Nearly nine million people across the UK are living with serious debt problems, according to a new report by The Money Advice Service (MAS)
The study lists the top five cities where people are “over-indebted”.
The most heavily indebted area was Hull, where 43.1% of the population admitted they were in trouble financially.
The four other places were also in England: Nottingham, Manchester, Knowsley and Liverpool. All five areas had at least 40% of the population in heavy debt.
BBC News reports that latest figures from the Bank of England suggest that personal borrowing, including mortgages and unsecured loans, is now at £1.43 trillion. That is the same level of borrowing that was reached during the pre-crisis peak in September 2008.
“Millions of people could escape their spiral of debt by accessing free advice,” said Caroline Rookes, the chief executive of MAS.
“We know it transforms lives and the sooner people access it, the better – to take steps to improve their life for good,” she said.
While individuals can be helped to escape the spiral of debt, we have to remember that in our current system money is created as interest-bearing debt. (97% of money is created by high-street banks when they make loans.)
This means that although individually we might pay off our debts, collectively we are in debt forever. In the current system there’s actually more debt than money.
If we want money in the economy, we have to go into debt to the banks. And when we pay down our debts, the money effectively disappears from circulation. This makes it impossible for all of us to reduce our debts. If we start paying it off, then the amount of money in the economy shrinks. Less money in the economy means less spending, and less spending means fewer jobs, recession etc.
In the current system we can have either more money and more debt or we can have less debt and less money.
When the only way to get money into the economy is to borrow it from the banks that create it, then we’ll always be trapped under a mountain of debt. The continuation of the current money system guarantees that collectively we’ll be in debt forever.
The money system can be redesigned
In order to reduce the debts and the associated problems, that the advice organisations like MAS are dealing with, we need a systemic solution.
Without the reform of the money system the debt-problems will continue to grow.
But the money system is not a law of nature, it is a man-made creation. Therefore it can be redesigned to work for society rather than against it.
Instead of having all our money on-loan from banks, and relying on banks to keep lending when we repay our loans, we need to use permanent money which will continue to circulate in our economy. We are calling this ‘Sovereign Money’.
If we took the power to create money away from banks, and instead have money created by a public institution that would create it debt-free and spend it (rather than lend it) into the economy, then we could finally start to clear this mountain of debt. (Learn more here)