December 11, 2008
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News: Self-fulfilling Forecasts of Dark Days.
As the storm builds, weather reports become more ominous. Government sand bags have provided a little bit of relief, but Wall Street continues to be more ‘Katrina-minded'. They rightly warn that conditions in the credit card industry will continue to worsen for some time ahead. Because of the unprecedented conditions, nobody can say if the levee is un-breachable. These unprecedented conditions are the ‘perfect storm' where we have a population that is more heavily in credit card debt than ever, coupled with the certainty of unemployment levels exceeding what we know we can manage, coupled, also, with a condition where the combination of these two will undoubtedly exacerbate each others' demise. In other words, as job loss worsens, credit card default will increase. As that happens, credit will be harder to obtain and consumer confidence will fall. As that happens, there will be even further job loss, which will fuel even further credit tightening. On and on.
Again, where this will end, no one knows. Lessons from the past have borne-out the resilience of the credit card industry. Even know, good ground is being paved with healthy buttresses. Government is stepping in to regulate abuses and also shore up stability. Consumers are aligning themselves away from careless spending habits and adjusting to a lifestyle of living within their means. All these are known to be healthy and good. That speaks well for the credit card market. But the threat remains over job loss. Perhaps, after the Presidential inauguration in January, confidence will improve with a qualified leader that cares more about employment with good pay. It all hinges on real income for the masses. Bush's topple-down economics ploy has finally been debunked.
In the mean time, however, even all the right credit card moves will not stave off the dark days ahead. Wall Street analysts are in the awkward position of having to make these problems worse by forecasting the bad weather that we already know about, thereby, bringing even more bad weather with it.