Americans aren’t rich. But we think we are. So, we spend money we can’t afford to spend, and now we are, as a nation, drowning in debt. Let’s jump right to the scary graph:

That’s based on data from the Fed’s Survey of Consumer Finances. Total median debt has gone from 12% in 1963 to 220% in 2004.

Unsecured debt has jumped from 1.6% to 41%. And consider this: in 1963, 44% of the population had no unsecured debt at all. Not a dime owed on non-capital goods. In 2004, the typical American had over $2,000 in credit card debt alone. And another $4,000 secured against their retirement savings, life insurance, etc.

Spending on toys has taken its toll, but bigger purchases are playing their part, too. And when I mean bigger, I mean bigger. Here’s a graph of the median size of new homes in the U.S.:



That’s lifted directly from the PDF of the paper “Changing Trends: A Brief History of the US Household Consumption of Energy, Water, Food, Beverages and Tobacco” by Rick Diamond and Mithra Moezzi, of Lawrence Berkeley National Laboratory.

Houses are getting huge, as are mortgages. The median mortgage in 2004 was $95,000. The median income as recently as 1996 was only $51,950, according to “FAMILIES AND THE LABOR MARKET, 1969-1999: ANALYZING THE ‘TIME CRUNCH’.”

That last is a rather interesting report. Among other things, it discusses how median incomes for married couples have risen as women work more outside of the home.



The thing is, while women are working a lot more, men aren’t working that much less. So, while total income has gone up, it turns out earnings per hour haven’t.

1969 1996 Median Income $41,453 $51,950 Hours Worked 2000 2497 Median per Hour $20.73 $20.80

(Those are 1996 dollars.)

We all think we’re rich, that we should have bigger and better things than our parents had. We went to college, whereas our fathers didn’t, so of course we should be making more than he did, right?

Turns out, that in general we aren’t. Lot’s of people went to college, too, and thus devalued a 4-year degree. So, we expect to be able to afford bigger and better houses than our parents, and sure enough someone will give us a mortgage on one, but we can’t afford all these freakin’ McMansions.

The buzz on the interweb is that the housing market is going to implode soon. Lot’s of people will end up defaulting on the massive mortgage on their stupidly massive homes, and things will get ugly. No one can say how ugly, and whether or not it will spill out of the housing market and into the general U.S. economy.

I suspect it will. Much like before the Great Depression, Americans having been acting like we’re rich when in fact we aren’t. Instead of speculating on the stock market, we’ve been speculating in the real estate market. Well, guess what, any market can get inflated. They’re about to start calling in our margins-excuse, me, our mortgages and many of us can’t pay.

You aren’t rich. Stop spending money like you are.