The Effect Of The Federal Reserve On Debt

The Federal Reserve Bank building
America’s Debt Culture And The Financial Crisis
Part 1 How Much Is The US In Debt?
Part 2 The Effect Of The Federal Reserve On Debt
Part 3 The 2008 Financial Crisis And Its Effects
Part 4 When Did American Payday Lending Become Popular?

If you take a look on the Internet you can see exactly how much is owed by the government. Today the Federal Debt stands at $20,496,092,622,812.53 but by the time you read this it will be much higher. This amount does not include state and local debt or so called agency debt. And, it does not have liabilities for programs like social security and Medicare included either. In this article we examine:

  • Is the FED part of the problem?
  • Debt addiction
  • Breaking free from debt
  • Medical bills and debt

With the government owing so many trillions of dollars, it is no wonder that ordinary people have subscribed to the culture of federal debt. But, there is more to the problem than citizens just following the lead taken by the FED.

American households hold an average of $16,883 in credit card debt and much more in mortgages and loans. The increased costs of housing and medical bills means that for many families using a credit card is the only way to survive in the current difficult economic climate. The rise in the cost of living which has outpaced wages during the ten year period since the financial crisis is one of the reasons behind a significant rise in federal debt.

American households hold $16,883 in credit card debt on average

Once the cost of living surpasses the increase in income it causes a rise in debt. So, in spite of media commentators who blame the debt increase on reckless spending and a credit backed luxurious lifestyle, the fact is that many families are simply forced into using credit cards in order to keep their heads above water.

What is debt addiction?

Being addicted to debt is more than just spending on unnecessary shopping sprees. In many cases borrowing money to fund a lifestyle is connected to personal problems and not just financial ones. If you are in a situation where you are living from one paycheck to the next and have not made any long term plans to ever think about how you will repay existing creditors, you could be addicted to debt.

Of course, a lot of people run up large credit card bills and this does not mean that they are all addicted to borrowing. If you have lost your job and need to use the available credit to pay a bill, that is one thing. But, if you are spending to alleviate the pain that is caused by the job loss that is something else entirely.

A doctor is informing their patient about his medical bills

Being addicted to debt can be similar to alcohol or drug addiction. The spending gives you a temporary high that allows you to forget whatever problem is causing you to be upset or distressed. However, like all addictive traits, spending money that you do not have is only going to add to the problems. The only way to stop this kind of destructive behavior is to acknowledge what is going on and start to deal with it.

If you feel that you are in danger of becoming addicted to debt there is an organization, Debtors Anonymous, that can help. Furthermore, knowing how credit as well as the federal debt works can help you to understand not only how you got into the situation but also how to get out of it. Being part of the debt culture can affect anyone and once you recognize that you have a problem it is easier to change the status quo.

Being a slave to debt

Although most people are quite happy to owe money, others long to escape the clutches of the credit card and mortgage companies. Few, however, manage to get completely out of debt. And, surviving in the modern world appears to be almost impossible without a credit rating and at least one line of credit.

Eight out of ten Americans are in debt and most hold the view that it is a necessary way of life.

Where it is easy to go wrong is to put your whole lifestyle on a credit card and never clear the balance. Being a slave to debt does not mean you can’t have a mortgage to buy your own home or a loan to buy a new automobile.

In fact, eight out of ten Americans are in debt and most hold the view that it is a necessary way of life. But, using credit for an emergency or for a way to move your life ahead is not the same as being a slave to debt.

Medical bills and debt

One of the ways that people get into debt is through excessive medical bills. Unless you have extensive medical insurance you might need to borrow to pay off an unexpected bill. Around 41% of Americans are currently paying off medical debts and this is going to get worse when the Affordable Care Act is revoked. So, paying for insurance is one area which can help to avoid medical debts becoming unsustainable.

America’s Debt Culture And The Financial Crisis
Part 1 How Much Is The US In Debt?
Part 2 The Effect Of The Federal Reserve On Debt
Part 3 The 2008 Financial Crisis And Its Effects
Part 4 When Did American Payday Lending Become Popular?

About the author

Mark Larsen

Mark Larsen has worked in the finance industry for over 20 years. Over the course of his career, Mark has amassed experience in personal finance and especially short-term lending. He shares his valuable insights on onlinecreditusa.com