Evening star. [volume] (Washington, D.C.) 1854-1972, 1956-09-16
BY HERBERT BRATTER

Debts incurred by consumers rid
ing the crest of our ever-rising
standard Of living have reached
record $37 billion-close to $1,000
per family-in this country.
Some economists fear that this
tremendous heap of little con-
sumner credit" debts is a potential
threat to our economy, that it will
prove to be a dangerously unstable
llnderpinning for the economy if
business downturn should start.
So President Eisenhower has asked
the Federal Reserve Board to study
the matter.
What has been. happening is that
people in great numbers have been
buying cars, refrigerators, TV sets,
furniture, soft goods and even vaca-
tons out of future income. They
have borrowed other peoples
money so as to acquire things they
otherwise could not enjoy until
later.
At least two-thirds of the people
who buy cars nowadays pay for
them on the inStallment plan, and
they pay extra for that privilege.
OF the $37 billion total debt, some
SIS billion, is what people owe on
the cars that you see on the streets
and highways. individuals owe
another So billion for other con-
sumner goods. 81 billion for repair
and modernization loans, and nearly
$6 billion for personal loans" re-
payable in installments. The re-
naming So billion of consumer debt
consists of single-payment loans,
charge accounts and service credit.
Half of Population in Debt
The lenders of all this money are
commercial banks, sales finance
companies, credit unions and other
financial institutions, department.
furniture and household appliance
stores and other retailers. From
time to time SIS per cent of the
people use some form of consumer
credit. it is believed, and at any
one time probably half the people
are thus in debt.
Whether consumer debt on to-
days scale is good or bad for us is
very controversial subject. Some
hold that consumer credit is a great
blessing. enabling people to raise
their living standards and enjoy
today the fruits of tomorroW's toll.
Borrowing for this purpose is fur
ther defended on the theory that
otherwise people will fritter away
their incomes and never be able to
buy what they now purchase with
the borrowed money. Consumer
credit, it is claimed, forces people
to save"
Federal Reserve Board Member
]. X. Vardaman. iE, puts it this
way:
To him 1.-THE Typical instoIment bor-
FowerJ these payments ore essentially
sovings And when you stop TO think
about il, what more sensible use Of saw
ines is there than their purposeful oppli-
cation to on improved STANDARD Of Iiv-
ing? This is instoliment in life ITSELF
(. Consumer instoIlmenf notes might
well be termed human trust ceriifi-
eotes.
Without consumer credit It is now
generally admitted thot mass production
would be impossible Without moss pro-
duction. mass employment would not be
possible. ;. In other words, continued
high level employment is largely consin-
gent upon the full use Of sound and
steodily expanding consumer financing;
and the Iiquidity Of consumer credit Is
heoviB contingent upon Sustained high
level Of employment"
An Opposing View
But very different view Of con-
sumner debt today is offered by exc
Dean Neil Carothers Of Lehigh UNI
versity in the Commercial and
Financial Chronicle. He terms all
forms Of consumer credit "expen-
siye additions to the cost Of living.
. net reduction from national In
come. q danger to economic pros
perity and q possible cause Of
acute personal distress" to many
people. Installment sales, he holds.
increase present production. de-
crease future output. Their average
Is per cent carrying charges are 3
drag on the economy. The sales
entail q net loss Of productive
capital.
Also. they distort the economy.
Ths enormous S11ss d homes. ears