Credit Where Credit’s Due – The Anna Raccoon Archives

by Petunia Winegum on December 10, 2014

My name is Petunia Winegum and I’ve never had a debt in my life. One of those statements is true, and as this essay is not about nom-de-plumes, I take it you can guess which one. I’m actually the only person I know who never has had a debt in their life. Firstly, I didn’t engage in any further education and therefore never had to cope with loans or tuition fees; secondly, I’ve never owned my own home, so have never had to struggle with a mortgage; and thirdly, I’ve never had a credit card. Ah, yes – your flexible friend.

In the 1970s and for most of the 80s, the credit card was a coveted luxury of the wealthy; I certainly don’t recall any TV ads for credit cards showing a harassed housewife doing her weekly shop at Spar; these passports to the jet-set were always employed as payment in a casino or five-star hotel, promoted by gentlemen whose cigarettes were kept in a silver case and ladies whose virtue was kept in an eighteen-hour girdle. This was a time when the cheque book retained an air of elitism about it, after all, and there were few hints then that the credit card would descend the social ladder and threaten the stranglehold notes and coins still had on the average shopper. Although the genesis of the credit card can be traced back as far as 1920s America, it wasn’t until as late as 1966, with the launch of Barclaycard, that credit cards began to become tools of exchange in Britain. The American Express charge card had been introduced in the UK three years previously, limited to 3,000 British outlets, but Barclaycard was the first recognisably modern all-purpose credit card to be issued in Britain. This revolutionary format had appeared in 1958 with the Bank of America’s pioneering BankAmericard, an advancement on the range of different charge cards that were, in most cases, restricted to a handful of specific businesses at a time.

It’s interesting to note, however, that the problems this system would eventually lead to in the UK had already occurred in the States. Almost immediately after it was launched, the BankAmericard was mailed out to customers viewed as low credit risks, a move which resulted in the racking up of astronomical debts when the card inevitably fell into the hands of those who imagined they had been delivered a winning lottery ticket. This unsolicited scheme was outlawed in 1970, by which time over 100 million Americans had received a BankAmericard through the post.

British distribution of the credit card at least learnt from this disaster, and Barclaycard was introduced cautiously, its initial beneficiaries being men of business and the generally affluent. Even in the US, the spread of credit cards as a legitimate, universal method of acquiring goods was restricted by legislation that prevented banks from operating in more than one State; Bank of America was licensed in California, but found a way around federal laws by licensing the BankAmericard to banks based outside California. When Bank of America expanded its operations on an international scale in the late 60s, the BankAmericard was licensed to foreign banks, with the sole issuer in Britain being Barclaycard. Indeed, due to the minority use of credit cards in the UK at the time, Barclaycard held a monopoly on the market until the Access Card was introduced in 1972.

Within twenty-five years of the arrival of the Access Card, Britain underwent a monetary revolution, with ‘invisible money’ becoming the prime source of purchasing across the board, regardless of social standing. The increased availability of the credit card by the time of New Labour’s ‘Boom without Bust’ boast meant it had by now ceased to be the golden ticket of the wealthy and enabled even the poorest households to acquire the chattels that had been marketed as life-saving necessities in the eternal struggle of keeping up with the Jones’s. Students were also now a favoured target for banks and building societies; faced with outrageous tuition fees for an education that their parents had received free of charge, students were sold the credit card as a means of easing their passage through university, and with more young people than ever before entering Academia – courtesy of Tony Blair’s zealous drive to democratise higher education – there was a huge untapped audience available to be fleeced by unscrupulous banks and credit card companies. Debts incurred from a credit card would combine in an unholy alliance with debts incurred from tuition fees to render an entire generation in hoc for the majority of their adult lives. Any rules and regulations that had previously existed to prevent the exploitation of the penniless and financially vulnerable were swept aside as the public were told it was their duty to spend.

High street spending was integral to the economic stability Blair and Brown presided over, prompting the Iron Chancellor to make his famous proclamation that Labour had ended the cycle of boom & bust that had tarnished the economic reputations of their predecessors. Low interest rates and low inflation contributed to this climate, and as housing prices soared, householders were saving less and spending more; in order to spend as much as was required of them, borrowing increased and the credit card was the essential tool in purchasing goods without the ready cash for them being available. Oddly enough, nobody during this era of hedonistic acquisitiveness seemed capable of seeing any further than the next item on their shopping list, although hindsight shows this was a situation that was simply unsustainable. The country was living on borrowed time, just as its citizens were living on borrowed money.

When the whole country had been surviving on credit, residing in homes they’d been led to believe they owned and surrounded by goods they’d purchased without paying for them, the extravagance of bankers didn’t seem out-of-step; the generating of wealth and the alleged democracy of it was crucial to the boom era, and as long as everybody benefitted from it, why should conspicuous consumption and the flaunting of affluence be seen as remotely vulgar or overtly ostentatious? Thatcher’s boom had largely been limited to a small section of society, whereas Blair’s boom had been more widespread and the gap between the haves and the have-nots – however superficial – appeared to be narrowing. Indeed, why should someone engaged in menial work on the minimum wage have been offended by the sight of a City boy quaffing champagne when he or she could nip into their local supermarket and purchase the same brand of bubbly on their credit card and effectively replicate the pose?

However, when the credit crunch began to bite, when businesses began to go bust, when workers began to be laid off, when interest rates began to rise, when homes began to be repossessed and when the kind of lifestyle Joe Public had become accustomed to had to be reluctantly relinquished, it was the bankers and Gordon Brown who were seen as the men who had got their sums wrong. But then, so had everybody else.

Four years on from the mother of all busts, I approached my bank with the intention of opening an account that would enable me to buy goods online, for which I needed a card. At first, my application was rejected due to the fact that a credit check revealed I had no debts hanging round my neck. One would imagine that would have worked in my favour, but apparently not. It was almost as though I was viewed as suspect for not having any debts; what the hell was wrong with me? The problem was eventually sorted, but this initial obstacle said more to me about the state of financial affairs in this country than any exhaustive examination on ‘Panorama’. Maybe it’s my age, but I still feel debt has shame attached to it; most younger than me don’t appear to. They have accepted it as part of life. But by making a soft target such as bankers the cartoon villains on whom to pin the blame for Britain’s economic ills, the public are effectively absolved of their part in what has happened since 2008. If debtor’s gaols were still with us, however, the allure of your flexible friend may have been less irresistible.

Petunia Winegum

{ 62 comments… read them below or add one }

Roderick December 10, 2014 at 9:55 am

You don’t have to be a conspiracy theorist to see “boiling frog” malevolence behind this.

Dumb down education, enforce political correctness to mould minds and stifle debate, encourage the masses to take on more debt than they can afford, minimise any meaningful differences between the political parties, and hey presto: a perpetually docile, indebted, infantalised electorate gratefully waiting to be told what to do by Big Brother.

Moor Larkin December 10, 2014 at 10:05 am

I have used a credit card for many years. I still write “Access” on my cheque stub, even though “Access” ceased to exist quite some years ago. I use it, and always have used it, in the exactly the manner prescribed by the Barclay boss who was vilified for telling the truth not so many years ago.

In a series of stormy exchanges at the Commons Treasury Select Committee, Mr Barrett, who earned £1.7million in salary and bonuses last year, admitted: “I don’t borrow on credit cards because it is too expensive.” He added that he had urged his grown-up children not to run up such debts. “There’s no question that a credit card is an expensive way to do borrowing,” he said. “I would not recommend to anybody that they chronically borrow on a credit card.” His comments were compared to jewellery tycoon Gerald Ratner’s disastrous description of one of his products as “crap”.
http://www.dailymail.co.uk/news/article-200064/Bank-boss-use-card.html

Lizzie Cornish December 10, 2014 at 10:22 am

Excellent article. Mind you, I believe it started before this.

I’m SO old now that I was paid in CASH, on a WEEKLY basis, as was everyone else. Then, they brought in Monthly Wages, for which you *had* to have a bank account.

Of course, this is when people started to go into debt, using too much of their money at once.

When you lived from week to week with being paid, you kept within your weekly budget, (generalizing here) and it was far, far easier to do this. Monthly though threw that all out of kilter. And so, they then brought in Your Flexible Friend, to help you over those awkward parts of the month….

I believe that the entire idea of being paid monthly was started with the sole intention of credit cards being snapped up at a later date, when enough folks had got themselves into a right old muddle. And, it often starts when you start a job, because you’re expected to work for an entire month before you get any wages at all, throwing many into debt before they’ve even started….All very clever stuff….

Bankers are darn clever at Thinking Ahead…it goes with The Psychopathic Brain Patttern….

windsock December 10, 2014 at 11:17 am: And you wait until Universal Credit starts – that will roll ESA, JSA, Housing Benefit and a few others into one monthly sum…. no more fortnightly payments, no more direct payments of rent (housing benefit) to landlord – the most poorly educated and poorly qualified will have this dumped on them. They don’t see what’s coming either, so just await the wave of evictions.

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Engineer December 10, 2014 at 1:50 pm: I see what you’re saying, Lizzie; but I think there’s another way to look at it.

For one thing, paying wages in cash was a huge nightmare for employers – security arrangements, the cost of massive safes and secure transport for it all, depressingly regular attacks by armed robbers, that sort of stuff. Doing away with it reduced the cost of doing business, making it better able to compete with the rest of the world.

It also seems depressingly patronising and paternalistic – “you can’t be trusted to manage money, so we’ll just give you enough to get you through the week”. I’m glad that everyone is now treated the same; no split between ‘office’ and ‘shop floor’ any more.

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Mudplugger December 10, 2014 at 10:24 am

I have had credit cards since the 1970s, long before debit cards existed, and never once paid a penny in interest. Credit cards are tremendously useful devices, enabling a whole month’s individually-trivial expenditures to be accumulated and then paid off with a single efficient transaction, hands-free by Direct Debit these days. They are acceptable world-wide, avoiding the need to carry large sums of different currencies too. They also offer protection, free of charge, against some retailer disputes under Section 75 of the Consumer Credit Act.
True, I’m actually using them as a ‘charge card’ rather than a ‘credit card’, but that’s an option available to all. My credit cards also repay me a small percentage of the total value of all my spending every year, usually a couple of hundred quid of rebate. So what’s not to like ?

The problem comes when the financially-incontinent choose to use a credit card to purchase goods and services for which they will not be able to pay in full at their monthly statement date. No-one forces them to do this, they decide of their own volition. It is understandable that banks will not resist such behaviour, as that’s their core business-model, making money out of money. But rather than demonising credit cards or the banks, the key issue must be the education of the users to understand that everything has to be paid for eventually, and if ‘eventually’ is a long time ahead, then it will cost you a lot more. Simple.

Wigner’s Friend December 10, 2014 at 11:44 am

A veritable hole in one.

stephen lewis December 11, 2014 at 1:26 pm

But rather than demonising credit cards or the banks, the key issue must be the education of the users to understand that everything has to be paid for eventually, and if ‘eventually’ is a long time ahead, then it will cost you a lot more. Simple.

But I think that is the crux of the conspiracy – should there be one. The kids who can’t or refuse to be educated and school curricula that doesn’t educate (in real life terms) and the consistent programming to buy stuff we don’t actually need.
Maybe the conspiracy exists – maybe it doesn’t but it is certainly the outcome.

There are some positives to the outcome, we’re almost all, a lot more comfortable than we used to be.

Andrew Duffin December 11, 2014 at 4:40 pm: “… education of the users to understand that everything has to be paid for eventually… ”

This gets tricky when there are entire political parties dedicated to convincing the populace of the exact opposite.

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eric hardcastle December 10, 2014 at 10:33 am

I am loving Petunia’s guest appearances.
I too- have never been in debt in my life. I had an old fashioned father who said “if you cannot afford to buy it you don’t need it”. I’ve never had a mortgage and paid outright for a house (in Melbourne). I have credit cards but they are paid off by the end of the month
The oddest thing is that my father was also a banker. He was never in debt in his life either which is odd for a man who spent his life ensuring others got into debt. After he retired he said banks were inherently evil.

Moor Larkin December 10, 2014 at 11:15 am: I recall that in what must have been about 1966, I went with my mum and dad to view a house that they thought they might be able to buy. It was due to cost about £2,000. Dad was earnin about £14 a week driving a bus I think. They judged that they could afford to pay the mortgage if they could get the loan. They had to produce a 10% desposit however. Nobody they knew could afford to give them £200 and no bank would lend them the money. So we carried on living in a “council flat”, paying rent to the government.

Hire Purchase and Credit were the great social enablers of the second half of the 20th century. That some folks are too stupid to be able to add up and too greedy to resist having “more” should not be a reason for the rest of us having a method to capitalise ourselves and our futures. The only thing wrong with the Banking Crisis was that the socialists intervened in the market and ensured the dinosaurs didn’t go extinct.

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Roderick December 10, 2014 at 10:52 am

I seem to remember an old advertisement for Access: “The card that takes the waiting out of wanting.”
The promise of instant gratification at an unstated future cost, rather like hard drugs perhaps…

windsock December 10, 2014 at 11:24 am

Check out (woops, a pun!) the Selfridge’s sales slogans:

http://imageobjecttext.com/2012/03/22/selling-a-message/

Moor Larkin December 10, 2014 at 11:29 am

Selfridges, a honeypot for the the wretched refuse of our teeming shores.

windsock December 10, 2014 at 12:02 pm

Visit on the first shopping day after Xmas. The queues for the sales look like they have come straight from Heathrow.

Moor Larkin December 10, 2014 at 12:09 pm

Can’t afford it mate…

windsock December 10, 2014 at 2:21 pm: Doesn’t cost anything to watch – not if you’re a local, anyway. Life as entertainment.

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English Pensioner December 10, 2014 at 11:13 am

Most of us who’ve bought a house have borrowed money, but other than that I’ve always paid my debts as they become due. I’m not a good customer for the credit card companies, because I’ve never ever paid them a penny in interest.
Perhaps it was because my father was an accountant and he showed me how compound interest mounted up faster than you could possibly imagine. Now all you need is a spreadsheet on you computer and it will do the calculations, and any one in their right mind should check the cost before borrowing.

Moor Larkin December 10, 2014 at 11:25 am: My dad left school at 14 and was a “driver” all his his life and he knew how to add up. No accountants required, just grown-up thinking. I think you are a good customer for the credit card companies because they don’t really make their money from you, they make their money from the fees they charge the retailers for processing the payments. If credit card companies relied on those who “can’t pay, won’t pay” they’d have gone out of business long ago. Simple arithmetic.

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Fat Steve December 10, 2014 at 11:52 am

As always Uncle Petunia you write on an interesting topic and within it are a fair number of latent points ….perhaps the broadest is the modern interpretation of the nature of money which might usefully be considered from one perspective as nothing more than a physically disembodied covenant to pay ….The old pound note was ‘ I promise to pay the Bearer on Demand the sum of ‘….. a physical weight of precious metal. The financial world is now propped up just by promises…..and if you haven’t got a history of having made promises (as it appears you haven’t) and kept them then you haven’t shown you can play the game,
But there is a rather interesting point to my mind that you touch upon and that is the mathematisation of economics and credit, the origins of which might be found in the 1980s when the junk bond market came into being, the dynamics of which relied upon the notion that if one took a broad enough spectrum of poor or speculative credit risks and set a higher than average (but by no means excessive) interest rate mathematically one would turn a profit……solution……. explode credit ….a great means of turning a buck but inherent within is the notion is lets not worry about the ends produced (the philosophical notion that free markets produce only good results) which necessarily meant importing some pretty dangerous notions relating to moral hazard…..both in relation to the debtor and inevitably by the bankers who just have to produce mathematical ‘proof’ (?) that their lending model ‘should’ work…..surprise!!! surprise!!!! it didn’t……and bluntly they and the politicians who rode the wave of ‘prosperity’ probably always knew it.
Should I or anyone else beef about it? Yes and No ….yes coz its reductionist of the individual and his personal obligations within Society and therefore socially destructive…..but no coz I needed that easy credit when I was educating my children…..in a manner of speaking I used the easily available lines of credit to invest in what I consider to be the future that matters to me…..but I struggle to condemn those who used it for more immediate pleasure. The Bankers? well yes a bit coz they are professionals and that infers duties rather more than just making money ….the Politicians? well rather more so coz they have genuine duties of care apart from courting popularity.
No doubt the financial model of the last 30 or so years is flawed in many respects and I think the game in town for the moment is what might replace it …..your guess is as good as mine though I think we might both agree that it would be a safer system if ‘money’ (or credit as money now is) had a rather different basis than simply a covenant to repay by some notional and fictional individual modelled mathematically who lived in the past.

Moor Larkin December 10, 2014 at 11:58 am

In my view the “junk bond” market was also a liberal do-gooding idea that defied the laws of human nature like so many of those ideas.
http://jimcannotfixthis.blogspot.co.uk/2014/02/masters-of-universe.html
“When the Bust came, what caused it? Many things, but the general consensus is that it was those wicked Banksters and/or tax dodgers. However, I keep reading that the real reason was to do with loaning money to poor people in America. Those people could not afford the loans but some kind of global desire to make the world equal drove the finest minds in the financial sector to give loans to people who could not afford to pay them back.”

Ho Hum December 10, 2014 at 12:29 pm

Yes. Probably tl:dr (and sorry it’s only Wikipedia!);

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis

In particular, as mentioned in the article, a lot of blame gets attached to the ‘Mark-to-market accounting rule ‘, as expanded here;

http://en.wikipedia.org/wiki/Fair_value_accounting_and_the_subprime_mortgage_crisis

Fat Steve December 10, 2014 at 12:29 pm

@Moor Larkin a liberal do-gooding idea
Funny as how I have gotten older that that reason appears more a justification for the advancement of those who pedal such ideas rather than the advancement of those they claim they want to help.

Fat Steve December 10, 2014 at 12:52 pm

@Moor Larkin ‘some kind of global desire to make the world equal drove the finest minds in the financial sector to give loans to people’
Ho! Ho! Ho! Finest minds eh?
Well if you believe that as reason rather than justification for the model then one can believe whatever nonsense anyone might say. Inherent in believing in such a notion is that bankers are not just mathematical geniuses but motivated by selfless altruism which no more stands up to proof in outcomes than their fancy mathematical equations ….still no doubt it gives them some personal sense of well being as they sit on their balcony of their Manhattan Penthouse and spit the stone from the olive in their martini on the commuters below. No different than the Calvinist elect imagining they have the ‘finest minds’ in Christendom but indulge themselves in (seemingly) less sensual pleasures.

Moor Larkin December 10, 2014 at 1:03 pm

It’s just a Capitalist version of the Soviet notion that people can be “given” prosperity. The principles that lie behind it are benign but of course the individuals expediting the policy see their becoming rich at the same time as their righteous reward. There are many other aspects of course, not least that America sent all it’s Capital to China and that some of the most highly-capitalised nations in the world are the oil nations to whom usury is a sin, just as it used to be in the Christian west and it’s no coincidence that the Dark Ages in Europe fully ended when “credit” became “legal”.

Fat Steve December 10, 2014 at 1:42 pm

@Moor Larkin It’s just a Capitalist version of the Soviet notion that people can be “given” prosperity.
There is a rather interesting critique of Society after the industrial revolution that it is not ownership of the means of production (which includes deposits in the banks on which the banks rely as capital to base their lending) but who controls the means of production….the term coined is Managerialism ….. The Managerial model were originally picked up on by Bakunin, a contemporary and originally a supporter of Marx, but who came to see the outcome of Communism less as the dictatorship of the Proletariat and more the tyranny of those who had positions of power in the managerial model. The critique was developed by someone called James Burnham and it is thought Orwell drew on his ideas most obviously perhaps in Animal Farm usually interpreted as solely a critique of communism but it extends equally well perhaps even better to the modern capitalist model where the means of production whilst not owned by the state are owned by equally amorphously by pension funds etc but controlled by what we are told are the ‘finest minds’ …..the NHS (the private public partnership is a hoot in this respect as well as the slogan ‘Your NHS’ ) is actually the best illustration of Managerialism at its worst and endures only because a sizeable minority actually see meaning in individual responsibility . Managerialism is power without responsibility or accountability ….and privatising reward and socialising failure as has been done in the banking crisis is a nigh perfect example of what Burnham predicted.

Moor Larkin December 10, 2014 at 3:05 pm: There was a weird period in the 80’s when some change to bankruptcy regulations occurred. All our suppliers at the time started going bankrupt and then re-emerging as a “new company” and business just continued as normal. From what I could gather the regulations change had meant they could escape paying all their debts and emerge phoenix-like from the flames of their wilful dissolution. It was dead obvious that somebody must be paying for this and I had a feeling it wasn’t the creditors because I daresay my company had paid them money in their previous guise for works never completed. The nearest I ever got to grasping what the secret might be, was “tax writeoffs” but I’m sure it was even more arcane than that. It also put paid to any notion that bankruptcy was “failure” or “shameful”; it just became another financial scam. I daresay lawyers were re-writing the rules apace at the time.

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Carol42 December 10, 2014 at 2:59 pm

As I recall I think it was during the Clinton administration that banks and building societies were stopped from red lining districts and told to lend to poor people who would never normally have qualified for a mortgage. These loans were sliced and diced and sold as secure and mortgage backed. Of course it all ended in disaster for everyone but no administration stopped it until it all crashed, especially a disaster for the poor people who thought they were now home owners. There was a good TV prog. On it and their distress was terrible, a cruel delusion though possibly with benign intentions.

Moor Larkin December 10, 2014 at 3:11 pm

Obama the lawyer made $23,000 out of that in Chicago apparently.
http://www.snopes.com/politics/obama/loans.asp
Obama represented Calvin Roberson in a 1994 lawsuit against Citibank, charging the bank systematically denied mortgages to African-American applicants and others from minority neighborhoods. “I don’t recall him ever standing up and giving an impassioned speech — it was a lot of behind-the-scenes stuff,” said Fay Clayton, the lead lawyer on the case.

On Feb. 23, 1995, Obama billed 2 hours and 50 minutes for an appearance before Judge Ruben Castillo on behalf of his client, and also for reviewing some documents in advance of a deposition. That cost Citibank — which ultimately had to pay the winning side’s fees — $467 at Obama’s hourly rate of $165. Miner commanded the higher rate of $285 an hour. During his appearance before the judge, Obama said he would need more time to file a response to a motion, and the judge agreed. That was all Obama said during the half-hour hearing. His final bill on the case was 138 hours, or $23,000.

dearieme December 10, 2014 at 3:17 pm

“a cruel delusion though possibly with benign intentions: if it was Clinton’s doing you can be confident that the intention wasn’t benign. Except towards Slick Willie.

Carol42 December 10, 2014 at 3:23 pm: I can’t remember all the details but I think they were coerced into the totally unsuitable lending to have access to government funds, something like that but I don’t think it was all the lenders fault by any means. I am inclined to agree about Clinton, probably to build a real sense of prosperity though built on sand.

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Ho Hum December 10, 2014 at 3:37 pm

There will always be differences of interpretation and opinion, and that one, not being necessarily so, is no different.

The (US) Financial Crisis Inquiry Commission stated:

“the CRA (Community Reinvestment Act – the Act Clinton agreed amendments to) was not a significant factor in subprime lending or the crisis. Many subprime lenders were not subject to the CRA. Research indicates only 6% of high-cost loans – a proxy for subprime loans – had any connection to the law. Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law.

http://en.wikipedia.org/wiki/Financial_Crisis_Inquiry_Commission

for its full conclusions

For a more full record of the CRA, and its purported part in the crisis, see

http://en.wikipedia.org/wiki/Community_Reinvestment_Act

Carol42 December 10, 2014 at 9:42 pm: Thanks for that I guess the whole lending thing got completely out of hand here and in the US. I just hope at least the next generation will be wiser.

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Chris December 10, 2014 at 12:00 pm

Circa 2000, I saw this all coming. Trouble was, by that time I had foolishly allowed myself to be swept out to sea myself.
I didn’t have a credit card at all until I was 23, and that was a TSB card with a £250 limit – nice and manageable.
Then I applied for a new-fangled (and much-promoted) new bank account with First Direct – the “telephone and internet only” banking arm of HSBC. They not only gave me a bank account, they gave me an immediate £3000 overdraft, a £6000-limit credit card and a £3000 “flexi-loan” account – a cheque book account in which you could “use” up to the limit of £3000.
As soon as I started using those facilities, I got post urging me to take out a ‘Goldfish Card’ – starting credit limit £7500. That was followed by an invitation to have an “MBNA Card”, followed by American Express. Then I bought a house, and got a 125% mortgage with Northern Rock, plus the Northern Rock credit card (limit: another £5000)
All around me people were buying their first house and still maintaining 3 holidays a year & 2 or 3 newish cars in the household, and still going out 3 times a week.
I cannot remember what I spent my credit on – it wasn’t ‘all at once’, but the problems of balancing the sheer number of creditors was dragging me under by as early as 2001. Utter madness. I paid the price for my being swept along with the crowd in the ‘consumer boom’ – it was easily done and unlike most people, I did see the juggernaut hurtling towards us (even if by then I was in over my head).
I am glad I am out of the system now, and used to living hand-to-mouth, there’s not many consumer goods produced now I would actually ever want.
This is just tickling the sides of ‘my story’ – I may develop on this in my own articles at some point.
The “Bigger Picture” – well, wasn’t it easy to get people drunk on consumerism so much they completely forgot/ignored the warnings of the more frugal generations that preceded them. In my household, using “Access” for something relatively cheap would have meant my mother & father sitting down at the table and working out how it could paid for ‘when they bill came in’. With the consumerism of the late 90’s comes the normalisation of it all for the next generations… and we can see the results of that all too clearly now.

Moor Larkin December 10, 2014 at 12:15 pm

* With the consumerism of the late 90’s comes the normalisation of it all for the next generations *

Neither of my grown-up children has a credit card although one often uses retailer-provided “loan facilities” to buy stuff. That one had a bit of a shock recently when negotiating a new mortgage arrangement. They were knocked back by £3k because of an outstanding other loan. They were baffled because they believed they had no other loan. It turned out to be their mobile phone arrangement. In the changes to financial definitions the arrangement to pay O2 £x per month for the next years and not have to buy the i-phone outright, is now being classed as being a loan to buy an i-phone at a very high price… ….. Regulations often lead to the most unexpected consequences.

Alexander Baron December 10, 2014 at 2:34 pm

The money system is based on irredeemable debt; I thought everybody knew that now.

My own experience of credit cards is somewhat novel. Back in the early 1980s I had a Dixons store card. I went in one day to buy a digital watch; it was only about £6 but they checked my card and there was not enough money on it. I bought the watch with cash but they made such a thing about this small sum that I have never bought anything else on credit.

In the 1990s I asked the Abbey National for a cheque guarantee card; they told me I couldn’t have one and they couldn’t tell me why. Since then I have been offered one by them or Santander but said I didn’t want one. I have a debit card with a different bank but still never buy anything on credit. I had two sayings many years ago:

ACCESS – a credit card encourages silly spending

and long before that

pay as you go; if you can’t pay, don’t go. I realise not everyone can live by this mantra but apart from a mortgage and possibly a car, what does anyone even in the modern world need to buy on credit? If businesses did business on this basis too, what a wonderful world this would be!

Moor Larkin December 10, 2014 at 2:59 pm: * The money system is based on irredeemable debt; I thought everybody knew that now. *

There was a super advert that the FT ran in the 80’s. It had a satellite going round the globe and a voice-over saying things like,
“Where is all the money?”
and
“What would happen if you tried to spend it?”

The answer to the latter query seems to have resolved…

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Carol42 December 10, 2014 at 3:13 pm

A big cause was the huge rise in house prices between 1997 and 2007. The house we bought in 1996 for £66,500 had risen to £225,000 but 2007. Even as a beneficiary I thought it was ridiculous . I lost count of the people I know who were remortgaging every year for cars, holidays, new kitchens etc. I never did as I wanted to get rid of my mortgage as soon as possible, having lived long enough to know prices could fall. When the recession hit many were stuck with mortgages they couldn’t afford and job losses or no salary increases at best. Hopefully some lessons will be learned now.

dearieme December 10, 2014 at 3:21 pm

30 comments at the mo’, which amount to “a fool and his money ….”.

Engineer December 10, 2014 at 3:39 pm

Indeed. A good argument for some fairly basic education at an early age, no?

dearieme December 10, 2014 at 5:24 pm

Looking back, on many subjects “at daddy’s knee” was a better school than school was.

The Blocked Dwarf December 10, 2014 at 7:04 pm: Not just ‘at’ but ‘over’ was a better school than school was….going by today’s YoOOff anyways.

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Hadleigh Fan December 10, 2014 at 5:33 pm

The guy on £14 a week was paid enough to buy a £2000 house on a mortgage as it was under 3X annual salary. No doubt he would have paid less rent for a council house, but then at the end of 20 years he would have no asset, and would go on paying rent for the rest of his life. The problem was always the deposit. Some in the private rental market were paying more than fortunates who had mortgages: they couldn’t get a loan because they allegedly couldn’t afford the repayments. What tosh.

Today, few youngish people can afford the house price, which can be 5 times or more the combined income of a couple.

I live in a house that my maximum salary of £70k achieved at the end of a long working career (and much, much, better than the average industrial wage) wouldn’t buy today, and yet when it was built 50 years ago it was in reach of the average earner.

Fat Steve December 10, 2014 at 6:22 pm

@Hadleigh Fan.
You could not be more right and the fact that both deposit and cost of private housing will be beyond the reach of most of the responsible and well educated next generations of British born Citizens will cause incredible social disruption…..and a small personal experience. Both my children are well educated and went to private schools. Whilst most of their Peers could borrow tuition fees to go to University most (from this privileged slice of the population) didn’t apply to University in London simply because it was too expensive to live in terms of accommodation costs. Well my wife and I ‘bit the bullet’ coz London is where both my children wanted to go ….for sound academic reasons…..and Ho! Ho! Ho! ended up renting rooms in shared flats in Central London at extortionate rents …..ex Council flats bought by tenants (now landlords) with names one associates with the Indian subcontinent and have most probably returned there as wealthy ‘rentiers’ within their communities abroad or possibly even here if they rode the property boom at the right time and acquired another property outside London that was cheaper but could be paid for from rental income. We are not talking insignificant rental income ….in one case an ex Council property in Kings Cross with three small bedrooms yielded a little short of £30,000 a year. I think it was ‘La Raccoon’ who remarked that Spain is populated by ex Council House tenants who have cashed in and dropped out.
It seems likely there will come a time that when the relatively modest aspiration to have ones own home cannot be met (much now as some people can’t put food in their mouths) that there will be real political unrest….Will the next election be the start?

Fat Steve December 10, 2014 at 6:39 pm

The situation described by me above brought about by the ‘best minds’ motivated by altruism ……just like bankers eh?

Hadleigh Fan December 10, 2014 at 10:48 pm

I could got further back in time, beyond my personal experience, to when a recently graduated Civil Engineer with an Oxbridge First, working 8:30 to 5:30 Monday to Friday and 9:00 to 12:30 on Saturdays would get paid £5.0.0d per week, and on that, could afford a mortgage on a semi in Surbiton AND to live AND to commute to work. (i.e. in 1954-5). The price of property is the main factor in the change of circumstances of someone in the equivalent position today, with transport following on as a major cost.

Fat Steve December 11, 2014 at 11:45 am: What is fascinating Hadleigh Fan is that the period 1954/1955 was genuinely a period of shortage and hardship ….Britain having the legacy of war …..and the period was one of demand management and not supply side economics …..yet priorities were different. The crisis in housing is simply one of planning …..of supply of land …..materials are cheaper and better now than in the 1950s. Asking for a political system in an advanced country that can enable one through reasonable commitment to put food in ones mouth and a roof over ones head is hardly unreasonable.

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GildasTheMonk December 10, 2014 at 6:28 pm

Interesting, Petunia. I have written lately of my financial woes, and although some details were changed for legal reasons (chiefly I didn’t want a certain person causing trouble) the substance is completely true. I had a small mortgage and then 2 small mortgages but a lodger in my home covered the cost of the second. I had an Access Card – I never used it. At one point I had a car load (£6,000) – paid off on the nail. Usually I paid cash. I was always perfectly happy with a functional old car that I could buy for cash for a reasonable fee. I well remember that when mobile phones started to get popular I couldn’t get a contract, because I had no credit record.
At one point I calculated that even with my mortgage on a flat, the bank owed me money.
From that, with the storms of life – chiefly 2 women who loved largesse and spending – I became bankrupt. Foolishness and nativity on my part, greed and cruelty on theirs. Time has given me that perspective. I will never forget or forgive.
I shall now never have a mortgage again. At first this depressed me. Now, I share your vision, to a degree. I earn quite enough, thank you. I earn enough for me, sort of. I am humiliated on one level, but I no longer need to pay the mortgage on the Big House, the School Fees, the Fancy Wines, the Extravagant Second Home, – all the stuff and more that come with Certain Persons. I am, as I always did before, living within my means, and although there are difficulties, I am free from debt.
One of the great ironies of my life – and there are many – is that the person who caused me the most damage was by profession a dentist. And my teeth needed continual treatment because of a childhood rugby accident in which they were smashed. Indeed, I was so badly hurt I ended in hospital with a broken jaw.
But, as a true sociopath, they declined to help once they had had my last penny.
I did have a nice smile, once. Although I had a burden of sadness from an early age, and I did not smile much. But my beloved friend Dr Pesta has told me that when I did smile it would light up a room, and she is a truth sayer, like me.
In my poverty my once famous smile had became a broken cliff of teeth, and as I tried to pay off the debts with which I had been lured into like a mammoth in a spear pit prepared by early Homo Sapiens, I floundered hopelessly, they deteriorated in colour and shape. I had no money for me. I felt so ugly.
A month ago, I walked into a fine, highly professional dentist practice which someone had recommended to me. Their patient list was full, but I have good will in many places, and I was seen straight away. I explained my shame and my embarrassment. I was utterly embarrassed.
The dentist did exactly the right thing: he behaved as I hope I do with clients who bring me difficult and/or embarrassing problems. He was matter of fact, he said that was what he was there for, and he was ultra professional. He worked out a plan or action for cosmetic and remedial treatment, and when he had done wrote out a treatment plan with a cost. It was rather a lot of money, although less than I had feared.
Over the years, because of the problems I have had with my teeth, I have become reasonably knowledgeable about the same. His or her receptionist asked me if I wanted to enter into a payment plan. I said no, I did not. I paid for the full course of treatment in advance on the spot. There and then, period. And of course, I have had perfect treatments since.
That is who I was before I was betrayed and cheated. That is who I will be again.
I will smile again now.
G the M
That is who I was.

Fat Steve December 10, 2014 at 7:21 pm: I am humiliated on one level
Balls Gildas as I hope the passage of time might teach you …..the humiliation is of those who were given adequate sentience and ability to live well and even provide for others but chose not to so do…..hopeless failures….your kitty knows more of the meaning of life and practises it perhaps because he/she has sentience uncontaminated by ‘higher’ reason or ‘logic’….a simple wish to live well if circumstances permit.
Before you get your teeth fixed, summon up your professional (rather than your real) smile and spit metaphorically through your broken teeth at those who have fall short of the decency that they were well able to achieve…..I assure you its a necessary step to re establishing your own values and discarding those you leave behind….thinking you are humiliated is to adopt and give credence to their value system ….and Gildas what goes around comes around as the passage of time will also teach

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GildasTheMonk December 10, 2014 at 6:29 pm

naivety not “nativity”!

The Blocked Dwarf December 10, 2014 at 6:39 pm: Thank you for clarifying, I was trying to get the messianic connection….

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The Blocked Dwarf December 10, 2014 at 6:29 pm

The Germans have a saying “Ist der Ruf erst ruiniert, lebt es sich ganz ungeniert.” which translates , roughly, as “Until you’ve lost your reputation, you never realize what a burden it was or what freedom really “, and that applies to Credit Worthiness too…in my ledger anyways.

To say my Credit History is POOR is one of those glorious British understatements- my credit rating isn’t ‘POOR’ -it is, to continue the analogy, a terminally ill medieval leper begging for alms on the streets, unclean and untouchable. And since starting a YTS at age 16 on £15 a week and The Bank That Likes To Say “Here’s a chequebook with 5o cheques in it and a cheque guarantee card” I don’t think I have ever been out of debt, despite earning rather large sums of money at various points in my life (there was a time when I didn’t leave the house without at least a ‘monkey’ in cash in my pocket…back when a monkey wasn’t peanuts).

I figured out long ago that the Grandparently admonishment “Never a borrower nor a lender be” was no longer applicable in a world where most people were insane enough to put themselves into debt for a lifetime just to ‘own’ their own home (nothing against property ownership but if you’re going to buy you put down the entire price in cash ,otherwise you’re a mug and probably a delusional mug).

So as soon as credit cards came along-for the hoipolloi – I got me some and ran up as many thousands of pounds of debt as I could (and trust me it was a struggle at times) At that time exceeding your credit level just meant they would throw even more credit at you. The day I walked into my bank and the manager RAN out to greet me in person, such was his relief that I was still alive, taught me a valuable lesson namely- the bank doesn’t own the debtor, the debtor owns the bank.

Run up, say, £100, 000 debt with a bank (and be without seize-able assets) and you’ll sleep like a babe. No one in their right mind would give me a credit card these days BUT if I need money my word is good for a grand almost anywhere among family and friends and despite being poor and on benefits I still seem to have enough over every month to part finance my 3 kids’ lifestyles , The Bank Of Dad, and keep Southern Electric’s share price solid.

GildasTheMonk December 10, 2014 at 6:38 pm

I see your wisdom! Have a look at my recent response!

The Blocked Dwarf December 10, 2014 at 6:51 pm

“, but I no longer need to pay the mortgage on the Big House, the School Fees, the Fancy Wines, the Extravagant Second Home,”

A wise man once said “The definition of ‘Status’ is buying stuff you don’t want, with money you haven’t got, to impress people you don’t even like”. I walk around in army surplus/2nd hand clothes, as I think you mentioned you do too, and nearly always have. ( I admit I used to turn up to job interviews in a good but 2nd hand suit with paraboots for shoes -single laced of course ,mirror shined and my tie a perfect Windsor and my shirt collar a razor….one has to have standards).

GildasTheMonk December 11, 2014 at 9:07 am: I completely agree

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Don Cox December 10, 2014 at 7:02 pm

The book “Shredded”, by Ian Fraser, about what happened at the Royal Bank of Scotland, is essential reading if you want to understand what has been going on.

ray barfoot December 11, 2014 at 7:33 am

dear sirs and madam, I am a yank whom lives in the u.s.a. I miss ms. raccoon but am quite happy with miss petunia. she has style. I am also 61 years young, and have learned the hard way, that living within ones means is difficult but not impossible, and that it can be done. I live from one month to the next as best I can .i have learned too that not all that glitters is gold. I also have had teeth problems like gildas, but was lucky enough that friends helped me get my bad teeth pulled and dentures to replace them. I am not unfriendly and I am talkative (somewhat). still I have a good life. I live within my means and have learned much. I do not do credit cards as intrest is way too high and I get only so much to spend each month. I like this blog and learn much from all of you. Merry Christmas to all and gildas and miss petunia have a happy holiday season. respectfully Raymond t. Barfoot
.

Moor Larkin December 11, 2014 at 9:46 am: Made my day reading that Ray T.
Have a nice time yourself too please…

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Ms Mildred December 11, 2014 at 11:31 am

I come from a frugal, not poor background. Dad an expert bookbinder of huge leather clad marbled and gold lettered ledgers for the co-op wholesale society. After a long twenties courtship, he married, in his late twenties, to a very thrifty mum who never worked. They bought a tiny new build detached house, with a mortgage, and swiftly had 2 children in ….THE DEPRESSION 1932. They survived due to my mother’s money management. I recall a row of small jugs in the back of the cupboard in the living room, coal money, ground rent, electricity, clothes, school uniform etc, maybe a caravan holiday at Rhyll. Dad gave her his wage packet and got ciggy money, beer money, and sixpence each way money, the rest was housekeeping and wait for it…. SAVINGS, for a car..tick. Then for a NEW camper van tick. For central heating…tick. For roof insulation…tick. Someone above has pointed out that money is no longer REAL. It is somewhere electronic. Unseen, unreal, under Blair and Brown, thrown at people. Served up with a sting in the tail. I know, I did debt advice for 14-15 years from 1994 to 2009. A recession in the nineties. Oh that pesky negative equity…spare me the misery of the poor sufferers of this new affliction A recovery of sorts. Then a glorious period of mad credit, way out of control. Borrowing on house value, then going bankrupt under the new rules. Heavily disaproved of by insolvency practitioners. My mum for chancellor. She never worked. A wizard with money. She got the goodies by wanting, saving and waiting. Yes I know all those techy goodies are out there on credit. Why such a hurry? There is always a better one in the offing…may cost less even.

mike fowle December 11, 2014 at 3:54 pm

I remember my father had an American Express card years ago, as he was one of those people who liked to have the latest gadgets. Trouble was hardly any shop or restaurant in the UK could accept it. I agree with the comment about Access Taking the Waiting out of Wanting – surely one of the most irresponsible slogans ever. I use a credit card for purchases a lot, especially on line, rather than carry money about. (Incidentally it’s interesting that both Lidl and Aldi don’t accept them, only debit cards.) But I always pay off the full amount each month(by direct debit). I think Brown did a lot of harm (in lots of ways, of course) but with his repeated mantra that he had abolished boom and bust, which surely encouraged people to overextend themselves, especially with the rocketing house prices when he was chancellor.

theyfearthehare December 14, 2014 at 1:17 pm

I remember reading an artice someplace several years ago about upcoming changes to credit card repayments. Basically, most of the world at that time were required to make a minimum monthly repayment of 5% of the outstanding balance.

Customers in the USA however were only required to make a minimum monthly payment of 2.5%, but changes to legislation would mean that they to would be soon required to pay the 5%, effectively doubling most peoples monthly card repayments. I remember thinking to myself at the time that many card holders would be struggle.

Within 6 months or so of that reading that article, the subprime mortgage fiasco was being cited as the catalyst for the economic meltdown. I cant find anything on line to verify this story, and I have no idea if repayment rates were actually doubled, or if this led to economic hardship, but common sense would suggest that there would have been an impact

Moor Larkin December 14, 2014 at 1:38 pm: Between 2006 and 2009 I was regularly using an up-country train route. By using the internet to advance-book and being flexible on the train times, I was able to regularly do the 700 mile round-trip for around £46 return. Sometimes I would pay £75 but you get my drift. Then in 2009 I read that new regulations overseen by John Precott were being put in place to combat some “unfairness in the system”. That unfairness seemd to be that some dorks didnlt use their brain and “shop around”. Anyhow, the nett result was that my fare immediately leapt to £90 and never any lower at the end of 2009. Currently I pay just over £100, demonstrating that left alone there is fare stability. In that context I have no doubt that new regulations to protect the poor against the wicked capitalists running the credit system, led to the rapid, if not immediate bankruptcy of the poor people and soon after, the rest of us… ….. Gotta love them who knows best.

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