Credit Card Crisis Is Here / Derivatives Next

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By Allen L Roland (about the author)

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For OpEdNews: Allen L Roland - Writer

The year long Bush Recession, which Bush still does not acknowledge, has now become a rapidly accelerating Depression fueled by a credit card crisis which is now a reality. Credit card companies are pulling back credit lines by close to 50% and consumers will soon stop shopping as the Retail economy sinks into a severe depression. Derivatives are next : Allen L Roland

The eroding stock market is just beginning to absorb the full impact of our economic nightmare and the current credit card crisis.

On June 30th, 2008 I wrote a column HUGE CREDIT CARD CRISIS NEXT FOR AMERICA in which I said that many Americans are living off their credit cards but be forewarned ~ that bubble is about to burst as more Americans are using high-interest credit card cash to pay at least part of their mortgages. Overall U.S. credit card debt grew by 435% from $211 billion in 2002 to approximately $915 billion year-end 2007. I also shared that the value of credit card accounts at least 30 days late was up 26% from the previous year, to $17.3 billion. Serious delinquencies among some of the biggest lenders rose by 50 percent or more in the value of accounts that were at least 90 days delinquent.

But Making matters worse ~ just as with mortgage debt, credit card debt has been put into pools that are then resold to investment houses, other banks and institutional investors. About 45 percent of the nation’s $900-plus billion in credit card debt has been packaged into these pools, and so many companies, not just a few, are at risk of being forced out of business by credit card debt write-offs.

Why do you think that American Express has become a Bank holding company ~ so they can have access to Hank Paulson's bailout dollars.

It's a badly shaking House of Cards and it's about to come crashing down and many Americans will pay the price as Danny Schechter wrote in June, ~ " While many eyes are focusing on the housing meltdown and its hugely negative effect on an economy clearly moving into recession, few are paying attention to the next bubble expected to burst: credit cards. Combined with the subprime losses, such a credit card nightmare has the potential, experts say, of bringing down the entire financial system and global economy... we are actually face to face with the results of the most massive failure of our political and economic system since the Depression. "

http://www.informationclearinghouse.info/article20196.htm

If you thought the housing crisis was bad ~ You ain’t seen nothing yet compared to the credit card crisis !

Think about it ~ your mortgage is now much higher than your house's worth, you have been living off your credit card for months and now they lower your credit line by 50% but don't lower your interest payments.

Your certainly are not going to go on a christmas shopping spree and if it comes to paying for food or rent versus your credit card bill ~ you're not going to pay your credit card bill.

My own personal experience with a major credit card company is quite typical ~ I've had my one credit card for over 23 years and last month I was late with my payment by two days. I was immediately socked with an increase in my interest charge from 14% to 27% and a one thousand dollar limit was put on my charges.

Prominent banking analyst Meredith Whitney predicts that credit lines will pull back by over 45% and by over two trillion dollars in the next two years ~ "In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent."

The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.

The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.

"In other words, we expect available consumer liquidity in the form or credit-card lines to decline by 45 percent."

Bank of America, Citigroup and JPMorgan Chase represent over half of the estimated U.S. credit card outstandings as of Sept. 30, and each company has discussed reducing card exposure or slowing growth, Whitney said.

A consolidated U.S. lending market that is pulling back on credit is also posing a risk to the overall consumer liquidity, Whitney said.

Mortgages and credit cards are now dominated by five players who are all pulling back liquidity, making reductions in consumer liquidity seem unavoidable, she said.

"...We are now beginning to see evidence of broad-based declines in overall consumer liquidity."

She also said credit lines to consumers through home equity and credit cards had been cut back from the second-quarter levels.

"Pulling credit when job losses are increasing by over 50 percent year-over-year in most key states is a dangerous and unprecedented combination, in our view," the analyst said. http://www.cnbc.com/id/27993643

And, by the way, the credit card companies also need to be regulated ~ Last week, while Congress was engineering a bailout package of the taxpayers’ money to rescue Citibank and save the economy, Citibank was sending out notices to its cardholders of a new and usurious policy ~ a policy that could drown consumers and help sink the economy. http://www.informationclearinghouse.info/article21316.htm

Remember, the credit card crisis is just the second leg of a three stage collapse of the economy ~ the third stage being the 900 pound guerilla in the room, which no one wants to talk about, the 650 trillion dollar unregulated Derivative market. See ~ UNSPOKEN CAUSE OF MARKET COLLAPSE IS DERIVATIVE TRADING http://blogs.salon.com/0002255/2008/10/13.html

Of course, along with the credit card crisis and a dramatic pullback in consumer spending ~ the next round of foreclosures will be Retail ~ for Malls from Michigan to Georgia are already entering foreclosure, commercial victims of the same events poisoning the housing and credit markets. http://www.cbsnews.com/stories/2008/11/28/business/main4637008.shtml

Happy Holidays !

Allen L Roland

http://blogs.salon.com/0002255/2008/12/02.html

Freelance Online columnist and psychotherapist Allen L Roland is available for comments, interviews, speaking engagements and private consultations ( allen@allenroland.com )

Allen L Roland is a practicing psychotherapist, author and lecturer who also shares a daily political and social commentary on his weblog and website allenroland.com He also guest hosts a monthly national radio show TRUTHTALK

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Allen L Roland is a practicing psychotherapist, author and lecturer who also shares a daily political and social commentary on his weblog and website more...)

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