The Coming Economic Meltdown Is Here!

[rrrevolution]

The Economic Meltdown has already begun.

". . . Consider the convergence of each of the following:
(1) Credit Card minimum payments double this month, with approximately 39% of all credit card holders presently paying the minimum balance and the average adult carrying a balance in excess of $6000 each this will trigger exorbiant fees and costs and lead to default interest rates as high as 30%;
(2) New Bankruptcy Law becomes effective October 17, 2005, and significantly impairs the right to a "fresh start". Consider that most will not qualify for traditional bankruptcy and will be forced to file a Chapter 13 which will tie them to a "repayment plan" over 5 years if their income over that time would contribute a total of 25% of the debt owed, will require repayment of all credit card debt incurred in last 90 days before filing, and raise the cost to file and participate in the plan for 5 years;
(3) Rising interest rates will affect every form of credit . . ."

MORE at www.rrrevolution.blogspot.com

[Maru Kitteh]

1. Won't take long for the housing bubble to explode

under the current whammy of increased minimums and exorbitant gas prices. Many people buy way more house than they should, usually the very best one they can squeeze into their current budget with a shoehorn. The most irresponsible among us with those interest only loans usually live in the burbs where the commute is long and social competition can be brutal. You add in increased debt load and those higher fuel cost and she's a gonna blow! :nuke:

[The Backlash Cometh]

2. You know what else has been crossing my mind?

Are our foreign policymakers that really stupid not to understand that applying military force in a broadbrush manner isn't going to create new enemies out of previously neutral civilians? I mean, was there a grand plan to ensure there would be perpetual conflict between our countries?

Domestically and Foreign policy speaking, exactly what has a Republican administration done better than the previous Democratic one?

[txindy]

5. And an economic crisis would certainly up the level of enlistments

Simply based on the need to be employed in some manner. No, I don't think this is all an 'accident'. Not at all.

What has the repub admin. done better? Um,.....

**crickets chirping**

[newportdadde]

3. I didn't know 39% of card holders just pay the minimum.

That is a very interesting stat, do you have a link for it? I knew it would be bad, I was thinking 15% but 39%... damn.

[Lochloosa]

9. Looks more like 60% make the minimum payment...link below

http://www.creditguard.org/press_release_15.html


On the other hand, credit experts’ claim that while 40 % of all Americans pay their credit card balance in full every month, the other 60% are barely able to make the minimum payment. These experts argue that such an increase in the minimum payment would be too harsh on the majority of credit card holders.


Edit to add:

The Negativity Surrounding the New Regulations

Many experts argue that forcing people to pay inflated minimum payments will further damage their financial well-being. Already, most of the consumers work two jobs or overtime to pay off their bills and almost all of them are in no condition to allocate extra cash towards their minimum credit card payments. Credit experts also believe that many consumers who are unable to come up with the extra cash will be heavily fined with late fees and other penalties, which would lead to additional financial woes for the consumers

[rrrevolution]

11. Don't Forget the Default Rate Being Imposed if Late on Any Pmt

In the last 24 months all credit card agreements have been UNILATERALLY modified to provide for immediate increases in your interest rate without notice to you if you are late on ANY BILL PAYMENT to ANY CREDITOR. For example, if you are late on paying the cable bill, all of your credit cards rates could increase immediately. This went into effect once you used the card after notice of the change.

The other shoe dropping is that failure to pay the new minimum payment (with any attendant fees imposed, like being over your credit limit, etc.) will trigger an astronomical rise in your DEFAULT RATE of up to 30% on the unpaid balance.

And if you file for bankruptcy under the new law after 10-17-2005, you will have to pay all of your debt incurred, fees and interest accrued in the ninety(90) days prior to filing the bankruptcy petition, and hand over all your income, except a bare minimum to live on, for the next five(5) years, if the court determines such payments would amount to at least 25% of the outstanding debt at the time you filed.

The new bankruptcy law makes no provision for those who lose their jobs, are inundated with catastrophic medical bills, or the victims of other tragedies -- the credit card companies are going to get their's and through the bankruptcy court own you for up to five(5) years.

THis is why the Dems voting for the new bankruptcy law need to be called out and held responsible at the polls. A total sell out of the poor and middle class trying to struggle along to make ends meet.
A total gift to the banking and credit card lobby.

[rrrevolution]

13. Link to indepth analysis at DailyKos -- scary stuff !!!!

http://spot.dailykos.com/storyonly/2005/8/20/173341/766

Just an excellent analysis of how bad things are going to be, and reading tea leaves is not required.

Look at what the Credit Card Companies are doing to plan for the defaults, as it says in this article they are planning on massive defaults by consumers:

"Included in this quarter's provision was $210 million to establish a reserve for anticipated net charge-offs from additional minimum payment requirements for consumer credit cardholders, which will be implemented in the fourth quarter."

[pitohui]

21. who the heck are "many experts"

do they work for the credit card industry by any chance

increasing the min. payment means that credit card cos. will be stringing out yr payments over less time which means YOU pay less interest

it's always better to pay more of your balance than less of yr balance

dare i say, do the math

[raccoon]

4. Good article.

You brought up some good points, especially #2 and #9 ("The increase in the price of oil and gasoline is hitting Americans not just at the pump, but in the cost of everything we buy. ")

Can you give a source for this one?
"(8) The Chinese and Japanese are beginning to cut back on their monthly purchase of treasury bills which provide liquidity and lower interest rates for all Americans, which will lead to even higher interest rates throughout the economy. "

Many of the items in your list mean one thing: a majority of Americans have or will have in the near future, less money to spend. Which means businesses will have less business, which means they'll have to lay off, which means more unemployed, which means there are more Americans with less money to spend, etc.

[rrrevolution]

12. Link

www.jamaicaobserver.com/columns/html/20050807T020000-0500_85635_OBS_HERE_COME_THE_CHINESE.asp

The article here reports that the Chinese bought $200 billion in U.S. Treasury Bills in 2004, and around $300 billion through August of 2005 -- attributed to Paul Krugman of NY Times.

I am trying to find the article I got the statement from regarding the cutback in Chinese and Japanese purchases of US Treasury bills.

The key fact that we need to take seriously is that China is now our competitor for the limited available world oil supplies, has an economy growing at 9.5%, and has the power to raise US interest rates just by suggesting that it will cut back on US Treasury Bill purchases -- whether they do so or not.

The alliance of China with Venezuela and Iran, and uneasy cooperation with the Russians, could create bargaining power to put the US over a barrel -- pay the inflated price asked or face an embargo from these countries. Since the US imports 50% of its oil, Saudi Arabia could not possibly provide all of that need.

[raccoon]

18. Thanks for the link. Good article.

Also some more unnerving statements there:

"China's exports to the European Union countries are rising so fast that they have almost displaced the US..."

"China has already replaced the US as Japan's biggest trading partner with trade between the two Asian countries representing 20 per cent of Japan's trade last year. Trade with the US accounted for 18 per cent of Japan's total..."

Uh-oh.

[pitohui]

22. so in other words china is NOT beginning to cut back

you say they bought $200 billion in 2004

already bought $300 billion in 2005 -- & it's only august!

that is not cutting back, that is increasing the size of their purchase

forgive me if i don't panic just yet

china believes in the usa treasury bill, i think i do too

[lonestarnot]

6. Yes it is now crumbling into who the hell knows what!

[radwriter0555]

7. re-enlistment is up because there are no jobs waiting for troops at home

so what else can these poor guys DO?

[KayLaw]

8. I'll follow the link later

I need to do some errands, but I'd like to comment that I've been telling my husband this all weekend. The war against the middle class is here and will be fought and over by next spring. I can see the warning signs as clearly as I would see tanks lining up, one by one, and surrounding my home.

This morning I read something else here at DU -- that being the new 401(k) deduction. I don't know yet whether your article mentions it, but I've noticed a big push for a national sales tax, then of course who knows what they'll do to Social Security. . .

[ProfessorGAC]

10. One Thing To Remember, Though

The national delinquency rate as measured by all banks, is about 2.2% and around 3% on credit card debt. (I'm on the board of directors of a small bank, so i see these numbers every month.) That's not 3% of people, it's 3% of the total credited money.

The critical point for any single bank is considered 6%. So, we're a long way from a delinquency rate that will trigger massive default and cash losses. Our bank is about 1.7% delinquent (anything over 90 days), and the credit card program is still one of the most profitable in our bank. So, there is a wide gulf between the current situation and crisis.

Not that i am comfortable with this level of consumer debt, mind you. I just think that consumer debt is a weak indicator of overall economic vitality. I think the bigger issue is the propping up of the nominal growth rate by extra gov't spending with huge piles of borrowed money. This is the more concerning issue, to me.
The Professor

[rrrevolution]

14. What Happens When the Gov't Spending Winds Down?

Without a perpetual state of war to driving government spending, what happens when government spending winds down? What if the Chinese hint they will buy less US Treasury bills next month and interest rates begin to rise precipitously?

What will be the effect on the American consumer? Especially when job layoffs skyrocket as the housing industry, and all the related industries,take a tumble?

Simple concepts hit home with the American worker. No money to pay bills, no jobs to earn money, no money to buy consumer items, may lead to a total economic plunge into depression. And with the redistribution of wealth to the richest 1%, will this 1% reinvest in our economy or will they take their money overseas chasing a bigger return on their investments?

All simple questions -- with explosive results.

[raccoon]

15. Well, one thing for sure, no matter how bad it gets,

if the interest rates, inflation rate, and unemployment rates get way into the double digits, the WH folks and the media hoes will NEVER
use the "D" word.

[pitohui]

24. thank you for a much appreciated note of calm EOM

.

[BlueJac]

16. This is the Bush body slam

All Shrubs duck are getting in a row now!

:sarcasm:

[jokerman93]

17. Watch for new enlistment incentives

Debt forgiveness for military service - something like the old college loan payoff.

[pitohui]

19. not much of a meltdown if you ask me

yeah, the economy sux but the little depression of early 90s much worse than this

go around & count up the boarded-up homes in yr neighborhood

compare to how many in 1991

there's no comparison

here where i sit, in 1991, there were 3 boarded-up just within a few steps, now there are zero, & i don't know of any in the entire town, altho i guess if i really hunted, i could find one

we're nowhere near the size of an economic collapse that everyone over the age of 15 has already survived

hysteria is bad for the heart & the brain

[Beetwasher]

20. Uhhh, Your Personal Anecdote About Boarded Up Homes Is Ridiculous

and evidence about nothing. If in fact there is a recession coming (back? Did it ever end?), it's just getting started.

[pitohui]

25. read post number 10

sounds like some good insider numbers to me

i'm not an industry insider but i can clearly see the difference between this economy & the last severe depression in the early 90s

this just ain't a crisis on the level of even the post 9-11 slump or the dot-bomb, it sure as heck don't compare to 1991

yeah, the economy could be better but don't kid yourself

it could be a heck of a lot worse, esp. considering the clowns in charge

[Beetwasher]

26. I Did, And He's Right AND Doesn't Support You'r POV

Reread it. There's PLENTY to be concerned about in this economy, even though it may not be ONLY what the OP was suggesting.

Your personal anecdotes are not data. The Prof. provided data.

[nadinbrzezinski]

23. No we are just getting there

wait a tad, you shall see

[rrrevolution]

30. we have closed factories, thousands laid off, where do you live?

We have had tens of thousands lose their jobs, factories have closed and jobs are leaving the country faster than you can say "gone." And guess what folks, it is not just the textile and manufacturing jobs, it is the high tech jobs with IBM and other multinational companies.

I am glad you see things looking up. It just is not the case most everywhere else, unless you already belong to the richest 1% club.

[rrrevolution]

27. Figures released locally today - existing home sales dropped 2.6% last mo

and the local real estate market is seeing lots of inventory hit the market. And this market is not even one of the so called "housing bubble" markets.

We have been losing jobs here at the rate of 10s of thousands.
So how about that for an anecdote.

[rrrevolution]

29. Link to Official figures

http://quote.bloomberg.com/apps/news?pid=10000006&sid=aKY3nx06K5YQ&refer=home

Article says that inventory is highest since May of 1988.

[stepnw1f]

28. They Are Creating Debt Slavery

I really do believe this is what they are trying to do. The are building a new Aristocracy.