The Culture of Debt

David Brooks has a thoughtful commentary in the International Herald Tribune about how we, as a nation, drifted from a culture of thrift to a culture of debt. In it he draws a broad outline of how the social story surrounding money and buying things has changed.

"Each time an avid lender struck a deal with an avid borrower, it reinforced a new definition of acceptable behavior for neighbors, family and friends. In a community, behavior sets off ripples. Every decision is a public contribution or a destructive act."
David Brooks

But you could also say that each deal reinforces a new definition of required behavior, in that, once credit begins to fuel a certain class of purchase, that allows prices to move out of reach of most people's cash on hand, thus requiring that more and more people purchase on credit. While this allows for products (and perhaps services should be included in this as well) to become more feature rich, it also allows for a certain level of inefficiency and higher margins to creep in over time. Automobiles may be a good example of this - the fact that most cars are purchased on credit has allowed prices to increase much faster than incomes. Modern cars have all sorts of whiz-bang features, many of which would be too costly to include if people were to by cars with cash as a matter of course. By the same token most, if not all, large automakers have finance arms (Ditech, for instance, is part of GMAC, if I recall correctly) that allow them to derive revenue from financing the cars they sell.