Posted on 07/08/2009 4:36:31 PM PDT by FromLori
Credit card delinquency figures bring to mind the rock classic “You Ain’t Seen Nothing Yet.”
Ever after today’s record report — delinquencies jumped to 6.6 percent of all card debt in the first quarter from 5.52 percent — the peak may still be far off.
The sunniest forecast in the Obama administration’s stress test suggested that credit card loss rates for banks would climb to between 12 and 17 percent in total over the next two years. This assumed an unemployment rate averaging just 8.4 percent in this year. Based on the gloomier scenario of 8.9 percent joblessness, the two-year write-off climbs to 20 percent.
As we race past the government’s worst assumptions, the risks mount that consumer distress will plunge the banks back into crisis. Despite recent rising profits, bankers will need to make sure th
The dismal job market bodes ill for default rates. The United States is continuing to hemorrhage jobs at an unexpectedly rapid pace. It would take only another few months of job losses at last month’s rate to push unemployment above 10 percent, according to Decision Economics. If June’s payroll loss is sustained — an unlikely but possible outcome — unemployment would climb to 11 percent in less than six months.
Credit card issuers may also be dismayed that once Americans lose their jobs they are taking ever longer to find new work. The share of the jobless without work for more than six months is up to almost 30 percent — the highest level since records began in 1948.
While many people can continue to service their debts for a couple of months, half a year of unemployment can cause all but the most prudent saver to default. Benefits replace roughly half of previous wages, according to the Economic Policy Institute in Washington.
(Excerpt) Read more at blogs.reuters.com ...
Wait until Obama hits upon the Credit Card Right.
All low income Americans should have access to zero interest or low interest credit cards, just like their wealthier counterparts. To fund this initiative Obama will get the government into the credit card business.
Get ready for the G-Card, coming to a supermarket near you.
BTW, MANY banks want to return the “bailout” money but the government will NOT take it back. They didn't fully understand the strings attached to it and don't want the government running their banks.
You mean Obama’s regulations have not fixed this problem?
This is old advice, but get out of as much debt as you can. It’s going to be a VERY bumpy ride for the next 3-5 years.
Unbelieveable I think they may be advocating for just something like that check this out!
The easy way around the credit card default problem is to set up a credit card payment system similar to the one created for home mortgages. The pool of consumer credit is huge, nearly $1 trillion by most estimates. Cutting the costs of paying back banks could allow financial firms to survive another assault on their balance sheets.
The weakness of a credit card reset program is that people with lower monthly payments might be tempted to spend more freely and increase the amount that they owe. The bad side of that is that their total obligations will rise and they may default at some point in the future as a result. The good side is that a consumer spending more money will help lift the economy. Dropping monthly credit card payments is nearly as good as a tax rebate. Consumers with lower monthly household costs may begin to fell flush again.
Forgiving credit card debt, or at least lowering monthly payments, is a stimulus package all its own. The $787 billion that the government is spending now in the hope of reviving GDP and job creation is not working. The government is better off mainlining the money to the consumer’s credit card.
http://247wallst.com/2009/07/08/the-great-american-credit-card-debt-foregiveness-program/
You may be more right than you know. I expect the debt will have to be monetized and Americans will receive a Basic Income Check each month form the gov’t. Probably be a few years before it hits, but I think this is where we are heading.
parsy, who will get his monthly credit and finally learn how to play guitar
DOW up on better than expected disaster!
The Bear Market Rally of 1929/30
Yes, there was a spectacular stock market crash in 1929. But a stock market crash does not a depression make. Remember 1987? There was a very similar crash … but no depression. Not even a mild recession.
The crash of 1929 proved to be only the prelude to further heavy losses in 1930-1932. After the initial crash from 381 to 199, a huge rally emerged. Prices rose all the way back to 294 for a 48 percent bear market rally. Hence initial losses were roughly cut in half!
The stock market crash on Black Thursday, October 24, 1929, was just the beginning of the carnage to hit Wall Street.
Unfortunately, investors didn’t recognize this rally as a selling opportunity. Instead, they listened to the bullish advice of Wall Street pundits and the government’s declarations that the worst was over and prosperity was right around the corner.
As we all know, this optimism proved to be, well, premature. The huge rally turned out to be just a bear market rally … soon the market started to tank again.
First, stocks tumbled back to the crash-lows, where a second and shallower rally emerged. Then after this bout of hope had evaporated, the market cascaded lower for another two years. From the high during the summer of 1929, the losses mounted to a staggering 89 percent.
Now, let’s fast forward to …
The Bear Market Rally of 2009
After having lost more than 50 percent off its October 2007 high, a huge stock market rally started in March 2009. This rally amounted to 43 percent and had all the typical characteristics of a counter trend move. Especially noteworthy was the low and diminishing volume, which is typical bear market rally behavior.
Just as in 1929, this rally led Wall Street and official sources to conjure economic optimism. This is not a coincidence … the stock market and sentiment measures are highly correlated. But rising sentiment does not forecast a betterment of the economy. Instead a rising stock market foregoes rising optimism.
Now it looks like this bear market rally is over …
There is technical support around 880 in the S&P 500. A break below this mark would ignite another sell signal and confirm the end of the rally. The next support level is around 800. If this line doesn’t hold, it’s back to the March lows. And if these lows do not stop the slide, a very important message concerning the economy will have been given: “Depression ahead.”
I think that the next few weeks and months will not only be very interesting, but also very important. Yet hardly anybody on Wall Street seems to think about the possibility of a new, stock market low.
They should. And so should you. Remember …
Employment Is Much More Predictive Of Recessions and Depressions Than the Stock Market …
Since the start of this crisis, world industrial production and world trade have been following the pattern of the 1929
http://www.marketoracle.co.uk/Article11891.html
I am interested in a couple of metrics. One is the average wage and the other is the average hours worked per employee. Both were down another 6.7% last month. Until those numbers reverse there will be no re-employment, minimal if any profits and the market’s “green shoots” will whither away to dust.
It HURTS to admit it, but Peggy Joseph was a more politically astute person than I was in correctly predicting the future under Obama.
So what happens in the Obameconomic era when a person just stops paying on their credit cards? Maybe they’re unemployed or just marginally employed? Either way they don’t have the monthly payments anymore. Will banks just write it off, or will they turn delinquents over to the collection zombies? Will the collection zombies garnish their pitiful wages and/or unemployment? Help me, Obama! Bail me out of all that debt I piled up! Make the rich pay for it! Then I can start running up my credit cards again.
Interesting but what about those that have never been in this position before ( have been wiped out, or med bills)?
I want to pay all my bills as I always have, but there is $20 an hour missing now.
Peggy Joseph — “I never thought this day would ever happen. I won’t have to worry about putting gas in my car. I won’t have to worry about paying my mortgage. Obama will pay for it!”
http://michellemalkin.com/2008/11/05/and-the-real-winner-ispeggy-the-moocher/
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