in the same home for seven generations. What’s so wrong with that?

I think we have a funny way of looking at costs, like they are somehow independent of the income that we bring in. But, from the way I see it, every dollar you decrease in costs is a dollar that raises the amount you take home to the bank. That’s income!

Essentially, when you pay off your debt, you give yourself a raise each month in the amount you would have paid for the debt, and you are not paying the amount you would have paid in interest payments over the life of the loan (which is sometimes 2 to 3 times the principle amount!) If you really want to give yourself a long-term, permanent raise, pay off your mortgage. It’s like giving yourself a 1,500 a month raise. It’s permanent!