Is there an artificial, consumer driven impetus to the current economy? Best answer on the web

Posted in: darrelrussell.com edit
07 Jan 2009
  • With a consumer mentality of, "Buy it now before prices go up..." is it possible that this helps to stimulate an otherwise moribund economy? With much of this "impulse" buying being financed, does all of this credit card consumer panic buying put off and exacerbate an eventual recession?


  • Credit card debt is the most expensive debt you can have. Because the interest rate is a lot higher for credit cards than it is for other types of debt.

    And if consumers are now maxing out their credit cards. Then this is bad news for the economy. Because many of these consumers will not be able to repay their debts. And eventually these consumers will have to cut back drastically on their spending.

    When people's incomes are increasing and people are spending more money. Then this is good for the economy.

    But when people are spending borrowed money. Then any benefit for the economy is temporary. Because there is a limit to how much money people can borrow. And borrowed money is not free. On top of repaying their debts people will have to pay high interest too. Which may be good for the banks. But not so good for all the other businesses that provide goods and services.