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GENE ROBERTSON: Foolish spending, predatory lending trap too many of us

Friday, October 7, 2011 | 3:31 p.m. CDT

COLUMBIA — "Debt is like any other trap — easy enough to get into, but hard enough to get out of." – Henry Wheeler Shaw.

If anyone thinks being unemployed and broke is the worst condition to be in, think again.

Even with all of the negatives that accompany being poverty-stricken, being poor and in debt is worse.

Most of us are probably affected by someone close to us experiencing the consequences of debt. Too many of us are in debt or near debt ourselves. None of us are immune from its direct or indirect impact.

Students, military families, the working poor, veterans, the elderly and even the middle class are all vulnerable.

Institutions engulf us in debt throughout our lives, starting at the moment of birth for some. Debt continues into education, health care, courts and even religion in many cases.

Much of this indebtedness is occurring without sufficient education about consumer pitfalls. While lending and credit can be legitimate tools for economic activity, the misuse of spending, lending, credit — and its exorbitant fees — plus endless compounding interest, create a sad, even devastating, situation.

Just as the economies of countries and corporations all over the world are victims of this debt syndrome, so too are many states, cities and neighborhoods.

We are all aware of the havoc that results from excessive consumerism, poor spending and borrowing. Yet none of us appear to be immune from engaging in this dangerous practice.

Illness, disasters, job loss, under-employment, as well as devaluation of currency, can all contribute to debt. We are all vulnerable to, or victims of, the predatory credit practices by greedy lenders with no social conscience. They earn their income from providing nothing more than diabolical and devious means of sweeping us into a contaminated, contagious pattern of debt.

Being poor does not prevent further debt either. No longer are down payments, material collateral, credit ratings or employment required to get a loan.

Lenders bet on future potential to insure people and organizations in their credit practices. They even peddle insurance on toxic contracts. 

Many lenders capitalize on the absence of traditional equity to replace traditional lending practices with less savory ones. Payday loans, auto loans and check-cashing services proliferate in our cities. 

The judicial system is fraught with an assortment of vehicles to trap anyone who might be arrested. Bail and legal expenses await prisoners and their dear ones. 

Parents and other relatives of inmates are sometimes encouraged to mortgage property to obtain lighter sentences for their imprisoned relatives.

We can’t even opt out of this syndrome by dying. Funeral expenses can also push families further into debt.

For too many, being broke is only the doorway to further pain and suffering. Being the victim of unscrupulous lenders and usurious practices give rise to the phrase "the poor pay more." Much more.

The poor might hurt most, but we all pay too much. Too few protective policies, programs and practices exist to address injurious lending, borrowing and credit practices.

Too many bankers, legislators and assorted service providers and entrepreneurs have become complicit in these practices. 

We must create laws that protect us from these practices. Truth-in-lending laws are too weak.

We need to reinstate the 1933 Glass-Steagall Act, the law that created the Federal Deposit Insurance Corp. and was systematically repealed over the years,or create something new.

We must hold perpetrators of unsavory practices legally accountable.                       

William E. "Gene" Robertson is a Columbia resident and a professor emeritus at MU.


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Comments

Michael Williams October 7, 2011 | 9:59 p.m.

Gene says, "We are all aware of the havoc that results from excessive consumerism, poor spending and borrowing. Yet none of us appear to be immune from engaging in this dangerous practice."
______________________

Speak for yourself, Gene. I've never done it....not even once.

The best "Truth in Lending" law is educating yourself.

Start with taking Simple Interest 101 as a prerequisite for Compound Interest 205 and Credit Cards 310. Once, just once, calculate how many dollars you will spend on a $100,000 home at 7% for 30 years (hint: It exceeds $250,000).

And start buying assets instead of crap.

Finally, if you don't have the cost in cash you EARNED, not borrowed, DON'T BUY IT!!!!!!!!!!!

(Report Comment)
Gregg Bush October 7, 2011 | 10:49 p.m.

Your reality
Is not universal. Please
Practice empathy.

(Report Comment)
Gregg Bush October 7, 2011 | 10:51 p.m.

To reference the "me"
And "my" only is narrow
Minded. Life is big.

(Report Comment)
Gregg Bush October 7, 2011 | 10:54 p.m.

Looking at you own
Experience, makes you think
Of just-world theory.

(Report Comment)
Gregg Bush October 7, 2011 | 10:58 p.m.

If you don't research,
Cynicism will lead, but
Deeper is the truth.

(Report Comment)
Gregg Bush October 7, 2011 | 11:01 p.m.

You're an astute man,
Mister Robertson. You have
Such insight and truth.

(Report Comment)
Michael Williams October 7, 2011 | 11:01 p.m.

Gregg: Gene said, "...none of us..."

I wanted him to know the word "none" is inaccurate.

And I have no empathy or sympathy with those who failed to pay attention in high school math, fail to understand "interest", fail to understand the pitfalls of "minimum payment", fail to pay off the credit card (not plural) at the end of each month, buy junk instead of assets, fail to read the fine print, borrow more than they make, and use debit cards instead of cash.

Nope....none from me at all.

(Report Comment)
Michael Williams October 7, 2011 | 11:11 p.m.

Most progressives I either know or have communicated with are extraordinarily regressive when it comes to the biggest personal freedom:

Recognition that YOU are your OWN first line of defense.

Instead, regressives want the gov't to be the first line.

You are a whole lot freer when you are first.

(Report Comment)
frank christian October 7, 2011 | 11:14 p.m.

Mike - Hate to disagree, particularly at the site of such a silly description of the human fault (by some) of overspending in the image of a Federal government that tops anything this professor has mentioned here or probably could have dreamed in the realm of "overspending". Credit, per se, is not bad. That some use it, as in the radio show about credit, when asked how the young lady had incurred $30,000 in credit card debt. She replied, "I don't know, they kept increasing my limit and I kept spending it.", to a destructive extreme is not caused by the system, but by lack of education in consumer economics. This retired professor might better help those he believes need new laws "that protect us from these practices.", if he could institute better education about these "perpetrators of unsavory practices"(those who lend money, aside our Federal Government, of course.)

Sorry for using you to write about him. Finally, you reminded me of an old cartoon, I believe from the New Yorker magazine. A couple was entertaining in their living room with orange crates, cardboard boxes and a single bulb hanging fro the ceiling. He says, "my wife and I are proud that we paid cash for everything we have." (Where should one live during probably the second 1/3 of his or her life while saving that 1/4 mil?)

(Report Comment)
Michael Williams October 7, 2011 | 11:27 p.m.

Frank: When I wrote, "borrow more than they make", I should have included modifiers such as the following:

"...borrow more than they make" with no understanding of interest, no hope of paying it back quickly or faithfully, and/or to purchase crap rather than assets.

I've borrowed money in my time; I won't say how much, but it's a lot...personal and business. But, I did it wisely, with knowledge, and with preparation that I would be financially upward-mobile with sufficient speed to cover my debts. Now I'm debt free except I still owe 4 grand on my farm tractor...won't be a problem, tho.

(PS: My credit card (singular) company hates me.)

(PSS: As for the single light bulb, I'll have you know that it's 2000 watts!!!!!!! :^)

(Report Comment)
Ricky Gurley October 8, 2011 | 2:37 a.m.

I think I can sum up what got us to this sad state of affairs in three easy sayings that our government (and a large cross-section of society) has adopted as rules to live by:

(1) "In the land of the idiot, the moron is king"!

(2) "I simply refuse to accept responsibility for something that is entirely my fault"!

And.......

(3) "I don't mind accepting some of the blame, but I do mind accepting any of the consequences"!

(Report Comment)
Ellis Smith October 8, 2011 | 7:24 a.m.

@ Ricky Gurley:

No argument with your observation, but I want to note that the census data for the United States are seriously in error. "Above their necks" there are far fewer adults in the United States than current census figures suggest.

They may LOOK like adults, but they act like [spoiled] children.

(Report Comment)
Delcia Crockett October 8, 2011 | 8:33 a.m.

Someone has to be the adult. Chances are.

:)

(Report Comment)

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