Home > Personal Finance > Mortgages, Greece & Obama’s Budget: The Global Financial Literacy Crisis

Comments 1 Comment

Seven days, three seemingly disconnected announcements, and one subtle theme: what we have here is a failure to communicate… or more to the point, a failure to educate. America and much of the world is in the midst of financial literacy crisis that goes well beyond one’s ability to manage his or her own money.  Consider what’s going on at home and abroad.

First, the attorneys general of 49 states agreed on a $26 billion package with five major banks in order to settle lawsuits brought by those states alleging improper mortgage practices and rampant foreclosure fraud. Then the stock market went through the roof when the Greek government agreed to a series of truly severe austerity measures hailed as yet another final solution to the teetering solvency of that once-prosperous EU country. And finally, the Obama administration released its new $3.8 trillion budget proposal, which projected a massive deficit for the coming fiscal year, and significant deficits for each of the next six years.

[Article: Eastwood Meets the West Wing]

What a web we weave.


Credit.com’s Credit Report Card
Check your credit bureau profile for free with this great tool. See your detailed credit evaluation, expert advice on managing your credit, and unlimited free updates every 14 days.
Get Started Here »

You may not realize it, but these three events are part—and an excellent illustration—of the global financial literacy crisis, one of the overriding problems of the modern financial world. Let’s start with a little context: The $26 billion settlement package of course received as many brickbats as it did kudos, but whatever you think about its specifics, you need to know that American residential real estate today is estimated to be about $700 billion underwater. I wonder if most people understand that the settlement is little more than a drop in a very large bucket.

[Free Credit Calculator: Use Credit.com’s Credit Report Card]

In Greece, the new austerity measures include a 22 percent cut in the minimum wage and the elimination of 150,000 government jobs over the next 3 years. This, in a country decimated by 5 years of steep recession and an unemployment rate over 21 percent, represents a new kind of Greek tragedy. The night before Parliament passed the new legislation, there were violent demonstrations in half a dozen Greek cities, including a turnout of about 80,000 in Athens where the cocktails were provided by Molotov. That’s quite a statement for a city with a population of some 650,000. Despite the proportion and emotion of the popular outpouring, the new austerity legislation passed by well over a two to one vote.

I wonder if those demonstrators in Greece understand why their elected officials did what they did, and what they had to do; and I wonder if Americans really grasp the significance and relevance of the near collapse of the Greek economy.

And then there came the new proposed U.S. budget, with its 60,000 line items jacketed in blue but awash with red ink, which projects a deficit of over $1.3 trillion for fiscal 2012, and a deficit every year for the next six, gradually shrinking to “only” $575 billion in 2018. I wonder if anybody, on the Hill or elsewhere, really understands anything about that budget.

Thus in short, the mortgage settlement addresses at best only about 4% of the overhang, the unrest in Greece is likely to accelerate with no guarantee that the new austerity plan will actually solve the problem anyway, and the Obama budget pleases no one, and was predictably declared on life support by many observers on both sides of the aisle.

[Credit Cards: Research and compare credit cards at Credit.com]

The real problem … (cont.)»

Image: ToastyKen, via Flickr.com

Pages: 1 2

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team