Without debt there would be no economy or spending.
Bold statement…but true.
A quick synapse of this is as follows:
- As consumers we spend money.
- This money we spend makes the economy run and grow.
- We also use credit to spend the money we are spending.
- We may find ourselves in debt or insolvent through a variety of means.
- We may go bankrupt, or use another form of insolvency to discharge our debts.
- Our creditors lose out on that money we discharge, but can claim it as losses.
- We then after a period of time, have access to credit again, and spend again, aiding the economy.
Sounds simple on the surface, because it is. If we do not spend money, the shops do not get money, and they go bust, and the economy tanks.
Why are there stimulus packages in the USA, or tax rebates, or increases in benefits, as there were during and after the pandemic????? To get us to spend money!
Banks and lenders need to lend money so they can make money. And there are bad credit loans so that even those with a low credit score or bad credit, can get a loan.
It is a cycle, and that cycle of debt, discharging debt, getting more debt, improves the economy.
Naturally when a huge company goes bust, and they owe millions to suppliers and have hundreds of employees, this “trickle effect” is not good….but there always is a rebound effect.
People get a fresh start, and can spend again.
If you look at business and the economy it does a boom, bust, boom cycle.
Am I an advocate for this, and people going bankrupt? No. So before I get bombarded with those saying I am telling people to use bankruptcy as a debt management tool, I am not! Only Donald Trump does this 🙂
Well his businesses have, fact.
If you are in debt and struggling with payments and bills, you are not thinking about this cycle, your mind is just on paying the bills and the notices you may be receiving. There is always a way out, an option. It may not be the option you would like, but there is a way to stop the stress and pressure.