The Danger Of Too Much Debt
While a lack of liquidity in the credit markets are providing a natural break in spending, many Americans are also tightening their belts with the prospects of recession on the horizon. Consumer spending has slowed considerably over the last few months and it’s having a noticeable effect on the economy.
It is unfortunate that it takes this kind of situation for people to finally start thinking about saving money. The amount of debt we have in our society is ridiculous. For many people, their idea of budgeting is the limit on their credit cards. The government is no better with the national debt at $9 trillion and rising.
It can be difficult to save money in our over commercialized society. We are being constantly bombarded with marketing spam at every level, when you watch television or surf the web, we even get it from text messages on our cell phones now.
As ridiculous as it sounds, the current economic climate actually seems to encourage more debt. Rising inflation and low interest rates greatly favors debtors rather than savers. This can be misleading however, since our economy doesn’t exist in a vacuum. With the dollar falling to record lows, the relative wealth of our economy compared to the other nations of the world is taking a serious beating.
It is really the savings rate of a society that builds up wealth over time for an economy. Over the years, our society’s savings rate has dwindled and the accumulation of debt has grown to epic proportions.
As much it would help the economy for us to spend our way out of a recession, is that really the best thing for us as individuals or as a society? Debt and credit can be powerful tools to help leverage your financial situation, too much of it however can be disastrous. You need only look to our highly leveraged financial system to see how that is working out now.
May 23rd, 2008 at 4:54 pm
[…] state of chaos because of an emergency trip to the doctor or a surprise diagnosis. Like any other debt, medical bills shouldn’t be ignored but should instead be paid down as quickly and steadily […]
June 6th, 2008 at 11:28 pm
[…] state of chaos because of an emergency trip to the doctor or a surprise diagnosis. Like any other debt, medical bills shouldn’t be ignored but should instead be paid down as quickly and steadily […]