If you’ve been following the news, you may have heard of the $800 billion payday loans of sorts the government is about to give the consumer credit industry. They’ve already spent about $500 billion in bailing out the ailing companies that provide it to keep them from going under, why not give them more money to loan to us that we technically already gave in the form of taxes? It’s like we’re loaning the money to ourselves, and having to pay back what we’ve already paid! However, we could actually use the extra money.
We, the people, can actually fight it off, by NOT Clamping Down
The thing is that when it comes to recessions, there is always one thing that could actually help, and it is universally the thing that suffers the most, and that is consumer spending. What we mean is that during periods of economic recession, consumer spending takes a dip because of a lack of consumer confidence, and the use of payday loans usually climbs a bit. Granted, if you don’t spend because you’ve lost your job and you need to save money, then in that case you absolutely shouldn’t be spending on anything. However, the retail and services industry is one of the largest in America, and those jobs and income depend on people spending. If the purchasing stops, the economy slows even more. If you, the consumer, goes out and spends on consumer goods, the benefits are that the stores stay open and can make money and pay their employees, and the company doesn’t go under, and those people in turn can purchase goods and pay taxes, keeping the economy going.
Spending, not saving, is what beats Depressions – Get the Economy moving again
The second emergency cash infusion can be a good thing – it may not necessarily be great, but it can really work. Now, our economy is hugely dependent on credit. People use it to buy houses, cars, use credit cards, and get educations. When these funds aren’t available, then the following consequences arise: Homes are devalued, and nobody buys or builds houses anymore. Construction workers are out of a job, so are all construction specialists like plumbers and electricians, so are millwrights who make the lumber to build, and so are the loggers who procure the wood. The auto industry suffers further and further losses and they need cash, wrecking the economy of the upper Midwest, and the risk of not being able to educate the American workforce and public? That’s perhaps one of the worst risks that face us. If the government bailout can work for the American people by getting the spending going again, then money will start rolling in and the big machine will come right back to life. That will get us back on track, and that is what almost always works in periods of recession: if the money starts rolling in again, then growth begins anew. Granted, some people won’t be able to afford to, and will have to turn to payday loans in order to even stay afloat, but spend normally this Christmas. You’ll be doing America a favor.
This is a well written article but I disagree on some points. Spending is a short-term solution, it could be that there are more businesses than consumers can support. Recessions aren’t always a bad thing. It cuts waste, businesses that weren’t that good to begin with shut down.
It balances out the values of homes in Florida and California that were increasing in value so quickly that no one could afford them.
Encouraging people to spend and not save will only result in a bunch of broke 65 yr olds with no savings or retirement working as bagging boys at the local grocery store.
I run an affiliate payday loan website, so I make money from people looking for loans to pay bills and buy things but I definitely wouldn’t encourage people to handle their money irresponsibly. Still a good post though.