Economic crisis continues

By Monica Dorsett
Word Contributor

It�s on everyone�s mind. The current economy is a hot topic. There is worry that we are heading into another recession. This is probably very true.

There is no doubt that the economy is under pressure. But how bad can it get? It�s scary to think some policymakers are comparing current economic trends to what happened in the 1930s.

Even though this statement is true, the economy is nowhere near as bad as it was then. It does, however, have the potential be so.

One of the most evident changes to average consumers is the falling gas prices. The fact that gas has dropped so much so quickly is a good indicator of the economic status.

One part of the gradual economic downfall is the falling prices. While low prices allow people to buy more for less, a frightening cycle begins. Financial stress levels are lessened, but, on the other hand, big businesses cannot make as much profit and cannot afford to employ as many people. Therefore, many people are fired or laid-off. Unemployment rates tend to skyrocket. This leaves people with even less money than before to pour back into our economic system. This vicious cycle just gets worse as time passes.

Another major factor for the recession America faces is the current credit market. More people have defaulted on pre-existing credit loans than in previous years. This adds stress on the credit market.

On top of the devastation caused by those who do not pay back their loans, the credit system must account for dropping prices. Since prices are lower now than when the loan was taken out, borrowers must pay it back in the inflated dollar amount. This means in order to pay back the loan now, borrowers must put more money toward it. The consequence is that all the extra money put into the loan cannot be spent on consumer goods.

The economy is heading downward. Policymakers acknowledge this fact. They are trying to alleviate the stress on individuals, businesses and banking industries alike.

Monica Dorsett is a senior at Ottawa Township High School.