Debt is the rocket-fuel of capitalism. It’s the go-juice that makes finance sexy. For consumers debt is a way of life. At a national level it underpins everything. Forever increasing, it’s a problem-solver, a profit-turner, a quick fix, a strategic bargaining chip, a delay tactic, and a sign of strength. It’s the greatest asset class of all, unless defaulted upon when it becomes toxic. So the question is, do you love it, hate it, or fear it?
If I owed the bank £2000, I should be worried. If I owed the bank £2 million, the bank should be worried.
seems to be a necessary evil people are judged by financial institutions. . have a little debt and they love you and will throw more at you. have too much and they wont give you any for a long time. never have debt and youll struggle to get some for the first time seemingly. and credit reference agencies pimp you like a cheap bitch giving you marks out of 1000 for how they will allow others to roll you over and charge you top dollar to drop your trousers and aim for penetration. personally I hate debt. im now 43 and have the lowest levels of my life.
Affordable debt is ok, pity those poor bastards paying astronomical interest rates. In the year 2013 you'd be forgiven for believing that it is allowed to happen at all. Criminal.
Don't really have one apart from mortgage. Couple hundred on visa and thats about it. I keep my debt very low. Occasionally i hit the visa, i.e. for clutch or forks, but then pay it off.
Had this discussion last night over dinner with friends. I'm guessing I will have a crap credit rating as I have no debt nowadays, thank God.
It has proven to be a rather useful invention during the odd war Pete, if that's what you are getting at..... Credit would be a more appropriate description really. Without credit in all it's forms, government and private, we wouldn't have a capitalist system at all. And the other forms of organisation tried so far have not been entirely without issue either. So, clearly an essential component of a thriving, capitalist system of organisation. Excessive debt (to whom?!) is clearly an issue. But remember boys and girls, for every debtor there is a creditor.... (ignoring seignorage).
Debt is a double edged sword. Our economic system requires growth, amongst other things, to service debt. The question is whether there is a limit to growth and what happens if growth hits the buffers and triggers mass default. The chances of the mountains of debt that exist today ever being repaid is nil but that doesn't matter to the elite who feed off the flow of money. Inflation is just about the only tool that can limit real value of that mountain of debt, but it is the average man in the street who suffers, not the elite. Debt enslaves populations. At an individual level debt is OK if it is used to fund capital investments that either provide a return or can be paid off from increasing levels of income. When it is used to fund day to day living, or living beyond your means it is very bad for the individual. Whether it is the greatest asset class of all remains to be seen, but I suspect it is a balloon waiting to burst.
Excellent, I was hoping to tempt you into contributing, Ian. Indeed for every debit there is a credit, for every debtor there is a creditor - it's a zero-sum. Except that when the debtor is broke and can't pay, the debt becomes an overhang. It's on somebody's books as an asset, but with nothing to back it. When there are lots of those they become toxic. Somehow they have to be written off - but at whose expense? Who takes the haircut?
It should be between the debtor and the creditor but when the scale of the problem is so large as to threaten the banking system then everyone ultimately gets involved. Then there is government debt underwritten by the taxpayer. But in the meantime the fat cat bonus culture has returned, so what do they care ? If you can bank a few tens of millions and lose even 90% of it then you are still sitting comfortably. There is the principle of 'when you are in a hole the first thing to do is stop digging', but I see no evidence of that.
I've just signed up for a shit load of debt, bit good debt if that makes sense. Bought a house, well I had to sometime, I must be growing up. what I loathe with a passion is these pay-day loan companies that thrive on people's problems and no doubt make the situation worse!
Well you all explain to me this then , from what I can gather every country is in debt, the Yanks the Brits, Jerries ,Irish , French, Eyeties , Icelandterds everyone, so who's got the loot then , if there's a creditor for each of those then they must be as rich as Slimon Coward. Banks ,finance , insurances , all those that deal in digital money have fucked up the world , call me old fashioned but wasn't the world a better place when those that could produce something with their hands earnt their money, now those that have the money are those that produce nothing.
Debt is one of the tools available to businesses and individuals in order to manage their cash flow. What is required in the short term and how much it costs will vary, based on a variety of factors (such as credit ratings, loan or deposit terms, risk versus reward policy of the company/individual etc.). Debt, per se, is not a problem. When financial institutions begin to consider debt as a commodity, that is where dragons lie. They (the financial institutions) were the architects of their own downfall, and also the downfall of millions of people who were offered credit terms way above their ability to repay the loans. Debt as a commodity was another example of the financial institutions developing "instruments" to bring bottom line results to their own organisations without tangible or real beneficial impact to anyone else. The ability of a small number of people to feather their own nests far exceeded the ability of the regulatory bodies to ensure the avoidance of unintended consequences.
Bear in mind that governments are the only people who are able to borrow money on an intergenerational basis - so the idea of there always being a debtor and a creditor, in all other circumstances, is a zero sum game and works logically, save for the odd death/debt overhang/estate settlement timing issue. But in theory, like the accounts of any firm, it must add up in the current period. Except when you introduce government debt, which allows a current generation of lawmakers/government to borrow to finance current expenditure on the basis of being able to raise the money to repay it, or service it, by encumbering future generations as they are the only institution with the power to raise taxation on it's people. Problem is that this also allows a "one off" pulling forward of future income into the present period. Now since the dawn of time, governments have done this once the banking system developed, sometimes this has gone really well (Victorian England), sometimes less well (Estates Generale)! But the period post WWII has seen an almost unparalleled period of pulling forward future income (raising long term govt debt) in US/European countries, on the back of the "solidarity" felt post WWII, to fund social security and government spending on a level never previously seen. Standards of welfare have grown enormously as a consequence, but there is a bill to pay.... Intergenerational debt is a real issue. Banks are there to circulate credit between savers and borrowers, without whom there would be piles of cash (being deflated in value) and plenty of potential economic activity lacking finance (reducing overall welfare/wealth generation) and real economic growth would be stunted at best. Look for examples at all the regions that have not developed healthy thriving credit institutions. However, inbalances of this scale are frightening and adjustment periods are likely to be long. Although politically expedient, and socially bonding, blaming a handful of bankers for the current issues is completely missing the point I am afraid. Their net take from this system is almost a rounding error in the scheme of things, however unpalatable it may seem (to me as well!). The real issue is the Western Europe/US has grown accustomed to living far beyond it's economic means, and resorting to borrowing on a massive scale to pay for social security, medical improvements, welfare, private living standards and educational advances...... The creditors of all this are the rising Asian economies such as China, and future generations. But to remember, 500 years ago China was the dominant economic power. They were outward looking, culturally superior and more advanced technically, and no-one would have bet that Western European economies would have come to the position they occupy today. What we are really seeing today is a fairly massive scale, worldwide reversion to the long term mean average...... .....together with some micro/macro economic swings. So, debt/credit is a useful tool, like many other tools available to man. It's misuse is the problem. But as they say, to err is to be human......
