Saturday, June 12, 2010
Debt is not wealth
"Debt is good" luring young into disaster
Good ole bankers - let's crucify the next generation.
Posted by chrisch @ 09:03 AM (2119 views)
25 thoughts on “Debt is not wealth”
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estrader says:
I was thinking about this the other day and the article is right. I have been made to feel as if I am committing a crime against the economy by having savings and investments and no debt.
techieman says:
est…. a “smooth criminal”?
enuii says:
Key paragraphs 2/3 into the article:-
‘In the future, as a nation we will be dependent on generations of graduates who will start off their careers with a mountain of debt which, in many cases, will be far more than they earn in a year. We will have to hope that they do keep on paying their debts and do not get downhearted in large numbers.’
Maggie Kirkpatrick of the Consumer Credit Counselling Service is not optimistic about the ability of this generation to pay back their debts. “Students leaving university now are finding it harder to get higher-paid employment,” she says. She detects amongst them “sheer disappointment at not being able to achieve what they expected”. And she hopes that they do not get so disillusioned that they just give up on the debt repayments, but she says: “That might be something that grows in future.”
hpwatcher says:
I was thinking about this the other day and the article is right. I have been made to feel as if I am committing a crime against the economy by having savings and investments and no debt.
The government (Whitehall) & BOE has shown time and time again that they simply aren’t interested in encouraging saving.
nomad says:
Estrada @ 1. I suspect that Philip Green doesn’t suffer such doubts 🙂
righttoleech says:
dont feel too guilty estrader, you are doubtless paying tax on your shrinking capital to bail out n’er do wells.
techieman says:
Actually i think we need to turn this on its head. The emergence of IVAs and/or personal bankruptcies being subject to one (as opposed to 3) years of discharge, encourages the poor old (young) debt ridden people to renege, especially if they have no assets to speak of tthat they need to protect.
That discourages the lenders, to a degree. Infact its a balancing act. The ponzi scheme has to be paid for by sucking in more people, most of who whom will continue to pay (because its the “right thing to do”). BUt when they realise the burden placed on them, AND that they CAN get out of it AND can use the Bankers morals, as justification then….
The interesting part of this is
“The RSM Tenon Tracker of personal insolvency in England and Wales shows “the fastest-growing age groups being the over-65s and the under-25s”, says RSM Tenon’s head of bankruptcy, Mark Sands. Under-25s accounted for nearly 5 per cent of all personal insolvencies in the first three months of 2010. Nearly 2,000 people in this age group went in for bankruptcy or another official form of insolvency, up 27 per cent on the year before.”
The over 65s? whats the number for those? That may be more of an issue depending on the extent of their assets. As for 2,000 thats nothing – so at the moment this is a non story. This story may become increasingly important and the numbers here should be tracked with the numbers of repossessions. If we start to see numbers of say 20,000 [the numbers are per quarter] then that will have an impact and an impetus, since at a tipping point social stigma goes out the window.
Fraccy says:
Hard drugs, cigarettes, bestiality porn, and paedophiles should be kept away from the young.
So should financial institutions.
charlie brooker says:
But I thought greed was good.
Muzzman says:
Poorly written article. 3rd paragraph from the end. Poor Jane cannot go out at the end of the month as she does not have any money. She got a music degree and did not understand there are not many well paying jobs for music grads.
Graduates in general are finding it “harder to get higher-paid employment” What a shame that they do not get handed director level jobs. Maybe they should have their helicopter parents come do the job interviews for them and negociate their pay.
£20k is nothing compared to what people wrack up in The States. Their parents got it for free and now have to contribute a small portion to their fees. You would hope it would focus them more to get better grades as there is something to pay off at the end.
rumble says:
“The government (Whitehall) & BOE has shown time and time again that they simply aren’t interested in encouraging saving.”
The country is supported by banking, the business of banks is to create debt.
letthemfall says:
One has to conclude from all this that Marx was right.
paranoia blue says:
I guess so if we look in the “rear-view mirror!â€
britishblue says:
Estrader @ 1. Not all debtors and savers are equal. There are good savers and bad savers and good debtors and bad debtors. A good saver is someone that is dilgent with their money and has money put aside, but also consumes and contributes to the economy. A bad saver is someone that hordes money and doesn’t contribute to the economy by spending some off it. A person that has a million quid in the bank but goes around in a £500 car is a bad saver and will do just as much damage to the economy as a bad debtor – arguably more!
Likewise not all debtors are equal. There are bad debtors who sponge of the state, fraudulently get credit and default on their debts. This includes companies e.g. the banks as well as individuals. There are also good debtors who are people that have worked all their life, got themselves into good jobs and then found themselves out of work. First these peoples have spent their savings and then had to go into debts whilst they are still searching for a job. Likewise there are thousands of small businesses out there that have been hit by the recession and had to make the choice of laying lots of people off or using debt to keep afloat whilst they work their way through the problems. There are also people out there whom have had no family backing and are trying to develop businesses. It is almost impossible to create a new business without money and hence a large proportio of these are debtors. Some of britains most successful entrepreneurs have been debtors at one point.To put all debtors in one category and treat them in a derisory manner is pompous.
Also there are Institutionalised debtors which are students coming out of university. I employ quite a few part time and I would say that most are going to be between 20-40k in debt when they leave. If they do a PHD the figure is closer to 60-80k. There is no concept that they have to pay this back until they do their final exams and go from undergradate to unemployed status. This is like a tsunami waiting to hit the UK in the future. The new governments proposal to increase student fees will only make this situation worse. So not only are this generation going to have to bear the current debt the country has, they are also going to have massive debts themselves from day one of their working life and have to pay for an ageing population.
If we want to get back to equilbrium we are going to have to look after good savers and good debtors and take to task bad savers and bad debtors. This applies as much to countries as individuals e.g. Germany needs to spend
Tounge in cheek, I think it is a bit of a holier than though attitude to say, ‘I have been made to feel as if I am committing a crime against the economy by having savings and investments and no debt’.
simon68 says:
GROSS DOMESTIC PRODUCT
GDP (Y) is a sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X – M).
Y = C + I + G + (X − M)
In Europe and UK, GDP is equated to G (Government Spending) since…………..
Government Spending (G) = hope the ponzi scheme still work & foreigners keep on buying gilts to support UK Government Spendings.
Consumption = credit bubble has been burst & unemployment is high; so it must be reduction.
Investment (I) = land costs/labour costs in UK is too high and it’s not conducive for investors to plough money for capital outlays.
Net Exports = UK produces nothing & exports nothing; so it must be a net imports.
Swissnic says:
What happened to the time when it was a shamefull embarrassment to have debt, even a mortgage. As a cash-positive 30-something, I am proud to be entering this economic disaster area with my head held high!
@8 – Yep, Greed is good… You dont have to take on debt to be greedy though! ;o)
@10 – Nope, Marx was an ideological idiot! The system could work if we just reverted back to a gold-backed currency.
FIAT money is the root of all economic evil (when manipulated by non-benevolent governtmenr, i.e. all of them!)
simon68 says:
There in no such thing as bad savers since wealth will take many forms; some people may store all their wealth in properties and other in gold bullion or some buy shares or place all money into a high yields foreign currency deposit.
What is bad debtors…………………..Those that won’t have intention and ability to repay loan or some call it Ponzi scheme.
From Wikipedia, the free encyclopedia
1910 police mugshot of Charles Ponzi.A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned. The Ponzi scheme usually entices new investors by offering returns other investments cannot guarantee, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going.
The system is destined to collapse because the earnings, if any, are less than the payments to investors.
http://www.debtbombshell.com/
mr g says:
No one has mentioned another major reason for this problem.
Many younger people are obsessed with the cult of celebrity and therefore have a “I want it and I want it now” outlook on life which means spending money they haven’t got.
simon68 says:
You know why Chinese are rich, they are hard working and save a high proportion of their earnings to achieve aspirations such as study for a degree or buy a flat. They are careful in spending each penny of their hard earn money.
Frivolous Youth says:
Mr g,
Many younger people have been locked out of the principal means by which society accumulates wealth and assets, all because they turned up late to the feeding trough carrying huge debts which were foisted on them at short notice by the government. Now they are getting attacked by those that want them to prop up overvalued housing. If you exclude people from even the lower rungs of the ‘housing ladder’ and saddle them with debt, they are not going to want to do the responsible thing and save up their pennies, so that one day, in their 50s, they can buy a shoebox starter flat.
Young people are used to living in debt and have nothing to lose. A lot of people I know have actually negative assets into their 30s (and probably in future 40s), when you take the student loan into account. Im more surprised that middle-aged people and families would want to get into debt for new cars, holidays etc, as they actually have responsibilities and assets, houses etc that they could potentially lose.
rumble says:
Exactly at 15 and 16.
People going on about eg high speed broadband so that we can progress like South Korea. Barf. South Korea progresses because South Korea is full of South Koreans.
“they dozes”
simon68 says:
To: rumble
Then UK Gov’t need to implant South Korean DNA into its local people.
markj69 str05 says:
‘The country is supported by banking, the business of banks is to create debt.’ Glorified loan-sharks with a licence to bleed you dry!
Sort of reminds me of an old robin hood film. Where the sheriff on Notts, keeps claiming his taxes, despite the surfs in-ability to pay.
markj69 str05 says:
“…therefore have a “I want it and I want it now” outlook on life which means spending money they haven’t got.”
Agreed. But this has created a catch22 situation. Demand has created unsustainable production lines (Economic growth on the back of debt). Production lines have enabled favourable prices. Cheap money and ‘buy now pay later’ scheme creating a new generation who do not need to wait.
Will we look back in 50yrs, and label this era as the ‘greedy years’ which brought teh economic world to its knees?
Whoever governs this country, and countries alike, should be responsible for its subjects, industries, institutions, private and public sectors being able to survive in the present, short term future, and long term future.
mr g says:
@markj69 str05 “Whoever governs this country, and countries alike, should be responsible for its subjects, industries, institutions, private and public sectors being able to survive in the present, short term future, and long term future.”
IMHO that is the most intelligent comment ever posted on HPC!