Nothing much changes.  This post first published on the 4th November, 2009!

Debt stress in Middle Class America – how may this play out?

On Saturday, October 24th Yves Smith of Naked Capitalism ran a Post on her Blog about an anonymous couple who were over their heads in debt.  (Yves has given me written permission to reproduce the Post.) The story of this couple then generated a huge response of comments. Read the comments, each and every one of them.

Then ask yourself where this is all heading?  These comments may, almost certainly are, just be the tip of the iceberg.  Seems a long way from Lincoln’s Gettysburg address in which he was reputed  to have used the words: “… government of the people, by the people, for the people, shall not perish from the earth.”

Some days I worry; worry a lot!

The extract from Yves Post about this couple is reproduced below but far better is to go and read the whole Post and all the comments.

UPDATE: Since writing this Post Yves has published a further Post on the topic again generating a huge volume of comments.  That was Sunday, November 1st.  Then bright and early on November 2nd James Kwak of Baseline Scenario weighs in with his version, Do smart, hard-working people deserve to make more money? 150 comments (at the time of writing) for that one.  Interestingly, as the days have gone on the mood of the commentators has become more reflective and thoughtful thus partly negating the theme behind this Post.

This is the original Post from Naked Capitalism:

Some readers like to demonize those who get in over there heads with debt as people who lived high on the hog and had their day of reckoning come upon them. This story, forwarded from a reader, shows the picture is more complicated.

When I was young, savings of six months of living expenses was considered to be a good cushion against risk. Is that true any more? I doubt it. Although this couple didn’t even have that much stashed away, the sort of buffers that worked a generation ago are insufficient now. People spend longer between jobs than in the past, and if/when they do find new work, it is often at a lower level of pay than before.

Job loss and major illness rather than an overly lavish lifestyle are still the biggest causes of bankruptcy. And now that the average tenure at a job has shrunken considerably, people need to have more in the way of savings, yet the high cost of unemployment means it is even harder than before to build up a big enough kitty.

Via one a correspondent:

Just like most everyone I know, my husband and I are in big debt with our credit card companies. My husband was laid off on New Year’s Eve last year. We were in total shock. I am retired from the USAF and receive a small monthly check, and my husband began collecting a meager unemployment check. He searched all over the US and made several trips out west knocking on doors and handing out his resume. NOTHING. Anyway, we had no saving and a little bit of stock which was cashed in at an all time low. No help there. Then we started living off our credit cards. Without them, we would have not made it, period. Our daughter and her family moved in upstairs and her husband was working of a whopping $8.50 an hour. No help there. So basically we were supporting them as well.

We have a mortgage payment of $1175 and $30,000 equity still in our home, but we are unable to refinance at a lower rate BECAUSE my hubby was unemployed!

Getting back to my B of A card, I have NEVER been late on a payment in 10 years (until last month). I have always paid more than the minimum (until January 1st). BUT, my interest rates have inched up and up in the last few months and then, BOW! I tried to use my card about 3 weeks ago at the grocery store and it was denied. Needless to say, I walked out without the food. We don’t waste anything, not money, not food, not heat or lights, nothing, but we are going down fast. The good news is that my husband got a job this week (at a much, much lower wage) and will finally get a pay next week after almost 10 months. The bad news is that B of A is killing me and will ruin me soon. I sent them a “token” $10 payment on the $450 monthly that I owed. The payment was on time, but the $10 sure didn’t make them happy. They slapped a “LATE FEE” of $39 even though my “payment” was not late AND of course the dreaded overdraft fee of $39. Yesterday I got a statement from them saying that my next payment due 11/11 is $950. I can see the snowball at the top of the hill ready to roll. What do I do? Do I revolt and refuse to pay? Do I keep sending them $10 as a promise to pay? OR do I write Kenneth Lewis and say I want some of their TARP/bonus money back so I can apply it to my B of A account? It’s not fair, although I know we lived off our credits cards and much of what I owe is money that I spent on essentials, BUT, the ultrahigh interests rates combined with their slap-on-every-extra-fee-we-can mentality is outrageous. We have worked all our lives to have and keep our excellent credit ratings and now all that is shot.

What do I do? What do we do? Like I mentioned before, my husband just got a job, but he will be making much, much less than he used to. Our mortgage is behind, the bank is on us about that, our credit cards a behind and they want even MORE blood, our kids and their families aren’t making it even though they work and pinch every penny, no insurance is within reach for them or their babies, so we have been shuffling payments to help our grandchildren, the list goes on and on and on and on…

Please, what do we do? How can we stop the madness that has engulfed us? We are good citizens, worked hard all our lives, paid all our bills on time and paid more than the minimum – until lately -, penny pinch, reheat the reheated leftovers, eat toast, never go out, never hurt anyone, love our family and served our country, and now this.

Please, what do we do?

oooOOOooo

Could have been written yesterday!