Comment by ithayer | Hacker News Reader

Comment by ithayer | Hacker News Reader

Parent Full thread

Hey there, thanks for the comment!

You are absolutely right that there were about 1.5M bankruptcy filings last year [this number is growing (1)]. Note that we haven't made any claims about the ordering on the graphic, but bankruptcy is an option which is often under-considered, because people are scared of it, and driven by FUD to pursue other options which often have lower success rates.

Rod and I have learned a tremendous amount about debt since founding this company. We have heard every possible misconception from people who are not in debt, such as

- "people don't care about paying debt off as much as weight loss because it's not visible" - "only dumb people get in debt" - "people should just stop shopping and pay off their cards"

The list goes on. What we have learned from speaking with dozens (now probably hundreds) is that there is no "typical" debtor. People that have reached out to us vary in age, sex, location, education level, stress level, income, employment, height, weight, hacker cred, skin color, and so on. The number of people in this situation in the US number in the millions. The statement "Don't most of them just pay it off" trivializes situational problems which are extremely diverse and complex. And "take a long time" it does - people that are either not financially educated or unable to pay off their debt can live in a steady state of repayment, paying a perpetual existence tax to banks. This should not be the state of the world!

(1) http://www.uscourts.gov/News/NewsView/10-11-08/Bankruptcy_Fi...

If the debtor pool varies as widely as you claim, that reinforces something I've been wondering for a while:

Is it true that Americans are in debt because they are fiscally irresponsible, or is it because the playing field is tilted?

It is hard for me to believe that 33% of all Americans can't grasp the idea of "spend less than you make". Sure, a lot of it is consumer culture / media pressure, etc. But other countries have the same sort of culture and lack our level of credit card debt. Could it be that the field is tilted -- e.g. wages are simply at a level that does not allow the average person to save much even if they try, meaning that as soon as they hit a financial bump (job loss, non-insured surgery, car repair) they are in debt and the interest rates on the card spiral?

This is not a conspiracy theory -- I don't think there is a literal collection of people in a room saying "how do we stick it to them this week?" -- but I do think that many economic actors (credit card companies, credit bureaus, major retail stores, etc) act in their own self-interest to continue this situation.

I've seen bits and pieces that support this theory, but I lack the economic and political background to tell if this is right or not. Can anyone point me at good sources?

One interesting tidbit: the most popular support request we've received since launching is to make the service available in the US and Canada.

One natural reason that this situation has gotten worse is that the credit card market has become completely saturated (everyone who wants a card has one [almost]). This, combined with relatively easy credit recently has resulted in the card companies marketing to people that they would previously had stayed away from.

We've learned that people often become accustomed to credit at an early point in their lives (college), rely on it for awhile, then don't suffer any explicit repercussions, and so grow accustomed to it until the problem grows and it's too late.

I don't really think it's a 'conspiracy' either, since it's clear what the motivations for all of the involved parties are.

Would love to chat about this more, but I need to tend to the serverz :)

But other countries have the same sort of culture and lack our level of credit card debt. Could it be that the field is tilted -- e.g. wages are simply at a level that does not allow the average person to save much even if they try,...

Most other countries have considerably lower wages (PPP-adjusted, not nominal) than we do.

http://en.wikipedia.org/wiki/List_of_countries_by_household_...

http://en.wikipedia.org/wiki/List_of_countries_by_average_wa...

If an average American reduced his consumption to the same level as a profligate Swede of average income (i.e., one who spends his entire paycheck every month), he would be saving about $15k/year.

The average American is a mirage. Replace that by the median American, and it's immediately down to $7k. Then notice that this "excludes most non-cash income(e.g., like employer contributions to social insurances, or the value of government provided health care and education)" and we can argue whether, after paying for health insurance and retirement/kids college savings, the median American really is better off.

International comparisons are hard to come by, but here is one which is US vs Sweden (one of the richer "other countries"):

http://super-economy.blogspot.com/2010/03/income-distributio...

This attempts to include the value of assorted government benefits (health care, education, etc), ignores deadweight losses (e.g., $1 in govt costs providing only $0.90 in benefits), and ignores the value of employer provided insurance (all of which favor Sweden).

Americans are still considerably richer (though the bottom of Sweden is better off than the bottom of the US). The gap gets even bigger if you restrict the comparison to Americans of Swedish descent.

http://super-economy.blogspot.com/2010/03/super-economy-in-o...

Reply on news.ycombinator.com