Debt Bubble Reaches Critical Mass
By Ryan Healy | January 25, 2008
Have you noticed how many debt blogs have sprung up in recent years? Have you noticed how many people are finally realizing that debts must someday be repaid?
This is indicative of the underlying problem, which is, simply put, too much debt. Just how much debt have Americans accumulated? Let’s take a look at the actual numbers.
Between 1996 and 2006 householders added $5.9 trillion to their debts, most of it on their mortgages. From 1999 to 2006, household mortgage debt went from $4.4 trillion to $9.33 trillion. (Mobs, Messiahs, and Markets, p. 262)
What is a trillion? It’s a number too big to fathom. So to get some perspective, all we have to do is see that mortgage debt more than doubled in a period of only seven or eight years. Not good.
But what about the consumer side? What about all those folks who don’t have mortgages? Again, we quote from Bonner and Rajiva’s book.
From 1999 to 2007, household debt went up more than all the debt that households had previously accumulated in the 220-year history of the United States. From 1999 to 2006 consumer credit outstanding, too, rose from $1.6 trillion to about $2.5 trillion. (Mobs, Messiahs, and Markets, p. 263)
The significance of these numbers should not be underestimated.
What happens when American consumers stop spending and start repaying their debts (as they will all be forced to do at some point)? What happens when lending standards are tightened and minimum payments are increased?
It doesn’t take a genius to see that America’s debt problems will have a profound impact on the economy over the next few years. There is simply no way to use credit indefinitely. The debts will have to be repaid. And since the “health” of the American economy depends heavily on the use of credit, it will suffer mightily when consumers stop spending and start repaying.
So why do I share this with you?
Because I want you to see how dangerous America’s debt load has become. And because I want to encourage you not to wait a second longer to begin repaying your debts. The use of credit is the same as borrowing from your future. Learn to live in the present with what you have in the present. Settle accounts with your future now so that when the future comes, you won’t be indebted to it.
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5 Responses to “Debt Bubble Reaches Critical Mass”
Comments
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January 26th, 2008 at 4:50 am
indeed, now is the time. i’m sad to say i’m one of those who realized later than i should have. thankfully it’s not too late to do something.
January 26th, 2008 at 4:46 pm
Nathaniel - Thanks for the comment. Yes, now is the time. And don’t worry about not starting sooner. The thing that’s important is to start now and stick with it.
January 27th, 2008 at 5:53 pm
Yup…..I’m one of those newbies. I get upset at times that it has taken me so long to realize what I have done but I’m glad that I’m finally doing something about it.
It will be so nice to be debt free!
January 28th, 2008 at 6:29 am
Thanks for the comment, InTheHole. Better late than never, right?
January 29th, 2008 at 4:16 pm
I would never have gone into debt except because of a longterm medical crisis… at least I say I wouldn’t of.
Anyways, as much as possible, if you can’t pay for it, don’t buy it. The interest is really what kills you, more than just the fees.
Ryan’s right. Live in the present. Learn to be happy with what you got. If you want more. Great. Go earn it.
It’s no fun paying for something you’ve ALREADY enjoyed. I’m speaking from hard experience.