What would happen if we did nothing to fix the credit crisis?
Question/Comment: I just listened to your explanation of the credit crisis on the NewsHour. I’m wondering why I should care. I am a renter, have no savings to speak of, no stocks and work for a small family business with virtually no debt. What if we did nothing? What’s wrong with letting the people who benefitted most from the junk credit pay the piper themselves?
Paul Solman: Superb question. And congratulations for being in the vanishingly small percentage of Americans who appear to be invulnerable. But even you, I’m afraid, could get hurt.
A small family business. You extend credit to customers, I assume, even if it’s only accounts receivable. What happens if they can’t pay, because their accounts receivable can’t pay, because they rely on bank credit? What happens if your customers have to cut back drastically because of investments gone bad?
What happens if your credit card company goes under, and they won’t honor it at the store?
Look, if you’ve got a hoard of cash, and food, and a generator, and who-all-knows-what-else (gold coins? medications? guns?) you may be okay. But we’re in a thoroughly interconnected world, all of us non-survivalists here in America. We go up and down together.
You’re obviously a prudent person. But unless you’re way off the grid, you’re at some risk.