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The economy and personal debt |
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Written by Administrator
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Saturday, 09 August 2008 |
Jayson Brock | IDebtPages | 8-8-08
The US Economy is not in trouble, it is in deep trouble. Nothing that it will not bounce back from. It is truly just the natural course of a growing economy. When anything in life is growing at a massive rate it will eventually bust, pop, crash, fall off, weaken or even die. Well the US Economy is not dead, but it is serious injuried.
The current economic state is increasing personal debt and decreasing income. Household income has remained fairly even over the last year as the cost of such items as fuel, food, water and even property taxes has increased by 40-60%. This formula has created large amounts of debt. Debt that includes credit card debt, truly the next subprime mortgage crisis sitting by like a patient snake ready to jump out as soon as the current mess is clear.
Millions of Americans are using credit cards just to stay alive until the job market, gas pricies and food prices drop back down to levels that relate to their current income. Using a credit card to pay for essentials suchs as food and gas are common for the everyday American trying to make it to the next pay check. The issue is that so many are not sticking to their budgets and the debt is stacking up and about to be the next big problem in our economy.
Let's think about it for a moment. Debt is high in America + Americans have no money and less income + Home foreclosure is in the millions this year + Job loss is at an all time high + Bankruptcy is booming, this equals big write offs for creditors. Those Americans with 20k, 30k and even 100k in credit card debt are going to lean toward debt settlement to eliminate their debt. So when a debt settlement company works with those creditors to settle debt 40 cents on the dollar, where does the other 60 cents of each dollar go? It is brushed under some rug and not calculated into our economic growth or decline, at least not yet.
You see the point here is that we are shopping, living, eating, and paying bills on our credit cards daily. When we do this it is seen as economic stimulation, but the reality of it is that another time bomb is building in the financial market. All the debt that is written off or is settled is creating a false sense of economic growth.
Wachovia Corp. analyst Glenn Schultz predicted in a July 18 report that loan charge-offs by credit-card securitization trusts industrywide may climb to 7 percent in coming months from 5.6 percent currently.
The mortgage industry is going through the same crisis now. It extended credit to borrowers that truly did not qualify and now it is being written off in foreclosures and massive bank losses. Banks are closing down doors and mortgage lenders have shut down by the thousands.
Can we learn something from the mortgage meltdown quick enough to make adjustments to the credit crisis that looms around the corner. It is estimated that the credit card crisis may have an even larger impact on the economy.
For help with credit card debt visit http://www.DebtApply.com and for help avoiding foreclosure please visit http://www.MyLoanSavers.com.
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