Show notes from Episode #162 of the Sweaty Startup Podcast.
We’re living in historic and uncertain times right now, with a lot to consider. How will the current pandemic shape how we shop, how we work, and affect our economy in the long-run?
The top concern for Nick in the current economic climate is a potential debt crisis. Debt is what keeps a dynamic economy moving. You can buy a house, a car, stocks, and even everyday products through debt, some of which is in relatively safe and secure manner and some of which is reckless personal financing.
As the economy tightens up, there’s increased risk of a debt crisis. If people fail to pay their debts, lending becomes riskier and banks require higher rates to write their loans. This in effect makes it harder for borrowers to pay their loans off, or makes them less likely to take out a loan for something like a house or a small business, both of which are destructive to our economy. Very few Americans have substantial amounts of money saved up, we are fueled by debt.
The Fed has already lowered rates to promote healthy lending, but this hasn’t solved the problem yet. Now the government is needing to step in and finance loans, which is a last resort to promote the activity that our economy needs.
If America falls into a debt crisis, it will affect every small business and sweaty startup in the country. Consumers will have less money to spend and will need to cut their spending on services like lawn care, landscaping, and painting. Summer home projects will be delayed, which then puts businesses at risk. If there is one thing you should be following closely in this time, it’s how Americans can deal with a looming debt crisis.