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Consumer debt: Some call for mass relief

Oct 17, 2011 Philip Burgess

Consumer sentiment is a major component of the U.S. economy, with spending accounting for roughly 80 percent of the marketplace. So it follows that that a heavily indebted consumer base will be hesitant to spend. More importantly, much of the mass debt that is currently afflicting consumers is in the form of mortgage dues. For that reason, Fox Business contributor Dunstan Prial argues that there will be no viable economic recovery until the housing market bounces back, and that won't occur until banks find a comfortable lending policy that straddles the line between strictness and leniency. "There is a related question, though, and the answer to it may be harder to quantify than the others: When will debt-laden U.S. consumers, rightfully scared for their jobs, feel secure enough to start spending again at levels that will boost demand and give a real jolt to the economy?" Prial asks. Some analysts, such as Salon contributor Alex Pareene, have even called on financial institutions to enact mass debt relief - indeed total forgiveness, in some circumstances. They argue this will free up consumer budgets and drive spending.