How will the financial crisis effect students?
Most of the economic jargon goes above my head. I’m wondering how this crisis will effect me, in my daily life, and when; I don’t own a house, and go to school, receiving subsidized and unsubsidized loans. Will this crisis effect my loans, and if so, when? I’ve heard that financial aid has been "guaranteed" for one more year; and after that, nobody knows. Frightening..
Yeah, I’ve heard about this guarantee on all things federal, up to $100,000, but why should we trust the FDIC, at this point?
If you have student loans with lock-in interest rates, then you are "insulated" to a degree. Wait a bit to see how this crisis unfold, but do talk to your financial advisor on how to prepare.
The real trouble starts after you finish school and go into the job market. If this crisis is not resolved, then it will impact everyone negatively. Your ability to pay back student loans depends on your earning potential. If the crisis impacts the long-term health of our economy, then your earning potential will drop as well, thus diminishing your ability to pay off the loans.
There are some really dire scenarios. Bear with me as I explain this a bit further:
1) As a people, we Americans save little and spend more than we earn. It is not only our government that is running a deficit, the same is also true for Americans collectively. So, to fund the shortfalls, we borrow from foreign countries, especially China, Japan, Korea, and some Middle East Countries.
2) These countries have been willing to lend us the money because they believe America is a safe place to invest and park their money while it earns good interests.
3) The minute these countries stop believing that America can pay off its debt because its long-term economic prospect is not good, they will scale back their lending significantly. The current crisis, if not resolved, will significantly diminish their faith in our ability to pay back the debt.
4) Should the foreign country withhold lending to us, we will be in a lot of trouble. You remember how easily credit was obtained in the past few years, right? Well, the easy credit was bankrolled in large part by foreign lenders. Our banks, mortgage lenders, and government used the foreign cash to pay for and finance a range of things like cars, houses, student loans, and government social programs such as social security, medicare, medicaid, etc. Just imagine the spigot of foreign money stops. The entire economic system runs on credit/lending. Credit is like blood, enriching the cells that are businesses and average consumers so they can grow. If credit ceases, then our economy would be in a state similar to holding one’s breath for too long. Things will fall apart.
5) Interest rates will spike. Dollar values will fall, since foreign countries will sell of their dollar-denominated holdings, sending a huge hoard of dollars into the market chasing too few goods. In other words, INFLATION. With inflation, your money will be worth less and less.
6) Inflation plus higher interest rate will mean loans getting much tougher to come by or approved, and even if approved, much harder to pay back. You will spend a lot more on oil, gas, groceries, and other necessary things because the dollar pays for less due to inflation. Businesses will not be able to have access to loans to finance their operations.
7) The economy will be in a severe recession, possibly for years. Worse, there is a chance of a depression, as the entire international financial system collapses because so much of the system is tied in with America.
All this translates into a bleak picture as local and federal government run out of money and have to tax more precisely when we earn less and less. The end result is similar to Detroit, except applied across America.
9) Cities will scale back police forces. Crime rate will rise. Many homes will be foreclosed because even people with good credit now will have trouble paying the bills. Millions will go bankrupt. Lawns will not be mowed and turn into weeds. Our roads and bridges will crumble because there is no money to pay for their maintenance. Our military will be pinched severely too, as there will be no sufficient funds to maintain our force posture. Remember what happened to the Soviet fleet after the collapse of Soviet Union? The same will happen to our navy, army, and airforce: less soldiers and equipments will just rust.
10) Since dollars are worth less, our collective ability to import diminish greatly. If you think gasoline is expensive now, think again. There is one advantage to cheaper dollar: we can export more because our goods will be cheaper. BUT, since we no longer have a good industrial base left, there is little we can export. Even if we want to rebuild our industrial base, we can’t because we need capital to build factories and train workers. Guess where all this capital/money/loans will have to come from? Right, foreign countries. Since these foreign countries no longer have faith in our economy, their will not invest in building our factories. We are stuck.
In summary, the crisis will not immediately affect your student loans, provided it is eventually resolved. If it is not, it will affect a lot more than your student loans. It will impact your living standard for the foreseeable future and your ability to eventually pay it off.
1. The Sovereign Debt Crisis and Default. PIIGS. Portugal Ireland Italy Greece Spain. Whos Next?
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Why is greece in a debt crisis?
Im trying to finish homework, its late, help me out? Explain this is simple terms.
Also answer theses:
What is the impact of this crisis on America?
What are some arguements about this topic?
thanks
Sorry to answer this question late.
Here is a link to an article in the FT today which will give you the answer about Greece:
http://www.ft.com/cms/s/0/a0574c54-046e-11df-8603-00144feabdc0,dwp_uuid=2b8f1fea-e570-11de-81b4-00144feab49a.html?nclick_check=1
The problems in Greece are slightly different from countries such as the USA and UK in that these countries are suffering from banking/financial institution losses which have precipated a shortage of liquidity worldwide. Greece has been overspending on its public sector and the worries are that it can not now service that debt because of the economic downturn generally and shortage of capital in the global economy -i.e. it can’t borrow any more. So, in many ways Greece is collateral damage in the financial crisis.
If you look at the Ft article-there is comment that Greece has been fudging its figures- so has everyone else. The losses still in the banking mess have still not been fully accounted for (some estimates suggest that only 50% has been acknowledged). So a lot of countries are in an even worse situation but have buried their heads.
Incidentally, there is great fear in the UK that our sovereign debt will be downgraded by the rating agencies – that’s really bad. It’s just slow release of information -that’s all.
How is the current financial crisis affecting the American citizens?
How is the current financial crisis affecting the American citizens?\
Include details please.
Answer much appreciated..
The current financial crisis is affecting the American citizens in many ways. For example, the american citizens are not buying decorative & fancy items now. Because they are concentrating on the basic needs. If you need 50 dollars weekly & if you get around 45 dollars what will you do? The American citizens are doing the same now. Even America has been a big economifallenngth for the world, but now they are not at a position to be as strong enough. Because weakness makes negative on mind. Does not matter it is temporary or long term. So, now American citizens are thinking themself weaker than before.
Wilbur Ross Discusses Greek Financial Crisis, IMF Aid: Video
April 8 (Bloomberg) — Billionaire investor Wilbur Ross, chairman and chief executive officer of WL Ross & Co., talks with Bloomberg Television about the Greek financial crisis. (This report is an excerpt from the full interview. Source: Bloomberg)
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Do you believe the economic collapse we just experienced is over?
Do you think another worse collapse is imminent. Is the 15million dollar per second interest payout on our loans to China, Saudi Arabia going to sustain forever? Is the frivilous printing of money by Obamonomics going to hold our heads above water for long. Are
you optomistics or are we in trouble?
This is a debt-collapse Depression (aka balance sheet depression). It is caused by too many people spending money they did not have – taking on debt. Epitomized by a government spending money it does not have and its taxpayers do not have.
Depressions unfold in phases and stages. We have only seen the first leg down, and the first bear market rally. We have a long way to go. It will continue deteriorating until the debts are paid off and the balance sheets rebuilt. BO & Company have done exactly the wrong things, and are making matters worse, and prolonging the pain. They have more than doubled the US’s total liabilities from about $54 Trillion to $110-120 Trillion since 1/20/09, just 6+ months ago.
From the 1929 Crash until the stock market returned to its previous record in 1954, it took 25 years. The Depression itself lasted from 1930 until 1946, after the war ended. This is the Greater Depression since there is so much more debt involved.
And those "green shoots" are just some reused piece of Astroturf flung out the window in front of the sheeple in hopes they will "believe" in the "change." But nobody who is paying the slightest bit of attention to what is going on believes these "changes" are of the slightest benefit to anyone but BO’s campaign contributors.