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September 03, 2007


Alice Kousoum

The management of wealth by consumers worked very much like a balancing scale in that in order to avoid default consumers had to cut back on spending but cutting back on spending had adverse effects on consumption. The stock market crash occurred because consumers were not thinking collectively but rather individually. One potential solution that might have changed the results of the lack in consumer confidence might have been to educate consumers. This would especially have been a critical time to do so because the use of credit was becoming more popular. However it is uncertain whether this solution would have worked and whether a solution like this would work today, despite having a population more educated on the subject.

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