>I think the real indicator here is default and bankruptcy, not how
>much debt people take on. Debt isn't a priori 'bad' or 'good' --
>it's just an exchange of risk. For many people, exchanging a
>mortgage for a house that is their's is "worth it" -- despite the
>higher net cost of the house over time. The same can be said of
>autos, on down the line to big screen TVs in time for the Super
>Bowl. Borrowing to buy a high-flying stock can also have it's
>rewards, as (like we saw last week on this list) can getting student
>loans, gambling that your increase in credentialed schooling will
>give you a better life in some unspecified way.
Yes, but... Borrowing to go to school can give you a better life in many ways, but wouldn't it be more civilized if tuition were 0 and people didn't graduate with $60k in debt?
As for your other examples: borrowing to buy a house is fine - abstracting away from revolutionary transformations, of course - but it also fuels a rather nasy housing inflation ("the American national religion," as the late FNN credit analyst Ed Hart used to say). Mortgage debt was 41% in of disposable personal income in 1982, 53% in 1989, and 65% last year. That big increase in debt didn't move the homeownership rate much - from 65% in 1982 down to 64% in 1989 and up to 67% at the end of last year (a figure just released this morning).
Sure people borrow to buy consumer durables, but they may end up paying for it many times over. At least you have the TV or the car, though. If you borrow to buy a high-flying stock, you've got to get above-normal returns just to pay the interest. And if it no longer flies to high, you've got a big debt and nothing to show for it except regret.
Doug