The first thing I noticed about China, where I spent the last two weeks on vacation, is that the economy is almost exclusively cash-based.
Whip out a credit card at a fast-food restaurant and watch the puzzled looks on the faces of cashiers. It will almost match the puzzled look on yours when you realize “combo meal” means you get shrimp and egg custard with your order. A popular credit card slogan asks what’s in your wallet, but you had better have cold-hard Yuan in yours if you want to eat in Beijing.
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Not so, of course, in America, where the notion might seem like a quaint trip to a bygone era — not so long ago, actually — when, if you were devoid of greenbacks, you weren’t going anywhere for lunch.
The assortment of plastic in our wallets may give the illusion that the lunch is free.
With this in mind, it was interesting to return home this week to a couple of reports from the website wallethub.com. One shows that Americans are on pace to soon reach the $1 trillion level in total credit card debt, and that our plastic debt averages to $8,038 per household.
The other shows Utah is the second most “independent” state in the nation, measuring a variety of factors from government dependence to personal finances and vice. That’s good news, of course, until you parse it a little. Utahns ranked No. 1 in terms of the highest median household income, adjusted for the cost of living. That would surely surprise the folks who fixate on the state’s low per capita income. The state also ranks first for the percentage of people with household rainy day and emergency funds.
There are worse things to do than to earn more and save more than people in other states. Utahns also ranked an admirable 12th for the percentage of adults who are saving money for their children’s college education.
But when it comes to median debt per income, the state is a mediocre middle-of-the-pack 24th. Even here, the urge to spend what we don’t yet have is hard to resist.
The lingering question from the Great Recession of a decade ago is whether it truly was bad enough to imprint any lifelong lessons. Millions of Americans reportedly suffered because they had overextended themselves, either with unsecured credit card debt or with mortgages that suddenly exceeded the value of their depreciating homes.
Go back nine years and people were wondering whether cash would be re-enthroned as the payment method of choice, and whether Americans would become skittish about debt, adopting the no-nonsense approach to consumerism their ancestors did after the Great Depression.
You might be excused for snickering today at that notion, except that it isn’t funny.
It’s as sobering as the Ipsos/USA TODAY poll earlier this year that showed about one-third of people ages 45 to 65 plan to spend their retirement years working at least a part-time job. The reasons have a lot to do the after effects from the Great Recession, including things such as helping children or grandchildren with their debts.
The newspaper quoted Labor Department statistics that show 20 percent of people in retirement age already work to make ends meet. Thirty percent of those surveyed said they have no retirement savings, while another 30 percent have less than $100,000.
If you’re not already feeling bad enough about all this, another Wallethub survey found that 42 percent of Americans believe access to credit should be a basic right. We are, apparently, a nation of people born not with silver spoons, but with plastic cards in our mouths, and we seem resistant to financial education.
I’m not suggesting China’s economy is on more solid footing than ours. That would be ridiculous, as even two weeks worth of observations made clear. Still, it was interesting to note how frightened I almost felt counting out the cash in my wallet and knowing when it was gone, the spending would end. Except, of course, that I could go to a nearby ATM and conjure more magic cash from my plastic cards.
A nation that, a decade ago, got a taste of what a day of reckoning looks like ought to know better.