I’ve long argued that, once people in emerging market countries realize how much fun it is to buy stuff they don’t need with money they don’t have, there will be a multi-decade long economic boom the likes of which the world hasn’t seen since the U.S. set out on its orgy of credit expansion in the 1980s. According to this report at the Wall Street Jounal Real Time Economics blog, that process may have already begun.
In 2009, the year the global recession hit bottom, the aggregate credit-card balances of Chinese consumers rose 17.1% even as those of U.S. consumers fell 8.7%, according to a study by financial consultancy Lafferty Group. Brazilians increased their balances by 28.9%, part of a 9.2% rise throughout Latin America.
More people going into debt might not sound like a desirable development, but in some ways this could be. One of the global economy’s biggest problems has been its dependence on an overstretched U.S. consumer. If folks in places such as China and Brazil are now stepping up and taking on some of the burden, that could provide some much-needed rebalancing.
Now, don’t get too excited about the numbers highlighted above as this is likely a classic case of how percentage changes can be very misleading. The Chinese are undoubtedly coming up from a low base and we’ve got nowhere else to go but lower. Per this item at CreditCards.com, average U.S. credit card debt is now over $8,000 per person and I’m guessing that it’s close to zero in China.
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