Is the United States Done Spending Freely?
The buy-now-pay-later mentality that has gripped Americans for close to 20 years now may be about to end. In recent years, the U.K., the U.S., Australia, Canada, and other countries have reaped the benefits of an economic golden era. For many Americans, it seemed like no product or experience was beyond their means as long as they were armed with credit cards. However, the dark side of this era of indulgence is beginning to show. Several signs have manifested themselves in the last few months, possibly indicating that the U.S. economy is beginning to slow. The days of spending freely in the U.S. could be coming to a screeching halt.
The Warning Signs
One indication that the U.S. economy is suffering is the stubborn housing slump that has plagued the country for some time now. Rising foreclosures have set off a credit crisis that has derailed many global markets and stirred up concerns about the robustness of the current economy. Economists agree that the shockwave spread to industrialized nations faster than they predicted, which could be a wake-up call for many spendthrift Americans.
Besieged by Debt
Though the housing crisis has hit the U.S. economy hard, most experts agree that the biggest financial problem facing Americans right now is debt. To gain some insight on what to expect in our economic future, we can look to the events in the U.K. There, the number of people soliciting professional guidance on handling debt has hit historic highs. Last year alone, the Citizens Advice Bureau reported a 20% rise in the demand for debt assistance. Loans and credit card bills represented a whopping 40% of all inquiries posed to the assistance bureau. Economists agree that this situation is analogous to what is happening in the U.S.: people with relatively low incomes are getting in over their heads either with unsecured debt or with housing they can’t afford.
Our Dependence on Credit
Our current consumer debt issues in the U.S. beg the question: why are we so addicted to credit? Some experts point to the mainstreaming of “retail therapy” as one of the many culprits. Consumers literally get addicted to shopping and buying, and they usually do so by using money they don’t have. Other economists blame Washington for setting a bad example and burdening young people with student loans so early in their lives. The widespread availability of credit doesn’t help, either. A staggering 80% of American households have at least one credit card, but it doesn’t stop there. In fact, the average cardholder in the U.S. has seven credit cards. Increasingly, these cards are used for high-tech gadgets and other toys that were once seen as luxuries. Given the current economic climate, America may have to return to its more frugal days of living within one’s means.