Many economic experts have reiterated the dire situation that the US economy is in. At the end of 2012, GDP declined to a dismal negative.1%, making this is one of worse quarters recorded in the history of the United States. It has become very evident that the only thing driving this economy is a debt fueled bubble of false hope being pushed by the government and the media. Let's face it, most Americans are completely broke and if it wasn't still for available credit on their cards, they would be filing for bankruptcy. The debt to income ratio of the middle class is now surpassed 150%, while just four years ago this number was less than 50%. After the financial crisis in 2007, banks quickly removed any available credit on credit cards and any open lines of credit secured by property. This is one reason why the number of Americans filing bankruptcy climbed to record numbers that peaked in 2010. These numbers of Americans filing for bankruptcy would continue to increase if it weren't for quantitative easing that began in 2009. Quantitative easing is nothing more than digitizing or printing money, whether it be adding zeros to ones bank account or the physical printing of cash the effect is the same.
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Since 2010, quantitative easing has allowed banks to increase their balance sheets by loaning out money to individuals that wouldn't have been able to borrow back in 2008 or 2009. I believe this is one of the reasons for the drop in Americans filing for bankruptcy. Most people in the US try to be optimistic and hopeful which makes them commonly avoid bankruptcy filing at all costs even if it means kicking the can down the road. The consumer debt bubble that is now being created can never be paid off in a lifetime and the individuals going down this road need to wake up quickly. As long as filing for bankruptcy is still available and the US Constitution still stands, people need to wake up and smell the coffee. Typically, a bankruptcy attorney will look at a person's ability to pay the debts the person has back through settlement or consolidation. For many individuals, bankruptcy filing isn't an option if the person has the ability to pay the debt back in five years or less. If someone has a debt to income ratio of 150%, then add in interest and household living expenses, it becomes pretty obvious that it is next to impossible to pay this debt back outside of winning the lottery. A bankruptcy attorney relies heavily on referrals and their reputation and in most cases will steer an in debt individual in the right direction.
For those naysayers that think that an economic recovery is right around the corner, they need to stop believing what they hear and do a little research for themselves. In 2013, payroll taxes increased, leaving less disposable income for Main St. America to spend and causing a further downturn in this already fragile economy. In a brand-new survey it was reported that 24% of all Americans have more credit card debt than they do cash in the bank. Just hearing this makes it very apparent that many people are just one small financial disaster away from having to file bankruptcy. Even though the Dow is now closing in on a record high, at some point in time, the stock market will get a reality check when they find out that this is nothing more than smoke and mirrors.
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