Consumer Credit And Spending

Credit was born from Alfred Sloan, “ He set up the nation 's first national consumer credit agency in the 1919 to make his cars affordable”( Digital History). Sloan wanted to make money, sloan was convinced that Americans were willing to pay extra for luxury and prestige. Thus he he created credit so people would buy his cars, even if they were costly. With this new product many americans began to buy cars, clothes,furniture,household products,e.t.c. Pretty soon cars came a symbol of the new society forming in the 1920’s.”In that year, one American out of every 5 owned a car, compared to one out of every 37 English and out of every 40 French car owners”(Digital History). In other words Sloan didn’t care about lowering his price so that more people could

During 1997-2006, house prices rose 85 percent. This led to an irresponsible consumer spending spree. Millions of people bought a house that they could not afford. Government regulatory agencies and mortgage lenders became less strict with credit restrictions so that people could buy homes without making any down payment. In 2007, however, the home values and sales began to decline. Due to the loss of trillions of dollars in home value, a record number of borrowers defaulted on their mortgage payments. America was put into a recession in 2008 because of the contraction of corporate spending and consumer purchased. The prices of consumer goods spiked, while employment declined. On October 3, 2008, former President Bush signed the Troubled Asset Relief Program; however, the bill did not restore the economy as a whole. By June 2009, America's economic recovery was at its weakest since the end of the Second World War. I chose this event in history because it had a major effect on America’s economy and changed the course of history. Historians need to study the Great Recession because America should learn from their mistakes. The Great Recession was due to different factors; however, if the regulations on credit restrictions were not tampered with, then the severity of the recession could have been

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Credit card debt is one of this nation’s leading internal problems. When credit was first introduced, and up until around the late 1970’s, the standards for getting a credit card were very high. The bar got lowered and lowered to where, eventually, an 18 year-old college student with almost no income and nothing to base a credit score on previously could obtain a credit card (much like myself). The national credit card debt for families residing in the United States alone is in the trillions (Maxed Out). The average American family has around $9,000 in debt, and pays around $1,3000 a year on interest payments (Maxed Out). Many people have the concern today that these interest rates and fees are skyrocketing; and many do not

In 2008, the United States encountered a financial crisis that left millions of Americans unemployed and resulted in trillions of dollars lost. The financial regulatory system was the main reason for the cause of the financial crisis by allowing financial institutions to operate with little or no supervision. It also allowed for lenders to use hidden fees and fine print to take advantage of consumers (Wolin, 2011). President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act in response to the crisis on July 21, 2010, the intention of this act is to prevent another major collapse of the financial institution industry and geared to protecting consumers with rules to keep borrowers from abusive lending and mortgage practices

A major change that has transpired in America is the growth in consumer debts. Consumer debts have grown exponentially over the last decades due to the elimination of price controls that were once used by lenders to extend credit to consumers. “The elimination of those price controls changed the nature of consumer lending and consumer borrowing by providing an extraordinary profit opportunity to financial institutions and enhanced purchasing power to borrowers” (Lander 202). Whereas in the past, borrowing was done as a strategy for survival and used as a method for financial advancement, in recent times buying on credit and acquiring debts aimed at purchasing products for indulgence have become customary. Some feel that a consequence of this change has caused a substantial increase in consumer debts. On the other hand, others feel quite differently and believe that consumer debts are growing because of the inflation associated with the cost of necessities and the decrease in individual and family incomes. Per Christian E. Weller, a senior fellow at the Center for American Progress, “Data suggests that the run-up of debt is more of a consequence of economic necessities than of profligate spending” (583). Why are Americans going into debt more today than they did yesteryear? Despite the harm debts are causing the American society, Americans are going deeper into debts because of high interest rate loans and credit

Secondly, consumers should essentially be blamed for the Great Recession, beside they reckless took on debt and defaulted at a high rate without slowing down. On other hand, consumers were playing a high risk game by buying houses they could scarcely afford. In hope that the values for the homes they bought would rise fast enough to allowed them to refinance their mortgage with a new loan at a lower rate, before they start paying high interest rate to the financial institutions they sign the mortgage loan application.

Individual choices are responsible for debt and out-of-control consumerism. To begin with, credit cards have raised new issues as a result of people spending money they do not have. Using a credit card is fine if one pays the monthly credit payment in full, however, if they pay only the monthly minimum, it may take months to years to pay off the credit card debt. Additionally, we live in a materialistic society where what possessions we own reflect on our social status. This leads to out-of-control consumerism now that people are constantly trying to prove they are better than others even if it is out of their budget. In short, these actions are ways in which one can implement their free will. They are not required to buy expensive items nor

It suggests that given the rise in levels of inequality, the credit expansion in the personal sector before the recession was both necessary for supporting aggregate demand and employment, and it was unsustainable. According to this hypothesis, government policies that explicitly aimed at promoting lending to low income groups were the one to blame for the crisis. It also blames economists for not learning from the previous depression that occurred in 1920.

The “Great Recession,” the name given to the financial crisis that occurred in the United States between 2007 and 2009, saw the biggest contraction of the US economy since World War II. Real GDP fell as sharply as a -6.4% annual rates and unemployment rose above ten percent in the aftermath of the crisis. The primary culprit of the Great Recession was the US housing market. New financial instruments that allowed for lending to subprime customers, along with deregulation of the banking industry, and asymmetric information produced by credit agencies all played significant roles in these happenings. Moral hazard on behalf of financial product providers ultimately led to the asymmetric information that allowed the housing market to collapse.

Laura, you did a great job with explaining the importance of consumer credit. I think it is very important to have more controlled access to credit due to the unnecessary spending that takes place in the economy. I think it is a good idea for household to get into the habit of saving and get out of the habit of spending. With the recent economic turnover, mortgage companies and other investors had to get control of the credit that was accessible to consumers. When consumers go into default on their mortgage loans and credit cards, it causes issues for the lenders and their company. Having controlled access, it better was better for the business. Consumer credit has a great influence on the economy and personal spending, it is better for the

Even with increasing interest levels, the U.S. consumer credit market is positioned to do well in 2018, with delinquencies that are well-managed and extended broad access to credit across a variety of financial products. TransUnion’s (NYSE: TRU) consumer credit forecast in 2018 discovered that anticipated raises to GDP, individual earnings, overall employment along with the Housing Price Index, among other causes, are going to override possible disadvantages like raising interest rates and decreasing automobile sales.

In 2010, Her Majesty’s (HM) Treasury and the Government’s Department for Business Innovation & Skills(BIS) conducted a joint consultation entitled: A New Approach to Financial Regulation: Reforming The Consumer Credit regime. (HM Treasury, 2010) The consultation paper aimed to tighten the consumer credit sector following the 2008 financial recession, numerous campaigns by several agencies such as Debt Plan, Citizen Advice Bureau (CAB) StepChange and Money Advice Service (MAS), since debts increased debts among the financially vulnerable. (BSA, 2010; CAB, and HM Treasury, 2010)

It should be noted, prior to the crisis, there was already an increasing concern of economists and critics about the credit quality that was provided by the financial sector at the time when there was low interest rates that were applied by the government. There were also issues about the inappropriateness or ineffectiveness of the standards that were used in extending credit by the financial sector (Calvo, 171).

Poor financial decision making and weak consumer protections in consumer financial markets provided the motivation for this particular research. The Dodd Frank Act signed into federal law by President Barrack Obama on July 21, 2010, due to the most recent economic crisis, mandates the Consumer Financial