Inside the Mind of a Debtor Nation Year after year, I am stunned by the decisions people make that get them into financial trouble. I’ve seen monthly car notes the size of mortgage payments. People...

Inside the Mind of a Debtor Nation


Year after year, I am stunned by the decisions people make that get them into financial trouble. I’ve seen monthly car notes the size of mortgage payments. People take vacations or buy bigscreen televisions and expensive jewelry while ignoring huge federal tax obligations. ... Why do they continue to use credit even though they are already weighed down by so much debt? ... What has made us into a nation of people who spend more than we earn? ... Part of the problem is our economy’s reliance on personal consumption. On some level, we all know our buying is out of control, but we are constantly bombarded with messages encouraging us to shop. The steady stream blunts our reasoning power. ... Much of the difficulty stems from new retail technologies that make it easy to act without thinking. ... What’s the long-term effect of our overspending?

a. Explain the effect on the dollar of “out of control” consumer spending and draw a graph of theforeign exchange market to illustrate your explanation.

b. How can “out of control” spending be used to explain the trends in balance of payments since the 1990s?

c. Explain whether or not Americans should be concerned that the United States is a net borrower and debtor nation.