It isn’t just the increase in payday loans which concerns financiers, but the overall economic growth of the country. The high debt being carried by Americans is crippling the government’s attempts to fix the problem. Should the Feds do more or less? What about the housing industry, do we let it hit bottom or try to save it? These are just two of the many economic areas which must be addressed in order for the country’s financial status to improve.
One of the first lessons in macroeconomics is to understand aggregate demand. Aggregate demand refers to the demand placed on final goods and services at one time with the current price applied. When the people of a country are not placing a demand on goods and services, then the demand lessons which affects the country’s economics. Simply put, if there is no demand, the supply sits waiting to earn revenue.
Can the U.S. economy ever recover with private debt remaining so high? Many experts will so that it cannot. It takes the people of the nation to spend money in order for the businesses to thrive. Stagnant spending by the private sector has stunted the growth of businesses, especially the smaller businesses. The small businesses are usually run and funded by private family finances. When these finances are corrupted with large debt for personal expenses, there leaves little room for additional debt for business purposes.
Debt is not all bad. The nation was built on the ability to borrow and lend the fact that it got out of hand and has now created many problems; it shows that it is being mismanaged in the all sectors. The housing fallout could have been a good lesson for the private sector on how not to live too far beyond their means, but the spin placed on it by the media that it will “bounce back” kept people from learning a lesson from what had happened.
Loans which were taken out irresponsibility are one some of the major culprits with the economic problem. Lack of income, no job, or loss of job is preventing issues with loan payments. Booming house prices being sold with variable interest rates have caught many people in a trap of not having the extra income to make the payments once the interest rate moved upwards. The home rates dropped instead of skyrocketing as promised. Homes could only be sold for a portion of what was owed. Those who thought the home was a good investment did not pay attention to how other personal debt would play into their finances with a failed market.
High levels of debt have created households with limited contribution to the economic growth. Household budgets are not shedding debt at a rate needed to support the U.S. economy.
Bankruptcies, Payday Loans, Car Title Loans, Credit Card Debt
These areas of financial concern have become second nature to families of many income levels just trying to get by on their income. Job growth is crucial and as hard as the government has or has not tried to help, the situation does not seem to be changing anytime soon.
People will need to continue to cut back on extras in order to support the cost of living. Online payday loans, car title loans and other fast money opportunities will continue to thrive since there is no credit bureau check when determining loan status. Cut back on vacations, don’t upgrade working household appliances or entertainment technology, and skim on retirement plans and investments just to get by in the present. The future for individuals and the country will go hand in hand, one supporting the other through these tough times. Once we see the aggregate demand moving upward, the signs for an economic bounce back will be shining brightly.
