Tuesday, April 15, 2008

A Ripple And A Shutter

As the effect of the mortgage crisis and the rising cost of necessities ripples through our economy, major retailers are looking to shutter around 100 stores each in the coming year. Retailers count on banks to loan them money during their down cycles in order to meet payroll, etc. However, banks may be reluctant to extend new loans in light of their own challenges in the mortgage market. In addition, retailers are likely to experience more acute down times as consumers save their pennies to buy gas and food rather than Manolos and iPods.

A simple "close stores" Google search returned the following: CompUSA, Starbucks, Kmart, 84 Lumber, Toys R Us, Wilson's Leather, Radio Shack, Border, Ann Taylor, Circuit City, and the list goes on and on. From a purely psychological standpoint, it is demoralizing for Americans to walk into their local malls and see store after store with the gate down and the lights out. Abandoned retail buildings with weeds growing in their parking lots only feed the pessimism and sense of despair. But, perhaps this is needed to motivate us to get out of debt as individuals and as a nation.

Going bankrupt is the pits. Nobody wants to go bankrupt, but increasingly both individuals and businesses are filing those Chapter papers. I am enrolled in Bankruptcy next semester and look forward to learning about debt, how the Code operates, and the implications for our daily lives. What I do know is that, "the borrower is the slave of the lender."

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