From this writer's observation, it seems that we have two US economies. One economy is doing just fine. The people in this group have money. They are living well, eating out frequently and buying pretty much what they want.
Then we have a second economy made up of the unemployed and persons living on the edge of disaster. Here we see a growing number of credit card and home equity delinquencies. These people are in a downward spiral. Having lost their jobs, they are using credit cards to survive. This leads to double trouble -- no money and default on credit card debt and home mortgage.
Delinquencies on all consumer loans rose 3.23% in the first quarter, the highest level since 1980. Credit card delinquencies rose to 4.75% of all accounts, up from 4.52%.
In June, Citigroup Inc. (NYSE: C) increased interest rates on some 15 million customers.JP Morgan Chase & Company (NYSE: JPM) is increasing minimum payments from 2% to 5%.of unpaid balances.
With housing prices plunging 30%, late payments on home loans are up 3.52% according to the American Bankers Association (ABA.)
With unemployment rising to 9.5% and pushing 10%, these trends are no where near ending. Until job growth resumes, we pretty much will see more of the same.
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Reader Comments (Page 1 of 1)
7-08-2009 @ 5:18AM
al coholic said...
You make it sound as though unemployment caused this financial mess. Unemployment is more the result of the credit crisis not the cause of it.