Americans in debt

Americans’ combined household debt passes $16T for first time

By Morf Morford, Tacoma Daily Index

The man who chases two rabbits, catches neither. — Confucius

If there were ever a case where our individual actions accumulated into a major force that impacts us all – and future generations – it would be our personal debt.

At the end of every seven years you shall grant a remission of debts. – Deuteronomy 15:1-2

Debt is very strange, almost like a creature with no priority except it’s own perpetuation. After a time, debt takes on a life, or at least a momentum of its own.

The amount borrowed (the principle) may have been paid long ago, but the debt (thanks to accruing interest) continues – and as we have seen with student debt (protected even through bankruptcy laws) may persist throughout the debtor’s entire lifespan.

But what if we did what the Bible so clearly states; limit any debt (except perhaps home mortgages) to a maximum of seven years?

Surely any principle, loan expense and a bit of interest would have been paid over those seven years.

How a four year (or less) student loan could take more than seven years to pay off would certainly challenge any ethicist. Education, after all, is any society’s investment in itself.

Any culture that is healthy and intends to sustain itself should encourage, not discourage, individuals who would like to further develop skills and experience, and leave school with the determination, focus and resources to put their visions to work.

Debt hobbles each one of those.

According to a recent survey, up to 43 million Americans are holding student debt (about 8 million impacted by recent loan forgiveness programs) – nearly two-thirds of those holding student debt are women. Black women, in fact, hold the majority of student debt.

According to one report, 12 years after starting college, Black women owe 13% more than they borrowed, while white men, on average, have paid off 44% of their debt. So after twelve years, the majority of Black women owe more than they started out borrowing and the bulk of white men had not paid off even half of their student debt?

Extend that same dynamic – once called usury – and you have a debt snowball – or even avalanche – that never stops.

There’s some hard-earned wisdom in framing and defining debt not only in the area of interest, but also by time. More than twelve years to pay off a four year student loan? A small debt that balloons over time? No wonder we use predatory animals as metaphors for lenders, such as vultures and loan sharks.

I = PRT; Interest equals Principle times interest Rate times Time

If you had $100,000 today, invested in a portfolio that averaged an annual return of 5%, in a year, that $100,000 would earn a flat rate of $5,000.

But if all those portfolio gains were reinvested, you would earn $5,250 in the second year, $5,512.50 in the third year, $5,788.13 in the fourth year, and so on.

Until, thanks to the impact of this accumulating interest, that initial $100,000 investment grows to $432,194.24 (or 4.32 times what you started with) over 30 years.

The same thing happens, but in the opposite direction when it comes to debt.

A payable $10,000 student debt becomes $20,000, then $30,000 and then, with no time limit, grows almost geometrically.

Be sure to factor in other categories of debt (like mortgage balances which rose by $207 billion to $11.39 trillion total) or auto loans (which rose by $33 billion).

And then there are credit card balances which went up by $46 billion, just in the past couple years.

Non-housing related balances, including credit card, auto and student loan debts, saw the largest increase since 2016, up by $103 billion.

When that many people are in that much financial trouble, no matter where any of us might be individually, we are all in trouble.

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If the number trillion seems incomprehensible (it certainly is to me), consider that the average 8 1/2 by 11 page holds 1,800 characters.

That means that one thousand pages hold 1,800,000 characters (almost 2 million).

Multiplied by a thousand again (that would be 1 million pages) brings you to 1,800,000,000 (almost 2 billion).

One Trillion is equal to 1000 Billion.

And then multiply that number by 16.

To translate into bonehead math, that’s a lot of pages!

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