The economy of debt

I read online recently that American credit card debt grew by 315% from 1989 to 2006. 315%! I guess I know where I should be investing my money, in credit card companies. They have convinced my fellow Americans to take out 2.2 Trillion dollars in credit and cash advances in the last year alone. You know what that means? They’re making profits like the oil companies!

Am I the only one who find this statistic completely insane? I know that Americans are worried about recession. Housing prices are down, some are defaulting on loans. But I have to ask myself, how the Hell do you run up 2.2 Trillion in debt in one year?! Is it just another facet of the “finance our lives on the backs of our children” mentality or is something even more sinister at work here? What do you think?

12 thoughts on “The economy of debt”

  1. And the story gets worse once you get past the statistics to the realities. Card companies here and in the US have been allowed to quietly add in extras without telling consumers.
    On top of that, those who become trapped in card debt find their rates nudging close to top thresholds, where those are regulated.
    In Australia rates nearing 18% are common for those trapped. I looked at one of these the other day and the woman can only struggle to meet part of the interest payment from burying her late husband. The debt just grows and she didn’t even like the bugger!

  2. Hey, Frogette, the card culture is an innovation of the banks, a swindle to get people to spend money they don’t have. Between Banks and Churches, “There’s a whole lota swindling going on…”


  3. Back in the day America was prosperous because they manufactured a lot more stuff than any other country, and because they had large investments in other countries’ economies. So when a German or Japanese company made something, America got a cut. This sweet deal allowed the American worker to be incredibly well paid compared to his overseas counterpart.

    Now the situation has reversed and it’s the foreigners who own large chunks of American industry, and are taking a cut. All because Americans insisted on living beyond their already substantial means. Now they’re living much further beyond their means than ever, as the economic fundamentals dwindle. Expect repercussions.

  4. It is pretty much impossible to travel without credit cards. You cannot rent a car without one. If you buy an airplane ticket with cash you immediately get put on the “watch list” and can guarantee a shakedown at the airport.
    Other than that they are a bad thing. They encourage instant gratification instead of careful buying and allow you to “buy” more than you can really afford.
    Even though I already have cards from the bank and AmEx I get at least 10 offers a week for more. I had to get a special grinder just to get rid of the paper. Now the cards I do have are sending me checks in the mail virtually every week wanting me to run my cards up to the credit limit.
    I do use my airline credit card when I purchase big ticket things so that I can get the air miles but I only buy things I have the cash in the bank for and I pay off the card monthly.

  5. Cartledge that’s an awful story. She should have given him a Viking funeral (burning pyre) or an Irish one (stand him up in a corner).

    PG – Good catch! I found that ironic as well. More like Financial IN-Security

    DG – What is it they say, “A fool and his money are soon parted”

    SbT – You’re right, we sold our asses to the highest bidders and now we pay, and pay, and pay. Sigh.

  6. fallenmonk – Airlines have finally begun accepting PayPal, but you’re right about travel. Can’t get a hotel room or rent a car without a credit card.

    I don’t get many card offers, but my credit card company sends loads of those stupid checks. It just burns me up that people actually use those things. Get a loan, it’s way cheaper! Better yet, be responsible and don’t spend money you don’t have.

    I wish more people were like you. It would save so much pain and put those bad credit vultures out of business.

  7. The amount of debt is insane. Sadly, the credit card companies are finding themselves in trouble because of the mortgage crisis, so they’ve decided to raise rates even on people with good credit to recoup some of their losses. That’s going to slow down spending even more, which will in turn slow our economy even further.

    Stagnant or falling wages, no home equity to draw upon, and credit cards with exorbitant rates. Consumers are going to have to make major readjustments and learn to live within their means – they won’t have any choice.

  8. Consumers are going to have to make major readjustments and learn to live within their means…

    We can only hope.

    Nothing says “Screw you [Visa|Mastercard|AmEx|whomever]!” like paying off each month and living within one’s means.

  9. The amazing thing is that the financial companies that lend out the money haven’t learnt from what is happening in the housing market, or else they have but they just don’t care who they lend to and they don’t care a fig about their customers as long as they get paid back at that competitive interest rate.

  10. Lucy – I agree with you. It seems that the credit card companies make more money on interest and penalties than your purchases, so to them bad debt is good debt.

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