November 28, 2008
-
News: Over the Limit Gang.
Where this will end, no one knows. What we do know is that a large amount of our population is in trouble. ‘Fresh out of clover, mortgaged up to here…' as the song goes. Household-wise, we in double the debt we were in when Bush was first elected. Our nation's unprecedented borrowing habits have got us in a pickle that no one would relish. At $14.4 trillion, we're 39 percent over 100 percent of our disposable income in debt. Average household debt for credit cards last year was almost $10,000. This figure was arrived at from a 55,000-consumer survey, administered by CardTrak.com, considered to be leading analysts in the industry. Thirteen percent of us are way beyond that, owing over $25,000 in credit card debt. Caution was to thrown to the wind and, if we know anything about the wind – it changes. Things can dry up quickly. Of course this is a legitimate concern to the credit card industry – it should be a legitimate concern to every thinking individual.
It seems like we've gone credit card crazy. An average household last year was holding 13 separate credit card accounts. Of those, well over half of them had charges on them. Back in 1970 only one of those 13 cards would have had charges on it. Just since a year ago, personal bankruptcy is another third more than what it was back than. At this rate, bankruptcy will more than double every three years. To boot, there are people filing who owe $200,000 on their credit cards.
But now, it's come to a head. Credit card limits are being reached and consumer spending hasn't dropped this sharply in 61 years! What's scary is that we suppose it will all be over soon. The reality is that it almost certainly will not. We're victims of forgetting history. It's been so long that most us have not seen the rainy days. So we have not saved for them. But now, we're going to get a taste of what it feels like. Wooed by the easy credit and the housing bubble, we've failed to notice the warning that, eventually, prices would have to shoot up. We fell into a euphoria that saving was no longer crucial. We don't need to over-react, but we do need to establish some disciplines. More on those in a later article.