THE BIG BANGA THEORY is the next battle in People versus Wall Street.
Americans are ditching credit cards and according to a report in this morning's The New York Times holiday shopping with plastic is at a 27 year low.
Last month, president and chief executive officer of MasterCard Ajay Banga said, "I have declared war on cash. I believe MasterCard will grow by growing against cash." (Source: The Economic Times.)
Though we may thank Mr. Banga for his recent candor, the most recent battle in the war between the banks and people has been raging since at least September of 2009.
Big Banga Trio: Banga, Bernanke & Geithner by Chaz Valenza
Banks and credit card companies have made aircraft carriers full of money since creating plastic as a substitute for cash in the 1950's. Plastic was sold as a "convenience" product/service at price that has always been hidden to the purchasers, but perhaps at a fair value. Prior the economic crash, credit card offers were just business, nothing personal.
Now, it's personal and it's war. Since the too-big-to-fail financial corporations destroyed the economy, the public has also learned that broad categories of the same companies' consumer products are pernicious. This has caused a degree of resentment among the American public (perhaps this is the understatement of the decade).
How's the war going? You won't find reports from the front issued by Brian Williams. After all, he works for General Electric a most profitable company in large part due to the financial products of GE Capital. GE Capital also nearly brought its parent company to its knees with its exposure to toxic derivative "assets."
So, here's the body count you won't find anywhere else and it may surprise you:
In 2008 there were 176.8 million American "general use" credit cardholders (Amex, Visa, MasterCard, Discover).
By the end of 2009, that same category of credit cardholders decreased 7.4% to 164.7 million.
Today, only about 156.7 million people are credit cardholders.
This past year 8 million Americans deserted credit cards. They are no longer cardholders; that's right they don't have a one! BTW, having 3.5 pieces of general use plastic is the average.
This is a stunning reversal for the financial services industry as cardholders grew by over 13% from 2000 through 2008. (U.S. Census Bureau).
The projections were that cardholder numbers would continue to increase by 8 million through 2009, not drop by 8 million. (U.S. Census Bureau).
By January 1, 2010 there were suppose to be 181 million American credit cardholders, now there are only about 156.7 million, a 15.3% decrease.