At the end of this month, Alan Greenspan, who has been chairman of the Federal Reserve for 18 1/2 years, will be retiring. While the full effects of his economic decisions over the past years may not be felt for some time, he is leaving a legacy that is influencing millions of Americans today.

During Greenspan’s career as the Federal Reserve Chairman, the U.S. experienced unprecedented economic growth. Throughout those almost 19 years, the U.S. economy had the longest economic expansion in its history, with only two recessions that each lasted less than a year.

With the economy’s steady rise, however, has also come an increase in personal debt as people take more risks with their money. Personal debt in the U.S. is now around $11 trillion, compared to $2.7 trillion in 1987. People have been tapping into the equity of their homes through mortgage refinancing and home equity loans because of low interest rates. Because people had this extra money from their homes, they have been spending even greater amounts money. Greenspan estimates that $600 billion of consumer spending in 2004 was money from borrowing against homes.

So currently, as Greenspan leaves office, prosperity is rising, but people have also gotten themselves into record amounts of debt. It will be interesting to see what happens as the housing market cools and people are left with large amounts of personal debt. These high levels of debt, combined with the new bankruptcy laws and rising credit card minimum payments will create difficult situations for many Americans. People may increasingly turn to credit counseling and debt settlement agencies to help them with their debt problems. So although he is officially retiring, Alan Greenspan’s legacy will continue to affect the American people for many years to come.

This entry was posted on Thursday, January 26th, 2006 at 6:11 pm and is filed under Debt. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.