I read something this morning in a commentary elsewhere that has made me think today. We have touched on this topic here but I want to directly ask in a thread focused on the concept...

If the average consumer was debt free or at least carried very little debt and made large down payments for loans, would the auto industries and housing market be in the mess they are in? Would we even be in a recession?

 

Very interesting question! I think the auto industry and housing markets would be in much better condition, and the banking/financial sector wouldn't be nearly as big of a presence as it is. I think that in itself would have the potential for saving our economy. 

Pat:

I think that in itself would have the potential for saving our economy. 

It's sad that we didn't slam on the brakes as consumers much sooner.

I don't believe there would be a recession if we had not as society relied on so much credit over the years.

 

Wow, that's a "thinker" question.

First, I think a lot of it has to do with the chain that flows from manufacturers to retailers (in the auto industry aspect of your question). Most car dealers buy their goods from suppliers on credit, don't they? They don't pay for the new car outright in order to sell it at a profit. If the consumer buys the car on credit, the debt load then gets passed to the financier, who passes it on to the car buyer. It's like the debt load just trickles downhill. If the consumer paid cash or made a very large down payment, that debt is smaller and can't trickle so far. But I am not a financial expert, so I'm sure the nuances to the flow are much more detailed than that!

The housing market is different, I think, at least for existing houses and not new construction. That is WAY over my head, and I'd love to hear more about that from someone in the business.

I think a lot of the recession comes down to one simple word, "GREED." If banks hadn't been so greedy for a potential profit and given loans to every Tom, Dick, and Harry without a thorough background check, they would be a lot more stable. And now we are in hot water with the world economy, because many banks have packaged up this bad debt to look so pretty, and other countries bought our debt (the debt load trickles farther). Yet that debt load must stop somewhere, and no one wants to pay for it.

The greed also falls onto the average consumer. We want to keep up with our neighbors who bought a brand spankin-new SUV, and we want to look as good as they do. So we buy the car we can't afford. Our neighbors' kids are going to private school--we don't want to look like we don't love our kids, so we send them to expensive schools, too--schools we can't afford. Our kids' friends just got the biggest iPod/toy/electronic gadget on the market, and our kids beg us to give them one just like it. Instead of waiting until the price comes down, we give in and buy it for them so our kids can be cool and hip as well.

I think slk pretty much nailed it. There are a lot of people who just don't understand how money and credit really work. Credit has created a hugh disconnect between what it means to buy something versus what it means to own something outright.

slk2042:

I think a lot of the recession comes down to one simple word, "GREED."

 

I think you hit the nail on the head.  

 Hey there folks.

The problem is not debt per se.

This problem arose because debt was piled on more debt. Greed will always be a feature of our life on Earth. It is how that greed is managed by society that is the question. And also consider the cost of the funds that our Military uses to make the World safe for Corporatism. Socialize the loses and privatize the gains.

If you truly want answers as to why we are in the state we're in you will first have to turn off the TV!

Visit sites like www.endthefed.us    Go to youtube and watch documentaries on 1929 and the crash.  I'm sorry folks, but this has been in the works since Reagan and Carter. The Moneyed interests know the biggest stumbling block to their vision of a one world government is the United States Constition. That's why they will stop at nothing to try and make it just another worthless document with a bunch of signatures on it! This is what it's REALLY about.

I came to this site because I NEED to know how to can so I can survive when we go back to being a barter economy for a while.  I have taken a bee keeping class and want to learn how to raise chickens too. Eggs will be the new currency because people will be living hand-to-mouth. Think about how terrible the Great Depression was. Now think, we have reduced the farm population to 1%, if things DO get tight, you really think there will be enough food to go around this time?  No Way!

Keep up the good work and hope to learn more on this site.

Johnny

 

Okay here on 2 month we were not in a recession now its the deflation and not infaltion wish that government and the reporters get it right I say its a hard core inflation and recession what ever it is I guess I really don't get it???.....:)

 They say in the environment we may be entering toilet paper is the most valuable commodity there is!

Watch out for TP shortages i guess, and you will have a clue as to the end of our current system!

And just to be safe-stock up....chances are you will use it someday!

John

Johnny Dangereaux:

 They say in the environment we may be entering toilet paper is the most valuable commodity there is!

Watch out for TP shortages i guess, and you will have a clue as to the end of our current system!

And just to be safe-stock up....chances are you will use it someday!

John

 

LOL!

Sorry, I just had to laugh, although you may very well be right. Remember the lines in Russia...

There are so many self proclaimed experts that it's hard to know who to listen to, if anyone. My opinion is that we should stock up to a certain extent, but not hoard things to the extreme. If/when the economy crashes, it won't be like the Great Depression and we won't be returning to any idealistic rural existence or anything like it. We've changed too much. Our society has spawned too many ill prepared, self centered individuals who will feel you owe them whatever you have. That's a bleak picture I know, but being practical is being prepared, even if it means stocking toilet paper!