The hedonists' reckoning

The US is not the same country it was the last time people had to tighten their belts. It has changed socially, economically and demographically. The range of problems has widened and the range of solutions has narrowed. Back in the 1970s, there were relatively few people with credit cards and hardly any who were “maxed out” on half a dozen. But the US now has $2,600bn (€2,000bn, £1,600bn) in outstanding non-mortgage debt, and The New York Times recently reported that 5.5 per cent of outstanding credit card debt had been written off by card issuers as losses. Indications are that the credit card problem in Britain is considerably worse…

If people engage in the financial equivalent of burning their furniture for firewood, the politics of western countries will turn invidious and populist. As the first outlines of the Treasury department’s plan to bail out troubled mortgage-holders emerged this week, there was an understandable public anger at payoffs to people who made bad decisions and spent on vacations the money they ought to have spent on their mortgages.