Crossing Cultures,  Looking Back at the United States,  Money, Economics, Politics

Escaping the American Credit Nightmare

Note to readers: My opinion piece “Escaping the American Credit Nightmare” appears in the Sunday (Oct. 12, 2008)  edition of the Miami Herald, in the “My View” column of the business section. Here’s my original piece below — Barbara Drake: 

One of the pleasures of moving to Peru last July (2007) was escaping the flurry of credit offers that used to besiege our mailbox in Florida.

Each afternoon I’d grab the stack of new mail and spend a good 15 minutes going through the envelopes. There’d be offers for new credit cards, lines of credit, adjustable-rate mortgages on our home, home-equity lines of credit, cash-out refinances.

I had never asked for any of the lenders to send me the offers; they arrived unsolicited, in droves. Sometimes the offers were very tempting. Once our mortgage company, the illustrious IndyMac, sent an overnight mail packet offering to loan us more than double the value of our home. The letter in the packet urged me and El Fotografo to take advantage of this “special offer” and to “reap the rewards of responsible home ownership.”

The loan sum being dangled in front of us made my eyes swim.

I gulped and shoved the letter and envelope into the shredding machine I kept by the front door.

Each month there were more and more come-ons.

By 2005 I was getting seven to ten mortgage refi offers per week. I spent so much time shredding, I began to resent it. I didn’t have a choice, though; the companies’ letters contained sensitive information that I didn’t want anyone else to read.

Ripping up credit offers became a part-time (unpaid) job. And all over the United States, millions of people were doing the same thing: ripping up offers or falling for them.

It became an achievement NOT to take on more debt.

The TV began to feature lots of strange ads in the years 2004, 2005, 2006. The DiTech people were screaming for people to refinance now; sometimes I wondered if there weren’t subliminal messages in the ads, commanding viewers, “Go into debt now, Go into debt now.”

I also began to see a lot of ads for sleeping aids during this time. Ads with butterflies and drowsy music and assurances that this pill or another would send you into a dreamless sleep. I had never seen so many ads for sleeping pills before — not in the 1970s, ’80s or ’90s.

People in America couldn’t sleep, apparently. The nation was very troubled. And the dual panaceas — extended credit and sleeping aids — weren’t enough to keep the nightmares at bay.

Flash forward to 2007 when El Fotografo and I sold our house, packed our stuff on a shipping container and moved to Peru.

My friends and family didn’t get it. Why Peru? they asked.

The war, the economy, I said, and they still looked puzzled. Some friends pitied us. We were moving to a Third World Country without jobs, to a place where people didn’t speak English — was this really what we wanted?

I wasn’t sure when we arrived in July 2007. But my immediate sensation was one of relief.

It felt good to be in a country that wasn’t at war. It felt good to be in a country that wasn’t pretending it wasn’t at war.  It took moving to Peru for me to realize how heavily the bloodshed in Iraq and Afganistan hangs over one’s psyche as an American.

Soon after, we rented a house and started receiving mail in Peru. It was a trickle compared to what we typically received in the United States.

The second realization hit me: No more credit offers! 

My days of shredding envelopes from Capital One, Citi, AmeriTech and other greedy lenders are over. It is a great feeling to be free of that American imperative to Spend, Spend, Spend, Go into Debt, Go into Debt, Go into Debt.

Now that the American economy is unravelling and the mortage/credit fiasco is taking other world economies along with it, I am angry and disgusted with the financiers who engineered this mess.

Some people blame ordinary Americans for taking on too much debt and not controlling their spending.

I won’t blame the victims. The predatory lending spree took place in an enviroment with no oversight and little consumer protection. The offers were shoved down people’s throats, and while some people did take out too much credit in order to finance luxuries, there were plenty of people who used their new credit lines simply to pay the bills, buy gas and put groceries on the table.

When 9/11 hit, George Bush told the nation to go out to the malls and spend, the prop up the economy. Americans did as they were told, and then were told to keeping spending, more and more.

Now that I’m in Peru and my ears are no longer ringing with the “Spend” mantra, I can better understand the unfairness of that dynamic.

I am thankful that we left the United States when we did. And I hope that Americans will be kind to one another and resist the urge to blame the homeowners who are going under.  There, but for the grace of god, go I.

What should be done? I agree with economist Nouriel Roubini that the U.S. needs to create a federal home-owner’s mortgage program to provide massive debt relief to the household section. The US government did this during the Great Depression. My gut tells me this Depression will be worse.

I also believe that emerging economies like Peru should view the US crisis as a wake-up call. People in Peru don’t need high-interest credit cards. They need jobs, healthcare and security.

Without those basics, in 10 years they could find themselves in their own credit nightmare.

I am an American writer who lived in Lima for seven years (2007-2014), where I covered Andean traditions, melting glaciers and daily life in the capital for Miami Herald, MSNBC and Huffington Post. I now live and work in northern Florida where I champion climate change advocacy and compassionate, affordable eldercare.

12 Comments

  • Chuck

    This will probably be of no surprise to you Barb, but up until the moment I left in August those butterflies were still floating Americans to sleep at night.

  • Barb

    And I bet the butterflies are swarming now.

    What is the name of that sleeping aid anyway? Strange that the commercial is so vivid in my mind, but I don’t connect it with any product name.

  • sleepingcloud

    So true. I lived in graduate/family housing, and I (too cheap to buy a shredder) wasted hours tearing those damned things up.

    Here in Kuwait we see the picture from another perspective. Oil.

    In addition to real wealth being destroyed through predatory loan practices, real wealth is being transferred out of the United States at astronomical rates.

    When I was in China this summer, a third dimension of the crisis came into focus. Greenbacks.

    Slowly but surely banks in nations around the world are selling off their inventory of USD for more dependable reserves. “In God We Trust” doe not seem to provide the credibility it once had.

    Perhaps the more profound and disturbing issue from both in China and the Middle East, is that their economic models are very similar to those of the United States. Even though the Middle East is awash in US petrodollars, and China is awash in US consumer dollars, the same specters of Global Capital have created inflation and rifts in social and economic structures that haven’t been seen in decades.

    And when your biggest consumer, the one that has kept you afloat, has no money, you have to rethink your whole paradigm.

    This thing will hit everywhere–from the homogenized city centers to the furthest mountain outpost in the Andes where Coca-Cola is sold.

  • Barb

    Thanks, Chuck. I can’t believe I forgot that brand name. (I bet they’re a company to invest in, no?)

    SleepingCloud — my old friend from UF. (For those of you who don’t know, SC mentored me in my first year as a graduate teaching assistant when I didn’t know a damned thing about teaching college freshman how to write about literature.

    SC, good to hear from you. Your perspective as someone who has lived and worked in the US, the Middle East and China is such a valuable one. As you say, all bets are off as far as how other countries around the world are going to rethink their economic futures.

    I can’t see how China and Europe are ever going to put their trust in the US again. I mean, why would they? There will probably be some new banking paradigm put into place, with some new standard.

    Yeah, Coca Cola is big here, but the country has put its soda dollars into a local product — Inca Cola. Seems like a metaphor to me for how little countries might reshape their futures.

  • Bob

    Well said by all, my wife and I own a apartment in Lima we spend a couple a months a year there,as time goes bye I’m thankful my wife had the foresight to have us buy this home,she grew up during the “bad times” in Lima and her family had had there homes taken away by the government but they had a just in case house. This is how I see our home now, I have always wanted to live in Peru .Thank you for the great sight..Bob

  • Nixa

    I thought Inca Cola was bought out by Coca Cola? I could be wrong, just curious if things have changed since I was last in Peru. I think my family mentioned the former Inca Cola owners had a new (very similar) yellow cola. I wish I lived in Lima!

  • Barb

    Nixa — Coca-Cola bought out part of the Inca Kola enterprise in Peru (60%) in exchange for marketing Inca Kola in other markets, particularly Ecuador and the United States. So, yes, CC partly bought out the Peruvian company, but the agreement entails that IK’s parent company manufactures Coca-Cola in Peru.

    The Wikipedia article on Inca Kola has a very good history of how Inca Kola became the market leader in Peru, fought off Pepsi and went into partnership in Coca-Cola.

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

    According to the site, current soft drink leaders are:
    Inca Kola : 31%
    Coca-Cola : 26%
    Kola Real : 17%
    Pepsi (AmBev): 8%
    Sprite : 4%
    Others : 14%

  • Barb

    Bob — yes, your wife had foresight to buy her apartment. Any Peruvian who lived through the ’60s, ’70s and ’80s has seen incredible economic upsets (hyper-inflation) and is experienced in how things can suddenly turn bad. That generation of Peruvians does know how to prepare for the worst — a good skill to have in today’s unpredictable financial climate (worldwide).

  • Wolf...

    Hi I saw you pic in the Miami herald today and also did learn something about the” SPEND ” OM OM OM MANTRA, Lol…
    Interesting.

    Saludos.
    Wolf…