Economic Crisis

In the midst of economic uncertainty I would like to say that on some basic levels our economy is somewhat safe. At a very basic level the economy is still based on a farmer planting seed and harvesting more than what was planted. All the other facets of the economy are extensions of that in some way.




Ok so where does the crisis come from? Years ago I got into a situation where I had too much month left at the end of the money. I went to one of the payday advance places and wrote a check. The problem was that they charged interest. This put me in a worse situation the next month so I ended up going back. This cycle kept going for several months until I cut something somewhere to break the cycle.



Great budget story, but what does this have to do with the economy? What I was doing was basically getting a loan against my accounts receivable. This is a common business practice which becomes the same problem. Eventually you end up with your whole AR tied up in financing.



A big problem with this, aside from the interest, is that accounts receivable are not always received. Sometimes you don’t get paid at all. Then you are out that plus interest. When you realize the problem you have to cut back somewhere to fix it, but with a business this can mean peoples jobs. The best way out of this is to never get into it.



I know that this is a simplified version of the economy, but it explains why things cycle. It also explains how things are tied together. Once a financing place can’t get it’s money back from one business it’s less likely to loan out to others even if it has money from the government to do so.