Up until 2007, increasing levels of consumer debt was rationalized as a vital part of a growing economy because home values and 501K's overall value were easily keeping pace.
Homes once worth 150,000 had gone up to 300,000, 400,000, even 500,000 dollars.
In warmer markets, homes originally purchased for 120,000 to 150,000 in the late 70's, peaked at 800,000 - 850,000 dollars in 2007. Much of the consumer debt that was taken on was in proportion to the home equity and/or 501K savings that consumers had accrued, which means consumers were actually BEING RESPONSIBLE with their debt.
Once home values and 501K's reduced anywhere from 35% to 70% from their peak value in 2007, the stock market then crashed in the fall of 2008. Meanwhile, consumer credit card debt levels remained the same. Suddenly, consumer credit card debt in relationship to overall wealth spiked by an amount that I would guess to be anywhere from 200% to 500%!!!!
Wealth reversal began exploding since the beginning of 2008. Although credit card companies now offer balance liquidation programs at single digit interest rates, they have left out a key component. The problem with these credit card balance liquidation programs is that many consumers need to be able to respend a SMALLER PORTION of what they are paying down every month for new purchases.
Simply put, a consumer pays down their credit card debt approximately 2.5% every month (minus the interest rate charges), but that consumer would benefit immensely if they could they respend a modest portion of what they are paying down.
This monthly respend component for credit card balance liquidation programs have been COMPLETELY overlooked by everybody, and is why we must conclude that indeed, keeping everybody in debt, and continuing to favor the rich billionaires and their investments, is what wall street, and Barack Obama, are most pre-occupied with these days.
I have offered a four point economic program that requires no bailout and basically addresses the points made in this article.
Not only would this 4 point economic plan have an instantaneous positive affect on the economy without any needing any bailout money, this program would offer mid term and long term relief as well.
There has been a slight very decrease in overall consumer credit card debt in the past year, and even that tiny decrease has sparked some renewed enthusiasm for the economy. Imagine if Barack Obama actually supported legislation that made it REASONABLE for consumers to pay down their debt loads, rather than just write it off, like the banks do all the time.
Without a real consumer credit card debt paydown incentive program, HAMP had less chance of working for those who were fortunate enough to actually qualify for the program.