High levels of debt are bad for the country for many reasons. Families cannot contribute to the economy because they are struggling to pay off debts. Housing markets slump. Most importantly, everyday American families struggle to make ends meet. According to recent research released by the National Bureau of Economic Research, however, the problem may actually be worse than previously realized. The working paper reveals that rapidly rising household debt predicts recessions.
According to this research conducted by economists Atif Mian and Emil Verner of Princeton University and Amir Sufi of the University of Chicago, high levels of household debt in relation to the GDP is followed by instability and lower economic growth, which in turn is followed by recession. Exactly why this may be true is still unclear, but this research could have a huge impact on the way we look at economics. These findings stand in opposition to previous economic models which viewed increasing household debt as a positive for economic growth due to its implications that consumption would be accordingly growing.
What Does This Mean for Me?
So what does this research really mean for you? In terms of individual families, very little. Your debt—or lack of debt—alone has little affect on the economy as a whole. Unfortunately, on a greater scale, this means that rising levels of debt is indicative of a larger economic problem beyond what we previously realized. Since current levels of debt are rising as families struggle due to stagnant wages, the rising cost of college education, healthcare, and other vital necessities, and other financial challenges, we may actually be approaching another recession—something that would affect everyone.
Of course, this is a problem that the government will have to address, not just your family. While you may not be able to control the economic consequences of overwhelming debt nationwide, you can relieve some of the burden of debt affecting your own family. Bankruptcy and other debt relief options can make it easier for you to get back on your feet with a fresh start. Not only is this good for you, it may actually be beneficial for the economy as a whole. At the very least, you’ll be able to participate in the economy more fully—and it may even turn out to be a defense against the looming possible recession.
How Ohio Bankruptcy Lawyers Can Help
With so many families struggling with debts, now is not the time to feel guilty about considering bankruptcy. Bankruptcy can be a saving grace for families who simply got in over their heads with debt due to unforeseen economic changes. Bankruptcy sometimes is the most responsible financial choice that a struggling individual or family can make. If you want to explore all your options for relieving your debt burden in more detail, the Ohio bankruptcy lawyers at Luftman, Heck, and Associates are happy to offer a free consultation on your case. Simply call us today at (216) 586-6600 to find out how we may be able to help.