With Britain’s households now owing £1.5 trillion in mortgages, overdrafts, loans and credit cards, the day of reckoning nears, warns Jeff Randall, Telegraph 31st Oct 2011
It is the scandal of which we no longer speak. Like a mad aunt in the attic, the problem is not going away, indeed it can only get worse, yet we’re encouraged to pretend that the embarrassment doesn’t exist.
I’m referring, of course, to the obscenity that is the United Kingdom’s ballooning personal debt. It stands at £1.5 trillion, a little more than the country’s annual GDP, our national output. This figure is neither the budget deficit (forecast to be £122 billion in 2011-12) nor the national debt, which, despite so-called “savage” public-spending cuts, is on course to hit £1 trillion by the end of the financial year.
No, £1,500,000,000,000 is the amount owed by individuals in the form of mortgages, overdrafts, loans and on credit cards. It is perilously high, but indicates only where we are, not the direction of travel. The full horror of what is happening to household borrowing can be found tucked away on the Office for Budget Responsibility’s website. The numbers are shocking – they point to another looming crisis – which, perhaps, explains why no one at Westminster is willing to highlight them.
According to the OBR, UK personal debt will grow by nearly 50 per cent between now and the end of this parliament. Come 2015, it is forecast to reach £2.12 trillion pounds. How can this be right? The average British adult already owes £29,500, about 123 per cent of average earnings.
The article continues with looking for the roots of the “heavy dependence on debt” in the failures of policy of Brown’s government and ends with conclusion “in order to slay the Debt Monster, retrenchment and hardship are unavoidable”.
What this article fail to recognize, is the simple fact – perhaps it is because it is so simple and obvious that “the mind is repelled”? – that Debt is not a Choice!
97% of all money today represents debt! 97% of all money comes into existence when commercial banks make a loan. With 97% of money issued as debt, in order for some individuals to be debt-free, others must be in debt.
If we wouldn’t have this debt, we wouldn’t have no medium of exchange!
We have only these two choices under our debt-based money system:
If we want more money, we have to have more debt.
If we want less debt, we have to have less money (which means a depression).
And remember – even if we would implement the hardest austerity measures and suffer all the retrenchment and hardship – it would not help us anyway!
It is mathematically impossible, when all money is created via banks making loans, for the public as a whole to stay out of debt. If you manage to stay out of debt, it means someone else has to sink further ‘under the water’ in order to maintain the money supply. Our monetary system is based on debt, and without constantly continuing issuance of debt, the whole thing falls apart.
It’s time to stop considering money and debt to be “of no particular relevance to the functioning of an economy” (“including money in the models would only obscure the analysis” (!) according to a popular undergraduate economics textbook.)
It’s time to have a closer look at “where does money come from“!