So this is just conjecture at this point, but it will be interesting to see if anyone has already seen studies on it, or when there will be studies on it, whether or not they show I'm right.
I was reading the news today and noticed that data is showing that all types of consumer loans are increasing in defaults. I was thinking about that in comparison with the unemployment rate and then remembered that retail sales have been increasing since the start of this year. People are beginning to buy things again.
Part of those sales are coming because people are finally back in the stores buying necessities that they have been going without. Part of the buying is because people have been saving more and more since October of last year (mostly the wealthy, who, coincidentally have actually seen pay increases over the last year). Those who were saving their money were really hoarding it until things seemed to have bottomed out, so until today, I thought that the retail sales were due solely to this spending. Now I have a different thought as to why some of that spending is there.
Our government seems to be coming out with a multi-billion dollar program every week that is designed to give free money (grants in most cases not loans) to people who have been struggling or will be struggling over the next year. Most have just been outraged about the struggling home owner help, but there has been quite a bit more than that going on.
So here's my theory: Those who have been struggling to make their payments, but have been making them by foregoing a lot of normal everyda purchases, are now going out and buying those things and defaulting on their payments because they know they will get bailed out on at least partially on one of those payments.
I think this might be the case because you have to be defaulting on payments in order to get aid, and until now many have just been struggling through barely getting enough to exist while still making their payments. I have to admit, with the way the government is spinning this ("it's the big bad bankers fault not yours, just take this money and we'll make it all better.") it certainly does have a small appeal to just stop making my mortgage payment for a few months, or stop making my car payment so that I can get some "free" government money.
Of course the catch with doing that is a destruction of personal integrity along with credit score. Short term gain with a long-term problem. Why is it that our government seems to be going to extremes to give us this short-term gain while building up the greater likelihood of major problems in the future?
3 weeks ago
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Interesting theory, and I really hope it isn't true. I find it very interesting that out of one side of their mouth they spout high flung rhetoric about personal responsibility and out of the other forge bills that don't hamper personal responsibility per se, but remove any consequences from it. It's like raising children. If you don't implement consequences, the lessons of personal responsibility and appropriate behavior, not to mention true positive self-esteem, will be lost.
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