1. Cashinmattress said...

The subject of the NYT article, Diane Mcleod, is in dire straits indeed. A snowballing debt cycle is endemic of the children of the baby boomer generation, chasing that false horizon of security that was brought about by the war and the huge financial prosperity that brought to America with the industrial military complex machine running in overtime. Britain is no different, although the UK did still have large colonies throughout the world at that time to obtain tax. No more, and the people of both countries have spent not only their own futures away, but those of their children.
There is no easy solution to the problem, but war or revolution have always been great equalizers throughout history. Unfortunately, the world of today will not allow for large scale global conflict due to the presence of nuclear weapons. Revolution is also off the table due to the massive leverage that the state has over the population. Britain is bristling with surveillance, and personal freedoms have been greatly eroded in both countries with 9/11. America still has a population with the luxury of personal firearms, but their government has already prepared for that eventuality with the REX 84 program.
The only real solution is to have a re-balancing of wealth in our two countries. Brinkmanship will undoubtedly lead to some scary moments, but eventually, the powers and the wealthy will have to forgive the debts, or I fear that we will all be in bread lines and perpetually living in fear. So, what good is having a bunch of property if you are unable to eat? Or if fuel costs £10 a litre and you need identity papers in order to walk on your street? We've all lost our way and greed has become the ugly face of our two nations.
I hope the Diane Mcleod can see the debt for what it is: somebody else's problem. She needs to swallow her pride and declare bankruptcy, learn prudence and save a dollar of hers and not spend ten of somebody else's.
So, to bring a point relevant to the site, remember, that if you cannot afford to buy a property outright, you are actually living in somebody else's home until that debt is repaid. The bank and state become your landlord and you will pay a high price for the luxury of residence, with no real security other than your willingness to pay interest, whatever the price. Property has lost its significance as the home, the place that you raise family in and feel safe. This insane feast upon credit, fueled by our greed, has come to an end and those who were very hungry will now starve. Sad but true.

3. drewster said...

Nice piece. There's a chart in there showing the changes in debt levels in the US since 1920. Interestingly, the Depression didn't seem to have any effect. The last 10-15 years however have seen an absolute explosion in debt. Worth taking a look!

5. enuii said...

Drewsters right, an eyewatering article that drags all the skeletons out of the US financial cupboard and dumps them on the kitchen table.

Somehow I think we are nowhere near plumbing the depths of debt in the misnamed 'credit crunch' which should be more appropriately called a 'debt timebomb'.

7. drewster said...

alan,

Interesting point, but I'm not convinced. US bonds are all denominated in dollars. They can't lose their AAA rating because they can always print more dollars. It's nigh impossible for them to default on a bond. Also the ratings agencies (Standard & Poors / Moodys) are all US companies.

Having said that, if they print their way out of a crisis then the currency will plummet. That means hardship for ordinary folks (more expensive imported goods including oil); but it also means more employment in the export sector which is what America needs.