Change You Can Belive In

... whether you want it or not.

The WSJ has this bit of information on their Real Time Economics blog:

The sharp decline in U.S. household debt over the past couple years has conjured up images of people across the country tightening their belts in order to pay down their mortgages and credit-card balances. A closer look, though, suggests a different picture: Some are defaulting, while the rest aren’t making much of a dent in their debts at all ...

Our own analysis of data from the Fed and the Federal Deposit Insurance Corp. suggests that over the two years ending June 2010, banks and other lenders charged off a total of about $588 billion in mortgage and consumer loans.

That means consumers managed to shave off only $22 billion in debt through the kind of belt-tightening we typically envision.

The comment thread on that post is loaded with great insights. Here's the pithiest one of the lot.

Well, this is encouraging, isn’t it? The Fed is going to keep pushing on that string until it turns into a cobra.

Too late. It's already a cobra.


Borrowing money is a bad idea. There are only a few times where it makes sense - home mortgages, major business investments and financing responses to existential threats such as invasions and wars. Other than that, it's something best avoided. When you read posts like this or ones on the student loan debt crisis or California's debt crisis or any one of a hundred other debt crises, the comments are filled with good ideas for escaping that particular trap.

All those good ideas add up to one big bad idea. The problem isn't that we need to be able to write off student loans or the banks need to cut interest rates or the Fed needs to pump more $$$ into the system, it's that we're relying on lenders to give us this day our daily bread.

The culture that led us here is on life support now, but we still haven't figured that out. We're writhing and wriggling trying to get out of this or that particular mess, not yet realizing that it's the self-gratification that we need to lose, not the debt. The debt is the symptom, not the problem.

Change is coming whether you want it to or not.

H/T: Les Jones