MWP2 First Draft

Financial Instability: High Interest Rates

Financial instability may sound like an age old problem that is easily solved; but the extreme difficulty in creating financial prosperity and stability remains elusive. Too many people are worried about themselves and their debt instead of focusing on the companies that put them into debt. Banks and credit card companies should not be allowed to hike interest rates so high that it literally suffocates any individual using loans or credit cards to pay bills. Even in our financial recession, the interest rates on loans and credit cards are at an all-time high, thus making it nearly impossible for a struggling population to repay their debts.

The most dangerous threat is not the financial depression of which we are currently suffering from; the most dangerous threat is the extreme financial instability that is created by ever increasing interest rates and random inflations of prices. These prices and interest rates are inviting reckless people to take out loans and with the knowledge that they possess little chance of paying the loans back. These high risk borrowers are forcing bank companies to construct such specific and ludicrous contracts that require potential borrowers to pass a screening test to qualify for a loan. With such rigorous requirements to obtain a loan, more people are unable to receive the financial aid that is needed to build a better world.

With decreasing amounts of money being leant to the population, a countries economy is going to suffer and not grow. This implies that a country will no longer be able to maintain a modern and inventive mentality that the rest of the world is cherishing.

Loans may seem like the horrific bully of the financial crisis, but in fact credit card companies are the true culprit for much of the general public’s debt. Credit card companies are more than willing to lend money to those who are less likely to pay the debt back for many reasons. One such reason is the potential for mass gains in profit. A mass gain in profit may occur when a payment is not made on time. This late payment is automatically going to be increased by an extremely high interest rate on the next payment. This pattern of higher payment after higher payment is a formula for disaster. With payment after payment piling up, other bills also become late thus forcing a person to file bankruptcy.

Although the doom and gloom seems like a never ending abyss, measures are being taken to prevent the strangle hold that these problems impose. Attempts at restricting the overall severity of interest rates have made little affect. Even though the attempts to relinquish the grasp such companies have failed, it also means we are one step closer to winning the financial stability battle. Other possibilities to restrict the power of such ruthless interest rates could be to make a maximum cap on exactly how high they can raise their interest rates, should a late payment be needed.

Governments around the globe need to be defiant against these modern day tyrants. If they are allowed to continue on their reckless and greed corrupted paths, High interest rates on loans and other debts will ultimately cause our global economy to be set farther back than anyone ever imagined. Being set back so far could include the possibility of the global economy morphing into a trade based market. A trade based market would include the means of simply trading one person’s goods for the services of another person. This proposal alone should be enough to ratify just how drastic of an effect that high interest rates pose.