Some Debt Trends Are Good. This Isn’t One of Them.

[randomness]

As if the mortgage crisis weren't enough of a problem for the credit markets...

From http://www.nytimes.com/2008/01/12/business/12charts.htm:

American credit card debt is growing at the fastest rate in years, a fact that may signal coming trouble for the banks that issue them.

The surge in credit card borrowing comes as credit card default rates are gradually rising, albeit from low levels, and may reflect the fact that it has become harder for consumers to borrow against the value of their homes, both because home values have fallen in many markets and because mortgage lending standards have tightened.

Increases in outstanding credit card debt can indicate a strong economy, as confident consumers spend more, or it can indicate the opposite, as troubled consumers find it harder to pay their bills. The fact that the November increases in credit card debt came during what appears to have been a weak holiday shopping season could be an indication of the latter.

The holiday sales data indicated that consumers cut back in late 2007. But the consumer credit numbers would seem to indicate that they wound up further in debt anyway. Those are not good signs for the economy as 2008 begins.

Comments

[choirsoftheeye.livejournal.com]

Oy! The current state of the US economy is scary...

[quezz.livejournal.com]

Maybe it's time we admitted we can't afford our lifestyles anymore. This is how the middle class disappears: the middle class forgets what a "middle class" looks like. It happened in Brazil...and now we are doing the same thing. For example: anyone with half a brain should be able to know if they can afford a mortgage. We forgot during the housing boom, because we borrowed against our homes. Sure a few people may have lucked out like in any speculative venture...but speculation of that kind was left to the wealthy or to daredevils for a reason.

We made it a "middle class value" to own a home and assume it would appreciate wildly. The banks helped to convince us. We assumed that credit was money -- apparently, we forgot about the 1920's, the last time we used credit irresponsibly. Now were are paying for it. I personally don't own a home nor do I have a ton of credit debt. It still affects me because even if I am in the position to buy a home...there won't be any credit available for me to acquire one.

*sigh* I should emigrate. I will when I am serious about kids.