Financial Times: How the cards are cut (The looming disaster of credit card debt)

[marmar]

How the cards are cut
By Patrick Jenkins,Francesco Guerrera and Saskia Scholtes

Published: July 27 2009 03:00 | Last updated: July 27 2009 03:00


Mick Longfellow is teetering on the edge of financial chaos. A dedicated teacher married to an equally hard-working nurse, living in a modest house in Newcastle in the north-east of England, the pair spent the past decade treating themselves to gadgets, gizmos and home upgrades.

They put in new windows. They bought the biggest television and sound system their living room could accommodate. They changed their cars every year or two. With two children to spoil as well, they were living on credit - lots of it. There were store cards, car loans, personal loans and credit cards.

Now, amid the recession, those lenders want their money back. "The bank just closed down our overdraft. That was the killer blow," says Mr Longfellow. But with the family's debts running to £30,000 ($49,200, €34,600), far more than their annual disposable income, repayment is going to take a very long time.

It is a sad blow for the Longfellows. But multiply one family's debts by the millions of people across the world who are in an even worse state, losing jobs and homes, and the scale of the problem is clear. Estimates from the International Monetary Fund say that of US consumer debt totalling $1,914bn (£1,166bn, €1,346bn), 14 per cent will turn bad. For Europe, it expects 7 per cent of the $2,467bn of consumer debt will be lost, with much of that falling in the UK, the continent's biggest nation of borrowers. .........(more)

The complete piece is at: http://www.ft.com/cms/s/0/910e5a20-7a45-11de-b86f-00144feabdc0.html?nclick_check=1

[notesdev]

1. Going to be tough to sort out

how we handle all the people who went on these debt-fueled spending binges, trying to live a lifestyle well above what they earned.

I'm leaning towards thinking that it is just and proper that they spend as much time on the bottom of the pile as they spent on top of it.

[glitch]

2. Right. This credit crisis was caused by gadgets and not lot of under-insured health crisises and

Underpaid workers.

I wouldn't object to the article if they hadn't multiplied the "gadget" crisis to "millions of people across the world".

IOW IMO: bogus inferred extrapolation by the FT. :thumbsdown:

Still, R for an excellent example of this type of spin.