Tuesday, May 10, 2011

Banks lending, consumers borrowing

According to a report by the New York Federal Reserve, more consumers are willing to borrow money from banks, and in connection with, banks now and days are more willing to lend out loans. In 2008 the U.S. hit a meltdown point of debt and ever since, debt is increasing. But is debt, to a certain degree a bad thing? Debt, in terms of good can very much so stimulate the economy. If consumers feel that they are, at a comfortable time then others, able to buy more products, then isn’t that beneficial to the economy? It’s the simple rule of economics. If consumers buy, businesses are happy. Businesses are profiting, making more money and growing. This benefits the economy in so many ways. If businesses grow, job opportunities sky rocket through the roof. Unemployment rate has a chance to drop, money Is being circulated more fluidly than before. The economy has a chance to regain it’s footing. But too much debt is of course dangerous. The problem is that consumers borrow too much money then they could possibly pay off later. When consumers can’t pay off their debts, businesses, banks, or any other loaners aren’t paid. This can cause a chain reaction that isn’t wanted. When loans aren’t paid off, the economy suffers. Jobs and money are both lost. If consumers are starting to borrow more and banks are willing to lend a little more, maybe the best idea is to be cautious. To be careful on how much is lent and borrowed.

1 comment:

  1. Bank lending is a huge controversy in American politics. Within the past few years have been tending to distribute easy credit to buyers. Buyers who can’t afford the house, but buy it anymore. The buyer takes out a loan, and is obligated to pay back to loan over a period of time. However, when the economy is bad, give out easy credit it horrid for the economy. When a buyer takes a loan out on a house, and let’s say the economy is doing badly, then there’s a strong possibility that the house that buyer bought will lose its value. That being said, the loan that the buyer possess is not more expensive than the actual house. Buyers soon become agitated and refuse to pay off their loan. They are then forced to default on their loans and the bank takes back the buyers home. So all that being said, easy distribution of credit in tough times is really bad for the economy.