The Great Recession and You

A Group Chat with Some Familiar Friends

Great Recession

Recently I gathered together five of my best friends and had a frank discussion about money. I wanted to look at the impact the so-called “Great Recession” of 2008 had on our finances and spending habits.

The group was composed of the following people:

  • Jim: works in technical sales and earns most in the group, $4700/month
  • Hans: a car salesman who makes $4000/month
  • Tom: has a job in the financial sector, earning him $3500/month
  • Dimitris: has various side hustles and averages around $2200/month
  • Wu works in a factory for $1200/month

Read the Transcript

So, I would like each of you to tell me briefly how the financial crisis of 2008/9 affected you.

Jim: My earnings have increased almost 20% since 2007 but there was a real rough patch around the time of the crisis and for several years I spent a lot more than I earned. As a result my debts, at $57,000, are more than double what they were back then. Thankfully, I was able to consolidate and refinance so I pay very low interest – about $120/month which isn’t much more than I was paying in 2007.

Wu: Actually for me, though I earn much less than these guys, I am doing fine. My wage has doubled since 2007 and I have never been out of work. Though my debt has tripled, it remains very low at just $6000 and interest rates are reasonable so I pay around $10/month in interest.

Hans: Well, i’m not as well off as Jim but I am doing well. My salary has increased by 25% since 2007. I generally spend less than I earn so my debts are low. Even when the crisis cut my income (nobody was buying cars) I was OK because my debts are low. I owe about $17,000 to the bank – 15% more than in 2007 – but my interest payments are lower now, at $30/month, than before as I was able to take advantage of my good credit and get a low interest rate.

Dimitris: Well you guys are lucky. My salary has been cut by 15% since ’07. At $27,000 my debts back then were already sky high and would be a lot worse now if not for the fact I defaulted on one of my loans. I was able to come to a deal with my bank and refinance my debt over a much longer term, so I now owe $32,000 and pay around $40/month interest. I have no hope of clearing my debts for many years.

Tom: Well, I am a bit like Jim in that my earnings have improved since 2007 – around 15% in fact – but there was a lot of pain during the Great Recession. I do work in finance after all! I had to borrow a lot more than I planned so my debts skyrocketed to $26,000 now from just $11,000 back in 2007. Fortunately I was able to use some trickery to swap out some of my debts for lower rates, so I still only pay around $60/month in interest.

Ok, so you are all in debt! What happens when interest rates rise?

Hans: Don’t worry about me. I’ll be fine. I am great with money and I haven’t taken on too much debt. Financial prudence is a rare virtue but I have it in spades. My employer is a world leader in manufacturing and we have an enviable reputation for quality, so I expect my salary will continue to steadily rise. I could take on more debt if I wanted and my interest rates would remain lower than everyone else here.

Jim: For me this will be tricky. My financial adviser says that I can expect my monthly interest payments will quadruple in a few years time. That means I will need to find almost $500/month just to cover interest on my loans. I do own a lot of assets, but I always overspend and it sometimes gets me in trouble. I guess it will just cut into my discretionary income. Still, with the internet still on the rise the future looks bright for my industry and I am expecting my salary to improve.

Tom: I’m hoping to shake things up a bit. I am thinking of a career change from the financial services sector to something in manufacturing (but I have no idea what!). My debts are already crippling but although I still spend more than I earn I have put a lot of effort into cost-cutting and I believe the stars are beginning to align. With the changes I plan to make, I hope that my salary will outgrow my debt interest payments – if it doesn’t then I won’t have a lot of disposable income left.

Dimitris: I’m so far underwater that I already have big problems. If interest rates rise I don’t really know what to do. I suppose I may default on more debt, but that will just exacerbate problems. I already have no hope of clearing my debts.

Wu: Well I am still in a good position. My job prospects continue to improve and I expect my salary to continue to rise. Even as interest rates increase my debts are very manageable.

How have your spending habits changed since the crisis?

Dimitris: Since I defaulted on that loan payment the bank gave me no option. My hands are tied, and I cannot spend more than I earn. I feel like that guy who has to pawn his wedding ring just to eat. The bank manager said it was my fault for falsifying my earnings and underpaying tax but he is the one who approved my loan!

Jim: I’m sorry, I am hopeless. I always spend more than I earn. I have tried to improve but I still spend around $100/month more than my income. Because I earn a lot and always pay my bills, the bank is always happy to give me credit!

Tom: I feel like I am Jim’s doppelganger. I have failed to control my spending and so my debt continues to rise. According to my financial planner, if things go my way on the work front I should at least bring the fire under control. But to extinguish the flames will take many years, and I am just not sure if I have the discipline to reign in my spending.

Wu: Well I did increase my debts a little but only because things are going so well for me and I wanted to buy a bigger house. I used to save a little each month but now I pretty much spend everything I earn.

Hans: Dear me, none of you guys have any discipline. I always maintain a strict financial discipline. I spend significantly less than I earn thanks in part to that discipline and in part to my productivity at work. Why can’t you all be more like me?

Me: Have you looked at your FICO score lately? Any good?

Jim: Sure, I had an ‘almost perfect’ 825 back in 2007 and even though I now have a lot more debt I still score a 790. As I said, I always pay my bills.

Wu: My credit score is pretty good. I may not earn a lot but I am always improving, and despite my recent increase in debt I spend less than I earn most of the time. In ’07 I was rated a 730 and last time I checked I was up to a 740. I guess banks like it when we take on debt!

Hans: My rating is great, it has been 825 for as long as I remember. Why? I earn well, I spend less than I earn, and I have a low debt load. The bank knows I am good for it, so I can borrow pretty cheaply but I am not as flamboyant as Jim or Tom so I don’t need extravagant spending.

Dimitris: Unsurprisingly, my FICO score has collapsed. Back in ’07 I scored a 730, which wasn’t great because I had so much debt. But at least I paid it. Since I defaulted on that loan a couple of years ago, it has been open season. The bank did forgive some of my balance but my credit rating will take years to repair. I currently score a 500.

Tom: Back in 2007 I had a FICO score of 825 and I could do no wrong. Thanks to my bank deal I refinanced on favorable terms and avoided any real harm to my credit rating. But since I am so highly leveraged, my FICO score dropped to 770.


If you haven’t already figured it out, this conversation is an allegorical story of the experiences of the USA (Jim), China (Wu), Germany (Hans), Greece (Dimitris), and the UK (Tom). Go back and read it again if you need to.

The Great Recession was the longest and deepest recession of our generation and we will continue to feel the after-effects for years to come. Yet few of us can relate to the eye-watering debt figures that our countries carry. What does $20 trillion mean to me?

The discussion above uses published financial figures from 2007 and 2015 on a per capita basis to demonstrate the debt and spending that your government holds on your behalf. Earnings come from GDP (PPP) figures, spending and interest comes from a country’s net debt figure and published interest payments. The FICO score is an estimation based on a comparison of FICO with S&P Sovereign Credit Ratings.

So That’s the Whole Story?

Well, the conversation was a striking illustration of the worldwide effects of the Great Recession. However, there is one key difference between you and your country: your country can print money*. So although ‘Jim’/America will soon have to pay four times as much interest as today, the US can simply print more dollars to pay for it. This is why US Treasury Bonds are considered as one of the safest assets in the world. But there is a cost to printing money: if a government prints too much money it will increase the rate of inflation. This devalues your currency, and reduces your purchasing power.

What are your thoughts on the Great Recession? How did your country handle it? Leave a comment below!

*’Dimitris’/Greece is an exception since as a member of the European Monetary Union it does not control the printing of it’s currency. That is why Greece defaulted on an IMF loan repayment in 2015.


  1. Wow love the analogy! I should have known from the beginning based on the names.

    I’m with Jim in the US. I think the fed did the right thing by lowering interest rates during the recession. It certainly saved the economy from going into a depression. However the economy is much better off now and rates are still pretty low. With rates so low, it’ll be hard for them to fight the next recession.


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