Mortgaged to the Hilt: 40 Years a Slave

Australians love debt. Well, I don’t know if we love it, but we
certainly have a lot of it. According to the International Monetary Fund,
Australia has one of the highest levels of household debt in the world. The following chart shows us the levels of
household debt for selected countries as a percentage of GDP. Since 2008, households in the United States
(shown in orange), have steadily been lowering their debts. They’re currently sitting at 77.66%. China (at the bottom of the chart) — despite
all the news about its massive debt — are only sitting at 49.22%, although, this is
rapidly rising. This figure is probably quite low due to the
large rural population in China. It would be interesting to see the debt levels
of urban Chinese — I suspect they would be much higher. Japan’s household debt levels (shown in
red) have been steadily going down over the last 20 years, or so. The UK debt levels (in blue), have been going
down since the global financial crisis in 2008, but have since flat-lined at 86.35%
of GDP. However, Australia and Canada (shown at the
top of the chart) are the focus of this video. They seem to be following a similar pattern. Although there was a small dip in 2008, both
countries have been increasing their household debt at an alarming rate. Australia (in green) is at a whopping 121.71%
of GDP, one of the worst debt levels in the world. Before we go any further, let’s first define
household debt. Household debt typically includes mortgages,
car loans, student loans, and credit card debt. Here’s a chart from the US, but it is fairly
representative of other OECD countries household debt levels. The home mortgage is by far the biggest contributor
to household debt. This is followed by student debt, motor vehicle
loans, and then finally, consumer loans — credit cards and the like. Now lets take a look at household debt as
a percentage of net disposable income. This chart shows a list of G20 countries in
the OECD and their household debt levels. Again, Australia is leading the pack with
Canada not too far behind. Surprisingly, Koreans are in a lot of debt
as well. I have never lived in Korea, so perhaps, it’s
not so surprising. Australians have an average household debt
level of 211% of disposable income. What does that exactly mean? It means that a household with a disposable
income (i.e. after paying tax) of say $100,000, has a household debt of $211,000. On the face of it, this doesn’t sound particularly
bad, right? But we have to remember that these statistics
are the average across all Australian households. Not every household has a mortgage — actually,
only about one third do. The other two thirds have either paid off
their mortgage (for example, older people), or they rent. This indicates that the average person servicing
a mortgage in Australia has a much higher household debt as a percentage of their disposable
income than this data suggests. Furthermore, people who recently bought into
this overinflated housing market would be at even greater levels of debt. We should also remember that with debt comes
interest. These interest repayments eat significantly
into people’s disposable income. The typical home loan requires the borrower
to pay back both interest and principal, slowly chipping away at the loan. But some people choose to reduce their monthly
repayments in the short term by only paying back the interest, the so called, “interest-only”
mortgage. But interest-only loans come at a price. If you spend five years paying back the interest
only, you’ll still owe the same amount of money five years later. You’re making no headway on your overall
mortgage. Some people, especially investors, do this
hoping the value of their property will increase. They can then sell their house and make a
tidy profit, but this certainly is a gamble in today’s wobbly market. If the Australian housing bubble bursts, the
value of our housing assets will fall precipitously, but the size of our debt will not. One side is fixed and the other moves around. So Australians are swimming in debt, but will
this actually hurt us? A ministerial brief prepared for Treasurer
Josh Frydenberg was released on November 5, 2018 under Freedom of Information provisions
and states: “A large increase in unemployment would
quickly see an increase in loan defaults, which leads banks to slow the flow of credit
to the economy. The situation would likely be compounded by
weaker consumption as other households make efforts to repair their balance sheets. Moreover, given residential mortgages comprise
around 80% of Australian household debt and around 60% of bank assets, falling house prices
increase this vulnerability as they erode borrower equity and potentially expose financial
institutions to losses in instances of default. The bottom line is that households will likely
continue to service debt unless unemployment prevents them from doing so.” Other reports have shown that up to 1 million
households are “on the edge” of mortgage default. Their debt levels are too high, and they’re
running out of ability to service them. If the Reserve Bank of Australia lifts interest
rates, as they certainly will do eventually, many Australians will be, as we say in Australia,
stuffed. They simply won’t be able to pay back their
massive debt. The RBA has also been concerned about the
impact of high household debt on consumption, because consumption is a key economic driver. In a recent monetary policy statement, they
wrote: “A highly indebted household facing weaker-than-
expected growth in income or wealth is more likely to respond by lowering consumption. Consumption growth may also be weaker for
a time if households become concerned about their debt levels and choose to pay down debt
more quickly.” So with increasingly high household debt,
comes an increasing chance of economic downturn. What have we got ourselves into? But the question that I’d like to ask (and
attempt to answer) in this video is, “Why?”. Why have Australians (and Canadians, and Koreans)
got themselves into so much debt? What is it about debt that we can’t get
enough of? Well, sometimes it’s out of our control. For example, you lose your job and have a
big electricity bill to pay. Naturally, some of us will reach for the credit
card in this situation to keep our power switched on. Of course, there are other emergencies that
arise that need some quick cash, like an unexpected dental bill, or a car repair. But many of these unexpected bills could be
averted by simply having some savings on hand, the so-called, rainy day fund. Clearly, many people don’t have one and
are living paycheck to paycheck. Lots of people are simply not saving any money,
and by getting more and more into debt, their monthly repayments keep increasing making
it even harder to save in the future. Debt often brings about more debt. But the biggest reason people get into debt,
in my estimation, is because of a particular family that live nearby. A family with the life and the stuff that
we want. Of course, I’m talking about the Joneses. For over 100 years, we’ve been trying to
“keep up with the Joneses”, but apparently, we still can’t keep up with them. You see, when money becomes cheap and readily
available, everyone has access to it — even the Joneses. If everyone has access to cheap credit, then
naturally, lots of people will buy that new shiny car, or that glamorous house. In turn, their neighbours will see the new
car and want one for themselves. They head out and get a car loan to buy the
newer model. The neighbours then become increasingly unsatisfied
with their perfectly driveable, but yet, “out-of-date” car. More debt ensues and the cycle repeats itself. People want more and more stuff and they want
it now. Waiting for something seems like a thing of
the past. When I was a kid, I was always taught to save
up my money to buy the things that I liked. It took me about three months to buy that
remote control car that I wanted. Now with the power of finance, people can
literally walk into a car dealership with no money and come out driving a car. It’s bordering on ridiculous. It’s become far too easy to get into debt. It used to be that you had to go to the local
loan shark, or underworld figure to get some fast cash, but nowadays, you can literally
go anywhere. With services like Afterpay and zipPay, you
can just walk into Target with no money and buy anything you like without them even checking
your credit history. You could be up to your eyeballs in debt;
have no savings, and no ability to repay the debt, and still can get into more debt! What have we created? Some kind of money-gobbling monster. Since 2015, Australians have been spending
more than they have been earning. Sounds ridiculous, right? But it’s true. It means on average, we just keep using up
any savings that we had left and getting further and further into debt. And why do we it? Because we want more stuff. We want stuff that we don’t even need. We want new cars, new TVs, new sofas, and
new smartphones. We don’t want to keep our old phone. We don’t want to keep our 60-inch TV, because
now there’s a 65-inch. We don’t want to save up for anything. We just want all this useless stuff, and we
want it right now! What effect does all this extra debt have
on our lives? I have one word to describe it — slavery. A voluntary form of debt slavery. Some people will argue that it is not really
slavery in the true sense of the word, and I agree. But at the very least, you are giving up some
of your future life in order to pay back the bank. If you have a 30 year mortgage, plus a couple
of car loans, and a few maxed-out credit cards, you will have to work the next 40 years of
your life to pay it all off. Sure, you could choose not to pay back the
bank, but we all rationally know the result. Bye-bye house. Bye-bye car. Bye-bye 65-inch TV set. By getting into massive debt, you are beholden
to the banks. They can control your life. To me, that’s slavery. When will all this stop? When will we stop getting further and further
into debt? I think the only way to stop this madness
is for some sort of massive financial crisis to take place where everyone loses everything. Only then will people understand the true
value of the things that they took for granted. As Tyler Durden said in Fight Club, “It’s
only after we’ve lost everything that we’re free to do anything.” You can choose to go out and buy that new
car. You can choose to go out and buy that massive
house. But if the result is 30 or 40 years of debt
slavery, I say, “No thank you!”. I don’t want the banks running my life. I don’t want to have to work some crappy
job for the rest of my miserable existence just so I can keep all my nice stuff. The reality is, when you get into debt, you
simply end up owing more and owning less. It’s costing you money to spend money. Creditors have no interest in helping borrowers
stay out of debt — they are, after all, for-profit businesses. They earn money from your enslavement. You don’t want to be a slave, do you? I say, screw the banks! Screw the payday lenders! Screw the buy-now-pay-later providers! They all just want one thing — your future
earnings. And by giving it to them, you are setting
yourself up for a life of drudgery.

98 thoughts on “Mortgaged to the Hilt: 40 Years a Slave

  • The Sydney suburb of Box Hill where their has been massive residential construction is down……….40% ! , average home price now at 895,000 down from 1.2M just in the last 12 months , one in two morgage holders in the Camden / Liverpool region are in negative equity, nation wide there are over 1 million households in morgage "stress" yet government is in denial of the perfect storm we are sailing into.

  • With out consumption the global economy would collapse, but yet your stock investment's in Vanguard won't mean shit. Thank's to these people our investment's keep rising.

  • Your narrative about debt seemed to neglect the cost of housing. I've got a house deposit, but if I were to buy a house, I'd be trapped with debt.

  • Debtors are winners, the right kinds of debtors that is. For the most part mortgages are good. You take out a mortgage you effectively lock in your purchase price and pay it off with tomorrow’s dollars. So what starts out as a 500k mortgage over time feels like 250 then 100. This is why property is so good.

  • There should be a college course on the Jones'. You go to college, get married. Wife wants a house. Then kids. Have to move the kids around in a nice car. Kids want a car. Kids need to go to college. Add food, clothing and the latest gadgets. With each purchase the noose is tightened around your neck. Start complaining and wife wants to replace you. Now you have alimony. You become bitter and the next election you vote for Donald Trump. LOL

  • they have been raising price of credit for months, years, it about to be lowered,the propaganda campaign is reaching peak intensitythe market is being prepped for a big event, that is intended to exclude multitudes of locals,

  • I agree with so much that has been stated here but it has been my experience that borrowing to purchase a modest dwelling is a very wise decision. A mortgage is the only debt I've ever had. I've never had a car loan nor purchased anything of any nature with finance. Ten years after committing to a small mortgage my partner and I finally owned our house. It's now ten years further down the track and not having neither the obligation of paying rent nor a mortgage has given us significant financial freedom. Short term pain has really brought with it long term gain.

  • You know what’s funny
    I am the Joneses.
    If you want to be like me
    Don’t live beyond your means.
    Bad debit is
    Going over seas
    Constantly updating cars and electrical goods ect that don’t need updated.
    Learn to say no when your child wants new toys.
    Eat at home.
    Don’t impulse buy.
    Cut up your credit card.

    I only have one debit and that’s my home loan.

  • Okay since no one will state the obvious here it is for you all so you get it “ debt is the new money “ if you don’t wrap that into your brain you will just struggle in this modern economy

  • Have to say debt is only bad for idiots who don’t know how to use debt to make more money , nothing wrong with having stuff you can have that stupid guilt trip

  • Well you know what they say: "people borrow money they don't have, to buy the things they don't need, to impress the people they dont like. "

  • Good data, but you do not understand how the debt slavery system works in the western countries. Very few understand the debt-based currency, derivatives, and fractional reserve banking. The wealthy took advantage of it while the majority is enslaved with debt. Sadly, 78% in US are living paycheck to paycheck.

  • Slavery (2.0) It is invisible slavery vs Open slavery. It has probably happened since the dawn of time. I mean parents always want to slave their children here in Asia, they guilt trip them into paying every month. The west does the same thing via the government. It is the same as buying meat from the butcher so you don't have to kill the animals.

  • its in the dna, both countries in a housing bubble bursting at this time, poor people will be homeless in a year or two

  • Perth Housing is down 17% on average from peak, according to CoreLogic. Anyone want to bet we're not already unofficially in a bear market?

  • The thing which is really sick. They create new money out of thin air for the loan. People don't borrow other peoples deposits. New money is created with a few taps on a keyboard, something which never existed before they signed on the bottom line, and pay a monthly fee for it. People are paying interest payments for what amounts to, A Fraud, which has been legalized by the government. Look up, how money is created by the bank of England 2014. "Loans create deposits, and not that other way around as people were told." In other words, Loans create new money which shows up in an account as a deposit" Double entry bookkeeping.

  • Mother fucking banker cunts, robbing… Don't know maybe the ultra-left thought capitalism would callapse in on itself and everyone would get free houses, probably 100 years away??? What about now??? I am probably smelling of conspiracy garbage here…

  • Mate brilliant video that all Aussies should watch as it gets to the very core in a simple way what has and is happening in our society. If people took responsibility the finance sector would be about a fifth of it's present size and the ticket clipper finance guys would be answering phones at call centers. This is all modern monetary theory that is going wrong big time and will be a bigger disaster than the Great Depression. Our useless governments and a stupid public have allowed this demise over the last 50 odd years.

  • Comercial banks loan us money created from nothing.
    The money for a mortgage is simply a book keeping entry. Banks do not need money to make loans.
    Money is created when you take out a loan.
    Money is destroyed when you repay the loan.
    The comercial banks created this housing bubble.
    They issue loans created from nothing up to the maximum a person can afford to repay.
    The price of real estate is controled by the amount you can borrow, the person who can borrow the most will out bid the competition.
    One day everyone who wants a loan is maxed out.
    There is no one to pay increased prices with a large loan.
    Then you loose your job. You can't make the payments.
    You are forced to sell, there is no bid at the asking price, buyers can't get a large enough loan, so you drop the price.
    Your price drop starts the house price collapse.
    The house price in a neighborhood is what ever the last house sold for.
    Other owners with large loans see the price drop and pannick, they will endup with negative equity.
    They will become trapped in their house, unable to sell without taking a loss. But they also maybe forced to sell, perhaps by a divorce this time.
    Of coarse only a few will be forced to sell but they set the price for the whole market.
    Falling prices cause banks reduce the size of loans
    And so it goes on as it feeds on itself.

  • 7:07 you nailed it. Everybody is following modern n glamorous media n want everything right now without working hard n saving for it. BUY don’t FINANCE, there’s a difference between the two if ya fools know it. I never had a debt n i never will. You guys keep chugging your beer n i will keep saving n investing. It will all pay off in near future. I will be driving a nice car that I will BUY n you will keep paying for your already worthless one for many years to come 😂.

  • The issue for those without a mortgage is that the collapse in the housing market will drive down all house values. This becomes an issue for those whose property is their retirement fund. The temptation will be to panic and sell and cash up. This will have the effect of driving down prices further and faster.

  • Yeah, I get it, we're all retarded wannabe reality TV stars us Aussies (not sure what that has to do with debt?) but when it comes to living in your own place – it's either rent and pay for someone else's mortgage or pay a mortgage and hopefully in some distant time in the future, you might just own your own home! Woooo livin the dream!

  • I tapped into my LOC & credit cards and had good credit to buy a fixer upper house, used YouTube and taught myself the trades. I am now grossing $65K rental income annually and the banks now want to hand me $500k. Me loves me DEBT!!! Ima take the bank's offer and pour champagne on some bubble butts…and the remainder will then go towards another distressed triplex.

  • A 458k house with a 50k down, loaned over 40 yrs will result in total payment of around 900k. This is not the way to own a house! Many do not know that in the event of a price drop, any devaluation of 30%, banks had the right to demand the difference within 48hrs. This will bankrupt any house owners whether they are employed or not.

  • The rest of the world is not buying the pity party that is going on in Australia right now. We all went through that in 2008. You guys are just 10 years late to the party. It isn't pleasant, but the same greed and debt enslavement that caused it in 2008 in the USA has caused it there. Lose the debt and lose the stress.

  • One thing that could make the downfall worse is the large foreign population. Over the past years, the job market has been heavily relying on foreign workers. Why hire and train a local when the system gives no constraint with bringing in an already trained, experienced worker from overseas ? The best part being you can pay him/her less, because he is from a country with lower wages ? These workers have nothing that hold them in Australia. No family, nothing. Only their Jeep potentially. So, when there is a downturn, job market gets tight, and the employer of that 457/PR dude makes him redundant, offers to switch him to part time worker, etc… it's easy for him to say : "well, I may just move back to my country, and that's it, problem solved". That employee is one less consumer, at the time when it would be gladly needed. I feel everything that helped this property bubble grow to insane proportions, will also make the downfall equally bad.

  • And the reason is that Generation Debt is now a decade older and at the peak of their earnings and borrowings.

  • Continue voting to import immigrants to keep house prices high & then vote for lifelong welfare dependant refugees, to keep our taxes high, then keep voting for social welfare programs to reward single motherhood to replace a nuclear family & make our taxes even highet & we will continue working like dogs for the welfare of others. Yes continue voting for leftist governments who want to turn you into a tax slave & debt slave.

  • The presentation started off well but descended into mantras and cliches.Pity.

    What it did highlight is that the bulk of the debt is held by approx one third of the households. Also I would argue it looks worse than it is because all of the immigrants bought in as wage slaves would rack up debt because they basically arrive with blot. This is statistically inflating the debt numbers. Reality is huge numbers of households have low debt and high assets.

    There will be no bust. Just a long long period of stagnation.

  • How does one think that just paying the interest alone is a wise decision? Can’t feel sorry for stupidity.

  • Well done mate, now you've gotta keep repeating this message over and over in different ways to say the same thing coz lots of us are not getting it!

  • Mostly true BUT a lot of people that "did" have savings have seen them disappear bit by bit to make ends meet! Increases in goods licenses regos and utilities for example along with other costs and earning a wage that for most has seen little increase in some time made digging into the savings inevitable. And you talk about a big economic crisis… don't worry pal one is coming. But why should everyone lose everything!??? I've worked long and hard and own my home. I'd like to see anyone try and take it off me!!!

  • I reckon eat drink and be Mary eat because you can't take it with you when you die so cock up the debt screw the banks clock up your day

  • afterpay is going to a shit load of millenials into bankruptcy. They can barely service their credit cards and now suddenly…..there's another source of money with no ways of repayment

  • Aint that the truth 🙂 … Tick tick tick goes the clock…. And when the carriage turns back into a pumpkin, it will all be someone else's fault !! … And prince charming will be nowhere to be seen….

  • Private Central Banking systems run by wealthy Jewish families which are based on usurious inflation prone mechanisms to keep nations enslaved. This is what Adolf Hitler fought against.

  • Smart people knew the bubble was going to burst. I got out a little early but fully owned 3 homes before cashing out. I purchased a home cheap in the mining town Moranbah for 125K in 2016. I was asked late last year if I wanted to double my money, this one isn't for sale.

  • Yikes. It took the 2nd biggest U.S. recession for my fellow Americans to realize that buying stuff you don't need witj debt is dumb.
    Good luck Aussies!

  • We sold everthing we had 3 years ago – brought a bus and have been traveling & working around Australia ever since. on average we works 9 months and travel holliday for 3 months each year. we have traveled the entirety of WA & NT and are now in QLD. we have lived & worked in many towns , met loads of interesting & wonderful people , seen some amazing & astonashing sights – we have zero debt and have managed to save ( from traveling & working ) 180K cash – we left Melbourne 3 years ago with 10K in our pocket. we havent had high paying jobs we are just smart about which jobs we choose to take. In remote areas housing & utilities are often part of the package. we will never go back to suburban drudgery again !

  • While I agree that getting into personal debt is a bad thing there are things to think about generally from what you have said. Firstly our whole economy is based on consumption, either by domestic consumption or people consuming our products overseas. So if people buy less stuff, the business who sell that stuff will lay off staff, unemployment will rise. People also have a general desire to save, however to function properly an economy like Australia's requires growth which requires more consumption. The only way for that to work is that there must be more money in the system chasing goods and services. That new money must come from more exports (not likely), or debt. So then we have a problem. The new debt must either be private debt, or government debt. We are blessed and also cursed on that front. We are blessed because we have a sovereign, fiat currency, which means that Gov debt, can always be repaid, simply by creating the money electronically to pay it. We are cursed because the public think that government debt is bad. Private debt is bad at today's levels in Australia, because unlike the government, we the public can in fact become insolvent, because we don't issue our own sovereign currency. The solution is a process of swapping private debt with government debt. Which the government can simply create the money into existence to pay..

  • Those dang jonesses are the root cause of all the worlds problem. Build that wall to keep out the joneses. ! 👁💔👁

  • well covered, Australia and Canada housing has suffered from the wealthy Chinese (and other) investors, keeps the govt coffers topped up with all the fees, but ensures the prices shoot up. Home buyers/owners rejoice at their new equity and borrow. All seem to have forgotten the early 80s when interest rates hit 18%, or even 2009 at around 10%, this is controlled by the Govt and ensures turnover thus more fees.

  • People should remember commandment number 10, and Proverbs 22:7. If they did they would not be in this kind of predicament!

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