Credit card debt is ready to blow -

Full story: Baltimore Sun

After every financial crisis over the past 10 years, the Federal Reserve has cut interest rates and pumped money into the economy.
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Marc Rosensweig

Baltimore, MD

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#1
Oct 10, 2007
 
When the bank card bubble bursts will the banks go back to congress to ask for even more stringent bankrupcy laws?
Dave_O

United States

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#2
Oct 10, 2007
 
Man, these credit addicts are like drug addicts, switching from meth to heroin or vice versa. They never learn the hard lesson: it is impossible to have euphoria all the time.
If people continue to make purchases beyond their means, i.e. using credit (equity or credit cards) instead of actual money to pay for things, credit that cannot reasonably be paid back, don't feel the least bit sorry or shocked when the piper comes.
Maria

Maple Valley, WA

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#3
Oct 10, 2007
 
I dont understand other people! They keep spending money using their credit cards then complain about the interest! Imagine paying 5 years interest on any credit cards!

Im glad im debt free!
Dave_O

United States

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#4
Oct 10, 2007
 
This says it all:

http://www.dailymotion.com/video/xt0c6_snldon...

The funny thing is that even though this is an SNL skit, it's better than all the financial advice you see on TV commercials and the like.

Since: Sep 07

Pasadena, MD

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#5
Oct 10, 2007
 
Dave_O wrote:
This says it all:
http://www.dailymotion.com/video/xt0c6_snldon...
The funny thing is that even though this is an SNL skit, it's better than all the financial advice you see on TV commercials and the like.
Maybe because the things you see on commercials are trying to get you to buy stuff, like debt consolidation "services?"
Dave_O

United States

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#6
Oct 10, 2007
 
ThomPane wrote:
<quoted text>
Maybe because the things you see on commercials are trying to get you to buy stuff, like debt consolidation "services?"
Exactly, they're hurting, not helping the problem.
bob

Tempe, AZ

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#8
Oct 10, 2007
 
sell your bank stocks!! ahhh
Desiderata

AOL

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#9
Oct 10, 2007
 
"should they really be increasing unsecured card debt...? "

The Bankruptcy Reform Bill of 2005 anticipated this eventuality by changing all unsecure debt to secured.

There is no such thing, anymore, in this country as unsecured debt.
Bob F

Fort Lauderdale, FL

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#10
Oct 10, 2007
 
Article summarizes the situation precisely. The people who really get hurt in all this are the rest of us fiscal 'conservatives' who did NOT buy more house than we could afford just to 'get rich quick' by house appreciation (remember the mantra? "House Prices Always Go Up). Now all these greed-motivated homebuyers are claiming 'victimhood' at the hands of the 'predatory lenders', when in fact they were in most cases consciously taking the 'gamble' of the teaser rate loans on the greed-inspired belief that in two years their new house would be worth 20 to 40 percent more and they'd be rich, and could deal with the teaser loan by refinancing or selling and making a bundle.
Now the foolish government is lowering interest rates to create another bubble, which will as pointed out end only one way (and I'm a former bankruptcy attorney).
No one ever comments that by lowering the interest rates the govt is hurting directly those of us who DO SAVE and have money market accounts and CD's!!! Who cares about us?? We are PENALIZED for being financially responsible by this irresponsible government, which itself lives some $9 TRILLION beyond its means (national debt), which translates into some $30,000 for every man woman and child in this country.
And they wonder why the savings rate is in negative territory??? But the politicians kow-tow to the groups which are politicall most powerful (homeowners), regardless of any consideration of fairness or principle.
Respectfully submitted,
ace

Glendale, CA

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#11
Oct 10, 2007
 
I am glad to see someone GETS IT...We are a nation of spenders
Great article....
Phil

Baltimore, MD

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#12
Oct 10, 2007
 
Bob F wrote:
Article summarizes the situation precisely. The people who really get hurt in all this are the rest of us fiscal 'conservatives' who did NOT buy more house than we could afford just to 'get rich quick' by house appreciation (remember the mantra? "House Prices Always Go Up). Now all these greed-motivated homebuyers are claiming 'victimhood' at the hands of the 'predatory lenders', when in fact they were in most cases consciously taking the 'gamble' of the teaser rate loans on the greed-inspired belief that in two years their new house would be worth 20 to 40 percent more and they'd be rich, and could deal with the teaser loan by refinancing or selling and making a bundle.
Now the foolish government is lowering interest rates to create another bubble, which will as pointed out end only one way (and I'm a former bankruptcy attorney).
No one ever comments that by lowering the interest rates the govt is hurting directly those of us who DO SAVE and have money market accounts and CD's!!! Who cares about us?? We are PENALIZED for being financially responsible by this irresponsible government, which itself lives some $9 TRILLION beyond its means (national debt), which translates into some $30,000 for every man woman and child in this country.
And they wonder why the savings rate is in negative territory??? But the politicians kow-tow to the groups which are politicall most powerful (homeowners), regardless of any consideration of fairness or principle.
Respectfully submitted,
the problem is that the investors who financed this debt will not get the benefit of the ARM's resetting to market, so the liquidity furnished by these investors may dry up becasue they will not get the expected returns. A depression may ensue, where no matter hw low rates will go (they were 1% in the Great Depression), noone will lend because of the high credit risks to getting repaid.
scorpion

Philadelphia, PA

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#13
Oct 10, 2007
 
Because of all of this runaway consumer debt, the U.S. Dollar won't have a leg to stand on and really come crashing, should the Dollar lose ground internationally by having its role replaced by the Euro (and there are plenty of indications that this process has already begun).
Paul

Dubai, UAE

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#14
Oct 11, 2007
 
The US dollar is still the reserve currency - but only just.'Helicopter' Bernanke will crank up the printing presses making more dollars and hence devaluing the dollar even more. This will cause more countries, especially in the gulf and Asia, to dump their dollar holdings and opt for a good store of value, possibly Euros at first but more likely gold.

The Fed will try to inflate its way out of trouble, but the runaway inflation will kill the US economy. It seems that Europe may well have no choice but to devalue too as US exports like aircraft become cheaper.

The only real store of value is gold. When fiat paper money systems start to look creaky and the general economy is heading south, gold is likely to rocket in value as the only store of wealth that central banks cannot devalue by creating more willy nilly.
Chris in Miami

Miami Beach, FL

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#15
Oct 11, 2007
 
Paul wrote:
The US dollar is still the reserve currency - but only just.'Helicopter' Bernanke will crank up the printing presses making more dollars and hence devaluing the dollar even more.
While I don't quite agree with your notion regarding the fiat money system, I would like to add to your point about printing endless and endless amounts of paper. From the beginning of the history of the Fed, all the way up until about 2 years ago, the amount of _new_$$ being printed was published (this figure is called the M3). For whatever reason, the Fed decided that this would no longer be the case, and alas the real source of inflation (ie new dollars) is no longer known, and other central banks are left to speculate ... I would actually believe that the US$ should float for less than it already does against an international currency basket if these figures were knonw today!
Robert

San Antonio, TX

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#16
Oct 11, 2007
 
It's not like this wasn't planned. This is all about wealth transfer and accumulation. It's the mushroom cloud that only goes up. Everyone else is just along for the ride. The ground work for allof this started with the creation of the Federal Reserve(which is neither federal nor does it have any reserve) It took 94yrs but the mission is almost accomplished. Transfer of wealth from past,present and future generations into the hands of a greedy few. Nice work guys.
Jean Coram

United States

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#17
Oct 11, 2007
 
I knew five years ago intuitively that the housing market had to blow, and as I read about average consumer credit card debt exceeding $5,000 I certainly agree this is the next blowout.
I believe that government intercession in certain situations is critical, but unfortunately those authorized to intervene have failed in almost every instance. Almost every government agency has a long list of failures in protecting the public. Here in Minnesota yesterday we had a hearing on Atrazine, a chemical which is globally mobile, dangerous to a degree we cannot yet appreciate, and changing the enviornment forever. Will anything be done? Highly unlikely.
I have been a fan of Volker since I was a manager at a financial institution for a number of years back when inflation was eating us alive. Sometimes you have to read between the lines, There are messages there which relate directly to today's credit card crisis.
It is frustrating as an individual to know how to change things, because I think even grass-roots political activists are treated as misbehaving children. I once thought the Independence party might be an answer, but apparently they will always have regional and political agendas which vary widely to such an extent they will never exercise any real power.
Many people will consider the following comments off the point, but I have to say it: teach your children early, teach them logic, teach them economic restraint by example, teach them compassion and an understanding of the connection between humanity and the balance of nature, and perhaps in thirty years we will have a proactive generation of people who can change the world.
Jean Coram

United States

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#18
Oct 11, 2007
 
I have already posted my comments. What do you want?
puffdippy

Walnut Creek, CA

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#19
Oct 11, 2007
 
These bubbles eventually lead to a recession, probably much worse. It is all about greed. Greed from people who can't afford what they want, greed from the lenders to increase earnings because of the greedy stockholders and greed from the hedgefunds that were trying to make the big bucks in a low interest rate enviornment. Don't let me forget the rating agencies who lied to please these companies that were packaging these cdo's. Credit cards next. Armeggedon can't be far away.
JJJ

United States

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#20
Oct 11, 2007
 
The difference between the Great Depression of 1929 and this 2nd Great Depression is that credit cards didn't exist then. When people lost their house, that was it. They went bust. Now, as your article suggests, people are able to stave off foreclosure by borrowing on credit cards which they know will be wiped out in BK. The banks are going to get a double-whammy by allowing unsecured credit card debt to increase. There will be massive waves of BK filings, wiping out maxed out credit card balances used to pay mortgage loans and living necessities. The banks will get burned so bad, that's when the bank failures will be all over the place.
Living cash only in a credit world.
to Bob F

Washington, DC

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#21
Oct 11, 2007
 
Bob F wrote:
... We are PENALIZED for being financially responsible by this irresponsible government, which itself lives some $9 TRILLION beyond its means (national debt), which translates into some $30,000 for every man woman and child in this country.
... Respectfully submitted,
You failed to mention that the yearly interest paid ($200 Billion or so) on the national debt translates into some $700 (of tax dollars) for every man woman and child in this country.

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