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First Person

Deep in Debt

When Louis Hyman, 31, a scholar at the American Academy of Arts and Sciences in Cambridge, began writing a book about the history of debt, colleagues wondered why he wasn't focusing on something "more important." Oh, what a difference a global economic meltdown makes.

By Beth Teitell
November 2, 2008
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We've had a few presidents come to office during economic crises. What can we learn from how they handled the pressure?

Franklin Roosevelt was elected on a balanced-budget platform, but as soon as he came into office, he immediately started going into wild economic experiments, from freezing the banks to creating all kinds of new agencies and organizations. Conversely, Jimmy Carter, who was elected in the midst of a tremendous economic crisis, became more conservative after he was elected and didn't want to try bold experiments, so things got further out of hand.

Any predictions on how Senator Obama or Senator McCain will handle the mess? I've been thinking about that. There's what candidates say they'll do and what they'll actually do. Usually those are two different things when it comes to presidential races.

Who's the man for the job? Obama. He actually thinks economic inequality is a problem that inhibits economic growth rather than a natural consequence of economic growth.

You've been working on your book, Debtor Nation, which will be out in 2009, for the last five years. It examines how debt in America went from being illegal and personal -- between you and your bartender, say -- to becoming the center of the American economy. How did it happen? The question is how debt moved from small-time loan sharks to big multinationals, isn't it? After World War I, personal debt served a new purpose in industrial capitalism, helping Americans buy expensive yet mass-produced goods like cars. In the interwar years, commercial banks began to invest in consumer debt, and retailers started to profit on the financing -- and not just the selling -- of goods. After World War II, indebted suburban Americans could leave their mortgaged homes in financed cars to shop on department store credit. Changes how you think about the 1950s, right?

Has your research changed your spending habits? Oh, no. I love to shop. But as an academic, I don't have a lot of money to spend.

I must ask: How much debt do you have? I think I have two packs of toilet paper that I bought on my credit card. I usually pay off my credit cards every month. I do have $15,000 in student debt, which looms over me, shaping the kinds of job choices I can or cannot make, like many young people.

So should we all hold off on using our credit cards to buy the iPhone or an awesome pair of shoes? A lot of the reason people go into debt isn't because they bought a new VCR or watch. It's not discretionary spending but non-discretionary spending that gets people into trouble. There's a lot of work that shows the majority of people who end up in bankruptcy do so mostly because of medical bills or short-term unemployment.

Do people often come up to you at cocktail parties and confess their debt? Yes. They want absolution.

-- Beth Teitell

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