Credit: The Importance of Being in Debt

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More U.S. consumers are more heavily in debt than ever before, but the burden seems to rest lightly on the nation's shoulders. By buying his furniture and house on the installment plan, charging his clothes, sending his kids to college on a loan, and taking off on a fly-now-pay-later vacation, the American consumer has piled up a truly phenomenal $280 billion debt-and is rapidly adding to it. Families are up to their eaves in $190 billion worth of mortgages, also bear another $76 billion in various consumer debts. One household in two has to meet installment payments on appliances, furniture, the car or personal loans. Nearly everyone shares in the $17 billion debt burden spawned by credit cards, charge accounts, single-payment loans and other short-term credit. While their grandfathers would have considered them reckless and irresponsible, these on-the-cuff customers have stimulated the current economic expansion and are turning the U.S. into the world's first credit-based society.

The recent vast growth of this debt has led to new concern by Government and economists about just how far it can go without danger. The Government has threatened to tighten credit immediately if there are signs that it is getting out of hand, and Joseph W. Barr, chairman of the Federal Deposit Insurance Corp., has suggested that Congress next year undertake a thorough examination of the whole credit situation. Such an examination might prove enlightening, but few businessmen and bankers, who are mostly the ones who grant the credit, feel that it is necessary. So long as incomes and employment keep rising-as they have been doing steadily-the lenders are not concerned about current consumer debt. In fact, says Conrad Jamison, economist for Los Angeles' Security First National Bank: "The environment is more favorable than ever for people to go out on a limb."

Instant Cash. Convinced of this, many businessmen are busy encouraging their customers to plunge more deeply into debt, and producing new and delightful ways in which they can do it. At the Emporium, San Francisco's largest department store, salesclerks have standing orders to encourage each customer who presents cash -which seems to lower one's status in many big stores-to open a charge account. To show how painless borrowing can be, a Los Angeles finance company runs a TV commercial of a man speaking into a pay telephone: "I wanted to ask, could I borrow" At that point, money pours out of the phone, filling the booth.

Even staid banks, which used to leave most consumer credit to others, are bombarding customers with new easy-loan plans. In the competition for auto loans, which account for nearly half of all installment debt, banks have pulled ahead of the auto-finance companies by offering lower interest rates. Still the competition grows. Following the lead of General Motors, both Ford and Chrysler have set up their own credit subsidiaries, and so have General Electric and Sears, Roebuck.