The American Recession 8: A New Great Depression?
As more and more facts and numbers about the current crisis in the US emerge, I find myself wondering just how deep this recession is and how long it is going to last. A number of people, among them Stiglitz, have indicated that it is deep and severe. But still the question remains: How severe?
This is what The Guardian (UK) writes:
America looks like it is already in recession, one that threatens rapidly to become the biggest slump since the 1920s. The collapse a week ago of the country’s fifth-largest investment bank, Bear Stearns, signalled that the crisis sweeping the world’s credit markets had taken a decisive turn for the worse.
Maybe it is a sign on the depth of the crisis that The Independent (UK) today brings an article entiteled:
USA 2008: The Great Depression
Food stamps are the symbol of poverty in the US. In the era of the credit crunch, a record 28 million Americans are now relying on them to survive – a sure sign the world’s richest country faces economic crisis
.. Forty states are reporting increases in applications for the stamps, actually electronic cards that are filled automatically once a month by the government and are swiped by shoppers at the till, in the 12 months from December 2006. At least six states, including Florida, Arizona and Maryland, have had a 10 per cent increase in the past year.
So, an inreasing number of American families have problems putting food on the table. Meanwhile, in Washington the republican government is concerned about proposing a plan for regulating the financial institutions, and launches a plan many commentators (Wall Street Journal) say is mostly “dead on arrival” (New York Times). And, one might add, a plan that will only, at best, be relevant to the next crisis – the current one is here and regulation is not going to make it disappear.
Wall Street regulation is not going to solve it. Not now.
The odd piece of information, strange facts, comments on news, ranting and rambling. Kicks and licks. Fun, irony and sarcasm, often, though, with some serious intention.
I live and have lived in Europe and the US. I like both.
I’m nekkid, so no need to undress me. Don't bite me. I much prefer stroking.
April 1st, 2008 at 3:34 pm
hey wat up???
January 25th, 2009 at 6:17 pm
[...] The American Recession 8: A New Great Recession [...]
March 6th, 2009 at 9:10 am
Banks Injure Economic Stimulus Plan by Jacking up Credit Card Interest
Could banks jacking up credit card interest during a horrendous recession—delay U.S. economic recovery and destroy the expected benefits of the Economic Stimulus Plan?
Millions of Americans now face the prospect of their own economic collapse. As the recession worsens, Americans increasingly can’t pay their credit cards, rent and mortgage payments. Despite these hardships, recently several U.S. banks and credit card issuers—largely jacked up interest rates they charge credit card customers. Consequently it should be expected the large hikes in interest will further choke consumer spending and cause a new surge of credit card defaults and home foreclosures? During the 1930’s banks inflamed Americans and the Great Depression by similarly raising consumer interest rates that forced millions of people and businesses to default on loans. Houses could not be sold. Perhaps Americans in 2009 should ask Congress ASAP, “Could banks jacking up credit card interest during a horrendous recession—delay U.S. economic recovery and destroy the expected benefits of the Economic Stimulus Plan?”
Congress has proposed spending billions of taxpayer dollars to pay for an Economic Stimulus Plan to create jobs, generate bank lending and stimulate consumer spending. How could any Economic Stimulus Plan be expected to succeed if Congress doesn’t act to limit the rate of interest banks charge credit card purchasers? During these bad economic times credit card lenders need to be limited to twelve percent. The current high credit card interest rates discourage consumers from making card purchases at retail and other businesses that would help stimulate economic recovery. Unless credit card interest rates are strictly regulated, credit card issuers could become the main recipient of the Economic Stimulus Plan, sucking up stimulus dollars from Americans forced to pay higher credit card interest on debts they incurred prior.
Here we go again? U.S. banks are duplicating in part through credit card lending some of the same problems that caused the sub-prime mortgage collapse and real estate crash. Except this time, U.S. banks aren’t selling packages of so-called mortgaged-backed securities to investors; the banks are selling “credit cardholder debt” to investors. Under this operation, after the bank sells a credit card holder’s debt at a specific interest rate, the selling bank can keep raising the cardholder’s interest rate—keeping part of the higher interest charged: the bank will have little or no exposure for the sold debt. This operation gives the bank little or no incentive to lower the credit card holder’s interest rate after they raised it. The bank can also profit from subsequent fees charged the credit card holder. Sound familiar? Do the words Sub-Prime Mortgage come to mind? Sub-prime mortgages sold by banks to investors, were frequently defaulted on by borrowers because they could not pay higher interest rates provided for in mortgage loan agreements. At least purchasers of Sub-Prime loans had real estate to secure the mortgages. “Credit card debts sold by banks” generally provide debt-investors with only the debtor to look to for repayment.
Banks selling credit card debt to investors has the potential of becoming a scheme that could cost U.S. taxpayers and the global economy billions. Congress needs to limit fees and interest rates banks can charge credit card holders. That would eliminate much of the incentive for banks to resell a credit card’s debt then keep raising interest rate on the credit card.
Meanwhile while U.S. banks continue to Jack Up your credit card interest, keep in mind these are some of the same financial institutions that failed to sufficiently provide the U.S. Government with an accounting explaining how they spent billions of “bailout dollars” provided by U.S. Taxpayers.