Tuesday, November 11, 2008

Look out for rats. They are always they first to abandon a sinking ship

I am normally, as a matter of economic philosophy, opposed to government bailouts. However, I am very tempted to make an exception here because it is the government that is causing a large part of this problem by inflating the cost of doing business Hong Kong. I would say that if the government gives any of these SME things money they should have their whole operation in Hong Kong. Why bail out any group that is actually manufacturing up North and simply based here? If they are not adding to the local economy through job creation and local taxes then let them wither away. Most of the people who own these type of firms have Canadian citizenship anyway so let them go back to Hong-Couver or Toronkong get a job and pay taxes there. They can enjoy the year-round sledding too.

I am more concerned, in a niggling, almost unconscious sort of way about personal debt in Hong Kong.

I don't have any statistics for the amount of debt held by the average adult in Hong Kong, though antidotal evidence makes me think that in some cases it might be rather high. I am not thinking of mortgage debt here, which is bad enough but what should be called discretionary debt. Credit card bills, vacations, Money lost in Macao, eating out eight times a week, 15 pairs of new shoes a month, USD $12.00 a gallon gasoline when you could take the bus; that kind of thing. It seems that everywhere I go I see a billboard advertising a finance company that wants to give me a debt consolidation loan. They also advertise on TV and have all but completely eclipsed the formerly ubiquitous but unlamented you-too-can-become-a-middle-aged-female-soft-porn-dancing-queen-with-our-weight-loss-program Unfortunately they haven't replace the belching guy trying to kiss his ugly wife antacid commercials.

I am assuming that if there are several companies doing this there must a pool of financially overstretched people dumb enough make their problems worse and make the saturation ads worth the advertising money.

What is scary about these companies is not that sometime people need them but that the companies are pitching the loans as a way to continue a life style that is overly extravagant. There is no "So you've made a mistake or had some bad luck financially, we can help you recover." Instead the pitch is "Get what you want when you want it." I think a lot of the people getting these loans will have to default as the economy worsens this coming year.

Unlike the problems with renting a business here, personal debt isn't the government's fault. I think that a fair number of folks may soon figure out that there is some virtue in delayed gratification.

It is my sincere hope that I am wrong about this. I also hope that the people getting these loans are smart enough to realize that if they have a choice of paying the mortgage or paying the credit card bill that they pay the mortgage.

Until Net Time
Fai Mao
The Blogger who is debt free

No comments: