Average american more leveraged than LEH

Discussion in 'Economics' started by KINGOFSHORTS, Nov 27, 2008.

  1. With those multi equity loans on bubbles, huge debt loads as they spend the weekends at the mall for "Shopertainment" Things are status quo as long as they can roll over debt and keep the leverage rations increasing.

    You had your housing bubble implosion, next year it will be the consumer credit implosion as credit lines go on default when consumers decide to stop playing and lenders put the final nail in the coffin and decide to stop or shrink lines.

    2009 will be the final nail in the coffin. Get ready to see dow 6500 or less.
  2. The banks through historically higher interest charges are much better prepared to deal with the unsecured debt defaults than secured debt defaults. Credit card defaults are easier to predict and easier to calculate than losses from foreclosures exacerbated by falling home prices.
  3. Do you think the whole credit system can be broken by the consumers through non-payment(default)?

    What if 30% of Visa customers decided not to make any payments for 3 months?
  4. I can answer that, since I've been hammered away that Visa is a great company since it doesn't suffer any credit risk and only takes a commission :D

    American Express however might feel the pain, or Citigroup, or JP Morgan, or BAC. The banks would be in severe trouble if people stopped paying their credit cards, but you're talking of millions of americans doing it at the same time. It's unlikely such coordination will happen.
  5. I was tinkering with the idea to try and organize it!

    yes I forgot about that point with Visa thanks, but what about Mastercard or whoever holds the debt, what default rate do they provision for, and what rate of non-payment could sink them?

  6. Hehehe, you are making assumptions based on historical data. Look at South African unsecured loans ( less than R 40000). Even better ask ABSA :D

    "...its unlikely such coordination will happen..."
  7. "High inflation, personal indebtedness and increases in interest rates have put consumers under severe strain.

    The erosion of consumers' ability to repay debt has led to the continued deterioration of the retail lending environment.

    Nedbank said this had placed significant pressure on retail banking, which was expected to continue for the remainder of the year and into next year.

    Booysen said: "It is not only interest rates, but we are beginning to see an increase in job losses."

    USA or South Africa?