About Debt Settlement

It used to be that virtually anyone could borrow money for any basis. If we wanted an even bigger house, a better TV or a faster car, and we didn’t have the money to pay for it, no worries. We put it on a credit card, took out a huge mortgage and financed our fantasies. As the fantasies grew, so did household debt, from $680 billion in 1974 to $14 trillion today. The total has doubled in just the past seven years. The standard household owns 13 credit cards, and 40% of them carry a balance, up from 6 percent in 1970.

The unfortunate but inevitable flip side to this is that we are in the depths of one of the biggest financial depressions of all time, certainly on a scale not seen since the 1930s. As the recession gets deeper we do not yet know the full penlty for the financial system, the economy or society as a whole.

Since the 1980s, Americans have bought more than they produced and have made up the difference by borrowing. Now is the time to get back to simplicity. It’s obvious that households need to start spending less and saving more. In the past the Government has offered quick and simple ways for you to consume – by reducing mortgage interest, for example – and those incentives have been successful. Americans now have the biggest houses, the thinnest flat-screen TVs and more cars than anyone else in the world.

This of course has forced the US to confront the bad habits it has developed over the past few decades. If we can kick those habits, today’s pain will translate into gains in the long run. But of course, there is no free lunch. If you want something, you have to pay for it. Debt is not a terrible thing. Used responsibly, it is at the heart of modern capitalism. But hiding mountains of debt is an invitation to reckless behavior.