In the spirit of co-operation

Monday 1st March 2010

By Andy Moody, managing director of TCF Debt Solutions

We live in a world of increasing indebtedness, not limited to personal, corporate or bank debts. We are now looking at the serious prospect of whole countries being effectively close to bankruptcy, with the danger that one country defaulting on its debt repayments leading to a domino effect which could draw in other weaker economies. The overall effect taken to its logical conclusion would make the recent credit crunch and banking crisis look like a walk in the park.

But before we all rush for the exit, I would say this is still only a possibility. Ironically, because of the danger implicit to every nation, we are seeing remarkable international cooperation to tackle global economic problems. Strange isn’t it that unless there is a common cause, national self interest on issues such as nuclear weapons, 3rd world poverty etc, stops the very cooperation that is being demonstrated to stop the world’s economy slipping into oblivion.

If we want to make a parallel to the world economy’s woes and those of countless individuals who are suffering from debt and the inability to service it, the causes and rationale are pretty similar.

First off there is a need to acquire products, goods or services without the immediate means to pay for them. This necessitates borrowing, which in the boom times meant easy access to borrowing. With income from taxes (in the case of a country) or income from work in the case of individuals, repayment is not a problem. However, in the rough times we have been experiencing, with household income or taxes shrinking because of lack of work or less tax being paid to the Exchequer and access to refunding or remortgaging difficult, and in come cases no longer possible because of lack of funding generally and loss of a decent credit rating, it is easy to see why an individual or an economy faces pretty much the same result.

What makes the difference is the individual misery that personal debt can bring with it. The state of our national indebtedness does not help the process of course, but there are thankfully many resources that the individual can turn to in order to sort out their problems which is what makes the debt solutions business so rewarding to help get people back on their feet. Mind you, if we experience the domino effect I was referring to earlier, then we will all have bigger problems to worry about!

Andy Moody is managing director of TCF Debt Solutions and has spent his career in financial services, with particular emphasis on businesses working exclusively with an intermediary focus.