Wednesday, July 2nd, 2008...11:06 am
Why America Wants You In Debt
We all know that the American economy is weaker than it has been in years. Although the talk of a recession of epic proportions that will make the 1929 Depression look like a stroll in the park being a little premature, that doesn’t mean that things will be getting any easier any time soon.
With 32 million families in the US in debt, you’d think that America would be happy to help them wipe out their debt. This is definitely not the case. In fact, they want you in debt right now.
American consumers make up the majority of the economy, two thirds in fact. The American government, along with corporation spending, represents a further third. With the state of the economy being so dark and depressing at the minute, if it weren’t for consumers buying what they like when they like on their credit cards then the country would head into a recession.
Consumers generally have two main reactions when America faces economical difficulties. They either carry on regardless and continue to spend, or they batten down the hatches and save as much money as possible via budgeting. Although you might be tempted to put away your credit cards and check books, if you do so then the economy would be in serious trouble.
Although the level of debt is almost ridiculously high with the total being just under $3 trillion, this is a good thing for the American economy. The average debt is around $12,000 but it is continuing to rise. With high food, fuel and gas prices, more people have to rely on their credit cards to make it from day to day in one piece. This means they’re still spending. It also means that the economy is just about staying afloat. Without consumer spending, it would almost certainly go under. This is why America wants you in debt.
In normal circumstances, an increased level of consumer debt would put a massive strain on the American economy because interest rates and monthly payments would become a struggle after a while, but as interests rates have purposely been lowered and many have no other way of paying for goods this isn’t as much of an issue as it would otherwise be. With nothing left to lose, the American government is seriously relying on borrowing to weather the storm.
Believe it or not, the housing market is also helping the economy. Although there are more repossessions occurring today than in any previous year in living memory, investors are picking up those properties because house prices have lowered so much that now is the best possible time to invest. Any new mortgage contributes to the growth of the economy, or at least stops it from going completely under.
It’s really important that this borrowing continues, especially in the wake of an increased incidence of bankruptcy and the generally bleak economic outlook. If it ceased, we’d all be in a worse position and facing inflation levels that would decimate the country. Unless you’d be comfortabkle paying $500 for a loaf of bread, America wants… no, needs you in debt.