2005 ... The year of the Black Christmas ?

Discussion in 'Economics' started by Wallace, Aug 31, 2005.

  1. via ‘Chode’ on Trade2Win forum: from:

    “ Millions of Americans are going to have a huge surprise before Christmas ... a big enough surprise to have them make a huge cut back in Christmas spending.
    The event will surprise you ... it is the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
    If your first thought is that it will not apply to you, and only to those who are involved in bankruptcy conditions ... think again.
    The new law has hidden provisions that will effect every American with a credit card who has been making the minimum payment amount in the past. This provision, by law, will have the banks change the minimum current payment of 2% of the balance to 4% ... changing the pay off period from 20 years to 10 years.
    When consumers get their 100% increase required minimum payment in November’’s statement, available discretionary income will be sucked out of retail purchases and into the banks.
    If I had to estimate it, this new change in minimum required payments will drain a minimum of 2.4 Billion Dollars of Christmas shopping purchases (November and December payments) and a reduction of discretionary income of 14+ Billion per year not taking into account increases in interest rates being charged. This is based on 2002 total outstanding U.S. credit card debt statistics. Now, 3 years later, it has to be significantly more. The effect on retail store profits, the stock market and the economy will be a very negative event.
    Information about Americans with Credit Cards ...
    Currently, 92% of Americans carry 5 to 6 credit cards in their wallets, and 55% have 7 to 8 cards in their wallet. About 20% of credit card users are “maxed out” and cannot charge more. These consumers, with no money will be forced to make double payments. This has to be some new form of banking insanity, as this will certainly force many of these consumers into bankruptcy ... but only after October 17th. when the new bankruptcy law doesn’t allow them to erase the charge card debt ... and requires them to pay it off during their lifetime. This will have a long term negative effect on the economy.
    For banks, it requires them to keep the amounts due on the books because technically it has to be paid, as guaranteed to the banks by the new law. This will create fictitious balance sheets for banks that make assets look wonderful when the likelihood of them actually receiving the payments are small.
    Currently, the average credit card debt per person is estimated at $8,652. A minimum 2% payment used to be $173.04 ... the new minimum payment will be $346.08. This happens just in time to create a Black Christmas for retailers. This is the average debt, so who have $20,000 in credit card debt will go from $400 to $800 per month. (Total U.S. minimum monthly payments as an aggregate amount would increase 1.2+ Billion/month.)
    I spoke to one subscriber who told me, its okay for everyone in my State of Massachusetts because all our homes are protected under the Homestead Act for $500,000 of assets.
    Wrong again ... Last April 21st. The new law quietly changed that. Homestead exemptions are now capped at $125,000, regardless of what the law of your state is, unless you've resided in that state for at least 40 months.
    What about someone’s car if they might be filing for Bankruptcy after October 17th.? The new Chapter 13 law requires one to pay the full loan amount ... not the current value of the car if you want to keep the car. This will apply to loans less than two and a half years old as of the date of filing. Similar new rules apply to any other property classified purchases within the last year prior to filing.
    Some folks I have talked to said, “that anyone filing bankruptcy is a bum and deserves everything they get!”.
    But, here are the facts ...
    Most filing bankruptcy are not trying to cheat the system. The average person filing earns a little over $22,000 per year and the majority had a long period of unemployment before filing for bankruptcy. Consumer's Union reported that 85% of the elderly had medical or employment reasons for the bankruptcy. Single, divorced mothers with children struggling to survive make up a large percentage of bankruptcies.
    What ever happened to our “Kinder, Gentler Nation”? Whatever happened to empathy and helping those who are truly in need. We spend Billions of dollars in government give aways to other countries and neglect our own people at home. This is indeed a sad loss of compassion for this country. ”
  2. very interesting. good post. thank you.
  3. the credit card companies and banks know much of the recievalbes out there are not going to be received so they just want to collect as much as possible as soon as possible
  4. Arnie


    There will definitely be some pain short term, but in the long term this reform was badly needed. But the timing really does suck.
  5. Ouch.
    Given the latest events, some are going to have a very tough period ahead of them. The new millennium sure has been a pressure cooker.
  6. No one should have that kind of credit card debt. Credit card spending is overwhelmingly discretionary.
  7. What one should and what one does have are two different matters.

    The sad part is that this debt has accumulated not because of useful capital investments such as cars, etc... but rather one domino's pizza at a time.

    You know, they sold manhattan for $24 in baubles way back when. Draw the parallel.
  8. (1) Looking at what serious economist/historians say about the 1929-1932 years: DEBT LIQUIDATION.

    (2) The "loss of compassion" is even more of a problem in Europe than it is in the US. In fact all these brutal "sharing and equalizing" theories flew over from Europe to the USA. Ever wondered why these florish so well: They are immensly profitable to the insiders of those brotherhoods of "illuminati" who constantly preach them to a credulous rapacious crowd. They have no difficulty in attracting armies of ambitious "useful idiots" while living themselves lives that former kings never even dreamed off.

    One day it will all come to a halt. The Charleston music stopped playing in 1929 as well.
  9. Mvic


    Very interesting thanks. I agree needed reform especially where CC are concerned but when coupled with the increases in gas and other prices I think we could shoot ourselves in the foot here.

    We will be suffering from the effects of the damage this administration has caused in its 8 years in office for the next 20-30. The administration of MBAs, sounds about right.
  10. BUY GOLD.
    #10     Sep 1, 2005