The Crisis of Debt and the Rising Cost of Living: How Credit and Inflation Control Modern Life, causes of the debt crisis

A Look Back: Life Before Credit Dependence

Growing up in Brazil during the 1980s, we rarely heard about credit cards or mortgages. The cost of housing was reasonable, and it was possible for a middle-class worker to buy an apartment or a small house within five years of saving.

Today, in many parts of Brazil, that balance still exists. But in the United States, credit cards and mortgages have been overused for so long that they’ve created a snowball effect of unaffordability. People end up working not to build their future, but simply to pay interest on debts they already owe.

This overreliance on credit has reshaped modern life — reducing quality of life while increasing financial stress.

When Debt Reduces Quality of Life

You might think: “If I can buy more nice things, my life should be better.”

That’s true — but only to a point. The more debt we create, the more we become bound to work just to pay interest, often without even touching the principal balance. This cycle traps millions of people in a form of modern financial slavery — constantly paying, but never owning.

When Debt Can Work in Your Favor

Not all debt is bad. Debt can work in your favor when it’s managed strategically:

• You could pay in cash for what you’re buying, but you choose to finance for convenience or benefits.

• Your monthly payments of all your debt are no more than 25% of your total income.

• You have at least two years of savings that can cover those payments if you lose your income.

Those two years give you time to recover — to find another source of income or sell the asset before it turns into a burden.

The Worst Kind of Debt

The most dangerous debt you can have is an unpaid credit card balance.

If you don’t pay your credit card in full each month, interest compounds quickly. Those interest rates are so high that you could spend years or decades paying interest, working for the bank instead of for your future.

Credit cards should be used as a tool (like getting cash back), not a lifestyle. If you can’t pay it in full by the due date, it’s not a convenience anymore — it’s a trap.

Are Mortgages Good Debt?

Mortgages can be both good and bad debt, depending on the situation. If it’s for your primary residence, a mortgage can be a good investment — you’re building equity and stability. s long as the payments are not more than 25% of your total income.

But if you already have a mortgage and want to buy a vacation or investment property, ask yourself:

Can I comfortably afford two mortgages without risk?

The Bigger Problem: Global Mortgage Inflation

On a global scale, mortgage lending has become one of the main drivers of high housing costs. The more banks lend, the more money circulates in the housing market. That extra buying power allows prices to rise even faster — making homes less affordable for everyone.

But here’s the deeper issue: the money being lent isn’t even real cash anymore. It’s digitally created money by the bank, numbers generated by banking systems rather than physical bills. This artificial creation of money fuels real estate prices to rise, and inflation — one of the biggest financial challenges of our time.

Understanding Inflation

Inflation means the cost of everything goes up. It happens every time money is printed, the more of something the less value it has, and you need more of it to buy the same goods and services.

How to Combat Inflation

To reduce inflation, we must address the root cause — excessive money creation. Governments print or generate more money to pay debts, but this only weakens the currency further.

The real solution isn’t simply cutting spending — it’s restoring balance between production, debt, and value. This might involve stronger financial policies in banking systems and tarifs from importation. Tarifs might increase the price to consumers but will reduce inflation which will reduce prices to consumers so it might not make difference on costs, while the country's debt can be paid without printing money.

Final Reflection

We live in an era where credit defines lifestyle, but true wealth comes from stability, not spending.

Maybe it’s time to redefine what prosperity means — not by how much we owe, but by how much freedom we have from debt.

causes of debt crisis

Have you felt the impact of rising debt or cost of living? Share your story in the comments — your insight might help someone else find balance.