The last recession that our country experienced was, in truth, a mild one. The stock market and many corporate profits began to tank, but consumer spending seemed to dance merrily on through the recession without as much as a scratch. Consumer spending has long been the major engine driving the entire United States economy, which is why it is so vital that this facet of the economy be untouched even by the roughest recessive activity.

In recent decades, recessions have been like this, Bearish analysts as well as strategists have been grossly underestimating the voracious spending habits of the United States consumer, as well as their overall resilience. This has gone on for at least the past fifty years or so.

Unfortunately, this time it is different. These are considered to be the five most expensive words in the entire English language simply because of what they are indicating. This recession is going to be a doozy, there is absolutely no doubt about it at this point as people begin to see that not only is it showing the earmarks of a regular recession, but it is also shaking up consuming spending in ways that our government and economy have not seen in numerous decades.

Why is this recession going to be so much worse than every other before it?

To be blunt, it is because the United States consumer is finally completely broke. For the past thirty years or so we have been piling on our debt, and spending nearly every single penny that we have earned. This insane borrowing spree has been made possibly by utilizing a virtual smorgasbord of 0% interest and 0% down lending products with ever appreciating asset prices.

Unfortunately, this situation is now changing at an extremely rapid pace. The lenders who once put these products together have now been completely torn down and demolished. Asset prices are falling at quicker paces than we knew existed. Where is this leaving us? Unfortunately this is leaving American consumers with absolutely no choice than to cut back severely.

For example, United States debt has risen significantly from 163% of GDP as of 1980 to a startling 346% in 2007.

Household debt, which is a subset of United States debt, has risen to 100% in 2007 from 50% of GDP in 1980.

Looking at these numbers should give you an excellent indication of where our level of debt is going. The credit crisis is forcing consumers and the government alike to take a long, hard look at our current financial health and what needs to be done to fix it. This exponential rise in United States debt and consumer and household debt is proof that we are not doing what is required to handle our money in a healthy and advantageous way. Above all else, if things do not begin to change now, this mounting debt will only continue to grow, until every last consumer in the United States is completely broke, even that top 1% that holds most of the wealth in the country. If banking and lending institutions are going bankrupt, and car manufacturers are seeking assistance from the government, then things really are slipping to the point of no return at a pace that no one seemed to anticipate.

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Originally posted 2008-10-30 05:40:21. Republished by Blog Post Promoter

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Banking, Bankruptcy, Debt, Personal Finance, bad debt, credit, economy, stock market

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american consumers, asset prices, consumer spending, corporate profits, doozy, earmarks, facet, fifty years, no doubt, paces, rapid pace, recession, recessions, recessive, resilience, spending habits, stock market, strategists, united states economy, virtual smorgasbord