KEY POINTS:
I spent last week rock-climbing in Australia. While there, I chanced on a TV programme on greed and the cause of the financial meltdown.
The programme had some luminaries, including a finance minister, experts from New York, and other financial specialists and commentators.
However, for me, the key
contribution, and the greatest insight into the cause and longevity of the crisis, came from a member of the audience _ a woman in her early-20s called Siobhan.
Siobhan appeared on the show because she had run up debt of $20,000 on her credit cards and had $25,000 more on hire purchase for a car.
She had just loaded $12,000 on credit cards for a holiday to China and Spain.
Siobhan seemed quite happy, even proud, that so far she had managed to juggle her various credit card debts quite successfully. Asked if she thought she should have saved for her holiday, she replied no.
Like many people, I have been trying to work out the cause of the meltdown and how long it will last. Siobhan's carefree attitude to debt and her borrowing habits give an answer, and it's not good.
Siobhan shows how attitudes towards debt have changed.
Easy credit (for holidays and so forth) and easy mortgages predicated on the idea that house prices only ever rise, are the major causes of our crisis.
Lenders, incentivised to dole out as much as possible, make Siobhan's habit possible.
This debt is unsustainable and our economic problems will not ease until our attitude to debt changes. Not all debt is bad, but the sheer level of our consumer debt is. Borrowers such as Siobhan, and the lenders who handed out the cash, have much to answer for.
Governments around the world may be able to ease the immediate crisis by doling out large sums, but the deeper economic problems will not ease until attitudes to debt change.
And these attitudes will not change until Siobhan, and all like her, feel real pain.
Many of the lenders who fed her habits then repackaged it into products of great complexity are already feeling it.
Do not expect the economic malaise to ease quickly and for the world to revert to normality any time to soon.
The high level of consumer debt means major structural economic issues will have to be worked through.
There are many people like Siobhan _ and they are not all in their early-20s.
The Western world has loaded up their credit cards and residential mortgages to excess, and now we will all have to pay.
* Each week best-selling financial author Martin Hawes shares strategies to help you grow your wealth. You can email personal finance questions to info@wealthcoaches.net or andrea.milner@heraldonsunday.co.nz