Sunday, August 06, 2006

Don't drown in debt!

Hold your financial breadth, according to this reuters article, one person every five minutes in England and Wales is buckling under a mountain of debts. The British public has put £54bn on credit cards and taken billions more in personal loans. If interest rates continue to rise, repayment may become a nightmare for many people who have made it a life style to brandish their cards.

Britain has a trillion-pound debt mountain, a figure which suggests a nation with an unrelenting addiction to debt.

The quarter point rise in Bank of England interest rates to 4.75 percent announced on Thursday will raise the amounts of interest people have to pay on credit cards and mortgages as they struggle with soaring household bills and flat wages.

USA, the world's largest economy is also sitting on top of a debt mountain. When the rich and powerful met in the Davos Economic Forum this year, alarm bells have been rung about the global economic imbalances. Uncle Sam has to put his house in order. Low savings and high consumption in the US, its large current account, and budget deficits are indications of the imbalances which will require some adjustments in the next few years.

If the US sneezes, the rest of the world will catch a cold so we need to watch out for the swell of the increasing tide.

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