by Charles Hugh Smith, Of Two Minds:
Easy, cheap credit has created a fantasy world where everyone “deserves” everything right now, and trade-offs and sacrifice have been banished as unnecessary.
Debt offers a compelling fantasy: there is no need for difficult trade-offs or sacrifices, everything can be bought and enjoyed now. In the old days when credit was scarce and dear, buying a better auto required substituting 1,000 brown-bag lunches for restaurant meals: yes, four years of daily sacrifice.
Sending a child to college meant no meals out (or perhaps once or twice a year), driving an old car, no vacations other than camping, working overtime to make a few extra dollars, summer jobs for every teen in the family and a hundred other sacrifices and trade-offs. All too often, only the oldest got to go away to university; younger siblings had to sacrifice their education for the greater good of the family.
If the oldest sibling was fortunate enough to earn a decent salary after graduation, he or she sacrificed to pay for the education of younger siblings.
Trade-offs and sacrifices were the core of household finances for those families that sought to “get ahead” or purchase things that required substantial cash.
Abundant, cheap credit upended the incentives to make adult trade-offs and sacrifice consumption for future benefits. Why eat 1,000 brown-bag lunches when you can buy a new car for $500 down and “easy” monthly payments? Heck, you don’t even need to pay for the lunches with cash; just charge them.