Is it just possible that we, collectively, aren't as dumb as we look?

Such thoughts arise when you start digging around in the statistics of consumer debt. They arise in spite of the flow of "gee-whiz" factoids that we encounter so regularly:

•           Like the idea that the average American now has so many credit cards                he needs a backpack to carry them

•           Or that if we laid all the credit cards we have end to end, they                would reach the outermost planet in the solar system.

•           Or that the typical consumer, if she exercised all her available                credit at once, would be able to buy Sri Lanka or, at very least,                the island of Madeira.

(I made all of these up. Readers with a creative urge may want to create some of their own.)

In fact, the actual numbers tell us that we are behaving remarkably like rational economic beings. We're borrowing when and where it makes sense. We're looking for--- insisting on--- the best deal we can get. And we, on average, are not plunging madly into debt.

The word "average" is important here because it hides the extremes. Some people don't borrow much at all. Others believe no dollar should go unborrowed.

Here, however, are the broad facts.

First, we're not going crazy borrowing against our homes. According to the most recent Federal Reserve figures, our houses are now (mid-year) worth about $14.1 trillion and are mortgaged for $6.4 trillion. That calculates to about 55 percent equity, 45 percent debt, a mortgage level any banker would love. Better still, that $6.4 trillion figure includes more than first mortgages. It also includes fast growing home equity loans and home equity lines of credit.

If you're young and owe a larger percentage, don't worry. What counts is that you plan to have it paid off by the time you retire.

Second, a great deal of home equity borrowing makes good sense. Today, it is possible to take out a home equity loan and get a lower interest rate than you pay on your older first mortgage. While you might be able to refinance your first mortgage to a still lower rate, that's an expensive proposition. Taking out a home equity loan often costs nothing. Still more of the increase in home equity credit is a transfer of high interest, non-deductible consumer credit to low interest, tax-deductible home mortgage interest.

Third, in spite of rising home equity loans and massive refinancing, both home equity and access to home ownership have increased dramatically. As recently as 1983, according to Survey of Consumer Finance figures, only 60.2 percent of all families owned their primary home, with equity (in 1998 dollars) of $4.2 trillion. By 2001 the percentage of homeowners had increased to 67.7 and home equity had increased to nearly $8.0 trillion, close to double. And that's also in 1998 dollars so its real growth.

Fourth, the playing field for consumer credit has changed dramatically. As recently as 1990, virtually all credit cards carried high interest rates. Some 93 percent of all account balances were charged 16.5 percent or more. Today, the percentage of account balances paying at high rates has been cut more than two-thirds--- only 29 percent of all balances pay at rates over 16.5 percent. An amazing 46 percent pay at rates under 10.99 percent.

Finally, those figures are for the accounts that continue to carry a balance and pay interest on it. According to CardWeb.com, nearly 40 percent of all credit card users pay their balance in full each month, incurring no interest charges. It's plastic cash, not credit.

So where is the worry?

The answer is very simple. Averages are averages. Inside the group there are people with virtually no debt. And people with more debt than they can handle.

In the nineties the expansion of credit was focused on lower income households. Between 1989 and 2001, credit card use by households in the top quintile (that's the top 20 percent) of income rose from 89 to 95 percent. For the second quintile it rose from 76 to 87 percent. Basically, things didn't change very much.

Credit card use in the bottom quintile, however, more than doubled. It rose from 17 percent to 38 percent of households. The second lowest quintile of income had a similar experience: credit card use rose from 36 percent to 65 percent.

Result:   the averages are fine but there's more churn, loss, and damage inside.