Mark my words...
I don't know how many of you are keeping up with current events, but there are two things going on in the US (one in the world) that, combined, make a recipe for disaster. Here they are:
1. Soaring oil prices
2. Tougher bankruptcy legislation
Okay, you say, you can understand how high oil prices can help depress the economy...but making it harder for people to declare bankruptcy??? That's silly, you may say.
Or is it?
Think like this: you are a consumer with credit cards. No significant debt yet, and you have a job. However, with the economy the way it is now (and with oil prices on the move, it could get worse), there's a good chance your job could either become redundant, get moved overseas, or just go away altogether (i.e., the company you work for goes under). Now, are you willing to take the risk of building up credit card (or any) debt under these circumstances, if you KNOW there's no "safety net" (i.e. bankruptcy) should you hit the financial "skids"?
Of course not.
So, what happens then? You spend LESS. Less spending means less money going into retail, which drives about 1/3rd of the GDP. That, coupled with soaring oil prices, could spell ...well, maybe not *disaster*, but it could cause severe damage to the economy. Could it start our slide into the next Great Depression? Who knows. I do, however, believe in the Domino Effect. Having had to go through bankruptcy myself (about $20k in debt, then no steady job for ... about three years now), when I get back on my feet, I intend to squirrel away as much of my money as possible. Screw retail.
What if a vast number of Americans take the same approach?
Passing the bankruptcy bill as-is (which the Senate did) is borderline dangerous. I saw on a news report that about 10% of bankruptcy cases are from abusers of the system (i.e., they rack up a large debt knowing they'll file). The other 90% get screwed. But, as I predict, if consumer spending drops because of fear of not being able to get out of debt, there will be some (as I heard on "Wayne's World" once) "dutch door action." Sure, there should be more reforms. They SHOULD make it harder to file a SECOND time. That would reduce abuse, and allow for otherwise responsible citizens to have that second chance in case everything (financially) falls apart.
But I guess it's too late now. The credit card companies are screaming they're losing millions of dollars through all the bankruptcies.
How much will the credit card companies lose if people stop using their cards altogether?
1. Soaring oil prices
2. Tougher bankruptcy legislation
Okay, you say, you can understand how high oil prices can help depress the economy...but making it harder for people to declare bankruptcy??? That's silly, you may say.
Or is it?
Think like this: you are a consumer with credit cards. No significant debt yet, and you have a job. However, with the economy the way it is now (and with oil prices on the move, it could get worse), there's a good chance your job could either become redundant, get moved overseas, or just go away altogether (i.e., the company you work for goes under). Now, are you willing to take the risk of building up credit card (or any) debt under these circumstances, if you KNOW there's no "safety net" (i.e. bankruptcy) should you hit the financial "skids"?
Of course not.
So, what happens then? You spend LESS. Less spending means less money going into retail, which drives about 1/3rd of the GDP. That, coupled with soaring oil prices, could spell ...well, maybe not *disaster*, but it could cause severe damage to the economy. Could it start our slide into the next Great Depression? Who knows. I do, however, believe in the Domino Effect. Having had to go through bankruptcy myself (about $20k in debt, then no steady job for ... about three years now), when I get back on my feet, I intend to squirrel away as much of my money as possible. Screw retail.
What if a vast number of Americans take the same approach?
Passing the bankruptcy bill as-is (which the Senate did) is borderline dangerous. I saw on a news report that about 10% of bankruptcy cases are from abusers of the system (i.e., they rack up a large debt knowing they'll file). The other 90% get screwed. But, as I predict, if consumer spending drops because of fear of not being able to get out of debt, there will be some (as I heard on "Wayne's World" once) "dutch door action." Sure, there should be more reforms. They SHOULD make it harder to file a SECOND time. That would reduce abuse, and allow for otherwise responsible citizens to have that second chance in case everything (financially) falls apart.
But I guess it's too late now. The credit card companies are screaming they're losing millions of dollars through all the bankruptcies.
How much will the credit card companies lose if people stop using their cards altogether?
posted by xanadian at 12:02 AM
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