Tuesday, March 17, 2009

Educated in debt

Today two headlines awaited me on my yahoo email account:

Strict laws for credit card firms

The Government is planning to introduce tougher laws for credit card firms to reduce the temptation to get into debt, it has been reported.
Study suggests university fees rise

The first looks like Labour finally waking up to the disaster of personal debt in this country ( I guess its almost impossible even for the deluded New Labour project to ignore now). The two suggestions are sensible and indeed welcome enough, though very small beer.

Then we have a call ( though the Universities spokesperson on R4 denied he was doing that a few minutes ago - certainly looks like it to me) for higher tuition fees for students. Now I'm old enough to remember the massive row over student loans for living expenses under the last Conservative government - with all the lefties now in government lined up on the other side of the argument.

But it strikes me that the two are linked.

We have started launching people from University (which now bizarrely means about 40% of the population) in debt. Add to that credit cards and bank accounts that don't stop at zero, but are a continuum. When Man in a Shed went for a drink at Uni he got a fiver out of the cash machine (yes it was that long ago ) and when it was spent the night and beer where over. With electronic cash no such limit now exists, and with state enforced debt you no longer feel bad about it.

Add to that the until last year received wisdom that the bigger a mortgage you could grab the richer you'd be in the end through inflating house prices and you can see how personal debt has got into the problem we're in now.

Its hard, since now the government is taking out a loan in all our names -the value of which currently varies between £20k and £40k depending on who you talk to, but it needs doing.

We need to save more, which also means use debt less.

The politicians seem to be slowly grasping their way towards this point. Our religious leaders, especially the Church of England, might like to ask themselves why they haven't taken a stronger line on all this .

The Universities desire to be funded by loans needs to be seen in this light. Perhaps a graduate tax would be better to avoid the perception of debt - even if the Lib Dems have been in favour of it in the past.

Further: I note the plan to restrict mortgage lending by the FSA ( and therefore the government ) to three times salary. Well its a start. I was impressed that till recently property prices in Brazil where far lower as they had no mortgages, but have unfortunately for them just introduced them.

Remember the current crisis was causes by foreign savings looking for somewhere to be deployed. This gave us the asset bubbles and unmanageable debt that have brought us to our knees. ( It amazing how few TV/radio reports point out this now widely accepted fact ).

However all this measures can be filed under : Stable door closed after horse bolted and should have been enacted far earlier by a government that understood our economy and wasn't relying on the debt bubble to get reelected.

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