What roll does poor fiscal education and decisions play in the disapearing middle class?

Question

I agree that the middle class is disapearing. My question is what roll does poor financial education have to do with this? Do things like Rent-to-own, credit cards, Tote-the-note car lots, check-cashing/payday loans rackets have something to do with this. Do the middle class, lower middle class and poor have a propensity to make poor fiscal decisions using things like listed above, and do the poor help themselves stay poor by using them?

Why does the government allow operations like them to continue to operate?

I would like to post this in politics AND economics, but I am sure I would get reported.

hopethishelps - would you like to explain your position, or would you just like to post a non-answer.

There is no victim to a person who shops for, finds and agrees to buy a over-priced car at 24% interest. Unless the buyer was made to buy under duress, there is not victim...only a dumbass with a car he can afford because he made a bad decision himself.

Answer 1

I would like to say that it is the big banking business, but I think that that is just the tip of the iceberg.The banking industry has sent out credit cards to teenagers who don't even have a job. They have made it to easy to borrow money, and a FICA score be damned. We are told the higher the score the better for us but they would rather you have a lower score so that they can charge a higher rate of interest. The only one that can afford credit is the very rich and they don't need it. I also have to blame we the older generation, we raised our children with to much, we gave and gave. They have grown and now they want what they have always had and the path to this need is filled with credit. Also the young have eyes much bigger than their pockets, I mean if I can have a NEW BMW for my 21st birthday they will be sorry. sounds childish to me but that is more and more everyday. W have become very materialistic, and it is getting worse everyday. I would agree with your premise that this is going down the road in the wrong direction if we don't start to educate young people before they ever get out of high school. We will end up with those that have a lot and those that have nothing. The word middle class will no longer mean economic level but will be nothing but a value system. Hope that this helps.

Edit note; A car that sells for $25000 is leased for 48 mos., and then is sold again this car nets the dealer about $50,000 for the buyer this is a poor investment, but for the dealer he think that it is great.

Edit note #2; You have said that there is no victom, If all of the folks that buy autos had a PHD in Economics I would agree with you, but they don't. A young single mother needing an auto to go to work and support her family goes into the car lot and leases a car because sh can't aford to buy one out right and still has a need to her this sounds great and will answer her need. When people lack knowledge they are easily taken in. Look I have an IQ of 140 and I would guess that you also have a high IQ but most people operate from about 90 to 110. Now take the low end of that an what do you have? A victom.

Answer 2

http://www.commondreams.org/views06/0308-20.htm
There are many scams being played on the middle class, and those you mention are some of the worst. Why does the government allow this? Because the government is complicit in doing the exploiting. As the above article expands on so eloquently, there is a systematic exploitation and destruction of the middle class going on. First it was necessary to break the unions, the benefits; relegating most workers as temp help now, the elimination of pensions, mobile heath insurance, etc., until all labor is temporary and insecure. Then outsourcing when possible and illegal aliens when not to put enormous pressure on wages to go down. Then permitting banks, credit cards, etc., to charge what used to be considered "mob" rates of interest and higher to further cripple, make dependant, and reduce the middle class.
As I used to be, most Americans are now puzzled by the "problem" on our southern border as waves of illegals flood across threatening our way of life and livelihoods. Few realize it is our government, specifically the Bush White House, that has signed away any protection from this flood, creating in secret the North American Union which will open the border and further collapse the middle class. http://www.freedom.org/naugreen2/player.html
The problem you so well describe has been deliberately created by the collusion of government and business, and if we as citizens don't really wake up fast and get involved in large numbers, we won't have any say in how this all plays out. We ignore it at our own peril.
Education is the only defense both for how to manage yourself, and in finding a more secure position, as the more your are educated tthe more options you have and control of your future. This trend looks unstoppable, so making yourself smarter and more valuable is the best strategy. As for the middle class, it looks like it is in grave danger as a whole.

Answer 3

You have a very good point. Look at the average amount of credit card debt that Americans have, I think something like $7,000-9,000. This is insane! Look at the car dealerships willing to loan anyone money regardless of credit rating. Loaning money for a new car is about the worst investment you can make. Your car automatically depreciates $3,000-5,000 just because it is driven off the lot. Taking out a loan to buy a house or get an education is one thing (you actually will get something back), but spending $7,000 on a credit card for stuff you don't need and can't afford or $40,000 for a new car is crazy.

Pay-day loans are probably the worst of the bunch. Say I am going to get a paycheck for $1,000 next Friday but need to pay bills this Friday, so I take out a payday loan of $750 to cover my bills. I will probably pay a service fee of like $25-35 for this loan. So I get my paycheck next week and have to pay back $775 to the pay-day loan establishment, leaving me with $225 to cover food, transportation, housing, and other expenses for the next two weeks (until I get paid again). Since my rent is due on the first, this will not cover it, so I need to get another pay-day loan to cover my rent. The cycle goes on and on.

Americans dig themselves too far into bad debt, loans for new cars, credit cards, pay-day loans, other high interest loans. We need to teach our children how to effectively manage money, how to track their expenses, and most importantly how to budget for future expenses. I should know about how much I will make each month and how much I will spend and how much I will save for future use.

Answer 4

Well when people detach themselves from economic reality and join the good ole boys in politics , that distance between them and the people they work for isn't a particularly great motivator on doing the right thing.

You are 100% correct in where you are going with this.

Answer 5

jernigan, I think you're on to something there.

If you want a bottom line it's not only fiscal but self-responsibility that's missing - plain common sense.

Answer 6

Blaming the victim won't help.