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By year-end 2009, we will see a more than $4 trillion pullback in credit lines. And we are a country that runs on credit. In fact, the entire growth in consumer spending from 1997 to 2008 was paid for with home equity lines and credit cards.
Credit standards are already impossibly high. My credit lines literally shrink every month because I do not use them. But what if I needed them? And I almost couldn't get a lease for a new car even though I have never missed a bill payment. The majority of people cannot borrow money and, therefore, cannot spend. This will not change in 2010.
Next: Reason #6: Excess capacity
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
Reader Comments (Page 1 of 1)
10-25-2009 @ 7:18AM
eddrut said...
we are headed for a depression . the bubble will burst.sonner or later
10-25-2009 @ 7:50AM
jimstep said...
Your blog on economy is great. I agree.
US debt of consumers, govt & business is $52 trillion. Consumer and businesses will have to walk away from over half the debts - can't pay it. Total US debt averages $600,000 per family, and with interest at 5%, this is $30,000 year - too much when average household income is only $50,000. So, that is massive deflation and depression. US debts would be much higher if govt liabilities (medicare, SS, pension) were included (govt debt then $77 trillion- and total is $117 trillion). Such liabs are required in GAAP accounting for businesses.