I am enjoying an NPR series titled “Drowning in Debt.” One of my associates here at All Business brought it to my attention, and I thought I’d share.
One of the most interesting pieces, at least for me, was Monday’s installment: “Why Do We Borrow So Much?” This piece looks at how the expansion of credit through the 80s and 90s has led to an increase in borrowing. Basically, if lenders are willing to loan, we’re willing to borrow:
People have “suddenly been given the ability to borrow more — credit
cards, mortgages, unsecured loans — and they’ve taken advantage of
that,” Harford says.
I think this raises an interesting point. We have a mentality toward money in which we think that if we can get something, we should get it. Unfortunately, as we are learning right now, just because someone will give us a loan — and a loan that we can’t really afford — doesn’t mean we should take it.
Prior to the introduction of easy credit, Americans were pretty much forced to accept a certain measure of discipline in their spending habits. And, while some advantages have come to the American economy as a result of more widespread credit, things went too far in the opposite direction. All restraint was removed.
The optimal solution is a happy medium. Our mindset as a country need to shift from one where we can get instant gratification to one where we use credit responsibly and sparingly, and start carefully considering our spending choices.