Seems that running up a ton of consumer debit is not isolated to the US. Britain has experience a run up in consumer debit levels that exceed those of the US. Britions have a debit to income ratio of 1.62, compared to 1.42 in the US and 1.09 in Germany. Consumer debit in England is greater than its GDP, which estimated for 2007 at $2.2 trillion dollars. The US consumer has run up $13.8 trillion dollars just below its GDP at $14 trillion.
A rather striking passage from a New York Times article:
“The housing boom automatically made people feel richer than they actually were and people went on to use the equity locked up in their property almost as a bank account they can dip into every time they want to buy a new car,” (Liz) Bingham, (head of restructuring at Ernst & Young in London), said.
As the perception of wealth grew, the social stigma around debt disappeared. Borrowing became such an accepted part of life that today one in five teenagers does not consider being in debt to be a bad thing, a survey by Nationwide Building Society showed.
Debt levels increased further as it became easier to get loans, and retailers, like computer chain PC World, offered both goods and the loans to buy them. Consumers happily accepted, thinking that as long as they were deemed creditworthy, they were not in danger of defaulting.
Sounds very similar to the way the US consumer has treated debit.
Its seems strange that if someone thinks or feels that they are rich, they are more inclined to spend money or take on debit. This perception of wealth seems to be rooted in a sense of entitlement and eternal optimism. People have warped their logic so that if they perceive they are rich they are entitled to look or act rich. Or they have been able to rationilze that they can spend the money now, because in the future some how more money will appear. All of which seems to fly in the face of how true wealth is built.
Source:
"Debt-Gorged British Start to Worry That the Party Is Ending", Julia Werdigier, NY Times
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