Sunday, December 23, 2007

No usury in these United States:

Story: (excerpts, emp add)
Unpaid credit cards bedevil Americans

Americans are falling behind on their credit card payments at an alarming rate, sending delinquencies and defaults surging by double-digit percentages in the last year and prompting warnings of worse to come. ...

Until recently, credit card default rates had been running close to record lows, providing one of the few profit growth areas for the nation's banks, which continue to flood Americans' mailboxes with billions of letters monthly offering easy sign-ups for new plastic.

Even after the recent spike in bad loans, the credit card business is still quite lucrative, thanks to interest rates that can run as high as 36 percent, plus late fees and other penalties. ...

Economists also cite America's long-standing attitude that debt — even high-interest credit card debt — is not a big deal.

"The desires of consumers to want, want, want, spend, spend, spend — it's the fabric of our nation," said Howard Dvorkin, founder of Consolidated Credit Counseling Services in Fort Lauderdale, Fla., which has advised more than 5 million people in debt. "But you always have to pay the piper, and that can be a very painful process."
Also, The bears must wait another quarter
Currently available data on consumer spending make it very unlikely that we'll see negative real GDP growth for the fourth quarter.

The BEA reported on Friday that seasonally adjusted real consumption spending grew at a 6.5% annual rate between October and November. ...

With 2007:Q4 real consumption growth in the ballpark of 3%, it's extremely unlikely that we'll see the negative real GDP growth for 2007:Q4 that some analysts had been predicting before the strong November retail sales figures came in.
That's amazing. 6.5% growth in real consumption from one month to the next. Looks like the American consumer will literally spend until they can no longer do so, and only then take measures to save and reduce debt.

Don't consumers read the news? Not that they should go nuts and stop spending entirely, but at least to pull back a little in light of the general warnings of future difficulty ahead (which could include a recession).

HERE'S A DEPRESSING THOUGHT: You figured that the day of reckoning was near? That faced with the prospect of trouble, people would straighten up and fly right? Well, consider the possibility that everybody, government, banks, and consumers, will just continue on in their merry way - facilitated by lots more borrowing - for up to one more year. The government is set to do that by passing AMT relief while adding to the national debt (since offsetting taxes were nixed). Banks are set to borrow massively from the Fed (anonymously, natch). And the consumer is, apparently, going to continue borrow - only this time on credit cards instead of using the MEW-AMT. And history tends to confirm this prediction in that repeatedly trends that "should" be stopped, like excessive borrowing or creeping inflation, are often not ended until literally, the absolute limit of the trend is reached - like slamming into a wall. And it ends up an even worse mess than before.


Consider that we are coming up on an election, and the Republicans will do anything they can to prop up the economy and postpone "paying the piper" until there's a Democrat in the White House.

By Anonymous Anonymous, at 12/23/2007 10:13 PM  

Yeah, I almost wish a Republican could win in 2008. They need to be made to take the full blame for what they've done but I'm sure Faux News will simply crucify the next administration for it instead.

By Anonymous e. nonee moose, at 12/24/2007 6:58 AM  

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