This is the problem with the united states, it's a country thriving on credit. Everyone I know is in some kind of debt and we dug our own grave. What's even more messed up is that people are encouraged to use their credit cards to get a higher credit score so that in the future you will be able to take a loan to buy the house that people originally can't afford.
I guess in the long run, the American dream caught up with us and has turned into a nightmare. I'm in the united states as well and I do have credit card debts, which I could easily pay off but I continue to pay off bit by bit each month to get that higher credit score.
I think the credit and loans is exactly what has f*cked this nation up. We need to be like other countries where we don't have trillions of dollars in debt. And these days the American dreams is over and people from other countries doesn't even consider the united states the land of opportunity anymore.
If you really think about it, as a whole nation the united states is in debt which reflects the individuals which counts for most of Americans.
I'm actually Swedish..
Alert: Wall of Text coming at you!
The problem isn't so much credit and loans as it is fiscal irresponsibility.
If I take out a $100k loan (I actually have roughly 200k in loans, covering the purchase of my apartment and other things), I make sure I can cover a 10% interest with no big changes to my lifestyle, and upwards of 20% with drastic changes, no matter what the current interest rate is.
A few months ago when people started panicking over interest hikes over here (along with the constant barrage of doom and gloom newspaper articles about foreclosures and layoffs), I did some back-of-the-envelope calculations and came to the shocking conclusion that I had to make some
drastic changes to my lifestyle.
I had to skip two taxi rides (one to town, one from town) and two nights/early morning drunken food binges, or I was at the risk of.. what? Skipping one night of drinking? Actually bring home-cooked food with me to work a few days a month?
In other words, I tend to lead a rather decent life, drinking beer with friends every week, buying the gadgets I want, eating good food most days (be it in town or at home), etc.
Looking at what margins I have at the end of the month, it's nothing to brag about, but looking at what the above can be exchanged for, it's a lot.
Food? I
could (if threatened at gun point) cook cheaper and more often, not eating great food every work day and save roughly $300-400 each month. I could skip a few beer nights (each one costing roughly $100 -- beer, food, taxi). I could skip toys for a few months.
This means that in reality, I have some pretty decent margins.
I'm not at a terrible risk of losing my job (you should see our laws -- companies hate them!) as the company is expanding, but even if I were, I could find a new one within a month or two with my skill set (and am currently owed half a year's salary by my government -- nice, eh?).
Summarizing my situation, I guess you could say that while I'm terrible at handling money (since I don't consciously save), I'm still fiscally responsible.
People getting loans bigger than what they can afford are the problem.
You should *always* count on interest rates possibly reaching 10%.
6-7% is normally considered a healthy economy.
2-3% happens every ten to fifteen years or so, as do 9-10%. Neither are good, but they do serve a purpose (correct the economy).
While our economy is quite a bit smaller than yours, we weathered a burst housing bubble back in the early nineties without too much trouble.
The American system of having a credit score is just annoying -- it should be a *very* simple calculation: your interest payments should be less than (salary - doable-but-not-great standard of living). Loans and credit can be refused to anyone who's forfeited on a payment (i.e., gone to a collector's agency, on to the federal/national banking regulation system or other authority capable of seizing your assets and THEN failed to pony up the dough, earning you a "permanent" mark).
Either way, detailed discussions about economy and finances don't really belong in this thread, so I'll try to shut up
