What if the consumer is no longer interested in borrowing.

Discussion in 'Economics' started by KINGOFSHORTS, Mar 14, 2009.

  1. I know most of the talk in washington is about unfreezing the lending markets so consumers can take on new debt,buy stuff and the economy will fix itself.

    But it seems that no one has asked, what if the consumer is no longer interested in borrowing?

    Maybe now Americans want to deleverage as well since cash flow from the job is not enough to meet more obligations and paying off debt and living a less stressful life is more of what Americans want today.

    Americans have been accustomed to a permabull market,cheap credit,etc.. unlike the post depression generation who spent less,did not borrow much and saved for a rainy day.

    If wages go up enough where Americans can pay off debt quicker you will probably see the economy begin to grow otherwise I just do not see anything on the plate that will reverse the course of this deflationary depression that is slowly building.
     
  2. Stuff will have to become cheaper.

    However, there are a couple of bubbles that never seem to pop: health care and higher education.
     
  3. higher education bubble will pop in the next few years. Health Care I am not sure, with all the litigation and insurance bring up costs etc.
     
  4. gnome

    gnome

    CORRECTAMUNDO!

    This is a major flaw in the politicos' desire to "get credit flowing again".

    Firstly, there is an entire echelon of former borrowers who won't be borrowing again at anywhere near the former pace... as lenders will respect that they are poorly qualified and won't lend to them.

    Secondly, many people will be scaling back their spending, paying down debt, and trying to build some savings.. in case they lose their job.

    Thirdly, this "lack of demand" will result in higher unemployment (and therefore less overall spending in the economy).

    Gummint will NOT scale back (the assholes never do)... and will run ever increasing deficits and will increase taxes.

    This will be the path* until the American economy burns out, the dollar collapses, and nearly all Americans are bankrupt.

    And to top it all off... bad as NObama and his ideologies are, he couldn't have come onto the scene at a worse time... :(

    * unless, of course, the Gummint wakes up and recognizes they need MAJOR reform to attract foreign employers to the US.. which will then employ Americans.

    Unfortunately, I think they are too short-sighted and greedy to do what's best for America.