Joshua Just Lawyer

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If you watch the precious metal market (as I do) you might have read this Wall Street Journal article that the gold market in New York went up this week. Or maybe you just hear all those cash for gold advertisements flooding airwaves lately. Perhaps it has you wondering – why is the gold market on the rise?

Why is Cash for Gold on the Rise?

The issue has to do with our economic recession, and the fact that people are unsure what the future holds. Some economists argue that we’re in store for an inflationary period which will contribute to the devaluing of our currency. In times of inflation, even though money devalues, the value of the gold market does not fluctuate. Inflation has no effect on non-monetary items like gold and real estate, which could be used to secure goods if currency is unavailable.

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What does the credit crunch mean?

The most recent consumer credit statistics issued by the Federal Reserve show that nationwide total consumer credit decreased at an annual rate of 5-1/2 percent in February 2010. In addition, revolving credit decreased at an annual rate of 13 percent and non-revolving credit decreased by roughly 1.5%. Basically, this means there’s less credit available for people to use right now but when you look at the numbers, you might be tempted to think that’s not necessarily a bad thing.

As of April 2010, the total consumer debt in America stands at roughly $2.5 trillion dollars. That’s approximately $8, 100 in debt for every person (including children) that lives in the United States. A 2007 study conducted by the National Association of Business Economics showed the combined threat of subprime loan defaults and excessive indebtedness posed the biggest short-term threat to the U.S. economy and we certainly saw the fallout from that in the 2008/2009 financial crisis.

So if the total consumer credit numbers declining, and there’s a little less easy credit floating around, you’d think most debters would use this time to reign in spending and focus on paying down their debt. Here’s why that’s not quite so easy.

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