Double dip recession deflation and depression in California? A good time to file bankruptcy.

                                                                          THE UNEMPLOYMENT RATE IS STAYING HIGH

The unemployment rate is still 12.3% in California and the economy lost 27,000 jobs in June according to the California Employment Development Department.  The LA Times reported that even though the economy lost jobs, the unemployment rate slightly declined.

Even so unemployment is still high and there does not seem to be any economic recovery coming soon for poor California.  In fact there seems to be a lot of talk about a double dip recession.  With no recovery on the horizon and high unemployment, it does appear as if the economy could slip into another recession.

                                                                                                  DEMAND IS FALLING

If unemployment benefits don’t get extended then there will be even less money in the system.  With less money to spend demand for goods falls and so do the prices for those goods. These falling prices brought on by falling demand are a sign of the beginning of a possible deflationary spiral.  This apparently is a hot topic now on Wall street.

Again as reported in the LA Times, the consumer price index showed that prices for everything except food and energy was up .9% for the year but this was the smallest increase in 44 years.  If demand continues to fall with increased unemployment and no extension of unemployment benefits then companies would have to do some serious price cutting to boost their sales.  This price cutting is deflationary.

                                                                                         RECESSION OR  DEPRESSION?

What does that mean to the consumer?  Well it’s good if you have not lost your job but you just have to pay less for what you buy.  You can now save a lot of money by buying the things you need at the new lower prices.   This situation can be good for the consumer but it can trigger a deflationary spiral as consumers sit on the sidelines and don’t buy anything because they believe that if they wait and things will get even cheaper.

Deflationary spirals and depressions often go together.  One leads to another as less and less buying leads to more unemployment, lower prices, a downward spiral, and general economic decline.  Apparently in the great depression prices declined 27% from 1929 to 1933.

 But what about the debtor?  If you are in debt then your burden gets even worse.  You will be paying back money borrowed previously when money was more available than it is now.  Now that it is scarce, it is much harder to pay back and the interest rates you are paying on credit card debt and other unsecured debt can be astronomical.

                                                                                 BANKRUPTCY MAY BE A NECESSITY

Therefore a deflationary period is a good time to get rid of debt in a bankruptcy.  You will need those scarce dollars to pay your bills and buy what you need to survive.  Spending your money on past debt is not a good idea in a deflationary spiral/double-dip recession/depression period.  In fact it may be a necessity for you to lose that debt to survive these difficult economic times.

Don’t think now that you have the luxury of being able to pay that debt back as you may have had in better times.  You may need to seriously consider bankruptcy for your own survival.  Why kid yourself that you can pay back these debts?  You will surely need your money for your basic needs and those of your family. 

You may lose your job and join the 12% unemployed so if you have any extra money available or if you even have a decent income coming in now don’t give it to the credit card companies or other unsecured creditors.  In California there is a very generous exemption program that allows most people to keep most assets and you can certainly keep your job in a bankruptcy.

Contact a bankruptcy attorney and file a bankruptcy today before you foolishly pay all your money to these creditors that you could discharge in bankruptcy.   The financial life you save may be your own!

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