Mortgages and credit cards are pushing borrowing to record levels. From Daily Mail on 22nd April 2011
“Families will be crippled by a spiralling debt crisis over the next four years, equal to an average of £84,000 per household. By 2015, total household debt from mortgages to loans and credit cards will hit a record-breaking £2,126 billion. The debt mountain is laid bare in documents published by the Government’s spending watchdog, the Office for Budget Responsibility.
“It has massively increased its forecast for the size of Britain’s debt in recent months. At present, the total household debt is £1,628 billion, but the OBR forecasts it will grow every year until the end of the Parliament. The OBR says some of the blame lies with the Government’s austerity drive and its devastating impact on families. Last June, the OBR forecast household debt would be £1,823 billion in 2015. Last month it upgraded this forecast by £303 billion.
“In April a long list of tax rises and benefit cuts were implemented. The OBR report raises fears about families who have no choice but to resort to increasing their debts. Labour’s treasury spokesman David Hanson said: ‘Hard-pressed families will have to borrow more money to deal with the effect of George Osborne’s tax and benefits squeeze.’ One of Britain’s biggest debt advisers, Consumer Credit Counselling Service, said many people simply do not earn enough. The typical Londoner who contacts the service has a monthly disposable income of £1,259, but their ‘basic’ bills add up to £1,286. A spokesman for the CCCS said: ‘It is all the little pressures that are adding up to hurt households, and erode their income.”
For everyone who is familiar with the fact, that actually almost all the money in the economy represent interest-bearing debts, this will be no surprise. In our debt-based monetary system it’s inevitable that debts will grow. Currently, 97% of money is created when banks make loans. Consequently, almost all money is debt. This means that we – individuals, families and government – are paying interest to the banking sector on nearly every £1 in existence. This is the root cause of our current astronomical levels of debt.
However, there is a way out of this debt trap. All this debt is completely unnecessary. There is no need for all money to be created as debt. All these problems are consequences of fractional reserve banking. The money that was created by banks as debt could just as easily have been created debt-free by the state and spent into the economy.
We have to reform the way money is created and injected into the economy. By injecting debt-free money into the economy, the reform would allow UK citizens, corporations and the government to significantly reduce their overall debt burden – something which is impossible under the current system. Interest rates would be set by the market rather than by the Monetary Policy Committee, ending the artificial setting of interest rates by the Bank of England and reducing the impact of extreme interest rates on vulnerable groups. We would no longer have artificially low interest rates pushing pensioners into poverty, and we would no longer have artificial high interest rates threatening to bankrupt those with mortgages.