Ben Varian Economics Debt Essay 19/09/2014

Who is responsible for the UK Consumer debt mountain?

The situation of debt in the UK is dire; ersona! debt has e"ceeded #1 $
tri!!ion and at the end of December 200% it &as a!most #1'( tri!!ion' )n the
ast t&e!*e months it has +ro&n by 10'%, &hich e-uates to an increase
of #114bn' This amount of debt is unrecedented in the UK.s economic
history' The amount of debt from mort+a+es and secured !endin+ on
homes has reached the #1 tri!!ion mar/ as &e!!; this is an increase of
11'0, in the ast t&e!*e months' This amount of debt from mort+a+es
reresents 10, of tota! consumer debt'
The remainin+ t&enty er cent of debt o&ed on is !oans and credit
cards 2the irony bein+ that the ma3ority of the !oans are bein+ used to
conso!idate debts' )n December tota! consumer credit !endin+ to
indi*idua!s &as #21( bi!!ion4 an increase of %'2, o*er the ast year
Tota! !endin+ in December 200% +re& by #11'%bi!!ion &ith secured
!endin+ +ro&in+ by #10'%bi!!ion in the month and consumer credit
!endin+ +ro&in+ by #1'0bi!!ion'
The nature of debt is a doub!e2ed+ed s&ord4 once you are in debt;
the on!y feasib!e &ay to rid yourse!f of it is to !oan money4 &hether by
mort+a+e or ersona! !oan' This incurs further debts !eadin+ to a
sira!!in+ uncontro!!ab!e !e*e! of debt'
5o&e*er for that to be considered the so!e reason for debt is
farcica!4 it mere!y acce!erates the +ro&th of the debt; it does not cause
debt in itse!f' Therefore there must be another cause4 ossib!y numerous
causes' But &hi!e debt has been at an a!!2time hi+h the true im!ications
and e"tent of such hi+h !e*e!s of debt ha*e not been fe!t by the UK
consumers4 in recent years eo!e ha*e been re!ati*e!y &e!! off; !o&
unem!oyment has meant eo!e ha*e a!&ays had 3obs to ay off those
Ben Varian Economics Debt Essay 19/09/2014
debts4 ho&e*er &ou!d they ha*e the debts if they &ere unem!oyed6 The
ad*erse effect of ha*in+ a 3ob is that eo!e may consider themse!*es to
ha*e more money than they actua!!y do romtin+ them to therefore
consume more' This is the rob!em &ith the materia! society in &hich &e
!i*e4 eo!e are 3ud+ed on &hat they ha*e and ho& much money they
earn' 5o&e*er money has become such an e!usi*e and indefinab!e term4
this is due to the rise in the !ast ten years of 7easy8 money' This is thin+s
such as credit cards; they a!!o& the consumer to buy no& and ay !ater'