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Does Increase In Debt Equal Increase In Spending?
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10 Aug Does Increase In Debt Equal Increase In Spending?
Recently, the Federal Reserve reported that consumer credit card debt increased at double the rate expected by economic experts. However, this has raised some debate between the rosy predictions that consumers have resumed buying goods and real estate and the gloomier observation that consumers are paying for basics using credit rather than cash. Some government officials believe that the recent economic stimulus chacks have resulted in increased spending, but some economists have stated that the government checks have only put off the problems until tomorrow.
The key to reading these reports is to see what we are buying. The dollar amounts and volumes for purchases of automobiles and retail goods are down. Meanwhile, defaults on mortgages and home equity loans are rising at record rates. The cost of consumables such as engery, food and transportation continue to increase.
These should be warning signs for any consumer. You know it when you use your credit card to pay for groceries. Does it make sense to pay interest on a debt for food you've already eaten? You know the answer. Lay off the credit for basics before you become a statistic.