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November 26, 2008

No Thanks, Mr. Paulson, We’re Repairing Our Balance Sheets

The newest push-on-a-string plan from Treasury Secretary Paulson is to force more federal money into consumer credit. The idea is that we can then max out our credit cards to new limits, buy houses and cars with too little down, and finance too much of too-inflated college bills. Presto, sales go up, housing prices become absurd again, cars roll off dealer lots and… and we can all get back to the good old days when the banks that lent us all this money could flourish.

What if we don't want to be in debt during deflationary time? What if we don't want to pay 18% interest on revolving charge accounts any more than we want to buy $4/gallon gas? What if we buy houses for reasonable prices with reasonable down payments so we can have smaller mortgages? What if we've realized that "zero percent financing" on a car just means that the sticker price has been inflated? What if we borrow a smaller percentage of college costs and shop for lower tuitions?

I don't want to be un-American or anything but we'll all be stronger if we have more savings and less debt – all except the debt merchants, of course.

There was a nice story on local TV station WCAX last night about local stores reinstating layaway plans to help people budget for Christmas gifts. Wal-Mart says not necessary; people'll always use plastic. We'll see.

There's an anguished story in today's New York Times which begins: "Come Christmas, McKenna Hunt, a gregarious little girl from Safety Harbor, Fla., will receive the play kitchen and the Elmo doll she wants. But her mother, Kristen Hunt, will go without the designer jeans she covets this season." Maybe Kristen Hunt is smarter than both the Times and Treasury Secretary Paulson.

There's no question that the sudden switch from an over-indebted society to a fiscally responsible one is causing a painful dislocation which'll probably get worse before it gets better. That's why we do need a jobs program building infrastructure which is properly financed with debt; that's why we do need extended unemployment insurance and a safety net. But what we don't need is to recreate the excesses of the past and to create so many business opportunities for merchants of debt.

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