As the smoke from the last three years of covid-mania slowly clears, it has become obvious to even the most fanatic supporters of the current administration that things aren't going well. You simply can't avoid the obvious increase in costs for everything or the weakness in purchasing power for most Americans.
Now, most small business owners are struggling to adjust to an ever-changing landscape that includes higher costs, lower demand and banking uncertainty.
Yet, we got this:
How on earth are any of these people still in charge of anything? It hurts my brain when I consider the abject failure of our economic team of "experts" has resulted in them all getting promoted rather that fired.
"The number of Americans rolling credit card debt from month to month is now higher than the number of people paying their bills in full for the first time ever.
Americans are buried under more than $1 trillion in credit card debt. Credit card balances increased by $45 billion between April and June alone. Meanwhile, credit card interest rates have climbed to 20.6%. With both balances and interest expenses rising, more and more people are struggling to pay the bills.
According to a JD Power survey, 51% of US credit cardholders now carry revolving debt. To put that into perspective, from 2018 to 2022, the percentage of those rolling over balances ranged from 40% to 50%.
The average balance on a credit card was $2,573 in June. That represents a 6.5% increase from a year ago."
This situation is unsustainable and is accelerating in pace to new levels of un-sustainability. Like a car that starts making "funny" noises that reveal a problem under the hood, our economy is now teetering on collapse in so many areas that it is impossible to know what will break or when. The US consumer is being squeezed between the two millstones of cost of living increases and stagnant wages. Something has to give and I personally think it will be the consumer, then banks, then mayhem.
The banks are especially vulnerable now to collapse on an epic scale not seen since the 1930's
"Two weeks after Moody's slashed ratings of regional banks on a 'triple whammy of factors', now S&P Global Ratings is joining the downgrade party. S&P is painting a grim picture for even more lenders due to higher interest rates and deposit outflows, according to Bloomberg.
S&P wrote in a research note that a "tough" lending environment forced them to downgrade five banks – KeyCorp, Comerica Inc., Valley National Bancorp, UMB Financial Corp., and Associated Banc-Corp, one notch citing negative outlooks for River City Bank and S&T Bank. The rating agency said the review of Zions Bancorp remains negative.
The reason for the downgrades is because depositors have "shifted their funds into higher-interest-bearing accounts, increasing banks' funding costs," S&P said, adding, "The decline in deposits has squeezed liquidity for many banks while the value of their securities - which make up a large part of their liquidity - has fallen."
The standard of living that most Americans were accustomed to has now become unaffordable. For now, the difference is being covered by debt at much higher interest. That isn't simply unsustainable; it is the definition of unsustainable.
"With savings exhausted and credit cards maxed out, consumers have little choice but to stop spending.
This undercuts the notion that the Fed can slay price inflation while simultaneously bringing the economy to a “soft landing.”
The bottom line is that Americans turned to credit cards because they didn’t have any other way to make ends meet. People don’t run up their Visa balance month after month to buy groceries when they are in “very strong” financial shape.
The stimulus checks are long gone. Savings are being depleted. The average person had no choice but to pull out the plastic if they wanted to maintain their standard of living. Of course, this wasn’t a sustainable trajectory. A credit card has this inconvenient thing called a limit. We might be close to hitting it."
