As generally accepted by the environmental community: consumption aka consumer spending is bad for the economy. My thought is also a lot of bad debt, when all this consumer spending is bought but not paid for. Good News? Good for the environment.
So here’s the story: if you’re paying off something you already bought, then you’re not “buying” new stuff, thus the economy continues to show weak growth. Which also means that past economic growth was premised on a debt model.
Yet here, Laertes! aboard, aboard, for shame! The wind sits in the shoulder of your sail, And you are stay’d for. There; my blessing with thee! And these few precepts in thy memory See thou character. Give thy thoughts no tongue, Nor any unproportioned thought his act. Be thou familiar, but by no means vulgar. Those friends thou hast, and their adoption tried, Grapple them to thy soul with hoops of steel; But do not dull thy palm with entertainment Of each new-hatch’d, unfledged comrade.
Beware Of entrance to a quarrel, but being in, Bear’t that the opposed may beware of thee. Give every man thy ear, but few thy voice; Take each man’s censure, but reserve thy judgment.
Costly thy habit as thy purse can buy, But not express’d in fancy; rich, not gaudy; For the apparel oft proclaims the man, And they in France of the best rank and station Are of a most select and generous chief in that. Neither a borrower nor a lender be; For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry. This above all: to thine ownself be true, And it must follow, as the night the day, Thou canst not then be false to any man. Farewell: my blessing season this in thee!
– Hamlet Act 1 Scene III
Oh Global Economy! Where went this sage advice?
When I went off to college in 1996 (I took a bit of a gap after high school) I had a high school education. My parents were (are still) middle class, productive and employed. I got my first job at 16 and have been continually employed ever since. My parents paid for tuition, I paid my living expenses. And from my first arrival on campus, I had my first credit card.
It had a $600.00 limit. And before you knew it, I was struggling to pay a $540 balance. On campus in those days, banks used to set up tents. They handed out tee shirts, water bottles, and doo hickies for filling out an application. It was August in Arizona, and it was hot so I needed a water bottle. Just like that.
There is no fault here, the issue is contextual. Ever been to a store with a give away sweepstakes, and then you’re called and called for timeshare deals and you can’t get off the list? Yeah, it was like that. They kept giving out credit limits. And by the time I graduated, that $600 dollar balance had grown into $3000.00 that I struggled to pay off. A very bad habit.
I didn’t have a financial education, and I never got one at college. Today I represent consumers in Court, and we have a term for what happened that hot summer in Arizona: relaxed lending standards. This blog is not about blame, it is not about banks. But it is about the Global Economic Crisis, the culture we live in, and debt.