credit card debt story - it's already a depression for a lot of folks

[grapejelly]

Deer Hunting With Jesus is an interesting book about what some would call white trash in the US. The rather poor small town folk who voted for George Bush. With low paid jobs in Walmart and in difficult tedious work such as, say, meat packing.

The story of mounting credit card debts suggests Americans are profligate spenders but I'm not so sure.

I think if you put these two pictures together, that in the book and the one you read in these sorts of articles and reports, the picture is radically different. It's one of many Americans who have no reserves whatever. Who are always on the ratty edge of being on the street.

They use credit cards the way people used to use savings -- whatever is left on their credit line is used as a cushion for emergencies and crises.

They may put their mortgage payment on a credit card at times.

Now these folks are seeing their homes go into a negative equity situation. Once again, they have nothing.

They are already in a Great Depression.

I think this has very strong social consequences that we can only begin to fathom.

[Rajiv]

Re: credit card debt story - it's already a depression for a lot of folks

See also Danny Schechter's new e-book SQUEEZED Should be read by everybody here.

Money makes the world go round, and lack of it can make your world go down as it has for so many people around the world. The law of gravity is as relevant in this sphere as any other: what goes up must come down. And right now, in the United States, some markets are going down as a full-blown credit/debt crisis brings economic issues into focus. Suddenly, stories that were buried in the back of the newspaper are up front as a new wave of economic pain ricochets from Wall Street to Main Street and back again. Waves of layoffs are rolling through the housing and finance sector while bankruptcy filings and foreclosures multiply. Suddenly reports of a kind that we have been accustomed to read about in the news of poverty and downward mobility overseas are coming home to roost.

There’s fear, uncertainty and even panic in the world of finance. In an interconnected interlaced system, when one sector implodes, others follow. We are now hearing about what’s been called the “Sub-prime crisis” as if only one small corner of the economy is in peril. But, like a serious infection, when untreated, a disease can spread into the whole body and damage not only its well-being but the confidence others have in it.

That’s what seems too be happening in the financial markets.

As Peter Morici explains in the Globalist, “Subprime mortgages are hardly the whole credit market, but the meltdown of their bonds cast a spotlight on the decaying integrity of investment banks and bond rating agencies…. Over the last several weeks, creditors have increasingly sensed they cannot trust banks or bond rating agencies, and they have fled to short-term Treasury securities. This was much worse than the collapse of mortgage companies that originated housing loans, because it caused all segments of the credit market to collapse.”

Its been called a Ponzi scheme – a manipulated and criminal enterprise.
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THE UNITED STATES OF DEBT

Total number of Americans ................................................. 300,000,000
Total consumer debt of Americans ........................... $3,000,000,000,000
Average debt per U.S. household ...............................................$30 ,000
Number of households not paying off their credit card
balances each month .................................................. ............... 6 in 10
Average length of time, in months, spent paying off
credit card debt .................................................. ...............................43
Consumer bankruptcies in 1980 ................................................. 287,463
Consumer bankruptcies in 2004 .............................................. 1,500,000
Consumer bankruptcies in 2005 .............................................. 2,000,000
Percent increase in bankruptcies .................................................. ... 422
Amount the average college student owes in loans
by graduation .................................................. .......................... $30,000
Amount that same student owes in additional
consumer debt: $20,000
Amount $1 invested in stocks in 1963 would have
compounded to today .................................................. ................ $12.36
Amount $1 invested in real estate in 1963 would
have compounded to today .................................................. .......... $1.79
Total in 2005 and 2006 lenders wrote in new
home mortgages .................................................. .... $3,200,000,000,000
Net profit percentage annually by the major
credit card companies .................................................. ...................... 54
Years it took for America to move from a society
based on production to a nation driven by consumption ......................... 25
Date when the first baby boomer will be eligible
for early retirement .................................................. ................... 1/1/2008

[FRED]

Re: credit card debt story - it's already a depression for a lot of folks

See also Danny Schechter's new e-book SQUEEZED Should be read by everybody here.

Net it out, here's the deal: "The average U.S. household has only 18.5 days of liquidity."

That's the average, including the one percent of millionaires and hundreds of billionaires who skew the average. The mean and median data are worse.

[Slimprofits]

Re: credit card debt story - it's already a depression for a lot of folks

Schechter's article in LA City Beat: House of Cards You thought the housing crisis was bad? You ain’t seen nothing yet.

Since Ronald Reagan, we have been living in an era in which neither the meltdown of the savings and loan banks in the 1980s nor the Enron-like scandals of the Bush years has stopped the relentless advancement and protection by both parties of the ability of financial institutions to make a buck at any cost to the social good and economic fabric. Which is what you get, of course, when both parties are so dependent on massive financial contributions to get their candidates into office and when the corporate media, heavy with advertising from the FIRE sector – Finance, Insurance and Real Estate – doesn’t warn the public or investigate the egregious fudging, misrepresentation and outright fraud that underpins the subprime and looming credit card crisis.

[..]

Here in the U.S., one mother, Joan E. Lisante, has set up a website targeted at other parents, www.consumeraffairs.com, so they can tell their stories. She wrote recently about what she calls the “plastic prison.”

“My 22-year-old son Jon, a college senior, got 52 credit card offers in the last year. I know this because, like a CIA operative, I intercepted the offers pouring into our mailbox.

“He got 19 from Capitol One, 13 from Providian, six from Washington Mutual, four from Chase, four from eBay and one each from an assortment of lenders ranging from PayPal to First Premier Bank in Sioux Falls, South Dakota (co-capital with “Small Wonder” Delaware of the credit card kingdom).

“Most begged Jon to rip open the envelope and wallow in instant gratification. Capital One, the most persistent suitor, shouted, ‘Offer Status: Confirmed. No Annual Fee!’

“‘16 Card Designs’ (but none that tally the total whenever you use it). You could get a response in as little as 60 SECONDS when you apply online.

“Now this kid has never held a job (yet) for more than one summer. He spent one summer working in the FEMA flood insurance call center, which shows how much expertise you need to work there. Although he is familiar with the inner workings of Blockbusters and Starbucks, Jon’s not yet a member of any corporate elite, prestigious profession or skilled craftsman’s guild. Does this matter? Apparently not.”

[..]

“The key for the banks,” Manning says, “is to get them dependent upon consumer credit, shape their attitudes towards savings, consumption and debt and to then multiply the number of financial products that they’re buying from that particular bank so the credit card will lead to the student loan, to the car loan, eventually to a home mortgage and then maybe some insurance products and investment opportunity.

The banks, he says, want students in a condition of dependency. “Young people today that see credit as a social entitlement have no understanding of what it is going to entail to repay those loans back. Once they’re used to living on borrowed money, then the banks realize that they’ll be following that pattern possibly for the rest of their lives. By the time they graduate they’re so indebted, and they’re so dependent upon the use of credit and debt, that it’s already presaged their future. They can’t possibly pursue the kinds of careers that they anticipated.”

[..]

Track the subprime and credit card mess back, and you will find its origins in free market policies since Reagan that deregulated banking and much of the oversight that managed for years to keep the greed-meisters on Wall Street in check. The failure of media-lionized Alan Greenspan’s Federal Reserve Bank to pay attention to predatory lenders and sub-prime schemers allowed them to prosper.

Add to these failures a complicit Congress, with Democrats and Republicans alike dependent on donations from the three leaders of the FIRE economy.

familliar themes!

see also national data and charts: Credit Quality Report (May 2008) source: Wells Fargo

[tree]

Re: credit card debt story - it's already a depression for a lot of folks

Big medical and dental bills not covered by insurance go straight to the card -- where else can they go for those with slim savings? :eek:

These debtors, if they don't have houses to protect, should seriously consider bankruptcy. Many of them -- including those making over their states' median income -- will find that they can still declare chapter 7, which erases unsecured debt. Too many fall for debt settlement scams.
And those who hope to wish their debts "into the cornfield" may find debtors' attorneys taking them straight to court.

Bankruptcy "reform" by Congress in 2005 makes it harder to go bk, but bk is still well and alive. Unfortunately, in some regions, especially the South, there is still substantial cultural prejudice against declaring bankruptcy. But when creditors, including hospitals, start threatening to garnishee wages, even the most reluctant can be persuaded to file.

For the perspective of some of the nation's best law professors specializing in credit issues, see www.creditslips.org.

[WDCRob]

Re: credit card debt story - it's already a depression for a lot of folks

Net it out, here's the deal: "The average U.S. household has only 18.5 days of liquidity."

That's the average, including the one percent of millionaires and hundreds of billionaires who skew the average. The mean and median data are worse.

Who knew the average American was such a deadbeat, eh Sapiens? Guess they're just too stupid to help themselves. :rolleyes::rolleyes::rolleyes:

[tree]

Re: credit card debt story - it's already a depression for a lot of folks

I have heard one of the nation's leading spokesmen for lenders refer to troubled debtors as "pauvrecitas"--pardon my guessed spelling, but it's Tex-Mex for "poor little things," and it's not a compliment.

This fellow was all for "personal responsibility."

But where is the responsibility among the many lenders that have lured the uneducated into taking on consumer debt?

Many a smarty-pants college grad has labored hard to figure out how to persuade working folks to spend money they don't have.

Is it stupid to be broke? Well, yes, sometimes. I have a friend who overspent for years, and she should have known better. She had no excuse that I can think of. (Eventually she fell for a debt settlement scam.)

But I can think of others who simply never knew how to withstand the siren song of Madison Ave., working on behalf of Wall Street, not Main Street.

Lastly, a lot of good fortune is just that -- it's luck.

[JayS]

Re: credit card debt story - it's already a depression for a lot of folks

"pauvrecitas"--pardon my guessed spelling, but it's Tex-Mex for "poor little things,"

"Pobrecito" does mean "poor thing" and is traditionally sympathetic. However, I almost always hear it used sarcastically.

[tree]

Re: credit card debt story - it's already a depression for a lot of folks

Thanks for the spelling. He was being sarcastic.