When most people think of the importance of credit, they just think how credit affects them. They may think how it would be harder to live without a credit card. If the person never has any debt on his or her credit card, they may think about their mortgage or car payment. In short, they just think about how credit affects THEM.

This gives people the basic idea of why credit is important for the consumer. There are many things that consumers need, like cars and houses, that they would be able to pay in installments but not all at once.

Peopel are still able to get mortgages and car loans, though it is still more difficult than before. So a lot of people don’t quite grasp how this credit crisis truly affects them.

The problem is that most people fail to acknowledge that the world is inter-connected. We aren’t islands. In terms of economic life, we are greatly dependent on other people. Unless you are a self-sufficient farmer that just eats what you grow and you don’t use electricity, water, or any other public services (basically unless you are Amish), then you are dependent on others.

Let’s start off with businesses. Many businesses, both startup and just small in general, need credit to expand. They don’t have the initial money, but they have the idea and framework and experience to succeed. Many of these businesses have been in operation for years and have a proven record of success. If these businesses can’t get credit, because banks are unwilling or unable to lend, then these businesses can’t innovate. Not only can you not use whatever product this business may have in store for you, these businesses are unable to create or retain jobs.

Without these jobs, there is less demand for goods in general, and thus the spiral of deflation continues.

Without credit, not only can consumers not buy goods that they can afford over time, businesses can’t innovate. Without innovation, we don’t have progress, and we won’t be able to find our way out of this recession.