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Millennials, Mortgages and Government Grizzlies

by | Apr 13, 2017

You may have heard that millennials aren’t buying homes because they are buried in tuition debt, due to the government driving up the cost of college.

You also may have heard that Wells Fargo Bank was exposed and fined for a scam of setting up accounts for customers without their knowledge, in order to meet corporate goals.  And like other banks, it gave mortgages to unqualified borrowers during the housing bubble, being encouraged to do so by the government, resulting in a housing crash and a bailout for banks.

Hold those facts for a moment as I relate a personal anecdote that, as you will see, speaks volumes about the nation’s economy and politics.

My 26-year-old son is a millennial but is so qualified to buy a home that he could pay cash for one in his price range if he wanted to, thanks to having no debt, substantial savings, a high FICO score, two engineering degrees, a good job with a Fortune 50 manufacturing company, and excellent career prospects.

Yet when he recently asked Wells Fargo to pre-qualify him for a 15-year mortgage with a 30% down payment, they were reluctant to do so.

Why?

Well, according to the geniuses at Wells Fargo, he doesn’t have enough debt and monthly expenses.

I’m not kidding.

You see, he has only two recurring monthly expenses:  One, he pays off the minor charges on his credit card each month so he doesn’t accrue interest charges; and two, he pays $400 a month to a coworker to live in the coworker’s house.  The frugal acorn didn’t fall far from his nutty dad.

Wells Fargo told him that his chances of being pre-qualified would be better if he had at least three recurring monthly expenses and higher credit card bills.

In other words, if he’d spend more and save less, he’d be more qualified for a mortgage.

It’s the new American way.

It’s not a good way.

Total credit card debt of all Americans just hit $1 trillion.  Auto loan debt had hit the $1 trillion level earlier in the year, and so had tuition loan debt. That makes $3 trillion of total consumer debt, or $12,244 for each adult American, or $25,714 per household.

Economists say this is a good sign for the economy, as it shows that consumers aren’t afraid to spend.  Economists probably said the same thing about indentured servitude in colonial times.

Our national government is a role model—a bad one.  The national debt is $19.9 trillion. This comes to $77,551 for each American adult, or $162,857 per household.  (The national debt does not include the $50 trillion or so in unfunded liabilities at the federal, state and local levels.)

Interest payments on the national debt for the first six months of fiscal 2017 were $152 billion and are expected to rise considerably in coming years.

Taxes to pay for all of this government profligacy are the third largest expense for households, coming after only expenses for housing and cars.  The cost of medical care/insurance is several steps lower than taxes, although you won’t hear this from the propagandists in the propaganda ministry of the media.

Most people don’t realize how high taxes rank, due to the government kiting scam known as withholding, in which taxes are taken from pay before the pay is even given to employees.   A surefire way of reducing taxes would be to stop the kiting and require people to write a check to the government each month for their taxes, just like they do every month for house payments, rent, utilities, and car payments.  Pitchfork sales would skyrocket.

Of course neither Democrat nor Republican politicians would ever stop the kiting.  They are part of the same predatory government that established a consumer protection agency with unconstitutional powers to supposedly protect consumers from financial predators.  That’s like establishing a federal oversight agency of hungry grizzly bears to protect sheepherders from having their sheep devoured by wolves.

Those who make a living from wheeling and dealing in government and consumer debt are doing great.  The indentured servants who are told that it’s their civic duty to spend and go into debt aren’t doing so great.

In 1962, the top 1% of income earners accounted for less than 13% of total national income.  At the same time, the bottom 50% of income earners accounted for about 19% of total national income.  Today, the top 1% of income earners account for about 19% of total national income, and the bottom 50% of wage earners account for about 13% of total national income.

In short, the top 1% and bottom 50% have switched places in terms of their respective shares of national income.

This switch is a reflection of the “financialization” of the economy.  That’s a fancy word that means that those who move money around are doing better than those who make stuff.

This is not a sustainable social arrangement.

Is it any wonder that working stiffs who aren’t on the government dole voted for Donald Trump?

Paradoxically, Trump has benefited personally from financialization.  Using borrowed money, he built casinos that took money from working-class patrons and built swank condos and golf courses that catered to plutocrats.

Meanwhile, the Democrat Party professes to care for working stiffs while being in bed with Wall Street and doling out money to slackers who don’t work.

Working sheeple are being devoured by the very same grizzlies that they elected to protect them.

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