Dodgy Dave, trying to scrape the barrel in searching for the last vestiges of grit in the British collective psyche, started off well by suggesting we “man up and pay down your credit card, suckas”. Well, he put it with an Eton twang in different words, but that’s what he meant. Apparently we have run up a collective credit card bill of £57Bn.
So far so good, but he backtracked when he was warmed up to the paradox of thrift and the British Retail Consortium suggested this was incompatible with growth. That’s always the trouble with debt, it never looks like a good time to pay it down, because the original good time you had running up the debt is now a distant memory, and you get to miss out on new good times.
The trouble is, that debt means that somebody owns you. Some of the time you can run away from the debt, with a bankruptcy or an IVA. In a modern capitalist society you need to either have no assets, in which case you can do that. I can’t do that, because I have assets and I presume I’d get cleaned out of assets before I could walk away from the rest. So I avoid buying stuff I can’t afford.
Even if you don’t walk away from it, debt limits your options. Owe a mortgage on a house and you can’t afford to take time out from your job or shift your work:life balance to less work and more life. You have to pay high rates of tax if you need to spend the money you are left with on the debt you incurred servicing your lifestyle. One of the other paradoxes of thrift is that once you have reduced your outgoings by eliminating debt (and a mortgage is still a debt) you can save at a much higher rate, because you can save in tax-efficient ways.
I happen to think Dave is right. Pay down your debts, suckas. Debt incurred to buy consumer goods is never good debt. I can’t afford 1 a Maserati GT to go to work. So guess what? I don’t buy one. It’s not hard, is it 😉
Consumer debt traps people is miserable lives doing miserable jobs so they can buy crap that they see on TV. Britain has been doing too much of this over the last 20 years. It’s time to take the red pill and wise up, because it can’t go on for ever. If you really have no assets, then sure, carry on, play the system for all it’s worth. You will never be free of the threat of the repo-man, but you may have a decent hedonistic lifestyle for a while.
It’s the middle classes that I don’t get – those that acquire debts and assets at the same time.It seems to be a curious version of the iron cage where people trap themselves into debt slavery for the TV dream. It can’t go on for ever, and you have to opt out or lose out. At least the guys that know they have nothing and find mugs enough to lend them money know they have nothing. That’s better than thinking you have something only to find out you don’t when the repo-man comes. You only have assets when you have no debts that could force you to liquidate what you have.
Not all debt is bad, borrow for productive assets like machinery and you can grow your business faster than you could otherwise. But pretty much all of what the British consumer is offered is bad, from credit cards to student loans to >80% mortgages. People managed without credit cards before the 1970s, and in the hard times to come there’s a good case to be made to discourage all unsecured consumer debt. It’s just too dangerous an economic weapon in people that believe the TV ads telling them
“you can have it all, now. Because you’re worth it”.
The reality is that you generally aren’t worth it and you can’t have it all now without shafting your future self, because that’s who you’re borrowing from, not the bank.
I’m with the original Dave. Sooner or later we have to live within our means. And since we borrowed for the party from our future selves a while back, we’ve now become those future selves. We can’t build an economy on endlessly ratcheting real debt values, because at some point we will run out of mugs to lend us more money.
1 Okay, so it appears I could afford to buy one secondhand if I stick to the lower part of the price range. But I’d have to do without a lot of other things or capabilities that mean more to me than being a ponce and driving into work in a Maserati GT.