For years its been policy to make poor people feel more wealthy. Unfortunately the modern making them feel wealthier actually makes them poorer. This may sound like alchemy turning lead into gold but finishing up with more lead. How is this done? Simple lend them money and tell them they can repay it tomorrow. In entering 2020 personal debt not including mortgages reached an all time high. eg:
UK city breakdown of credit card debt
London £19,656, Birmingham £13,757, Bristol £10,297, Norwich £10,187, Nottingham £9,952, Brighton £9,471
Manchester £8,869, Sheffield £8,494, Glasgow £7,768, Leeds £7,473, Southampton £7,450, Edinburgh £6,411, Newcastle £5,308,
More than a third (38%) of those polled said they have credit card debt, 19% personal loan, 19% bank overdraft, 12% car loan and 6% payday loan.
The problem now for the banks is that with the lockdown many people will not be able to service these loans. Also if the lockdown extends into months then people will see that its not a good idea to be living beyond their means and take a different approach to borrowing expensive money. From this there is a whole series of knock on events and unintended consequences. Do you follow high fashion trends, go on holidays abroad, buy the latest phone or electronic widget? Lockdown is changing the face of the economy but it may be the banks that suffer the most in the long run.