November 01, 2006

A world gone mad where the "Pay-Later Poor" buy plasma screen TVs and live the big pimpin lifestyle - until the credit runs out

What happened in our world where all of a sudden anyone and everyone (and I mean anyone) decided that they could live like a rich person, have the things rich people have, drive the cars rich people drive, wear the clothes and labels rich people where, and in some cases live in the houses rich people live in.

All without the income to do it.

I would suggest this worldwide insanity was brought about by easy access to two things: information and credit.

The easy access to information via the internet and television brought us shows like "Cribs" and "Laguna Beach" on MTV, where poor and middle class see the clothes, the cars, the jewelry and the flash that their rich peers have, and they want it too.

Easy access to media gave people around the globe a "keep up with the Joneses effect on steroids" where it wasn't just the neighbor you had to stay ahead of, no, it was THE WORLD you had to stay ahead of.

At the same time, credit, a record, amazing and sickening amount of easy credit found its way across the globe. Charge it. HELOC it. And then go buy it. But now the free HELOC money needs to be paid back, and interest rates are rising. So here come the foreclosures and bankruptcies. They don't show that on Cribs.

Here's a report from down under on the "Pay-Later-Poor" who are now well on their way to insolvency. This is just sick.

Debt-stricken families with new homes, cars and plasma televisions in Sydney's sprawling housing estates are relying on charity handouts to buy food.

Welfare agencies report a worrying increase in the number of middle-income families with big mortgages seeking help to pay grocery, electricity and gas bills.

Dubbed the "pay-later poor'' by St Vincent de Paul, they live in homes boasting cable television and the latest electrical goods and use credit cards to meet basic living costs.

Many of the families live in so-called McMansions.

Rising interest rates and petrol prices have hit them hard, with the latest figures showing soaring personal debt levels and bankruptcies.

Those who took up "buy now, pay later'' offers and store credit cards often found themselves in difficulty when the interest-free periods ran out, a member of the family fell ill or one of the family's breadwinners lost a job.

"I call them the pay-nothing-now poor - couples who have wanted everything now,'' he said.

"Retailers have created this new breed of poor - people who have over-extended themselves to buy a new home and then signed up to all these contracts to get the furniture, the television and cable.

34 comments:

Anonymous said...

The only thing dumber than an American is an Australian.

Dee dee dee!

Anonymous said...

I'm interested in this scenario only because I want a good deal on a house and I'm waiting for a massive bottom, er, in the housing market that is.

So what if people lose their houses? They would not have been able to afford them without the cheap credit and they got the chance to know what it was like to own a house. At least the houses got built so that when the crash happens, those of us who saved our money will be able to buy for pennies on the dollar. Those houses are a lot more valuable to the country's infrastructure (wealth) than cocoaine and hookers becuause they have lasting value to people as domiciles.

keith said...

remember durin the .com boom all the telecom infrastructure that was built and then sold for pennies on the dollar just months later (i.e. global crossing)

same thing with houses - way too many built, way too much speculation, and in a matter of months, pennies on the dollar.

Crusader Rabbit said...

Dubbed the "pay-later poor" by St Vincent de Paul, they live in homes boasting cable television and the latest electrical goods and use credit cards to meet basic living costs. Many of the families live in so-called McMansions.

Yes, but they made it to the top and they were able obtain all of their fancy toys and bling items while they were still young enough to enjoy them.

I hold it true, whate'er befall;
I feel it, when I sorrow most;
'Tis better to have loved and lost
Than never to have loved at all.

--Alfred Lord Tennyson

keith said...

man, that last comment, if not a joke, was one of the dumbest ones I've ever seen on HP

But oh, so very representative of the problem

Disgorge! said...

Yep, Aussies are even more house debt enmeshed than Murkans.

BTW, why are rents soaring with all the housing stock for sale?

Disgorge! said...

In a few days time, the Reserve bank of Australian is going to raise interest rates again, up another 25 points.

That's when the house prices in Oz are going to start plummeting.

DavidInLA said...

man, that last comment, if not a joke, was one of the dumbest ones I've ever seen on HP

But oh, so very representative of the problem


You took the words right from me Keith. It's the typical thinking of today's young people. Sure, they enjoy their crap today, but will pay a heavy price for the next 20 years.

Concerned said...

I notice it with friends and family.

People simply will not get married unless they have a big house, and fancy furniture inside it. Along with the flat screens etc etc etc.

My parents (although they were baby boomers) more or less lived in a furnitureless house (cheap chip-wood furniture), until they were actually afford good furniture (20 years into the marriage). Borrowing for 'luxury' items was out of the question. Their were no new cars...always second hand. Now that they have reached retirement age, they don't need a government pension to survive (even though they have payed their fair share of taxes). They invested wisely, and hopefully will be reaking the benefits for years to come. However both my parents maybe went on 2 holidays throughout their hole working life ( I am not joking), and worked their butts off to get where they are. They are now in the 'upper middle class'....but you wouldn't think if you were to look at them. They still work as much as they can.....

Todays generation (and most of the baby boomer generation) want everything NOW, and think they are entitled to it.

We have to get out of this rut.

I don't think the information age is to blame. You can search and find both sides to one story...it is up to you though, to shape your views.

p.s Is watching Seinfeld all that better on a flat screen ??

Paul E. Math said...

I'll say the same thing others have said but in slightly different words. It is the conundrum between instant gratification and deferred gratification. Instant gratification is a major part of western culture. And has reached peak proportions.

We might ask why that is - there are probably many factors. 'Lifestyles of the Rich and Famous' was the first tv show that I can recall that was what I call 'jealousy tv' - 'Cribs' is just another version of that. That certainly has an effect.

Easy credit is another element that tips the balance toward instant gratification.

Then there are the more specific rationalizations given to gratify yourself with a specific purchase. An example of this would be "It's not a McMansion, it's an investment". Thank you, David f-ing Lereah.

The Thinker said...

Easy credit is like uncovered meat!

Anonymous said...

For a lot of people with limited self-control, easy credit is like handing someone enough rope to go out an hang themselves with.

Anonymous said...

easy credit...with a lifetime to have to pay it off.....got a note in the mail from my cc...that there will no longer be a cap on the 3% fee for balance transfers.....the cc see the writings on the wall..upping fees to gourge those already drowning....

easy credit...easy debt...pretty easy to see how the economy implodes

Anonymous said...

Pay Later The Whole US Goverment is pay later the debt is for our grand kids to pay remember Deficts dont matter. Thanks ReThugs

Prof_Investor_40 said...

Keith,

You're on the right track, but don't blame the Internet. Social scientists postulate that 9/11 brought about the social-cultural trend of "cocooning", whereby people view their homes as sanctuaries and find comfort in their home surroundings and family in a dangerous world.

IMHO, instead of a renewal of spiritual faith, 9/11 has brought about a "live for today" mantra in the minds of younger people that did not grow up during the cold war and the threat of nuclear annihilation.

It is like the 1960's all over again.

- Prof

crusader rabbit said...

Prof_Investor_40 said... It is like the 1960's all over again.

...Minus the war protests.

Mark in San Diego said...

Of course the REAL rich (I have met a few in my lifetime - 50 Million US or more) don't buy all that crap. . .they buy quality cars and drive till the wheels fals off. . ditto clothing (usually boring Brooks Brothers stuff), their vacation house has been in the family for 100 years, and they wear a nice $200 watch - NOT a $5000 watch. . .after all, who do they need to impress?

Anonymous said...

This country, cry as they will about their poor. Has a class of poor like nowhere else on earth, at no other time.
Poor use to mean barely able to afford the necessities to live, no frills, no nothing other than shelter and survival.
Today, there are 'poor' or file as such, that have a big screen t.v or two, a car or two, microwave, dvd, cd player, nice clothes, and oh yes don't forget the Bling!!!
If people spend out of their means, who's fault is that?
I have to watch my spending habits. No one is going to bail me out.
Live within your means, before your means dictate how you live!

borkafatty said...

Screw credit cash rules...but paying with cash has its negitives IE: low credit scores.
No revolving accounts, paid in full, you are penilized for..backwards ass system for sure, but hey it is good for the Flock!.

Jip said...

That's the one catch about "Paying Later". It eventually becomes "I Want My Money NOW YA BUM"....

Anonymous said...

Playing the devil's advocate for a moment:

If our US dollar tanks, will it really matter if you spent all of them you had or if you saved up a few hundred thousand of them?

(Not intended as sarcasm, but a quest for enlightened opinion.)

Anonymous said...

Where is the self-control? Can't these people turn off the god-damned television set and get back to life?

When one monkey does something or has something shinier than the next monkey, then the latter monkey has to go out and ape the first monkey. Humans seem to be little better than apes at times.

I say f*ck these nouveau poor! Let them sleep in homeless shelters and eat from trash cans.

God-damn it! When I was growing up and still hungry after dinner, I had to go to the neighbor's house and steal food out of their dog's dish if I wanted something more!
For F*ck's sake! People have it easy these days.

Anonymous said...

Thing is, flat screen TV's aren't that expensive, and the price is going down.

I mean what else are you going to do when you're unemployed? Better than smoking crystal.

Flat screens are a former luxury item. Remember when cell phones cost $300 a month and looked like a brick?

Anything Made In China is cheap.

It's the necessities of life: ever increasing insurance, medicine, utilities, and, of course *oil*.

In the future, the shantytown dwellers will have X-box 1440's on huge (dirt cheap) flatscreens, powered by pirate stolen electricity, playing pirated Gangster Fu*k da Police games.

They won't have anything else, except weapons, pimps and drugs.

Anonymous said...

If our US dollar tanks, will it really matter if you spent all of them you had or if you saved up a few hundred thousand of them?

I have been pondering this very question for well over 1 year now.

Conclusion: Based on lots of research it appears that the USD is heading for the graveyard where all fiat currencies have eventually found themselves.

HOWEVER, how this effects you depends on who you are.

For Americans in the US: A new dollar will be created for use in the US; and the banks will convert 1 for 1 both your savings and debt into the new currency.

For everyone else in the world your savings in the old USD will become worthless.

When this happens the US will crash into a major depression; as its new currency will have almost no purchasing power over foreign goods. So imports into the US will crash & the sham debt created lifesytle American's now live will vanish.

Asia and Euorpe don't want this to happen too fast becasuse thier economies are not yet ready to handle the impact of the USD collapse. But the imballances are so huge now; that its just a question of when (not if) its going to happen.

* * *

So to answer the question above.

YES, IT MATTERS. Americans who are buried in now in non escapable debt (due to new BK laws); this debt will be the chains binding you to economic slavery for the rest of your life. You will never again enjoy the lifesyle you tasted for a brief moment in time. You will instead slave away just to exist in conditions worse than the lower class lives in today.

borkafatty said...

No offence:

But reading the last 2 Anonymous posts, I wish I was on crystal.

Anonymous said...

This story is like, 2 weeks old, Keith. You slipping?

Wet_Chet said...

The "pay later" attitude is human nature and has always existed for many of the uneducated -- read a Dickens novel written in the mid-1800's or The Richest Man in Babylon from 1926, or Shakespeare, or even the Bible.

Financial institutions that lend to risky borrowers, as they always have, will end up paying the price. This is how it should be, with no government bailouts.

I have a theory that I'd love to hear comments on: the fear of debt repayment is one of the reasons America has such high productivity. Few things motivate people like fear.

Anonymous said...

I've seen so may middle class families pull the equity out of their homes and rentals. They watch too many of those infomercials. Now it is time to pay the piper.

Anonymous said...

This Aussy info shows how much of a world problem this housing bubble is! Look at the U.K. and Ireland! They are even more over priced than the U.S. When my relatives left, they were sure glad they came here. Nothing has change there. The weather sucks, houses are substandard, food is boiled 'til no taste, and the roads are horrible.
When the bust hits, not just the U.S. will suffer!

foxwoodlief said...

Without credit the world economy will collapse. Without comsumption the world economy collapes.
Without a growing population the world collapses.

When all the world's resources are depleted the world collapes.

Anonymous said...

Anonymous said...
Playing the devil's advocate for a moment:

If our US dollar tanks, will it really matter if you spent all of them you had or if you saved up a few hundred thousand of them?

(Not intended as sarcasm, but a quest for enlightened opinion.)

------------------------

Hopefully, you were wise enough not only to save, but also to invest your life savings in something besides FRNs (or the equivalent, like T-Bills). Gold, silver, etc., will do great if (when) the dollar craps out.

Anonymous said...

foxwoodlief said...
Without credit the world economy will collapse. Without comsumption the world economy collapes.
Without a growing population the world collapses.

When all the world's resources are depleted the world collapes.

-------------------------

Actually, the growing population and consumption are by far the most serious problems. A growing population consuming ever-increasing quantities of limited resources. Easter Island on a global scale.

Anonymous said...

Flat screens may not be that expensive but, they are not a necessity either!

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