Thursday, 3 March 2011

Debt: if this is the cure, let's stick with the disease

It’s sometimes a bit of a thankless task to keep writing these posts – people pay so little attention to them.

I mean, some weeks ago, I gently pointed out to David Cameron that his picture of UK indebtedness as similar to a maxed-out credit card wasn't entirely credible. I thought I'd made it clear that personal debt had little in common with national debt. But there he was again, last weekend, trotting out the same old platitudes about ‘paying off the credit card.’ Woeful. Is he simply beyond training?

Then there's another much repeated sentiment doing the rounds, viz: we mustn’t leave a massive debt to our children and grandchildren. Stated like that, it sounds self-evident doesn’t it? It’s appallingly irresponsible to saddle future generations with that crippling burdern of debt.

The problem is that the idea only sounds plausible as long as you don’t think about the alternatives. Clearing down debt means cutting public expenditure to the point that our schools, our medical services and our job opportunities are seriously jeopardised. Will our under-educated kids with their blighted career prospects, denied access to decent healthcare services to treat  their depression, really thank us for inflicting all that on them? Might they not have preferred a bit of debt instead?

Will they wonder whether we were really thinking of them or just trying to avoid paying more tax ourselves?

This is particularly striking given that the debt isn’t even that high in historical terms. Obviously, the situation varies from country to country, but in Britain debt today as a percentage of GDP is about a quarter of what it was at the end of World War 2. The British war debt to the US wasn’t finally cleared until 2006.

I think back to my time as a teenager in the sixties, as a young adult in the seventies. Do you know, my mind was occupied by a great many things in those turbulent times but the crushing burden of debt on my shoulders never really figured among them.

The sixties: a pevious generation crushed by the burden of debt

Postscript. All this talk of debt puts me in mind of the story of Moishe tossing and turning in bed until the small hours of the morning. Finally Rachel shakes him and says, 'what is it Moishe? Why can't you sleep? You're keeping me awake.'

'I'm so worried,' he says, 'it's Shlomo next door, I owe him £500 and I don't know how to pay him.'

Rachel leaps out of bed and goes over to the window. Throwing it open she shouts out, 'Shlomo! Hey, Shlomo! My husband Moishe owes you £500 and he doesn't know how to pay you.'

She closes the window and gets back into bed.

'Now let him worry about it,' she says as she composes herself again for sleep.

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