Bank interest rates have remained low and static and so most people have found their loans manageable, just. Now, as the economy begins to recover, there’s talk of interest-rate rises; meaning that the cost of loans and mortgages will also rise and the pressure on those in debt will increase. It's estimated that over 8 million people in the UK already have a debt problem and about half of 18 - 30 year olds use credit to stretch their finances until pay day. Where does the responsibility lie to reduce debt? It's easy to say that an individual is responsible for their own debt and people should live within their means, but we know that isn't always easy and they may need help.
Governments, though, can't afford to be generous, especially when its own finances have diminished. People demand increased benefits, better healthcare, education and transport and all that needs revenue. Where is the government going to get it from? It has three ways to balance its books - by decreasing spending, increasing revenue, or borrowing and, if it does none of these, its own debt will increase.
Decreasing spending means cutting its programme of expenditure and that's never popular. A popular government is one which gives people what they want and austerity has been shown to be controversial and unpopular. Similarly, increasing revenue means increasing taxes and, although possible in times of a boom economy, it's political suicide when people are struggling. That leaves the third option, borrowing, and that's what nearly every country has chosen to do. National debts are increasing, even though it's unsustainable in the long term. For instance, the UK's National Debt in 2015 was £1.56 trillion and annual interest was £43billion. It borrows about £1.4billion per week.
There are exceptions, but the locations which don't borrow are small in number and size: Macau, with Chinese Sovereignty, has a large gaming revenue; Brunei has petroleum and natural gas; Liechtenstein is a financial and business centre; and Niue is a small South Pacific island with a population of 1600.
Other countries survive with debt by borrowing more. It's hardly a good example when they increase their debt and then tell individuals that they shouldn't. If a country can't balance its books, how can an individual? The answer is one, or a combination, of the other options. Either a country or individual must find a legitimate way of increasing their income, or they must reduce their costs. That's simple economics, even if it's not popular and, I believe, governments should lead the way. They must be prepared to say that they can't afford something. There are goods and services which individuals may like to have and those which are essential. The 'likes' should only be satisfied when there's enough money in the kitty. If we can't afford it, we shouldn't buy it. That may hurt for a while, but if it helps to be financially secure in the long term, it'll be worth it. Those with credit cards up to the max and expenses increasing will know how depressing that can be and any help given to them should include strong advice on debt reduction rather than benefits from a country which can't afford it.