Future of Credit

Originally Posted by classicman

Ohhh lets all point fingers. They are all too blame. We are all to blame.

Hey...just setting the record straight on the suggestion to "follow the money" since it was raised...the money trail speaks for itself.

But, IMO, again, that is not the issue nor, IMO, does "They are all to blame...We are all to blame" address the questions that piercehawkeye raised about the future of credit.

This is a good column from Fox ( ) on credit card debt and the potential impact on the economy:

U.S. Consumer Credit Card Debt May Crash Economy

While the number of people holding charge cards grew about 75 percent— from 82 million in 1990 to 144 million in 2003— the amount they charged during that period grew by a much larger percentage: approximately 350 percent, from $338 billion to $1.5 trillion.

Since the number of chargers is growing at a slower rate than the amounts being charged, you can guess what that means. Yes, the monthly revolving balances have been growing by leaps and bounds. In 1990, the Times reports, the average was about $2,550 for those households that carried a balance. At the end of 2003, that balance averaged about $7,520 – an increase of nearly 200 percent!

And that's only credit cards. The average U.S. household owes mortgage debt, student loans and automobile loans, in addition to credit card debt.

It's because credit has been so easy to get that we've managed to inflate people's ideas of how much they can take on. Barron's recently published a striking chart, showing Household Surplus (more income than outgo) compared with Household Deficit.

Throughout the 1960s, '70s, '80s, and '90s, households showed a surplus of varying degrees. It wasn't until 1999 — for the first time in about 50 years — that U.S. households started spending more than they took in. What started as a small deficit of about $50 billion among households quickly spiked to a deficit of more than $350 billion in the second quarter of this year.

Pretty much what I said in my first post....and ultimately did contribute to the crash of 07-08, along with the bursting of the housing bubble that occurred at the same time.

While the column is from six years ago, the personal credit crisis has only got worse since then.

The ratio of debt to income is continuing to increase (pdf) and it is highest among the youngest consumers and far higher than it was 20 years ago, when people were more disciplined and less inclined to spend beyond their means.

That $50 billion personal debt in 1999 rose to $350 billion by 2003 and now in excess of $1 trillion.... this is unsustainable and, along with a pending burst of the commercial property market, will adversely impact the future of credit.

Or you can take the Merc answer for everything and just blame the Democrats.