http://www.safehaven.com/showarticle.cfm?id=11722&pv=1 "The bank was saved, but the people were ruined." - Henry M. Gouge, circa 1830
Here's the part I like: "FAR MORE 'telling' is the LOPSIDED degree to which Credit Card balance growth is 'contributing' to total growth in Consumer Loans, a sign of intensifying 'stress' on consumers, amid accelerating job loss, home price deflation, and equity-market paper wealth devaluation. "Even the raging Frankenstein stops to note the shockingly UGLY data details: Commercial Banks, Outstanding Credit Card Balances ... SOARED by an eye-opening + $7.1 billion in the WEEK ending October 15th, representing a +1.9% single-week rate of expansion ... or ... nearly ONE-HUNDRED PERCENT annualized (+98.4%). "Even more 'telling' is the 'read' acquired by contemplating the following pair of data FACTS: * Credit Card Loans, 10 months Sep07-thru-Jul-08 ... up + $29.1 billion * Credit Card Loans, 10 weeks Aug-08-to-mid-Oct-08 ... up + $32.3 billion "In other words, Commercial Bank 'exposure' via the total amount of Credit Card 'loans' outstanding has risen MORE in the last ten WEEKS, than it did in the previous ten MONTHS COMBINED !!! "Moreover, the growth in the last ten-weeks, $32.3 billion, or about $600 million per 'shopping day' since the beginning of August ... represents nominal growth of + 9.3% ... or ... + 48.3% annualized over the last ten weeks. "According to American Express, delinquencies on credit payments rose to 4.1% of all credit outstanding in the 3Q, up from 2.5% in 3Q of 2007, with Bank of America's rate rising even more steeply, to 5.9% in the quarter. "Moreover, the 'pool' of loans deemed 'uncollectable' rose to a high 6.7% in the 3Q, soaring from 3.6% last September."[ That's a healthy economy, where people put a McDonald's lunch on their credit card. An excellent long term investment. As Peter Schiff has said many times, the money was BORROWED and SQUANDERED and the U.S. has nothing PRODUCTIVE to show for it. U.S. GDP is going to return to its 2002 level. The last five years were nothing but a debt illusion and over $3 trillion dollars in fake GDP is going to disappear.
Ooops, I cut off this last goodie by accident: What consumer spending there is has been fueled in part by credit card. Greg notes this uncomfortable piece of data: the second largest "merchant-vendor" for credit card use is now McDonalds. This suggests that many consumers are in serious distress when they need to get their $4 Big Mac and fries with a credit card. This is the problem facing the economy next year. Credit card growth like we have seen in the last few months has never been sustained at such a level, and is unlikely to be this time either. This is especially true as credit card delinquencies have been rising, as noted above.