Debt

Twin Peaks

David Beim, a former banker who is now a professor at the Columbia Business School, has something to say for people who want to pin this whole thing on the banks.

He has a chart illustrating how much debt American citizens owe, how much we all owe — with our mortgages and credit cards — compared to the economy as a whole. For most of American history, that consumer debt level represented less than 50 percent of the total U.S. economy, as measured by gross domestic product.

"From 2000 to 2008, it's almost a hockey stick. It just goes dramatically upward," Beim says. "It hits 100 percent of GDP. That is to say, currently, consumers owe $13 trillion when GDP is $13 trillion. That is a ton."

This has happened before. The chart shows two peaks when consumer debt levels equaled the GDP: One occurred in 2007, the other in 1929.

And that scares Beim.

"That chart is the most striking piece of evidence that I have that what is happening to us is something that goes way beyond toxic assets in banks. It's something that has little to do with the mechanics of mortgage securitization, or ethics on Wall Street, or anything else," Beim says. "It says: The problem is us. The problem is not the banks, greedy though they may be, overpaid though they may be. The problem is us."

We have over-borrowed, Beim says: "We've been living very high on the hog. Our living standard has been rising dramatically in the last 25 years. And we have been borrowing much of the money to make that prosperity happen."

In other words, the problem the banks are facing is the problem we, as a society, are facing: We all have too much debt. And getting rid of it is going to be painful.

Excerpted from “Taxpayer Beware: Bank Bailout Will Hurt”

by Adam Davidson and Alex Blumberg

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• Pleasure without conscience
• Knowledge without character
• Commerce without morality
• Science without humanity
• Worship without sacrifice
• Politics without Principle

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Belief is based on your feelings and ignorance, not on any factual evidence. If you had factual evidence for what you believe, you would not have to believe it - you would know it and we could all share in that knowledge.

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This is the beginning of my posts. I hope to stimulate ideas & conversations among my friends & my friends yet to be. This blog will mostly be about my music & my art. And secondly, it will be about the Zen of my life.