ASIA HAS A CHOICE: GERMAN RESPONSBILITY OR AMERICAN SILLINESS?

4/22/13

This morning’s (i.e., Monday, 4/22/13’s, page C1) Wall Street Journal reports that consumer debt is exploding in Asia, primarily in China, Indonesia, and Malaysia.  Nonmortgage consumer debt in Asia outside Japan has risen 67% to $1.66 trillion in the last five years.  In Indonesia alone, such credit has tripled.   Consumers are lining up to pay interest rates ranging from 15% on secured car loans to 40% on unsecured loans.  No wonder lenders are rushing to Asia.

Why are the newly prosperous Asians borrowing so much?   Such expansion is typical, we are assured, at this stage in their economic development as people start to make decent livings and yearn to buy the things they manufacture for others.   And it is certainly understandable that, after years of having very little, and being inundated with media images of the prosperity of Japan, Europe, and the United States, Asians outside Japan would want to acquire lots of the same junk with which we are curiously so fascinated.   But when one listens to the explanation of one Wiwik Sugiarti, who lives in Indonesia, of why he borrows to buy such things as televisions and DVD players…

“I can buy two or three things at the same time and not have to worry about how to pay for it now,”

one who has seen such misunderstanding and misuse of credit and its consequences gets the urge to utter something like “Uh-oh.”

Again, one can understand Asia’s desire to buy stuff.   But it seems to yours truly that the people in that part of the world can make a choice regarding the development path they would like to follow and the attitude toward money and credit they would like to emulate.  They can be like we Americans, who, through some misplaced sense of entitlement, have decided we deserve everything we want regardless of our ability to pay for our heart’s desires.  Alternatively, they can be like the Germans, who only consider buying things they don’t absolutely need when they have the money to pay for those things and even then agonize over parting with their hard earned euros.   There are, of course, exceptions to these generalizations; I am sure there are some spendthrift Germans out there and there are plenty of Americans (Yours truly comes immediately to mind.) who are much more German in their spending and saving habits.  But there is little doubt that the overall American approach is quite different from the overall German approach.

So which will it be, Asian friends and brothers?   Spend like drunken sailors, eat through the seed corn, and expect, or hope, others will continue to lend you money…or act like mature adults in financial matters?   The choice is, presumably, yours.  

We in America had better hope the non-Japanese (The Japanese are apparently already lost, by the way; see, inter alia, my 4/9/13 post  THE NOT SO INCREDIBLE SHRINKING YEN.) in Asia pick the latter.   If they spend like us, who will pick up the tab for our childish spending?