"Personal debt levels reach a record 140% of income," says the Daily Telegraph. In 1980, the paper explained, the level was only half as high. The Telegraph might have been speaking of almost any country in the English-speaking world. The leading financial regulator in the United Kingdom, the FSA, warned yesterday that debt levels were becoming dangerously high. Mortgage repossessions rose 65% last year. "There is a risk that consumers could be unprepared for a weaker economic environment...," said the FSA.
What has happened in the Anglo-Saxon economies? Several things: First, the financial industry in these countries has been extraordinarily innovative and aggressive - always finding new ways to lure people into debt. Second, these economies are more closely allied with the United States and the U.S dollar. The steady loss of purchasing power in the dollar, and the threat of consumer price inflation, has led people to spend rather than save. Finally, the Anglo-Saxon culture, along with the English language, has become the imperial standard. But it is a late-stage imperial culture, dominated by a 'get it now' emphasis on money, status and material well-being.
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About the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Comment by William on 4 February 2007:
As a banker's nightmare I've only ever once considered accumulating a credit rating worthy of a large loan. To do this I paid large deposits with several retailers and paid the debt off in a month when I could've easily paid cash initially; in the end I decided against taking out a loan on anything. And guess what? I've decided there's more pleasure to be had in saving up to buy something you own completely than borrowing against future earnings for a material item that might disappoint.
Over the years my income increased and I was offered lines of credit at every turn, but always saw the interest on such credit as a rip-off of my hard-earned capital. I never wanted to owe money to anyone and decided, very quickly, that a credit rating wasn't as valuable as outright ownership. Of course, I don't own a huge mansion but my property is mine, saved for over a lifetime. Everything I own I own. I also don't use ATM's as I dislike the idea of paying a transaction fee to get money that is mine from someone who is merely holding it for me.
I am probably wealthier than those who have accumulated more assets and earn a much higher salary. With little regret I watch as the whole western-world economy goes into the throes of inevitable bankruptcy, which is where it always belonged. Usery used to be a sin; I personally think it still is. You reap what you sow.
Comment by Lucifer on 5 February 2007:
Does the 140% include home mortgages? If so, that doesn't seem that bad. If not, then it's pretty damn scary.