100 million credit card accounts are gone since 2008 – Credit card balances decline by 22 percent since their 2008 peak.
Credit cards have been used as a lifeline and a way to live beyond one’s means in the United States for many years. Yet the current environment of deleveraging is hitting credit cards hard. The outstanding balance on credit card debt has reached a level last seen over a decade ago. This is positive since many were simply using credit cards as a method of spending money they did not have. Yet with access to debt becoming more restricted for households, how many people that once had credit cards have shifted to safety net programs like food stamps? It is impressive to see how the epitome of American debt spending in the credit card is contracting in this current environment. Americans are simply in the process of deleveraging and credit cards are one of those items that signal that debt growth does have a maximum tipping point.
QE3 into infinity and stagflation – Federal Reserve now purchasing over 50 percent of MBS and planning on buying $40 billion per month into infinity.
The Federal Reserve is playing with financial fire here. The last employment report was terribly weak and no amount of spinning can make it good. The drop was largely based on hundreds of thousands of Americans dropping out of the labor force. Is that really a positive sign? Last week we received data from the Census Bureau showing US household median income is now back to levels last seen in 1995. The Fed responded with an open ended invitation to inflation via Quantitative Easing III. Yet there is an inherent risk that is now approaching with stagflation. With GDP growth tepid and employment weak, any rise in inflation will likely stifle consumer demand in the current economy. How much lower can the Fed really push interest rates by purchasing mortgage backed securities? We are already at negative interest rates. Yet the Federal Reserve only understands this monetary policy measure and is beholden to the financial sector. These same policies have been in play since 2007 and who is really coming out ahead?
Federal Reserve slaps on financial rocket boosters but who will benefit? Half of Americans spend more than they make and household incomes fall back to levels last seen in 1995.
The Federal Reserve announced the sequel to the sequel on Thursday with Quantitative Easing 3. After all, if something didn’t work the first time might as well rinse and repeat. The markets are rallying yet what has come from the QEI, QEII, TALF, TARP, and all of those other backdoor bailouts? What has resulted is that we now have the highest poverty rate in a generation and US households have seen their household income fall back to levels last seen in 1995. Is this the solution? Who really benefits from these negative interest rates? The Fed had a hand in engineering the biggest real estate bubble we have ever witnessed and is now trying to allow banks off the hook by pushing rates so low that inflated prices appear lower simply because of the monthly payment. The middle class in the US has declined substantially since the 1970s and many failed to even acknowledge the reality that the national debt passed the $16 trillion mark. The solution? More debt and lower interest rates.
Economic duplicity with low wage capitalism – Nearly half of those that lost their job between 2009 and 2011 are working in a lower wage position. The hard financial reset button.
All jobs are not created equal. It is unfortunate that last month the drop in the unemployment rate was largely driven by hundreds of thousands of Americans simply dropping out of the labor force. Not exactly a way to build the middle class but to many it gives the false impression that things are getting better when they are largely treading water. Also a more trying sign of the times, a survey showing of the three million people that lost jobs between January of 2009 and December of 2011 with longer-term employment, roughly half that found a new job were making less than they once did. In other words, these people now have jobs but at the lower wage side of the scale. This also helps to explain why so many Americans are living day to day while facing the increasing cost of daily goods. It is hard to believe that for over a decade, the median household income has fallen for Americans. Young Americans are fully aware of the challenges the current economy faces because they are encountering it both in lack of savings and massive debt for college.