by Michael Luchies
America is changing as we know it more and more each day. Drastic changes that shift how we live seem to occur more frequently over the last few years. Gas prices go up.50 one day, and the stock market plummets the next. When your 401k value is falling faster than a bowling ball off of the Empire State building, it may not be your choice of investments that is to blame. Due to the inconsistencies of the market, volatility is very high. It seems we are headed for a depression. Yes, not a recession but a full blown depression. It may be 5-10 years down the line but it will come if things are not changed drastically.
Where to start: Trying to find a starting point when attempting to fix the economy is like attempting to fix a broken leg with a band-aid. Sorry for the gross image but the financial state in the United States is just as startling. Businesses need more business and consumers need more money. Solution? Well it starts with the consumer. Consumers make the business world go round. There is no better starting point for an economic makeover. If the consumer is unable to purchase products and services then everybody losses. The root of the problem is the falling expendable income of the average American family.
3 Starting points to help the average consumer:
Credit card, and loan rate restrictions: Everyone is approved! Hooray! We are in an age where anyone can buy a car worth $3,000 for $6,000 at a 19.9% interest rate. As times get harder for auto sales interest rates may reach much higher then this. Credit card and loan rates both are spiraling out of control.
Due to high rates many people be hooked by specials that seem to good to ignore. We are constantly baited into signing up for credit cards that offer 0% interest for 6 months. There is a reason that the credit card companies and bank offer such “incredible” deals. They know as you should know, that most do not pay off their balance at the end of the promotional period. When that 0% turns into 16% or higher APR compounded daily, you may be in a world of hurt.
There needs to be laws set to put a ceiling on the maximum amount of interest that financial institutions can charge customers. The banks are going under because too many customers cannot pay credit cards and mortgages so they are either filing bankruptcy or defaulting on their loans. A fixed maximum around 15.9% would seem fair for both sides, and since customers may be able to actually pay the bills the bank would benefit from this as well.
Get rid of or restrict payday loan companies: Something needs to be done about payday loan services. When a consumer gets trapped in this vicious cycle they may never be able to get out. Payday loan companies often charge 15% interest upfront so someone can have access to their paycheck a week or so earlier then scheduled. Most of the customers of these companies live paycheck to paycheck as it is. Add in fees and interest and suddenly they have a significantly diminishing amount of money left to pay bills and buy groceries. Now the customer needs their next check even sooner to help with expenses. This cycle will continue and affects hard working blue collar American citizens on a day to day basis. There should be a ban or at least stricter limits on how they operate. Payday loans are in my opinion an unethical operation.
Increase education and training: We are a product of our environment. It’s funny how the best school districts seem to end up in the cities and neighborhoods that are the best places to live as well. This is not a coincidence. Good teaching leads to learning which in most cases leads to success. With modern technology learning is not only done in the classroom but on the internet. The world wide web has opened up many doors that many thought were impossible. Online Colleges are everywhere and succeeding. Imagine if the government offered free online improvement classes, or interview skills, or anything that people could use to better themselves. The government has a responsibility and should have a high interest in the education and growth of its citizens.
It’s not always how good the education is but in what field. In struggling times only the strong survive. We need more engineers, accountants, and statisticians to help improve the state of our country. Sorry but we enough actors, journalists, musicians and psychologists. Special grants and more scholarships should be given to anyone interested in an engineering degree. The hard fields that workers are needed out of are not the easiest, and therefore do not draw a lot of interest from your average college student. Incentives work and should be used in improving education and work related training.
There are many other areas of the economy that need help before the U.S. can start to recover. Starting with these three suggestions would help stabilize consumer’s income and contribute to reversing our current crisis. After these are completed, focus would have to shit to the dreadful housing market and the nasty mess of corporations that are financial institutions.