Three Trillion in Consumer Debt

At the end of June, The Economist ran a special section on debt. The section is entitled Repent at Leisure and is by Philip Coggan. The whole thing is worth reading. In discussing consumer debt, however, Mr. Coggan makes a point that Rural Ways finds troubling. It is asserted that, in contrast to the not too distant past, lenders today are just as much (if not more) responsible for consumer over-borrowing than the consumer himself. Mr. Coggan puts it this way: “Nowadays it is the lender as much as the borrower who is perceived to be at fault for extending credit to those who should never have been granted it.” Foolish, yes, but at fault? I’m not buying it (or borrowing it, either).

Not to launch into a speech about personal responsibility, but c’mon . . . it isn’t the banker that will have his car repossessed; it isn’t the mortgage company that will have her house foreclosed; it isn’t Mr. VISA that will have his cable TV shut-off. The consumer is the one who is a) in the best position to know what he or she can afford; b) going to suffer the consequences of his or her failure to repay; and c) a completely voluntary participant in the whole mess. We’ve been hearing it for a couple of years in the pop media: It is big business, predatory lenders, short sellers, and the rest of the bad people who are causing poor ol’ Mom and Pop to spend more than they can afford. Do Mom and Pop really want to claim that they don’t know what just happened?

Apparently so. Mr. Coggan illustrates his article by telling the story of a young gentleman who got in over his head by many tens of thousands of dollars and needed help from a credit counselor to come up with a plan “before the bailiffs arrived.” What was the man’s reason for the series of decisions that lead to his situation: “’[I]f they are going to give it to me, I must be able to afford it.’” This is nonsensical. “They” are not in a position to know and “they” are not going to suffer if “they” are wrong. I’ll admit that loan officers can be very smooth operators and they can act like your loving savior, but have we all given up our bullpoop meters? And wouldn’t it be better to say, “I got talked into something that was against my better judgment,” than to claim that I don’t have the ability (not to mention the responsibility) to just say, “no?”

(It would be like saying to the local grocer, “I don’t have the capability to select my food, please just give me whatever you think I should eat.” Pretty soon you are sick on spoiled dairy, moldy bread, and rotted vegetables. What? Are you going to say, “I figured that if Albertsons sent it over, it must be good for me?” That is right, you can’t possibly be expected to take responsibility for feeding yourself.)