BORROW YOUR WAY TO PROSPERITY

The economic report just presented is declared to be favorable: “U.S. consumers in December increased their borrowing at the fastest pace in three months.  Borrowing expanded $21.3 billion in December, the strongest showing since an increase of $28.6 billion in September, the Federal Reserve reported.  That pushed total borrowing to a fresh record of $3.55 trillion.”  This forced me to do a double take; did I read it wrong, or did it actually say what it appeared to say?

A bit of research reveals, in fact, that it’s heavy borrowing by Americans which fuels our prosperity.  The Fed says U.S. consumer borrowing is good news for the American economy.  Economists contend this activity boosts growth in a country where consumer spending accounts for nearly 70 percent of economic activity.  So, though it may seem strange, we should all cheer when we learn “IOUs held by U.S. households rose to $11.3 trillion in the third quarter” and that “student-loan debt continues to pile up as tuition and other higher-education costs become increasingly out of reach for many families.”

As my years of schooling never included an economics course, this is possibly why I cannot find comfort in the knowledge that many of our citizens are head over heels in debt.  It seems counterintuitive that what is clearly bad for each individual American becomes collectively good for all Americans.  However, as they say, you can’t fight city hall, so I’ll not argue with the economic establishment.  But keep in mind the definition of an economist: One who philosophizes about other people’s money.

With the monetary experts now out of the scene, I’ll interject a few suggestions to real people.  Irrespective of any official proclamations to the contrary, personal debt is a pernicious hazard.  Although a sensibly arranged home mortgage loan is often a welcome necessity, the inability of many persons to avoid unmanageable obligations leads to troubles which never end.  The reality of loan default and family breakup, all stemming from a ready availability of credit and an eagerness of lenders to foist off unconscionable loans on an unsophisticated public, is a national tragedy.

I’ll conclude with a final thought: Conduct your life on the premise that all debt is bad.  Avoid it whenever you’re able.  Shun persons who advocate borrowing.

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If you enjoy this weekly Straight Talk by Al Jacobs, you’re invited to check out my monthly Financial Newsletter, as well as my new book, The Road to Prosperity

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