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Big Spenders? They Wish

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http://www.nytimes.com/2009/09/13/business...ml?ref=business

Millions of Americans have lost homes, jobs and savings to the financial crisis and recession. While greed and extravagance played roles, many lived beyond their means because their paychecks shrank. This article is adapted from “Past Due: The End of Easy Money and the Renewal of the American Economy,†by Peter S. Goodman, a reporter for The New York Times. The book, to be published Tuesday by Times Books, explores the origins of the crisis and suggests ways to reinvigorate the economy.

ONE afternoon in November 2006, a policeman spotted an expired license plate on Dorothy Thomas’s 10-year-old Toyota Corolla as she drove through San Jose, Calif. He ordered her to pull over.

Struggling under the weight of thousands of dollars in credit card bills, Ms. Thomas was perpetually short of cash. She had not bought a $10 auto registration sticker. The officer checked his database and recognized that she had already been ticketed once before for the same thing. He arranged to have her car towed away.

“I got down on my knees and begged that officer,†Ms. Thomas recalled.

As she watched her car being hauled off, she sensed that this was the beginning of a descent into a crisis from which she might not easily escape. Without money to pay the towing and storage fees, she could not extract her car from the lot, and the tab soon grew to $1,600. Without a car, she could not reach the hospital where she worked in the administrative offices, so she lost her $16-an-hour job. Without a paycheck, she could no longer pay the rent on her modest home. She moved to Oakland, where a friend lived in a beaten-down, rented house on a street they called Crack Avenue. By year’s end, Ms. Thomas, then 49, was occupying a bunk at a homeless shelter, searching in vain for a job in an economy plagued by unemployment.

Across the United States a sense has taken hold that the Great Recession and the financial crisis are predominantly a result of national profligacy, as if the economy had been undone by insatiable shoppers, foolhardy home buyers and greedy investment bankers. Extravagance and recklessness certainly played crucial roles, and yet they are only part of the explanation.

Many have lived beyond their incomes simply because incomes have been outstripped by the costs of middle-class life. By the fall of 2008, most American workers were bringing home roughly the same weekly wages they had earned in 1983, after accounting for inflation.

“For middle- and low-wage workers, the median wage basically went nowhere over these years,†said the economist Jared Bernstein.

Spirited and eloquent, Ms. Thomas had worked her way up from rural Oklahoma poverty, enduring the strains of forcibly integrated schools, before settling in California. She had become one of the first African-Americans to sell cosmetics at a Sacramento department store. Then, she forged a career in medical billing, at one point making $22 an hour. She had lived beyond her means, but not out of decadence. For years, she had rented homes in better neighborhoods than she could afford in order to send her two daughters to quality schools. She had run up credit card balances to pay for summer science camps and school supplies. She had never earned more than a high school diploma, but one of her daughters already had a master’s in education; the other was about to start college.

“I truly bought into the idea that education is the way out of poverty,†Ms. Thomas said. “If your kids are going to school with kids who are preprogrammed to go to college, then that’s what they will expect. I didn’t get myself out of poverty. But I got my daughters out. I was the bridge.â€

Long before “subprime†entered the American lexicon, before Wall Street convulsed with the collapse of giant institutions and the financial world seized with fear, a slower-moving crisis was already under way for tens of millions of ordinary people like Ms. Thomas. The shock of recent times has merely intensified this deeper crisis, rendering void a mode of living that was already unsustainable.

As wages stagnated, and as the costs of health care and education spiraled higher, easy money filled the gap: shrinking paychecks were masked by an explosion of consumer credit and by a pair of investment manias that made money surge through the American economy — one centered on the supposedly limitless promise of the Internet, the other propelled by faith that real estate values could only climb.

On the backs of these fantasies, the financial system lent out ridiculous sums of money to businesses and homeowners, as if the laws of supply and demand had been repealed.

Several more pages at the link.

For a mere $10 someone has there life destroyed.

As I have numerous times before we need a low cost global economy but that doesn't generate the billions the bankers need and crave. The only way to create that sort of wealth is with continual inflation it looks like there own greed and stupidity has finally killed the host.

And some people here think a private health care system is better than the NHS.

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http://www.nytimes.com/2009/09/13/business...ml?ref=business

Several more pages at the link.

For a mere $10 someone has there life destroyed.

As I have numerous times before we need a low cost global economy but that doesn't generate the billions the bankers need and crave. The only way to create that sort of wealth is with continual inflation it looks like there own greed and stupidity has finally killed the host.

And some people here think a private health care system is better than the NHS.

That's really sad. It goes to show how the machinery of government is shooting itself in the foot. Another taxpayer has come out of circulation - one less person to pay for the government and its lavish, unsustainable expenditure.

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That's really sad. It goes to show how the machinery of government is shooting itself in the foot. Another taxpayer has come out of circulation - one less person to pay for the government and its lavish, unsustainable expenditure.

Just how many are in this situation where a minor infraction sends there live out of control? It also highlights how ridiculous the system is that for $10 the state is prepared to bankrupt someone with fines that get way out of proportion to their ability to pay.

The system is failing.

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Just how many are in this situation where a minor infraction sends there live out of control? It also highlights how ridiculous the system is that for $10 the state is prepared to bankrupt someone with fines that get way out of proportion to their ability to pay.

The system is failing.

You really believe that anecdote?

If it's true and she lost her car because of $10, after being warned before, the woman is thick as shit!

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You really believe that anecdote?

If it's true and she lost her car because of $10, after being warned before, the woman is thick as shit!

Yes actually. You obviously have a deep need not to; burst your bubble?

Not everyone has spent their entire life in the comfort zone. Here's wishing you your worst nightmare.

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You really believe that anecdote?

If it's true and she lost her car because of $10, after being warned before, the woman is thick as shit!

I agree she was a little dumb, but probably thought she would get away with it or she was going to buy it when she had the money, other bills got priority and it never got paid.

I think you may be underestimating the number of people who literally do live pay check to pay check and do one massive balancing act.

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I agree she was a little dumb, but probably thought she would get away with it or she was going to buy it when she had the money, other bills got priority and it never got paid.

I think you may be underestimating the number of people who literally do live pay check to pay check and do one massive balancing act.

A lot of people I know actually.

That's why people are happy to be hit with finance charges to pay their car insurance monthly; because they couldn't afford to pay it in one go.

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Just how many are in this situation where a minor infraction sends there live out of control? It also highlights how ridiculous the system is that for $10 the state is prepared to bankrupt someone with fines that get way out of proportion to their ability to pay.

The system is failing.

It's desperate and it's counter-productive. This does seem to be the first signs of state failure we are seeing.

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That's really sad. It goes to show how the machinery of government is shooting itself in the foot. Another taxpayer has come out of circulation - one less person to pay for the government and its lavish, unsustainable expenditure.

Get a life. These kinds of people do not pay into the system they take out of it. "The working poor" - a new category of citizen dreamt up by the free market to divert tax into big business profits.

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Damn the poor, those leeches, they take so much out of the system that they are rich, but obviously in a poor way. When you are fleecing the system for a pittance it's difficult not to see the problem. Yep, the poor have a lot to answer for, if only we could get rid of them, hmmmm........ <_<

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