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I am not a fan of debt. Most of the good financial gurus will tell you to pay off your debt. Debt is a tool to use when there are no other options. Unfortunately, I think the attitude toward debt has changed for the worse.

The Debt Industry

There is a debt industry in this country. The banks, mortgage companies, credit card companies, “pay day” loan outfits, pawn shops and personal loan companies form the core of the debt industry. These companies directly benefit from consumer debt. It’s pretty easy to understand why these companies have an interest in downplaying the negative aspects of debt.

There is also a secondary group that benefits from consumer debt. The retail stores (Target, Wal-mart, Best Buy), car dealers and real estate agents make up the second tier of the debt industry. Without consumer borrowing how would these industries do? If people couldn’t charge an LCD TV on their credit card, get a car loan or a mortgage, what would happen to those people (and companies) that make their living in these industries?

Did you know that GM makes more money off of financing than automobiles?

General Motors, which sells more cars and trucks than any other company in the world, continues to make more money as a bank than as an automaker.

Instead of fearing the military industrial complex as Eisenhower suggested, perhaps we should take another like at the debt industry.

Attitudes about Debt Have Changed

There is a large segment of the economy that wants consumers to think that debt is OK. In fact the debt industry has been very successful. In the “old days” people were ashamed of debt. Debt wasn’t something to be entered lightly. Whether it was religious beliefs or just social standing, nobody wanted to be in debt.

People used to pay off their mortgage as fast as possible. This may have had something to do with a mortgage being callable at any time. In the “old days” a bank could call in its mortgage, meaning they could request that you pay it off at any time. Laws have since changed, but you can understand the incentive to pay off your mortgage.

Speaking of the law, or bankruptcy law in particular, you can file bankruptcy for very little money these days. In my previous life as a debt collector we used to call attorneys to verify that a client had filed bankruptcy. For as little as $400 down, a person could file bankruptcy and get rid of all the pesky debt they had legally agreed to pay back. Congress changed the bankruptcy law in 2005 to prevent abuse. This law was of course supported by the debt industry and opposed by consumer groups.

We Share the Blame

The debt industry wouldn’t exist without us. It’s easy to blame the faceless "evil" corporations for our current debt situation. However these companies can’t force us into debt. We have to sign up for it and apparently a lot of us (including my past self) just can’t help ourselves.

Consumers have an addict/dealer relationship with the debt industry. The debt industry just gives us what we want. We envy those in the large house on the corner. If we can get a jumbo mortgage to pay for it, then we have the ticket to the good life. Once we’ve purchased our McMansion, we need to fill it up with furniture and the latest electronic gizmos.

Stuff Replaces Meaning

Could it be that we’ve lost our compass? Religion used to play a large role in American life. However, religion as measured by those attending church, has begun to play less of a role. Is our obsession with stuff a reaction to the loss of spiritual or moral guidance?

I don’t have the answers to these questions. However, it’s disturbing to see where we’ve ended up. We have a negative savings rate in this country. China owns a large amount of our debt. Every day cargo containers full of Chinese goods land in our ports and we hand over our hard earned cash for plastic and lead.

What do you think? Is debt a major problem? Has our attitude as a society changed or is it something else? Leave a comment and let me know what you think.

Tags    Banks    Credit    Credit Cards    Debt    Opinion

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