zbig$
/ 2008-05-15 23:31
/
Uznany gracz - weteran 93/94
Market Super-Shock #2:
A New $2.48 Trillion "Black Hole" That's About to Swallow up American Borrowers
Fortune calls it the "bomb" in American wallets. It's the secret shame of millions of Americans. It's also another massive, looming market threat that's at least as big as the recent gut-wrenching housing bust...and many times bigger than the write-offs we've seen with banks.
What's this second enormous shock?
A mind blowing $2.48 TRILLION in looming consumer credit debt.
See, while houses went bust, millions of Americans could no longer draw off home equity to pay for all those flat-screen TVs, SUVs, and other toys essential to the good life. So they turned to their old friend the credit card.
Credit card debt alone has hit a record $915 billion. That's already bigger than the estimated $900 billion locked up tight in subprime loans. And remember, on credit card debt, you're talking interest rates three-five times higher.
And that's just the start.
Because after plastic, piles of other consumer installment debt have piled up. We're talking life on the layaway plan. Just how much? Total consumer debt stands at a mind-blowing $2.48 TRILLION. That's more than China makes in a year. It's more than the entire United Kingdom's GDP. And more than the GDPs of Italy, France, Canada, Spain, Brazil, or Russia.
Only they're making that money. We just owe it. And in huge numbers, millions more house-broke or unemployed Americans have stopped paying off their credit balances. Just like defaults on mortgages, defaults on other consumer credit are expected to soar.
Card issuers like American Express, Citigroup, Capital One, Bank of America and Washington Mutual are already bracing for a 20% explosion in credit card defaults over the months ahead.
Can you guess what happens next?