Debt

American Express: The Economy is Worsening

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June 25 (Bloomberg) — American Express Co., the biggest U.S. credit-card company by purchases and cash advances, said customers are falling further behind on their debt, signaling the economy is worsening.

“Business conditions continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations,” Chief Executive Officer Kenneth Chenault said in a statement today announcing the company would receive as much as $1.8 billion in a settlement with competitor MasterCard Inc.

American Express and rivals Capital One Financial Corp. and Discover Financial Services have fallen by more than a third in the past 12 months in New York trading as consumers absorb the housing slump, rising unemployment and higher food and fuel bills. New York-based American Express adopted a “cautious view” for the year in January after cardholder spending slowed and overdue payments rose in December.

“If you look at the employment situation, clearly that’s deteriorated, and consumer confidence is down as well,” said Sanjay Sakhrani, an analyst with KBW Inc. in New York who has a “market perform” rating on the stock. “Both play a key role in the credit-card industry.”

The Federal Reserve today left its benchmark interest rate at 2 percent, saying “uncertainty about the inflation outlook remains high.” Consumer prices rose 4.2 percent in the 12 months ended in May, the fastest pace since January, while the unemployment rate rose by the most in more than two decades.

Consumer Confidence

Confidence among Americans dropped to the lowest level in 16 years, the Conference Board said yesterday.

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Bad debts up 500 per cent as easy credit bites

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The credit crunch has hit home for thousands of New Zealanders as debt collection agencies report up to a 500 per cent increase in workload over the past few months.

Debt collectors who have been in the industry for more than 15 years say they have never been busier, with small-time borrowers and businesses “across the board” defaulting on loans and payment for services.

Meanwhile, budgeting advisory services are swamped with people needing help as debts spiral out of control. One service says its waiting time to see new clients is up to five weeks.

Graeme Byers, owner of debt collector Guardian Credit Services, told the Herald on Sunday his business had increased by between 400 and 500 per cent this year.

“There’s just more debt out there. Poorer people are getting hammered.”

Byers said the collapse of numerous finance companies had put many people into positions where they could not pay everyday debts. “One feeds off the other. It snowballs,” he said.

Read moreBad debts up 500 per cent as easy credit bites

War Abroad, Poverty at Home

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The US Senate has voted $165 billion to fund Bush’s wars of aggression against Afghanistan and Iraq through next spring.

As the US is broke and deep in debt, every one of the $165 billion dollars will have to be borrowed. American consumers are also broke and deep in debt. Their zero saving rate means every one of the $165 billion dollars will have to be borrowed from foreigners.

The “world’s only superpower” is so broke it can’t even finance its own wars.

Each additional dollar that the irresponsible Bush Regime has to solicit from foreigners puts more downward pressure on the dollar’s value. During the eight wasted and extravagant years of the Bush Regime, the once mighty US dollar has lost about 60% of its value against the euro.

The dollar has lost even more of its value against gold and oil.

Before Bush began his wars of aggression, oil was $25 a barrel. Today it is $130 a barrel. Some of this rise may result from run-away speculation in the futures market. However, the main cause is the eroding value of the dollar. Oil is real, and unlike paper dollars is limited in supply. With US massive trade and budget deficits, the outpouring of dollar obligations mounts, thus driving down the value of the dollar.

Each time the dollar price of oil rises, the US trade deficit rises, requiring more foreign financing of US energy use. Bush has managed to drive the US oil import bill up from $106 billion in 2006 to approximately $500 billion 18 months later–every dollar of which has to be financed by foreigners.

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U.S. Credit Card Debt Soars to Unprecedented Heights

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WASHINGTON—Studies indicate that credit card defaults and related write-offs increased drastically since 2006. Today, lenders write off 33 percent more in credit card debt than they did two years ago.

Statistics show that about 35 percent of all credit card holders are already exhibiting signs of possible default. Late credit card payments result in fees many consumers can’t afford.

Credit card debt accelerated to unprecedented heights since bank loans began to dry up due to mortgage defaults. Total U.S. credit card debt reached almost $800 billion in November 2007, up from around $680 billion in March of last year, according to the latest available government statistics.

In the aftermath of the U.S. mortgage crisis, the credit card bubble may be next to burst. In the past few years, banks have aggressively marketed credit card ownership and usage to consumers with limited income and low credit scores. Credit card standards remain lax, while loan standards have tightened to a degree.

Read moreU.S. Credit Card Debt Soars to Unprecedented Heights

Subprime crisis hits governments

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THE SUBPRIME mortgage crisis that pushed homeowners into foreclosure and forced the Federal Reserve to bail out investment banker Bear Stearns has also sent state and local governments across the country scrambling to refinance municipal bonds before they are hit with exorbitant interest rates.At the center of the storm are long-term variable-interest bonds known as “auction-rate securities.” Unlike traditional fixed-rate bonds, the interest rates on these securities are reset every 7, 28 or 35 days through an auction process.

Historically, the rate paid has been less than on traditional bonds, making the national $160-billion auction-rate market a reliable source of cheap financing.

But that market has collapsed in the past two months, sending interest rates climbing. As a result, California, Richmond, the Bay Area Toll Authority, the East Bay Municipal Utility District and Sacramento County are among countless government agencies forced to restructure their bond debts.

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