Spending what we don't have

I commented on this post from Daniel Tammet's blog which I like to read.

Daniel you are most correct. What has lead to debt being so high in the UK is not only the ease at which debt is available, but also the rampant consumer culture that exists here now. People just want to buy more and more things. It seems as though that is now our purpose as citizens of the UK, to spend money. Everywhere we turn, our senses are assaulted with many different forms of advertising, encouraging us to buy the next latest thing. Advertising is effective, people want the next think out on the shelves; they should really save up for it but by the time they do it will probably be out of date. So why wait when they can just borrow money and have it now!

The news the other day was trying to hypothesize why UK debt levels were so much higher than that of Continental Europe. I think they are mistaken here in the first place by comparing the UK in these terms to the rest of Europe. In so much as that the UK is far more similar to the USA when it comes to consumer culture. To compare the UK to Europe in this circumstance I think is like comparing apples to oranges; I would be much more interested to see the UK debt levels compared to those of the USA.

Obviously a large part of many people's debt is mortgage payments. Obviously it is fair to discount this type of debt when considering statistics. However in one of the few left wing views I have about society, I think that it is inherently wrong that people should consign themselves to a lifetime of debt, simply in order to have a home to live in. Regulating the housing market is a way to do this, restricting investment and capping prices at certain levels. It is investment in the housing market that drives the persistent increase in house prices; if regulations severely limited investment in the housing market, prices would not rise too high so quickly and housing would be more affordable. It is fair to say that with hard work and wealth comes the opportunuty to buy a better house, and there is no reason why this could not remain the same. However when the average person must commit to paying off a loan for the next 30 years of their life, simply to have an average home, it must be considered that this is not right.

The ease of obtaining a mortgage combined with low interest rates helps keep house prices on the up. People can afford to borrow more and so prices will be higher. A rise in interest rates will slow down the rise in prices. Again, for this we will take our lead from the US.