Foreclosures Closely Linked to Savings and Spending Habits

October 13th, 2008

Foreclosures are linked closely to savings and spending habits. It is associated with the carefully cultivated credit culture. It almost became a fashion to be sitting with loans – from cars, grocery bills to houses. Invariably this doomsday culture led to the hell of foreclosures.

The Japanese save and avoid spending. Their exports are more than imports. Japan enjoys a trade surplus of more than $100 billion. In America it is the reverse. Americans have not been taught to save and it imports more than it exports. It has a trade deficit of more than $400 billion. Yet all over the world people are made to believe that the America economy can be relied and trusted upon.

The Americans get their spending money by borrowing from Japan, China and also India. The international savings are largely invested in USA. The result is that America has taken from the rest of world more than $5 trillion. To keep the American spending from continuing the other countries are remitting $180 billion each quarter. It calculates to $2 billion per day. If this were not done the American economy would collapse.

It is this habit of spending that easily led sup-prime peddlers of loan to foist unmanageable mortgages on the gullible. Nobody thought that one day loans would have to be paid back. Nobody thought that their income would not permit them to keep up with increased interest. Due to this lack of thinking foreclosures took them by surprise and today they are out on the streets. Their spending power has gone. This is causing worry to not only America but also to those countries who pump in money from outside to keep the Americans from spending. The more they spend the more America imports to meet demands. And this keeps the other countries happy. So the fate of the other countries is linked with the spending of America.

Americans have used up their credit cards to spend from their future income. Because the Americans spend, it makes it attractive for China and Japan to export to USA. Year after year this has been going on – American imports more than what it exports.

Bluntly put this cycle has made the world dependent on the spending habits of America. It has become a habit with the world to survive on American consumption. So in the days following the foreclosure crisis the world has stepped in vigorously to provide America with spending money.