Debt and the blame game

I read "Deferred futures" a book review of Strapped: Why America's 20- and 30-Somethings Can't Get Ahead and thought: why the big deal?

No one puts a gun on our youths heads and say "You must get a loan to live it up." They may be brainwashed into thinking that the good life can only be gained by debt but there are not being forced to do so.

For our family, as of the end of Nov 2005, we became debt free again (sold our home and moved to a rental). We have always tried to be debt free, and I was debt free when I got married (had some student loans but paid off quickly, years before). My wife had a car loan and we paid that off right away. And for the first three years of our marriage, we stayed debt free.

When we moved to Austin, we [foolishly] took on debt to buy a house. However, I thought we were doing well for a long time since we only had mortgage (so called "good debt"). However, when I signed up to help out people in our church who are financially stressed, over the past 3 years I've learned to take to heart what the Jews had figured out few thousand years ago:

The rich rule over the poor,
and the borrower is servant to the lender.

Early last year, I thought downsizing was the right move for us but in the fall, we ended up deciding to move to Los Angeles this summer, so we've become debt free by moving into a rental. I hope to not get any debt even when we move L.A., but only time will tell.

The book "Millionaire Next Door" makes clear that living BELOW one's means is the one of the key ingredients to getting out of poverty. The problem is that people cannot wait to save up for the future, so we become enslaved ( i.e., get debt) just to gain something today. Ironically, with most things, by denying one's desire and sitting tight, you can not only save up money but you end up getting what you want cheaper, faster and all around better (appliances, computers, electronics, etc.).

The current real estate bubble has been an unfortunate turn of events on the US economy. Hi tech stock bubble sucked in a lot of people but I have a feeling that the bursting of the real estate will be worse than the tech burst of 2000-200X (I don't think we're really over the tech bust yet). Japan's real estate burst was in 1990 or so and they took about 15 years to hit bottom in 2005 (however, it could be a temp. bounce in price rather than a true bottom).

Update 1/17: more details: After living for 3.5 years, we sold our home for a loss of US$50,000 (yes, we lost money, but not the worst money loss story, which goes to our car we've purchased at 60-80K [stock options] paper loss). We made a down payment of 5% initially and foolishly paid PMI for 3 years.

Also, many in Japan have lost 70-90% in value over the past 15 years (see BOJ chart on page 23).