A Fragile House of Cards

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Registered: 11-11-1999
A Fragile House of Cards
Thu, 09-09-2004 - 3:53pm
by Tamara Draut August 9, 2004

As the Federal Reserve continues its "measured" interest rate increase, households across the nation are bracing for the impact. More than 50 million adults are in credit card debt, an economic problem that causes stress and at its worst, financial ruin. It helped drive the refinancing boom, as families cashed out equity at record levels in a modern-day version of robbing Peter to pay Paul. Most people would be stunned to learn that more children will now suffer through their parents' bankruptcy than their parents' divorce. The rise in household debt spells trouble for both our families and the future economy.

Almost two-thirds of the economy is driven by consumer spending, so any economic recovery hinges on Americans buying, buying, and buying some more—whether it's homes, groceries, or prescription drugs. But in this fragile economy characterized by slow wage growth, rising costs, and job instability, American families are keeping the consumption engine humming by taking on more and more debt. Some economists are concerned about the sustainability of an economy that's literally built on a house of cards. We should also worry about how households will cope with rising rates and swelling debt payments.

http://www.americanprogress.org/site/pp.asp?c=biJRJ8OVF&b=137768

dablacksox


Cynic: a blackguard whose faulty vision sees things as they are, not as they ought to be.---Ambrose Bierce, The Devil's Dictionary.