Thread: The use of credit cards and the economy

Originally Posted by lakeman
What this country has is too many people with too high a balance on their credit cards so they need to stop spending for a while as they pay down their balances.

As soon as the balances are low enough that people feel comfortable spending their money the almost recession will ease and whoever is in power will take credit.

Meanwhile the present admin is increasing the taxes on these people to give it to bankers and the next admin will increase taxes on these people to give it back to people who don't have credit cards. Both of these approaches are going to lengthen the amount of time it takes for things to get back to normal.

Originally Posted by nickcuse

i agree. i wish there was more chatter about the dangers of continuing to use credit in these times, espcially for people that can't really afford it. theres just no reason for it. fine, if you hot water heater goes to shits and you have to buy another one with your credit card, so be it. but i would imagine thats not where most of americas debt is coming from. i think if for the next year, americans just made a rule to not purchase anything unless they can pay cash, it would go a long way towards helping everyone out.

Good thread! I would like to add my idea here too though and it's slightly different from yours. I think that it's also a matter of some people needing to go into debt because of what Bush has done to the middle class and the lower class. When you add in the fact that the US has now declined to 12th. in the world in standard of living I think that fact bears my idea out. This is all worth a long discussion.

There most certainly are dangers to the use of credit cards but they are not all bad and we could even make things worse by not using them.

One danger which is enduring and not an issue that is timely is that the issuer of the credit card charges the merchants who accept them 2% of everything sold so automatically whatever you want to buy (whether you buy it on credit or not) has it's priced increased to make up for the 2% loss.

The less you use credit cards the smaller the increase in the cost.

Another problem is that people tend to buy more than they can afford. And this is not just a few people but most people. Many people will suffer banckruptcy as a result and we all pay for that in the end. It is harder to get a home loan as a result of other people's problems and the interest rate on the credit cards is higher than it needs to be.

But what is happening right now is that so many people have more credit card debt than they can afford and almost all of them are deciding it is time to stop incurring more. Most financial experts are telling people it is time to pay off those cards. Suze Ormon just told all of Oprah land that they need to stop using credit cards. Almost all of those credit card users are reducing spending so they can pay off their credit cards. Millions of people are not out buying stuff in the same quantities that they were buying them in for the last few years.

What do you think happens to the economy when droves of people stop buying as much as they used to.

What would happen to the economy if they continued to keep spending more than they earned?

It must catch up with people. There is no denying it. People can't continue living with the stuff they bought today that they should have bought tomorrow. They have to pay for the stuff sooner or later.

There is going to be an adjustment. Some people will go bankrupt. some people will pay off their cars or at least pay them down. It is a trend that will happen. Then in a few years when people are more comfortable they will start buying stuff again. Meanwhile this is the correction.

All corrections are painfull. We can delay this correction but it will happen or it will be shifted to someone else. The pain cannot be avoided.

Furthemore all CHANGE in the economy causes pain. The invention of the word processor was a change and it ruined the typewriter industry putting all those people out of work. Other (and more) people were employed but those in the typewriter industry needed to make a change - get new jobs.

When people buy less some retailers will need to move to other industries. They need to adjust to the change.

All change causes pain and all adjustments take time.

Now just a few people both realize this and take advantage of it. It is called arbitage. It is called selling low and buying high. It is called a lot of things. But mark my words the rich are the ones who did this and are doing this. The poor are the ones who fail to adjust. do you want to stop poverty? Then teach people how to adjust to change. The cycles of change are inevitable but some adapt and some don't. The auto workers who use the power of the union to fight to keep thier jobs from going overseas are the ones who are not adjusting. Don't fight the changes - adapt.

Meanwhile the politicians tell us that they alone can manage the change and that the will stop it. But all the while they are the ones who know what the changes will be. They are creating many of the changes and telling thier friends what the changes will be.

Originally Posted by lakeman

Originally Posted by lakeman
What this country has is too many people with too high a balance on their credit cards so they need to stop spending for a while as they pay down their balances.

As soon as the balances are low enough that people feel comfortable spending their money the almost recession will ease and whoever is in power will take credit.

Meanwhile the present admin is increasing the taxes on these people to give it to bankers and the next admin will increase taxes on these people to give it back to people who don't have credit cards. Both of these approaches are going to lengthen the amount of time it takes for things to get back to normal.

The what???? Almost recession. Are you this out of touch? I must have misread your post.

Originally Posted by lakeman

There most certainly are dangers to the use of credit cards but they are not all bad and we could even make things worse by not using them.

One danger which is enduring and not an issue that is timely is that the issuer of the credit card charges the merchants who accept them 2% of everything sold so automatically whatever you want to buy (whether you buy it on credit or not) has it's priced increased to make up for the 2% loss.

The less you use credit cards the smaller the increase in the cost.

Another problem is that people tend to buy more than they can afford. And this is not just a few people but most people. Many people will suffer banckruptcy as a result and we all pay for that in the end. It is harder to get a home loan as a result of other people's problems and the interest rate on the credit cards is higher than it needs to be.

But what is happening right now is that so many people have more credit card debt than they can afford and almost all of them are deciding it is time to stop incurring more. Most financial experts are telling people it is time to pay off those cards. Suze Ormon just told all of Oprah land that they need to stop using credit cards. Almost all of those credit card users are reducing spending so they can pay off their credit cards. Millions of people are not out buying stuff in the same quantities that they were buying them in for the last few years.

What do you think happens to the economy when droves of people stop buying as much as they used to.

What would happen to the economy if they continued to keep spending more than they earned?

It must catch up with people. There is no denying it. People can't continue living with the stuff they bought today that they should have bought tomorrow. They have to pay for the stuff sooner or later.

There is going to be an adjustment. Some people will go bankrupt. some people will pay off their cars or at least pay them down. It is a trend that will happen. Then in a few years when people are more comfortable they will start buying stuff again. Meanwhile this is the correction.

All corrections are painfull. We can delay this correction but it will happen or it will be shifted to someone else. The pain cannot be avoided.

Furthemore all CHANGE in the economy causes pain. The invention of the word processor was a change and it ruined the typewriter industry putting all those people out of work. Other (and more) people were employed but those in the typewriter industry needed to make a change - get new jobs.

When people buy less some retailers will need to move to other industries. They need to adjust to the change.

All change causes pain and all adjustments take time.

Now just a few people both realize this and take advantage of it. It is called arbitage. It is called selling low and buying high. It is called a lot of things. But mark my words the rich are the ones who did this and are doing this. The poor are the ones who fail to adjust. do you want to stop poverty? Then teach people how to adjust to change. The cycles of change are inevitable but some adapt and some don't. The auto workers who use the power of the union to fight to keep their jobs from going overseas are the ones who are not adjusting. Don't fight the changes - adapt.

Meanwhile the politicians tell us that they alone can manage the change and that the will stop it. But all the while they are the ones who know what the changes will be. They are creating many of the changes and telling their friends what the changes will be.

The only thing I would argue with is the idea that you can just adapt to having your job shipped overseas. That's pretty traumatic. People get stuff cheaper but it also means wages drop, but the price of the things we need doesn't go down. Food, housing, fuel. The price of these things (except fuel, which is down at the moment, but no one expects it to stay there) have not gone down to meet the wage drops most people have experienced over the past 15 or so years. Yes, you can start your career over every five years, but you usually start at the bottom and it takes a while to get your stability built back up again. It takes a toll on you, both financially and mentally.

A lot of people are just using credit cards to fill in the gaps. And perhaps they shouldn't have been using a credit card in the first place, but until a few years ago, they were sending them unsolicited to pretty much everybody.

lakeman- some wisdom in what you say as long as you're not trying to put the cart before the horse. In other words, don't try to say that the reason for the recession is because people stopped using their credit cards.

I think you would be further ahead if you considered how Bush created huge income inequalities in your country. When the retailers started asking for a bailout it's obvious that the people stopped buying and the reason the people gradually stopped buying is because they have no money to buy with. Not because of some epiphany where they realized that they had overextended their credit.

What blows my mind is the term "almost recession" from lakeman. This is dangerous and irresponsible.

The thing with credit cards is that they require restraint. And in a instant gratification society, that, along with "personal responsibility", is a dirty word.

There's no problem with people using inordinate amount of credit.

If the credit card companies want to give $5000 lines of credit to 18-year old freshmen in college who are studying phys. ed as their major, fine.

They shouldn't be allowed to tap the taxpayer when that boob kid can't pay his bills and files bankruptcy.

That fool kid should be required to go through formal bankruptcy to escape that debt.

Crime.

And Punishment.

And once people start growing up and using their credit wisely again, (hahahahahahahahahaha...SLAP!...sorry) the economy will be all better, the lamb will lay with the lion and the big pedophile cat will father some really weird looking animals and make someone a lot of money on the freak show circuit.

Originally Posted by ronin tetsuro

the thing with credit cards is that they require restraint. And in a instant gratification society, that, along with "personal responsibility", is a dirty word.

BINGO!! You nailed it Ronin!