Credit Has Become A Dangerous Thing
by Alex Saitta
March 1, 2009
For various reasons ours has become an economy of spend, spend, spend and if you donít have the income to pay for all your spending, you borrow the difference, and if you canít make the payments, the government will bail you out.
In our economy, credit has become a very dangerous thing. Let me use an analogy to explain.
Morphine when used in small doses has medical value. When used regularly it gets a person high, but it quickly becomes addictive. When used excessively, it will kill you.
Credit is like morphine. It is wonderful if used on a limited basis. If a company can borrow at 6% and build a plant that will generate 10% revenue, that is not only beneficial to the companyís bottom line, but to the new workers who get jobs and the consumers who use the new product.
Credit becomes addictive and will burden a person who over uses it, runs up his credit cards and can only afford to make the minimum payment.
Credit will kill you financially, if you regularly spend more than you earn, and borrow the difference. Sooner or later it'll lead to bankruptcy.
Individuals, companies and governments in this country have been using credit excessively, and that is the major reason for this economic crisis.
While President Obama looked great and sounded even better making his speech, his spend, spend, spend, and borrow, borrow, borrow proposal is not the solution. President Obama, the solution isnít for banks to start lending again so Mr. Smith can buy his tenth pair of Gucci sunglasses or Mrs. Jones can buy a vacation house she can't afford. More lending will be like giving the addict more morphine. Sure it will get him on his feet in the short run, but it will kill him in the long run.
The stock market has fallen 50%. The last time it fell that much, it took 10 years to start going up again. We could be entering a long period of rough economic times. Individuals, companies and our local, state and federal governments need to get their financial house in order. Not spend and borrow more!
Instead, President Obamaís message should have been, we all need to start living within ours means, paying down our debt, stopping the tax increases and saving money for a rainy day.