Busted: Bankers and The Global Economy

December 3, 2008

Credit Cards Portend to Lengthen Recession

shooting-foot1The venerable credit card has become a major tool of liquidity for the American consumer next to their own employment. The very tool that retailers and politicians are begging for is the tool most likely to take large hits in the very near future, constraining the U.S. economy at a time when recovery is being dreamed about.

The U.S. credit card industry is preparing to cut back $2 trillion in servicing to avoid the risks of default and to comply with recent regulatory changes. Meredith Whitney of Oppenheimer and Company notes, “We expect available consumer liquidity in the form of credit-card lines to decline by 45 percent.”

The consumer liquidity that business and bureaucratic mavens insist on is due to vanish quickly, further putting a further crunch on the economic crisis and the national ability to recover, at least in a typical “approved” way. Strangely, about the time that many economists are advertising as the end to this recession, in mid-2010, the curtailing of consumer credit will further preclude opportunities to artificially fuel an economic boom using conventional credit lines.

Pulling credit during a time of unprecedented job losses is going to put incredible pressure on the well being of the economy where established authorities are concerned. Lenders are going to be restricted from repricing credit card lines as part of new Unfair and Deceptive Lending Practices legislation. ~ E. Manning

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