I caught this at http://news.yahoo.com/...
So what’s Plan B?
There really isn’t one.
If this week’s bailout doesn’t work, the government will probably have no choice but to continue to buy assets. There’s no one left to pick up the tab. “The private sector got us into this mess,” said House Financial Services Committee Chairman Barney Frank (D-Mass.). “The government has to get us out of it.”
Getting us out of it would likely mean buying up even more debt in the markets if the $700 billion fails to turn things around. That could include credit card debt, which is securitized and sold on Wall Street the same way as home mortgages, car loan debt and even commercial real estate debt, until the problem begins to recede or the taxpayers gain effective control over the nation’s banking system.
Has ANYONE. Any other media outlet or commentator caught on to what could be the most significant "next" problem on the horizon in our financial mess? Credit card debt: sold as securities on Wall Street. Combined with a recession or economic slow down, this could be the most TOXIC of combinations.
As we all know, the Credit Card is now entrenched in American society. It is a necessary evil. If it was shocking as to how easy it was to get a mortgage from 2000-2006, obtaining a credit card is even easier. Its a walk in the park. Fill out the 1 page form, send it in, and WALA. Instant credit. Just ask anyone who has declared bankruptcy!! Only to find credit card applications on their doorstep the next day!!!
These are the facts: (Creditcard.com facts: 2002-2008)
-National average credit card debt per credit card borrower is $1,673. (Source: TransUnion, June 2008)
-Total U.S. consumer revolving debt reached $962 billion in May 2008, up from $879 billion at the end of 2006. About 98 percent of that debt was credit card debt. (Source: Federal Reserve)
Thats right: 962 BILLION dollars. Another trillion dollar bomb. Could this happen? I say yes:
- we enter a recession
- people lose jobs
- people, without savings (no thanks to the GWB policies that DISCOURAGE saving) resort to their credit cards as their only means of survival during tough times.
- US Consumer Revolving Debt total explodes. Groceries. Cars. Gas. All on credit cards. With no jobs, people cant pay the money back. We start creating debt to pay debt. Domino effect here we come.
- The Credit Card Debt Securities that the debt was sold as in the markets (as safe investments), become worthless, just as what happened with the subprimes.
- Credit cards are shut down. The ones that remain have drastically reduced lines of credit and insane interest rates. Now, no one, except the wealthy, has any access to credit, what so ever. Cash is king. Businesses have no access to credit for inventory, investment....... major problems.
- Hello Depression.
Like everyone else, including our congress, it's hard to wrap my head around the enormity of this problem. So you economists out there: can you clear this up for us? Any thoughts on the right shoe now that the left shoe has dropped? Is this possible?
Also, just WHAT are we getting for 700 BILLION dollars. It could be the first drop in the bucket.
UPDATE:
This little gem from a NYT article: http://www.nytimes.com/...
Like a homeowner’s policy that insures against fire or flood damage, credit default swaps are intended to cover losses to banks and bondholders when companies that have issued debt are unable to pay it back. The nominal value of the insurance outstanding is now $62 trillion, up from $900 billion in 2000.
Let me get this straight: The hedge funds have insured the debt of the entire economy, thru speculation up to 62 TRILLION dollars!!!! Our GDP is only 13 Trillion. The speculators are the ones who have created this whole mess. https://www.cia.gov/...
Anyone want to guess what they have the total 1 trillion dollar credit card debt insured for, were it to default?