Is The U.S. In A Recession?

While watching the evening news the past few weeks, there have been several stories about the “possibility” that the U.S. “might” be headed into a recession.

Might?

Yet today President Bush told reporters at a news conference that “I don’t think we’re headed into a recession”.  

Huh?

You don’t need to have graduated from the Harvard Business School to know that we already are in a recession. Hello! Maybe certain business leaders or people in the government don’t want to “scare” the American public by actually uttering the word r-r-r-recession. How sweet of them.

But come on, give us a little credit here. We in the American public know exactly what’s going on. We’re not stupid. Things are not going that well financially for a lot of Americans right now. All you have to do is take a look around.

And you know what? As much as I hate to say it, I think it’s probably going to get worse before it gets better. You don’t just snap your fingers and halt a juggernaut overnight. It took years (perhaps a couple decades) for us to get to where we are right now, and I believe it’s going to take a few years or longer to get this thing turned around.

Sorry to sound like Mr. Doom-and-Gloom, but you can’t ignore the facts.

But in a strange way this cloud could have a silver lining. I actually think something good can come of these challenging financial times.

With all the financial pressure and uncertainty, we’re all eventually going to be forced to make some new choices that will require all of us to …

In a way, we’re going to have to re-invent ourselves. 

From a financial perspective, we’ll going to need to reduce our debt burden and consume less and less. As we do that, things are going to settle down, and we’re going to start to experience freedom again by not having to work so many hours to support our previously stupid spending habits, and we’ll come to realize that we didn’t need half of the crap that we bought in the first place.

And maybe one day we’ll get back to the day where it’s socially acceptable to just sit on your back patio with your neighbors on a July evening and just listen to the baseball game … or play fetch with your dog … instead of checking your email 20 times a day from your iPhone.

Sign me up.

The Effect Of Difficult Economic Times And Its Impact On Debt Settlement

During the past couple weeks, numerous people (both clients and colleagues) have posed the following question to me:

With the U.S. and global financial markets presently experiencing a lot of stress and turmoil, how do you think that’s going to affect credit card companies’ willingness to settle for less than full balance on delinquent accounts? 

At first glance you might be tempted to say, “Gee, in difficult economic times with so many people struggling financially and unable to pay their bills, credit card companies would probably be very eager to accept just about anything they could collect.” However, my experience actually suggests just the opposite.

What I’m saying is that when we are in a challenging or recessed economy, it is common for large financial institutions to actually be less willing to write off a substantial portion of the debt that you might owe just because profit margins aren’t what they used to be (when the economy was booming).  In other words, when profit margins are down they just can’t be as generous in writing off large amounts of debt.

Now that’s not to say that you still can’t obtain settlements for less than full balance on delinquent accounts when we’re in a tough economy. Quite the contrary. It’s just that you might have to work a little harder because creditors might put up more resistance than usual because their coffers are not as full and there’s less margin for error. When the economy rebounds, it’ll more than likely return to business as usual.

Just my opinion and observation after working in this industry for over 12 years.