F O R M O R E I N F O R M AT I O N
http://moneycentral.msn.com/content/SavingandDebt/P70581.asp http://business.timesonline.co.uk/tol/business/industry_sectors/ banking_and_finance/article4837580.ece http://www.bloomberg.com/apps/news?pid=20601100&sid=aRT9cR JYO5ig&refer=germany http://online.wsj.com/article/SB122271216005586583. html?mod=googlenews_wsj
But as with any American crisis, the fault seems to lie basically everywhere except with the American people themselves. And so it has been with the current crisis. Though economists and analysts have for some time been saying that the American "culture of debt" would eventually implode, the overriding cause of the problem has not been spoken of by American politicians.
Reliance on debt
© Scott OLSON/Getty Images
But the fact is that from the most microeconomic level (Americans now have an average savings rate of less than 0 percent, down from 10.8 percent in 1984) to the most macroeconomic (the national debt is at $9.7 trillion), and financial (investors have come to rely on a huge amount of leverage for deals), America is addicted to spending money it does not have in order to fund its lifestyle. And it is not just consumer debt like credit cards that has saddled the American people and economy. People took out mortgages that they could not possibly pay off, thereby fuelling the mortgage crisis. People took out student loans that they knew they would not be able to pay back for 30 years. Personal debt in the US is around $20,000 per household and about 43 percent of American spend more than they earn every year, according to the latest statistics on consumer credit from the Federal Reserve. Europe too has seen individual savings rates shrink, but nowhere near as much as in the US.
But even though the increasing reliance on credit is not as much of a problem in Europe, the issue has still received some serious attention here. In the UK there has been more serious reflection amongst the media and the political class about the larger social factors that have brought on this reliance on debt, and there has been much talk about the "excess" in recent years of people themselves, not just of vague concepts like "the city".
A chronic lack of self-confidence In my experience, this is typical of how Europeans view their own difficulties. When I speak with Europeans about the problems plaguing the continent, they throw their hands up in the air and give a morose explanation about how Europeans are somehow inherently unproductive. When speaking of why the EU cannot seem to get off the ground, they sigh about the petty rivalries and nationalism that make Europeans unable to cooperate. When speaking of the difficulty in enacting social
system reform, they speak of the complacency or resistance of the European public more than they complain about broken government bureaucracy. As a venture capital reporter, I have often heard Europeans complain about how the continent could never be as entrepreneurial as the US because Europeans lack that ambitious drive for success. And indeed, this is what many Americans think of Europe as well. But with this in mind, Europe does not seem any closer to solving its problems than America. Perhaps the fundamental problem for Europeans is that they suffer from a chronic lack of self-confidence in themselves as a people, whereas the problem for Americans seems to be that they suffer from a chronic sense of overconfidence. Perhaps America has some extra swagger it could loan to Europe for awhile. •••
> David Keating Journalist Paris, France American
Dave Keating is the editor of Gulf Stream Blues (http://gulfstreamblues.blogspot.com)
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