Economics 101

Once upon a time there were no credit cards. You either lived within your means or had to barrow the money. To borrow the money you needed to have something to put up as collateral. No one was going to loan you money if they thought they were not going to get it back with interest. You made do with what you had; if you could not afford it you didn’t need it.

You could run up a bill at the store, but you had to pay it back. When stores got bigger and opened branches in other towns you could get a store charge card. This was good at any store in that chain, but you still had to pay it back. Then came credit cards and if you had one you could borrow money anywhere. Stores would sell you things when you had no cash and you only had to make the monthly payment. As long as you made the payments you had good credit and could get more cards. In the end you owed more than you could ever pay back, but your credit was good and there were so many things to buy.

The problem was everyone was glad to let you borrow money. Credit cards, car loans, mortgages it dad not matter. If you wanted it you get it on credit. People no longer lived within their means, but if things got tight you could use a credit card to make your payment.

You know the rest of this story. Factories moved away, jobs were lost, and people could not make those monthly payments. When people maxed out their credit and had no money to spend, stores no longer made as much money. They had to lay off employees, those employees had no money to spend, and you can see where this is going.

Until people get jobs or fell sure they aren’t going to loss the one they already have, things will not get better. You can bailout the big companies, but people still aren’t going to buy if they can’t pay. If we want out of this mess we have get people back to work. Let’s spend the tax dollars to make jobs and maybe things will start to turn around.