Saturday 16th of January 2021

Are the Days of Free Spending Over?

Until recently, countries like the United States, Canada, and the U.K. have enjoyed economic prosperity and an ethos of carefree and profligate spending. Before the economy imploded, most consumers believed that no luxury good or item to be out of their reach, no matter their socioeconomic standing, because credit could make anything happen. Designer items that once only adorned the affluent began to proliferate among the middle class, who clearly could not afford such things but were sucked into the “anything is possible” credit mentality. However, this golden economic era has come to a screeching halt, and the spend, spend, spend philosophy seems only a relic of the past.

Beset by Debt

The use of credit counseling agencies and related services has skyrocketed recently. Even before this economic crisis came to fruition, a U.K. study reported a 20% increase in the number of callers with debt-related problems to such agencies in September of 2007. The bulk of these inquiries, over 40%, concern credit card bills and other loans. The agencies also report a troubling rise in the number of people seeking assistance who are struggling to even pay basic expenses, such as utility bills. These signs all testify to the fact that the long-lasting consumer boom is taking its toll and coming to an abrupt end. Experts say the root problem is that people of modest incomes are getting in over their heads in credit card or housing debt, and it’s starting to catch up with them. The foreclosure crisis in the U.S. is proof that Americans are habitually buying more house than they can afford.

Why Are People Addicted to Credit?

Experts point to several factors to explain consumers’ dependence on credit. For one, the theory of “retail therapy,” or the idea that shopping is somehow a cure for all ills, is now a mainstream idea. But, to try to build an economy on this type of mindset is perilous and unwise. Secondly, the government is also partially to blame by helping or even encouraging people to take on huge amounts of debt, like with FHA mortgages or student loans. Student loans encourage young people to saddle themselves with debt while they are very young, which sometimes ends in disaster. Next, the availability of credit to almost anyone is also part of the problem. Consumers are barraged with credit-card offers in the mail and online, and getting a card is as simple as a few clicks of your mouse now. Finally, the ubiquity of celebrity, excess, fame, and fortune through the Internet and other forms of the 24-hour media create a culture of envy that makes the have-nots want what they really can’t afford.