lectur4-page35

lectur4-page35 - not realized their increased discretionary...

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Well, consumers had taken on quite a bit of debt during the 1980’s and many were pretty well max’ed out. Even if interest rates went to .5%, people are not going to borrow more money if they have already reached their credit limits. Folks who had variable rate loans observed their discretionary incomes increase as their monthly payments fell with lower interest rates, but many of those folks used this additional discretionary income to reduce their current debt loads. Folks with fixed rate mortgages on their homes scrambled to re-finance their homes with the lowest home mortgage rates since the 1960’s but this took time Fixed rate mortgage holders did mortgage rates since the 1960 s, but this took time. Fixed rate mortgage holders did
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Unformatted text preview: not realized their increased discretionary incomes until the re-financing process was completed. Folks that may have had little debt were fearful of loosing their jobs (employment insecurity). Every time you picked up a newspaper you were reading about more layoffs (down sizing) from companies that people normally did not associated with layoffs (down-sizing) from companies that people normally did not associated with layoffs. When you think you might lose your job tomorrow, you do not go out and take on new debt or spend your money without careful consideration. Eventually, the lower rates took hold, consumers made adjustments, and the economy began to turn around during mid-1991; and has continued that expansion to date 35 to date....
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