Archive for the ‘economics’ Category

Where did all the money go that was stimulating our Economy?

Monday, April 6th, 2009

This is a great question. Where did all the money go that was being pumped into our economy from 2002 to 2006? It seems like all the money globally disappeared overnight. The truth to the matter is there was never any money. Everything that was being bought and sold was on credit.

The banks, credit card companies, car dealerships, and other creditors were extending credit to everyone. These creditors also were lowering there credit standards. There is a reason why the current credit scoring process is in place. The FICO score model is calculated risk software that determines the likelihood of a borrower paying back a creditor. Evidently the creditors were ignoring this risk based software.

I am sure you can remember all the 0% interest rate loans on furniture, electronics, cars etc……… Some of these advertisers also sold you that there would be no payments for 3 years. This type of activity made no financial since, since people with high risk scenarios were being granted loans they could not afford.

With lending “its back to the basics”, if you cannot afford the loan, you don’t buy. I strongly disagree with getting furniture and electronics on 0% interest cards. My thoughts on this are what if you loose your job. How are you going to pay all of this off?

Now you are stuck with 0% interest loans that you cannot pay back.

This is what happened during the last 2 years. All of these loans started failing because of a recession and families over extending themselves. Is a Depression lurking around the corner? Unemployment during the “Great Depression was up to 25%. Now don’t get too alarmed yet, currently the unemployment rate is 8.5%. This unemployment rate is expected to go up to 10% by the end of the year.

There are signs of improvement in the market because of companies trimming the fat. Current economists claim we have hit rock bottom and are seeing signs of a recovery.

Needless to say, we as Americans are going to find ourselves in a different lending market. The requirements are going to be stringent. We are going to be required to have better credit scores and more savings to get loans.

Bottom line; don’t buy stuff on credit that you cannot afford to pay back the next month. If hard times fall in your lap, you might find a collection company calling you at work, at home and even on your cell phone.

Lets be smart for now on, and only purchase stuff we need…..

Author:Mike Clover your resource for free credit reports, credit cards, loans, and ground breaking credit news

The economic crisis: Changing American Behavior

Thursday, January 15th, 2009

The Federal Government may be counting on Middle America’s spending to shore up the economy, but it appears that most Americans are not heeding the call. This is a time when we’re saying “Let somebody else do it.”

Americans who have seen friends and family suffer economic devastation due to job loss or illness are finally realizing that it could happen to them. As a result, we’re making major changes – including cutting non-essential purchases and making regular deposits to savings accounts.

In the past few months, we’ve begun paying down debt and putting money aside for a rainy day. In a recent poll, Visa asked more than 1,000 people about their savings intentions and learned that 30 percent are actively saving for a rainy day. Others are saving for retirement (20%), for education (10%) or to purchase a home (8%). While some of these figures may overlap, that indicates that over half of us are now actively saving.

At the same time, some are simply bailing out, opting to take Bankruptcy to get a fresh start. Bankruptcy rates increased by a third from 2007 to 2008 – with 1.06 million consumers filing in 2008.

The most common reasons given for the decision to take bankruptcy are job loss, divorce, unexpected expenses, and significantly overextended credit. For many, there’s no ladder tall enough to help them see over the top.

Some have ended up in this position as a direct result of the risky mortgages they were sold. When the rates adjusted, they were unable to make the payments, so began drawing money from credit cards while putting those houses up for sale. They hoped to get out from under with their credit still intact. Unfortunately, prices began dropping at the same time, so many found that their homes were no longer worth the balance due.

Some attempted short sales – but often it was too little, too late. New plans in place will hope to streamline the process, but until now it could take 8-10 weeks to get approval for a short sale – during which time the foreclosure would have been final or the buyer gone.

Two Bankruptcy options are available:
• Chapter 7, which completely removes all unsecured debt and keeps secured debt.
• Chapter 13, which is a reorganization plan for people with little unsecured debt. Under this plan, participants agree to a repayment plan over 3 to 5 years.

The good news for those filing bankruptcy who want to keep their homes is that Judges will now be able to reduce the balance due – bringing it down to the fair market value of the home.

Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.