The Credit Crunch and How to Survive It
The global credit crunch has finally arrived -- a worldwide pay-back for the over-reaching and over-spending of many in the Western world. Spending has dropped, and mortgage and interest rates are looking set to rise. Coupled with increasing food and fuel prices, things look bleak for many, but is it really as bad as all that? Possibly not.
What is a credit crunch?
Well, for one thing it's not a recession. It could lead to one, but that is just speculation, for the time being at least. A credit crunch is a sudden increase in the cost of loans, or a reduction in their availability. So interest rates tend to go up, and credit cards or mortgages may get refused.
A recession, on the other hand, is a decline the a country's gross domestic product for two successive quarters of a year or more. Not where we are, yet. Recessions often last less than a year, though the country may take a little while to recover afterwards. Depressions last longer, but even the Great Depression of the thirties only lasted a few years. The Great Depression was a devastating blow to much of the world, and it must have been hard to see light at the end of the tunnel, but as John D Rockefeller said at the time:
"These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again.”
How to make it through the crunch
We are not in a recession at the moment; nor are we in a depression. Money may be tight, but it won't stay that way indefinitely. Nonetheless, this is not a good time to build up large debts, which would be susceptible to high rates of interest. Borrowing money to see you through this period could well end up making things worse, for yourself and the economy as a whole (unpaid debts are what caused all this, after all). We don't know what is coming next economically, so a prudent strategy would be for each person to live within their means.
More easily said than done, of course, but there are a number of strategies to help. Please select an option from the list to find out more.
