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Twist of the Double Edged Sword

Forgive me, I’m still catching up on my reading.

This one jumped out at me:  The Wall Street Journal reports U.S. Consumers Reduce Debt for Fifth Month in a Row

That headline taken in a vacuum should be good news right? Well… sorta. It was consumer debt that both drove the economy for the last 30 years and yet at the same time contributed to it’s implosion.

People drastically reducing spending and (hopefully) living within their means don’t help an economy that depends on consumer spending for 70% of it’s activity.  These people (including myself) are putting as much of their resources into reducing their debt and freeing themselves from the usurious practices of the banks.  But this is a case where we have too much of a good thing. If debt reduction happens too fast, the corresponding consumer spending reduction could extend this recession far longer than normal.

About the only good thing I can see coming from this either way is that if enough people relieve themselves of credit card debt, it will hurt the banks since they will no longer be able to make money from their usury. They might actually have to compete a little and put their interest rates at a reasonable level.

Anything that hurts the banks makes me smile a little inside. It’s not like they don’t deserve it.

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