What exactly happen?

People have been quick in blaming the government and the banks – the downtrend in housing prices… , But till date I haven’t seen anyone point out the real reason. The real reason being “CREDIT CARDS”

If you look closely – all the problem started from the US. Look closely at the US economy – it is a Credit Card economy! Each and every person has to have at least 1 credit card, and all the transactions are done on credit card. So what is so bad about credit card? There is nothing bad about credit cards – as long as you have the money to repay. But that is not the scenario in most of the cases. People are actually living beyond their means.

It is a huge difference between swiping a card at a supermarket and take out the cash and counting it and giving it. When you take out the money and count it a give it – you actually feel it. But with swiping – it is as easy as just signing a piece of paper!

So what happen – well people who did not have the money – started spending the credit – based on the assumption that they will repay it using their income for next month. But nobody seems to think about next month’s expense…So before long they are neck deep in credit and unable to pay. Solution – apply for a second credit card!

All this starts very early in life – by the time someone get’s out of College – they already have a huge Students loan, then once they get into a job – they buy a car – another loan – they get married – they get a house – a housing loan and a second car loan, they have kids – they take a loan for health care and another for schooling…and it goes on…

Starting from the individual – the whole society is living off loans – the US government has a balance sheet deficit of over ten Trillion Dollars (that is quite a lot of zer0000000000000s).

This is not something restricted to the US – UK and Australia are neck deep in this problem. Rest of the world is following…

Lately in India also I have seen this trend catch up. With the IT companies being lavish with their employees – people are getting used to living with easy money. I am sure most of you are being harassed by CC agencies to take a CC – they even offer you gifts to open a CC account.

Like everything else – you need financial discipline if you want to stay out of trouble. IF you don’t have the money – don’t spend it!

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