Meredith Whitney has been pretty accurate on the way down and hasn't been afraid to lay out the facts even if they aren't fun to hear. http://news.yahoo.com/s/nm/20081201/bs_nm/us_finance_research_oppenheimer (Reuters) – The U.S. credit card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said. The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted. "In other words, we expect available consumer liquidity in the form or credit-card lines to decline by 45 percent." Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co represent over half of the estimated U.S. card outstandings as of September 30, and each company has discussed reducing card exposure or slowing growth, Whitney said. A consolidated U.S. lending market that is pulling back on credit is also posing a risk to the overall consumer liquidity, Whitney said. Mortgages and credit cards are now dominated by five players who are all pulling back liquidity, making reductions in consumer liquidity seem unavoidable, she said. "...We are now beginning to see evidence of broad-based declines in overall consumer liquidity." "In a country that offers hundreds of cereal and soda pop choices, the banking industry has become one that offers very few choices," Whitney wrote in a note dated November 30. She also said credit lines to consumers through home equity and credit cards had been cut back from the second-quarter levels. "Pulling credit when job losses are increasing by over 50 percent year-over-year in most key states is a dangerous and unprecedented combination, in our view," the analyst said.
I'm not sure I find this to be a bad thing necessarily. Sure, the rationale behind it is diconcerting, but the end result may not be all bad...
In the long term maybe... Short term this sounds like an epic disaster considering how much of GDP is consumer spending and how much of that is debt. I guess it's better than loosing all of the credit card companies but I find this frightening. I don't have a credit card btw.
Yes it will be disaster, but letting people spend what they don't have doesn't sound like a good idea either.
I am getting less offers now these days, used to two or three per day now it is only like two or three a week.
What's the matter with credit? It's old fashioned. Cash for the merchandise—cash for the button-hooks—Cash for the cotton goods—cash for the hard goods—cash for the fancy goods. . . <object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/JZ9U4Cbb4wg&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/JZ9U4Cbb4wg&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>
