American Debt Slaves in Weirdest Economy Ever

During the Financial Crisis, consumers deleveraged by walking away from their debts. And now, with 20 million people still claiming unemployment insurance?

By Wolf Richter. This is the transcript of my podcast last Sunday, THE WOLF STREET REPORT.

During the Financial Crisis, credit card debt and home mortgages blew up spectacularly. When it was all said and done, about three years later, total credit card debt and home mortgage debt had plunged, not because consumers had paid them off but because consumers had defaulted on them and had walked away from their debts.

Now, at this stage of the Pandemic, 9 million people, according to the Bureau of Labor Statistics, and 20 million people, according to unemployment insurance claims, have lost their jobs. With these kinds of numbers, you’d expect consumer credit to blow up even more spectacularly than it had during the Financial Crisis. But the opposite happened.

For extra credit and not visible in the original podcast: a WOLF STREET reader (yup, “Rudolf”) took this photo to commemorate 2020:

Now, with credit cards, the banks make money in two ways. Many people use their credit card as a payment method, but they pay them off every month to avoid having to pay interest to the bank. With these people, the bank makes money because it gets paid a fee from the merchant for each purchase.

Other people use their credit cards not only as a payment method, but to borrow, and they pay interest on their credit card balances. With them, the bank makes money twice: first on the fee at purchase, then the interest on the credit card balance.

That interest can be very high. 25% is not uncommon. Sure, someone with excellent credit and plenty of money might be able to borrow at 8% on their credit cards, but they don’t need to borrow on their credit cards. They can borrow at lower rates in other ways.

It’s the people who have to borrow to meet their everyday expenses and who cannot pay off their balances, but can only make payments on their balances, who pay these high interest rates.

Credit card interest hasn’t really budged, despite the near-zero-interest rate policy the Fed has been pursuing, and despite its interest rate repression through asset purchases that have brought down long-term interest rates.

Apple can borrow for three years at something like 0.4%, and it can borrow for 15 years at something like 2.4%, based on its current bond yields.

But the average interest rate on credit card balances that are accruing interest – so these are people who are not paying off their credit cards every month but are paying interest on their balances – was over 16%, according the Federal Reserve data. This is higher than that average was in any of the prior years going back to the 1990s.

So the interest rate repression by the Fed doesn’t apply to credit cards. And for the banks in this zero-interest rate environment, credit card lending is a huge profit center with enormous profit margins.

For the Federal Reserve, which is responsible for the banks and regulates the banks, and whose 12 regional Federal Reserve Banks are owned by the banks in their districts, those high profit margins on credit cards are sacred. They fatten bank profits, and that’s what the Fed wants, especially during times when lower interest rates make other types of lending less profitable.

But here’s the thing – and it frazzles the Fed, and it has expressed its concerns over this already.

Credit card balances have plunged by over 10% from a year earlier, the largest year-over-year decline going back to the early days of credit cards. Balances are now back where they’d first been in August 2007, despite population growth and inflation.

During the Financial Crisis, credit card balances also declined, but they took a lot more time to do so. It took nearly three years from peak to trough, and balances fell because banks wrote off the balances they couldn’t collect. Credit card charge-off rates by banks were in the double-digits for an entire year starting in Q3 2009.

Credit card debt is unsecured, and lenders cannot repossess or foreclose on anything. They have to go to court and get a judgment and then execute on that judgment. But if the defaulters have lost their jobs and their homes by the millions, and they don’t have anything anymore, even obtaining a judgment doesn’t necessarily allow the bank to collect anything. So banks sold this debt for cents on the dollar to collection agencies, and the defaulted credit card balance disappeared from their books.

In other words, consumers deleveraged by walking away.

But during the Pandemic, delinquency rates have dropped for two quarters in a row, and are now near historic lows, and charge-off rates too have dropped and are also low.

So consumers used their stimulus money and their extra unemployment benefits to cure their delinquencies and pay down their credit cards.

That’s a real problem with the Fed, because the interest and late fees from credit card balances are a huge profit center for the banks.

And credit card balances also dropped because consumers spent less on services such as hotel and airline bookings, cruises, restaurants, and many other services where credit cards are heavily used. And that’s a problem with the Fed because it wants consumers to crank up the economy by spending money they don’t have, and that’s what credit cards are for.

Consumers have also lost interest in applying for new credit cards. According to the Federal Reserve “Credit Access Survey,” which is released three times a year, with the latest coming out just before Christmas, the number of people who said that they’d applied for a credit card over the past 12 months plunged by nearly half from the Good Times, to the lowest rate in the data going back to 2013.

So not only are consumers paying down their credit cards at a historic clip, they’re also cutting back on applying for new credit cards.

Let’s face it, we’re called “consumers” because it’s our job to consume. It’s not our job to be happy and fulfilled because that doesn’t do the banks and the stock market and the economy any good.

Our job is to spend money, and if we don’t have enough money to spend because we don’t get paid enough, we need to borrow this money and then spend it. Being reduced to “consumers” is our fate.

But if we don’t do our jobs and consume enough, the US consumer-based economy will grind down, and the global economy that supplies American consumers all this stuff will grind down, and all heck will break loose, globally. Everyone is counting on us “consumers.”

That’s why the fact that consumers are cutting back on credit-card borrowing frazzles the Fed; it stifles consumption; and the sky-high interest rates in a near-zero interest rate environment is where banks make out like bandits, while those consumers who can least afford it are paying out of their nose for these bank profits.

On the other hand, the Fed is happy with its handiwork on mortgages – though the bottom of the market is threatening to fall out, held in place only by forbearance programs and foreclosure bans.

In many parts of the country, there has been a veritable land rush. According to the National Association of Realtors, sales in November across the country were up nearly 26% from a year ago, back to levels not seen since 2005 and 2006, just before the housing bust. And the median price of existing homes jumped by 15% year-over-year. These would be huge numbers during boom times. But this is a pandemic when between 9 million and 20 million people have lost their work.

But then there is the other side of the housing market: 5.5% of all mortgages are in forbearance, according to the Mortgage Bankers Association. That’s 2.7 million mortgages where homeowners are currently in a deal with their lenders that allows them to skip making mortgage payments.

Some mortgages have exited forbearance in some way, either by the house being sold and the mortgage getting paid off, or by the mortgage being modified with extended terms and lower payments, or in some other way. But new mortgages are still entering the forbearance programs, and since early November, there has been no improvement in the number of mortgages in forbearance.

Many of the mortgages that are now in forbearance programs were delinquent before they entered into forbearance, and by being in forbearance, they’re no longer considered delinquent, but the problem remains. It’s just a form of extend and pretend.

Then there’s the Federal Housing Administration, the FHA, which insures mortgages with low down payments extended to homebuyers with lower credit scores, including subprime credit scores. Down payments can be as low as 3%. The FHA currently insures about 8 million mortgages.

A record 17.5% of those mortgages are now in some stage of delinquency. This includes mortgages that were delinquent before they entered into forbearance and are still delinquent.

And nearly 12% of the FHA-insured mortgages are seriously delinquent – meaning over 90 days delinquent.

In some metros, the delinquency rates are far higher. In the Atlanta metro, 21% of the FHA mortgages are delinquent. In the metros of Houston, Chicago, and Washington DC, 22% are delinquent. In the Dallas, San Antonio, and Orlando metros, 19% are delinquent.

These delinquencies can mostly be cured by selling the home, thanks to the surging home prices. But in each of those markets, there are tens of thousands of delinquent FHA mortgages, and if they are to be cured by putting the homes on the market and selling them, the flood of new inventory and the nature of forced sales would put enormous downward pressure on home prices in those markets, and the efforts to cure those delinquent mortgages by selling the homes would set off renewed fireworks.

This is the other side of the housing market: Widespread problems with delinquent mortgages because 9-20 million people have lost their jobs. Those homeowners await a day of reckoning when forbearance and foreclosure bans end.

So we find ourselves in the weirdest economy ever. Part of the economy is rocking and rolling, such as everything having to do with ecommerce and Chinese imports, pushed up by a sudden switch of consumption from services to stuff, fired up by federal stimulus money of all kinds.

Stocks and bonds and home prices are sky-high, fired up by nearly free money from the Fed for those that have access to it, and by the Fed’s efforts to inflate asset prices beyond recognition to enrich the asset holders, and to enrich the biggest asset holders the most, and by the Fed’s effort to create the greatest debt boom ever.

And there are the broad national and local strategies of extend-and-pretend where delinquent mortgages are brushed under the rug of forbearance programs, and where renters are protected by eviction bans.

Part of the economy is in deep trouble, and millions of people are still out of a job, and about 800,000 people are getting laid off every week and are filing initial unemployment claims. These are huge terrible numbers. And consumption by regular people is still down from a year ago because people have cut way back on buying services, and the surge in purchases of goods hasn’t made up for it.

But the good thing is that people are paying down their credit cards. No one should borrow at double-digit rates during the Fed’s interest rate repression. To heck with the banks’ profit margins. $10,000 in credit card debt may cost that person $2,000 or even $3,000 in interest per year. That’s money down the drain of bank profits. If the borrower is falling behind, massive late fees begin accruing in addition to the interest, and the total owed the bank just jumps.

There are a lot of services and goods that people could buy with that money, and that would help the real economy a lot more than surrendering that money to the banks in interest and late fees to fatten up the bank’s profit margins.

And it would be a good thing if consumers stuck to it and continued paying down their credit cards that carry this usurious interest rate in a zero-interest rate environment – and to heck with the Fed’s wishes.

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  150 comments for “American Debt Slaves in Weirdest Economy Ever

  1. Michael Grace says:

    How is it possible for banks to survive if they cannot totally exploit their customers with criminal interest?

    • Thomas Roberts says:

      The banks always find a way. In America, to exploit new people in new ways.

      • Joe Saba says:

        could it be why they’re trying to go cashless
        then negative rates means you pay to keep ‘money’ in banksters bank

        • Thomas Roberts says:

          Cashless is very good for the banks, very bad for consumers, so maybe. For consumers, it means the ability to spend more than you have, be even lazier, or take advantage of credit card rewards.

          Negative interest rates on despoits, wouldn’t make much sense and most people have no significant savings anyways.

    • Zantetsu says:

      I’m pretty sure the interest they charge is commensurate with the risk they take lending to people who mismanage their finances so much that their best option is a high interest credit card.

      Apple can get loans at 2% because Apple does not default on its loans.

      Joe Shmoe who makes $30,000 per year and who has $10,000 on his credit cards cannot get that deal because his likelihood to default is much higher.

      I cannot understand how people can cry and lament about credit card interest rates when they are a voluntary service that people choose to use because it’s their best option, and that requires them to pay interest at a rate commensurate with the risks associated with lending to them.

      Don’t like high credit card interest rates? Don’t buy stuff on credit that you can’t afford! Can’t survive without buying stuff on credit? Then you probably made a bunch of poor live choices that the rest of us are going to have to clean up for you. That’s fine, but it’s a totally separate discussion related to stimulus checks, unemployment insurance, welfare, etc, not a credit card interest rate discussion.

      • Tex says:

        Lol, they don’t understand that debt is a tool rather than a can you can kick down the road later to perhaps pay or not pay.

      • otishertz says:

        People with terrible finances can’t get a credit card

      • otishertz says:

        More like there are unfortunate people, who had a good situation and good credit, that are falling on hard times in greater numbers now (because etc) and they have turn to credit cards for a bridge loan to keep their household going.

        Cards which will likely get shut down within a year by an algorithm that digs into every personal detail it can and determines their situation has changed.

        • Happy1 says:

          People in a good situation have savings. Frugal prudent people should never need to use credit card debt.

    • K says:

      I have not seen this discussed in any magazines except for the FinCEN reports. See “FinCEN: Leaked records show 2 trillion dollar flow of dirty money” in DW News. However, I wonder if there is any evidence that Italian organized crime lost to a more powerful, more connected, non-Italian organized crime in the USA when organized crime members ceased being feudal.

      Thus, the non-Italian organized crime members could get money via their close links with the banksters and finance more hits on any Italian or other groups. If so, the banks (and their controlling banksters) have another, huge source of income: the proceeds of organized crime.

      I certainly have no personal knowledge of whether this is true.

    • K says:

      One more thing, remember that the business of banking is the less profitable business that banksters can operate if they are as dishonest as I believe: they have access to companies’ private financial information. Thus, their cronies can engage in insider trading, which is
      ubiquitous.

      Do you ever wonder how most politicians take office, supposedly put their assets in “blind trusts,” and then after they leave office they are somehow multimillionaires? Do any of you have access to such great “advice” that your modest savings of maybe a million get turned in a limited number of years into many, many millions — with amazing regularity?

      They can also pick who will win in any financial contest. If you are a banksters’ crony, you can get ultra-low interest loans and overwhelm any opponents who have to get financing at regular rates. If you are not sufficiently friendly to the banksters, they can deny you access to any type of credit or discourage people from doing business with you, e.g., suppliers.

      I do often wonder if any of our US or EU largest companies are truly independent and if any of them are controlled by or subservient to the banksters or organized crime groups connected to them. It would explain how “The Quiet Coup” that Simon Johnson wrote about occurred.

    • K says:

      The word “criminal” would seem to be very appropriate, reportedly. Watch “Money laundering, oligarchs, terrorists: How corrupt are the banks?” in DW’s To the Point. Read the foreign press as to organized crime and banks. Ever wonder why the 15 billionaires that Forbes Magazine reported own US media do not allow their media to cover this corruption of US banks more prominently?

    • Swamp Creature says:

      I use Wells Fargo for most of my banking. Based in San Francisco They may be a crooked bank but they are less crooked than the other 4 major banks. Citibank is a criminal enterprise, same with JPM/Chase. BOA is not much better. Wells customer service is very good. What they do behind the scenes doesn’t affect me so I could care less.

    • MARK J says:

      What do you mean exploit and criminal? This is America.

    • Enginer01 says:

      “These delinquencies can mostly be cured by selling the home, thanks to the surging home prices.” But the “surging home prices” is largely a “flee the cities” phenomenon with limited duration. As inner-city prices drop, gentrification begins.
      And…the banks make out like bandits at the high interest charged for RV sales. RVers are accounting for a lot of today’s better-off Homeless.

  2. Tony22 says:

    Credit card debt is unsecured. It is a civil matter. If you don’t own a house, an expensive car, and in some states they can’t touch even those, if you owe a huge amount on credit cards, there is nothing that they can do to you, short of ‘ruining your credit’ and lowering your credit score. That’s a low price for walking away with tens of thousands of dollars of food, life saving medicine or medical care.

    • Wolf Richter says:

      Tony22,

      Not quite. The bank, credit card company, or collection agency can get a judgement, and then execute on that judgment by garnishing your wages, bank accounts, and brokerage accounts. They can obtain your government stimulus check, tax refunds, etc. If you have any money or income at all, they can get it.

      Your only protection will be a bankruptcy filing to let a judge decide how much you’re going to pay every month, under court order, and for how many years.

      Granted, if you’re really broke, and have nothing and don’t have any income, banks might not file a suit to get that judgment, or after getting the judgment might give up because they know you cannot squeeze blood out of a turnip.

      Also, if millions of people default at the same time on their credit cards, as they did during the financial crisis, the system gets overwhelmed, and you might escape simply because there are too many defaulted borrowers.

      • Ronin says:

        The world should have a 60-90 strike on paying any debts every year to show that people are in control of the banks survival not the other way around. Why is it when the whole system they designed to enslave us threats to break their existance the banks are willing to adjust their policies? The truth is it doesn’t pay to be responsible like me and others because every 10 years a crisis happens and the rules are bent to be bailed out for the dead beats that over-borrowed.

        • Gershom says:

          The world should have a 60-90 strike on paying any debts every year to show that people are in control of the banks survival not the other way around.

          That’s adorable. Bank lobbyists draft every piece of financial legislation passed by “our” elected representatives in the Republicrat duopoly. You have the relationship between the people and predatory capital completely backwards.

        • Joe Saba says:

          why if one walks away – they really need to file chapter 7
          put everything in someone else’s name

      • Michael Gorback says:

        In Texas you can’t garnish wages, your house is protected, one car per driver is protected, your retirement account is protected. Texas was initially founded as a debtor-friendly state to attract settlers.

        In Texas there’s winning and then there’s collecting. I’ve only collected on one lawsuit: they had two drivers and three cars so I got a used car.

        In another suit that I won the guy moved out of town. I hired a PI to track him down and found his bank. I hired a lawyer to go after his bank account. The bank’s response was to take the money for itself because he lied on his auto loan with the bank.

        Which brings me to another observation. When you win a lawsuit you need to register it so it goes on their credit report. I’ve had several angry former patients call me up because my report to the credit bureau prevented them from getting a loan. Your own sh*t doesn’t stink.

        • Apple says:

          Vengeance is mine sayeth the doctor.

        • Petunia says:

          Did you surprise bill them then get a judgement against them too, when you could have just written it off your exorbitant income? SuperPredatorCool.

        • Dan Romig says:

          Wow!
          Vengeance? SuperPredator? No.

          Last month, I needed a crown from my dentist. He did a great job for me, and I paid him.

          Last summer, my truck needed its rack and pinion to be re-plumbed with a new fitting from the power steering pump’s line to it. My mechanic did a great job, and I paid him.

          I have not needed Dr. Gorback’s time or skill set, but if I did, I am sure he would do a great job, and I sure as hell would pay him for his work.

        • Petunia says:

          Dan,

          You are assuming the money was made in an ethical manner, I’m not. I have had a few serious issues with doctors billing me for malicious diagnosis, surprise billing, and pushing unnecessary medical treatments.

          And to quote a line from the Big Short. “He isn’t confessing, he’s bragging.” One of the most disgusting posts I’ve seen here to date.

        • Dan Romig says:

          Petunia,

          Yes, I am assuming that the money was earned in an ethical manner.

          For 43 years, I was ‘Dan the TicketMan’, a sporting event ticket broker in the Twin Cities. Now with Covid-19 and no more sporting events with an after-market for tickets, I am happily retired.

          My clients with season tickets to sell for games they didn’t attend trusted me to sell them for the best I could and be honest with them on the price and commission kept by me. My customers trusted me that I would deliver good seats at fair prices.

          I ran a business and offered a service. Just like my dentist, my mechanic and Dr. Gorback does. I always kept my books clean – on both ends, and I understand the importance of paying those who supplied the tickets and being paid by the buyer when selling the tickets. My clients trusted me to where they would send me thousands of dollars worth of tickets up front on consignment and wait for them to sell before balancing out. My word was of value to everyone I did business with, but it was a well-earned value.

          That’s a bit trickier to do when you are a doctor seeing a patient for the first time, as you bill them after treating them, not before. My point is that the doctor deserves to be paid for services rendered.

        • Bill in ILL says:

          I agree with Petunia, doctors, or whoever they hire to run their accounting departments can be serious crooks. I have seen ridiculous charges for services NOT performed. They refuse to adjust the bill and the insurance company says “It’s between you and your doctor”. The patient is completely screwed.

          A personal example; my wife broke her ankle a few years ago. She had the surgery, therapy, and healed up. We went back to the orthopedic surgeon for a final post-surgery office visit. The assistant came in and said she needed an x-ray, so he took her down to the x-ray room and had it done. Came back to the examination room, the doctor came in, looked at the x-ray, said you are fine, do you need a new boot? We said yes, so he left. He did not spend 10 minutes with us. The assistant came back and gave my wife her new boot. All good, right? No, it wasn’t. We got the bill, $200.00 for the office visit, agreed. $140.00 for the x-ray, agreed. $400.00 for the new boot, expensive, but agreed. Then a $900.00 treatment fee! He did NOTHING, no treatment whatsoever! We tried the insurance company, no help. Tried to negotiate with the doctor’s office, no good. The doctor is now trying to collect that $900.00 from us like Gorback above.

          This year, I am paying over $1400.00 OVER my supposed maximum out of pocket. I have the expenses documented as I have an HSA account for medical expenses. The insurance company insists I did not spend that money and I have no recourse. I could hire an attorney, but his fees and court costs will easily shoot way past $1400.00.

          Speaking of insurance companies, the doctors are also paid huge amounts of money by the insurance companies before anyone comes after me for my co-pays and deductibles. So, both Michael Gorback, apparently a shady doctor of some sort, and Dan Romig are basically blowing BS up our backsides.

        • Dan Romig says:

          Bill,
          I will let the doctor speak for himself on that opinion regarding his ethics.

          I was merely presenting the point of view that professional services rendered deserve to be paid for by the consumer of those services.

          ‘Apple’ equated that to an act of vengeance. ‘Petunia’, who I very much enjoy reading comments from, accused the doctor of having an exorbitant income and of being a predator.

          Far from blowing BS, I, like Wolf, call it as I see it. (We would all probably agree that he is the best there is at it!) Yeah, I give Dr. Gorback the benefit of doubt, and assume he has integrity. I will continue in that belief until it is proven otherwise.

          By the way, one of the best parts to owning and running your own business is being able to choose who you do, and who you do not deal with.

        • Absur Ditty says:

          Who needs a USA doctor? They typically bill their time doing procedures at $1000-$5000 PER MINUTE. At that price I’m happy to spend my time figuring out how to get by without them.

          There are plenty of alternatives/competition
          – get free high quality medical info from the internet
          – can usually diagnose minor stuff yourself on the internet
          – buy the medicine you need cheap online or in Mexico
          – if you need major treatment go to mexico, India, anywhere other than USA really
          – if you’re going to die anyway just get the home hospice care. who wants to spend a couple years checking in and out of hospital, or hooked up to equipment, or alone in a nursing home- that’s not living anyway.
          – avoid most health problems by eating properly
          – use youtube to learn how to stitch yourself back together, pick debris out of your tissues, and set bones after any accidents

          And this B.S. of requiring a physician ($250 for 4 minutes of face time, plus 2 hrs sitting in waiting room) to write a prescription for a $4 generic medicine is infantile. You know if you travel to many other countries you can just walk into a pharmacy and buy what you need without a nanny physican script.

        • otishertz says:

          You had me until you said “patients.”

        • Happy1 says:

          Ha ha, yes Michael For back, as a medical person, same experience, people with an unpaid 100$ balance angrily calling about a debt being sent to collections.

          Rothe other comments about the high cost of physician based medical care, this certainly does happen, but the idea that medical professionals are billing “hundreds of dollars a minute” is off by a factor of almost 50, for every 1,000$ ten minute interaction you share, I have 50 instances of Medicaid paying 200$ for total colectomy and all pre and post operative care, which spans hours of physician time. Your plummer is paid more on an hourly basis. The 1,000$ for 10 minutes thing does happen but is typically limited to PE backed groups who surprise bill outside of an insurance network. Literally no one is paid hundreds of dollars for a few minutes of work day in and day out. Those who have had this experience are anomalous and a lot of bad policy is being based on their their outlier anecdotes.

        • Absur Ditty says:

          Last 3 times I’ve been unfortunate enough to interact with a physician or a PA or a nurse practitioner (mostly when I really needed a stupid script because my supply was out and I didn’t have time to go to Mexico)- the practitioner interacted with me for about 3-4 minutes, in and out of room and charged me $250. That’s easily $3,000 per hour. I meant to say thousands of dollars per hour but I’m so extremely angry at the health system and the physicians ripping off my family that I accidentally wrote $1000’s of dollars per minute when I meant $1000+ per hour.

          But it is extremely revealing that someone claiming to be a physician came on here and admitted that physicians do sometimes actually charge $1,000 + PER MINUTE.

          OK so physicians do some charity work or take low compensation for medicaid patients, but not for me apparently. So I guess the model is gouge where they can and do a little charity work to appease their conscience?

          The real solution for this crap is to: 1 ) end the stupid unconstitutional federal restrictions on people making, buying or using medicine 2) kick the fedgov out of the medical education business 3) end the stupid licensing programs which protect physicians rackets 4) Eliminate all the stupid federal regulations on the practice of medicine including the EHR requirements, HIPPA (a monstrosity which was never actually passed by Congress) and etc. Local medical care delivery is NOT interstate commerce and the fedgov has no authority from the Constitution to be involved- only some idiotic corrupt supreme court OPINIONS which need to be set aside to observe the actual LAW.

          Under the reforms I describe, physicians could still do very well, only they’d have to please their customers instead of taking advantage of us.

      • Bob says:

        You miss the point. Debt is moved from individual to federal balance sheet. Same as Hamilton consolidating all states revolutionary war debts on federal govt balance sheet to promote permanent monetization of debt. Untrue to say people are paying down debt.

      • josap says:

        Banks sell bad debt to collection agencies. Usually for pennies on the dollar. Then they hound people to death and try to collect what they can. They often settle on a small amount, but they still make a profit.

        • Heinz says:

          As old Ben Franklin sagely observed, creditors have better memories than debtors.

      • Tony22 says:

        Tens of millions of citizens who have lost their job, spent their last dollar and perhaps their home with a second and first mortgage ahead of any other creditor, but most likely rent do not have “wages to garnish, or bank and brokerage accounts. Nor do they qualify for government stimulus checks, or have tax refunds” if they filed an exemption from withholding, something that smart working class Americans do.

        Withholding refunds was also the only way the IRS was able to collect the ACA Obamacare fines, remember?

        “if millions of people default at the same time on their credit cards, as they did during the financial crisis, the system gets overwhelmed, and you might escape simply because there are too many defaulted borrowers.”

        That’s the whole idea Wolf. February’s credit card billing cycle might be a good time to force the Biden regime’s hand for more relief in that manner. :-)

        What these economicall disenfranchised people often have is firearms and lots of ammo. = “Now hiring process servers and eviction specialists. Must have bulletproof vest and armored vehicle.”

      • Happy1 says:

        I do volunteers with people in financial trouble, and I have yet to see people Inna default situation who have assets of any kind that can be garnished, wages being the sole exception. People with massive credit card debt invariably are renters, have car loans, sometimes student and medical debt, and usually have drained their retirement accounts. In my experience with a few dozen of these situations, there have been no people in this situation with even 10K of assets.

    • endeavor says:

      The banks need to offer credit to the workers employed manufacturing products sold to Americans. Only the Chinese government won’t allow them.

    • What ever happened to revolving credit? In that system you couldn’t sell anything until the entire bill was resolved. I recall folks getting in trouble, selling stuff they bought on credit to meet their debts. Which brings up the CC for gold trade. Can they take your PMs? Even the ones you didn’t buy on the card. What if you have them stored out of the country?

    • Swamp Creature says:

      When my Father in law passed away he left about $15,000 in credit cared debt that could never be repaid because he had close to zero net worth We hired a lawyer who contacted the credit card companies and they settled for .50 on a dollar. They were happy to get that.

      • RightNYer says:

        Why would you have agreed to pay a single penny? It wasn’t your debt, and the debt died with him.

        • Anthony A. says:

          Exactly! My ex died and left $60K in CC debt, all unsecured. I’m sure the “please pay us” letters addressed to her stopped after a couple of years.

        • Swamp Creature says:

          When you are Executor you get stuck with the debt indirectly. Same with the legal fees. We found out the credit card debt in the discovery process. It was too late. We also found out that he had a squatter living in his townhouse. Had to throw the stuff out in the street. It wasn’t pretty. Wound up selling the house and not making a penny.

        • RightNYer says:

          Swamp, only if the deceased has assets. I guess that was the case? I misinterpreted your post to mean he had no assets.

        • Anthony A. says:

          ^^^^ “I misinterpreted your post to mean he had no assets.”

          I did too….sorry.

        • Swamp Creature says:

          My Lawyer never told the credit card company that there were some assets in the estate. He scammed the scammers.

        • Swamp Creature says:

          The interest was over 30% on the credit cards because he wasn’t paying them on time and they were adding penalty late fees. The only thing he was buying was groceries on the cards and still essentially went bankrupt. He was a top Hair Stylist in the DC area and died penniless. Sad story.

          I certainly don;t feel sorry for the credit cards companies. They were vultures.

      • Happy1 says:

        Similar experience, working with an elderly gent as a volunteer, guy couldn’t control compulsive spending on crap that he thought was collectible, died with 10K debt and two storage units full of what can only charitably be called “stuff”.

  3. MCH says:

    Someone else stimulate the economy, I have done my share…. I advocate for others to spend the money and prop up the economy.

    Nope, I don’t mean the US economy.

    • drifterprof says:

      Same here. I’m sincerely doing my share in supporting the Thai economy with my U.S. rental and retirement income.

      • roddy6667 says:

        That is a good plan. Work and save in an expensive economy, and retire in an affordable one. I spent 65 years in CT. Now I am in Qingdao in China, The US dollar buys 5X as much in lifestyle.
        I consider it to be a form of arbitrage.

    • Caleb says:

      Prediction: All the supplies that people have bought are going to be slowly used up over the next couple of years and will cause a consumption depression.
      Plus, why would any Trump supporter, or real progressive Democrat hoping for authentic change, prop up the Bidenarris economy with their discretionary spending?

  4. drifterprof says:

    What’s up with all the credit cards giving deals like “no interest until 2022”? Seems like that is cutting off their main gouge usurious profit.

    • Ed C says:

      Same as a drug dealer offering a free sample. Was going to say samples but usually one’s enough to get hooked.

    • josap says:

      They still get their spiff from the retailer every time the card is swiped.

    • Ron says:

      Hindsight go to college on loans graduate buy a house furniture 2 cars all on credit lose job flush it all down the toilet live on street in San Francisco look in the mirror see the problem

  5. joe2 says:

    “So the interest rate repression by the Fed doesn’t apply to credit cards.”
    “the Fed … has expressed its concerns … Credit card balances have plunged by over 10% from a year earlier”
    If that is not enough to show you the Fed is not simply bungling, but actively transferring wealth from the poor and middle class to the rich as part of a larger plan, good luck in your fantasy land. Blissful ignorance won’t last long as things accelerate.

    • David Hall says:

      People on federally enhanced unemployment were earning more for not working than when they were working. There is a bill for $2,000 stimulus payments pending a vote in the Senate. A 41 year old Louisiana man was recently elected to Congress. He died of COVID before he could move to the DC metro area. In Venezuela they printed money and gave government handouts until there was no food left on their shelves. Venezuelans started using U.S. dolares (USD) instead of bolivars.

      • Harrold says:

        And here in the US we pay farmers not to grow crops and call it “capitalism”.

        • Wolf Richter says:

          We’re paying non-farmers not to grow crops. Fixed it for you.

        • roddy6667 says:

          Dairy farmers are the biggest welfare queens around. They get 2/3 of their income from milk subsidies. Remember that when you see the farmer with the $90,000 pickup truck and multi-million net worth.

  6. BT says:

    For us potential first-time home buyers, the wait continues.

    • Marbles says:

      If I were a potential 1st time buyer, I would concentrate on patience, reluctantly. Good luck to you.

    • Rowen says:

      Foreclosure moratorium expires at the end of January. Not sure what they’re gonna do, but I’m sure there will be some can kicking.

      • Swamp Creature says:

        The should foreclose on the lenders who made these mortgages. These bastards stuck us with of 5K in receivables over the holidays. This never happened before. Usually they like to clear all their books before the end of the year just for tax purposes. All their employees who work in accounts payable must have called in sick.

        When these lenders go under like they did in 2008 & 2009 I’m going to celebrate.

    • joe2 says:

      I was scared silly when I bought my first house for $32K since the guy I bought it from paid $14K (20 years earlier) and he thought he robbed me. I asked my father if he would back me up although I knew he couldn’t.
      I learned about renovations, wallboard, electrical work, plumbing, and roofing from that house. Now it is easy to learn from how-to books and on YouTube.
      Everything else after that was sweat equity. At my peak I owned 5 houses. Sold them in 2006.
      If you can afford it by spending less on a car or something else, working a second job, or fixing it up, or negotiating with realtors on fees – do it. Run the numbers, but all life is a gamble. And if you fail, believe me, you will get another chance based on the experience you have gained.

      • Zantetsu says:

        That is not really possible anymore joe2. It was possible when the difference between affording a house and not affording a house was scrimping and saving, but those days are long gone.

        NOTE: this is not equally true in all parts of the country. If you are willing to live where housing prices are very cheap because job prospects are very poor (my home area of Youngstown Ohio comes to mind) then you probably can still do stuff like this.

      • Lynn says:

        Right now in many places a literal unsafe tear down will cost $200K in many places. One that needs a complete new foundation, a new roof, all new electrical and plumbing and a full house of insulation. Plus of course drywall, major framing/structural repair and some luxuries such as paint, flooring and maybe something besides plywood shelves in the kitchen. If you’re lucky there are no rats.

        Do you have any idea of the inflation of lumber and insulation costs in the past year? We’re talking another $100 – 135K for what most people would consider habitable counting only labor for foundation work, and materials. Plus years of DIY. Plus permitting.

        Eating through 50 lb bags of rice and P&B sandwiches for a few years just isn’t going to do it. The only people who can afford houses in many areas today are people who inherit money, make much more than average or are well backed investors.

        • 91B20 1stCav (AUS) says:

          Lynn-

          “…and that old house we lived in, the roof is cavin’ in, like every other one along the block. Took thirty years to pay and ten to rot…” – rodney crowell ‘Home Sweet Home (Revisited)’.

          may we all find a better day.

  7. Pacifica says:

    I have a bad feeling that the game isn’t going to end well..record debt has consequences and they are coming..

  8. Phoenix_Ikki says:

    The FED, a perfect partner for the fat cats to get even fatter while watching millions suffer so another billionaires Ahole can buy another yacht. If this isn’t perfect illustration of how deep we are into late stage capitalism then I don’t know what is.

  9. Petunia says:

    There are ~17 million people in the US that live in mobile homes and are not covered by the forbearance program because the land the home sits on is rented. Also, the loan on the home is not a mortgage but a secured personal loan, where the home can be repossessed. These people are among the lowest paid in the country and probably represent the largest group of unemployed workers. Congress and the fed doesn’t seem to know these people exist.

    • timbers says:

      Interesting, didn’t know that about mobile homes but I’ve seen the in the news recently. Thanks Petunia.

      I live a city that has an area with homes a step above mobile homes but nailed to the ground. They are called Campanelli Ranch, named after I’m sure the developer of the time in the 50 and 60’s. Single level homes easy to heat and repair. Built when working folk in America were prospering and could but inground pools in their backyards and add additions to homes.

      So just got the latest real estate tax bill yesterday from the city, with nice double digit increase because evaluations being dramatically increased (Thanks Jerome I love paying much higher taxes on my home so you give trillions to billionaires while you tell no inflation).

      So lots and lots of working folk who own these homes that are a step above mobile homes but anchored to the ground are getting much higher taxes.

      Wonder how many will end up losing their homes?

      And yet our Congress that gave trillions for socialism for the rich, couldn’t approve aid to local govt even though it was local governments that bore the primary financial burden of Covid.

      Just another normal day in the US of A.

      • Petunia says:

        Less than a mile from me was a trailer park which was recently emptied out for new high priced homes. Low income and poor people are being displaced at an alarming rate. I have no idea where these people have gone, farther into the sticks I assume. I also don’t know who will buy all those new homes going for 50% to 200% more than in 2019. The next crash is going to be spectacular.

        • Here the Eminent Domain decision casts its shadow. Many cities and states passed laws which defied the decision, however the city also went on a program of designating areas “blighted”. This leaves the door open. This was before the Ca state redevelopment agency was closed. Replacing low cost housing is like bankruptcy, the process moves slowly at first, and then much faster. The state faces a shortage of affordable housing, and people facing eviction. Now is not a good time to be tearing down what little is left. However the stock market is producing new demand for capital investment. For some reason condo prices seem to outgain all other tiers. I think ultimately the condo will replace the mobile home and the duplex. That much seems to be mildly inflationary outcome at the least, condos by sq ft are more expensive than existing homes.

        • Lynn says:

          The county where I lived passed a measure giving rent control to owners of mobile homes in parks. It was easy to pass because unlike apartment dwellers the owners have a stake in their homes which other home owners can relate to. Before that our parks were emptying out. Large corporations had bought up a lot of them and raised rents beyond what most could pay.

          One owner being evicted from a park in the northern part of the county set up a propane tank to explode and held the sheriffs off for a while.. He was quite old and had lived there for decades. He lost all equity and had nowhere to go.

      • Heinz says:

        So many people habitually don’t act their own wage– and are prime candidates to become life-long debt slaves.

        Others overbuy and overpay for more house than they can afford in the long run.

        For them, the phrase ‘house rich and cash poor’ applies.

  10. MonkeyBusiness says:

    The Fed should be happy, because this is dry powder for the next binge.

    The fact that people were able to reduce their debt means the economy was in pretty secure footing.

    • timbers says:

      You’re probably right. Yet, a renter knowing of eviction bans might choose to not pay rent and instead pay off credit card is save for house. Figures on that likely hard to come by. When eviction bans ends, he just moves to new place flush with cash.

      • MonkeyBusiness says:

        Yep, as for people who will lose their homes, I am sure players like Blackstone will come in and swoop those homes up for 50 cents on the dollar and then they’ll just rent it back to the original owners.

        Happy times.

      • rip says:

        There are millions milking the system right now. I was talking to a contractor who told me that his crew was collecting the enhanced unemployment benefits even though they were still working. Wait, what? Yes, they simply stated their income was down due to COVID, so even though they were still working they got the enhanced money, too. Why? Because all they had to do was “self certify” with no proof of income or anything. I understand this is going to change with the next round, but the whole thing was rife with fraud.

        • Mr. House says:

          My landlady did the same thing. She was collecting the 600 a week plus we never stopped paying her rent. Just bought herself a new car.

        • Heinz says:

          Anything the gubmint touches attracts fraud and corruption like a moth to a flame.

          A whole class of ‘opportunists’ run a niche economy on DC corruption.

      • QQQBall says:

        Timbers,

        Good thought on not paying rents but paying CC instead …and there is no interest on unpaid rent, but heavy late fees and interest on CCs… also the USG might pass a bill to pay off say 4 months of rent for you.

        My debit card was hacked for 2nd time in a year. Not replacing it. I have an internut CC with a low limit that I will use. The CC is paid monthly automatically.

  11. BuySome says:

    In death a member of fight club has a name. Cue the Pixies while we watch the credit industry implode. And the day gets going again with dollar melting and metals solidifying.

  12. Massive government handouts fed the Great Depression,
    1929-1941; 1940, in America, unemployment was 15 %.

    No one returned to work just because
    “free money” flowed freely, duh !

    World War II:
    — Brought Death & Destruction.
    — Returned people to work. &
    — Created the baby boom.

  13. WES says:

    I think people wanting to reduce debt and save more is a very rational decision when they perceive uncertain times ahead.

    What could signal an uncertain future more clearly than the Fed reducing interest rates to zero or to negative real interest rates!

    • timbers says:

      Yes. The Fed’s actions are not the actions of a confident central bank.

  14. OutWest says:

    What else can be said? You petty mutch summed it up.

    In the end, those who have access to debt have access to opportunities. If you can’t borrow cash to get ahead in this world, you are most likely stuck. I’ve borrowed a lot to get ahead and paid it all back….

    Less debt, less problems.

  15. Brant Lee says:

    “To heck with the banks’ profit margins.” My new motto! I sure don’t have any need for a bank except for direct deposits and a checking account.

    I don’t think people are even able, through fear of covid, to spend like before the pandemic. I still haven’t been to a sit-down restaurant, I’m more or less out of the habit.

    We have been made aware of just how piggish our lifestyles have been. $75 meals for 2 at restaurants can buy a big Hickory smoked ham, a nice roast, wine and big bag of tators that makes for a lot of good meals. I’ve even lost about 10 lbs in a year.

    Banks and the Fed should be known for what they really are, now. High predatory credit card interest rates, payday loans, no-interest savings accounts. 3% transaction fees on cards are ridiculous too.

    • Paulo says:

      Well Brant, we haven’t lost any weight in our house but only because we cook so well at home. I agree with your comment on dining out. You can buy whatever ingredients you want and hang the idea of anything being on sale, and still produce an A1 meal for a fraction of what a restaurant charges. And most dining fare is pre-packaged and portioned up, delivered ready to cook by ‘the chef’.

      As for credit card debt, years ago…decades back, I vowed to never buy any liquor or meals on a credit card. I worked with a guy, and this was back in the ’80s, who ran up an $800 dollar CC bill buying ‘big shot’ rounds. He had quite the hangover the next day, and I’m talking about his bar tab. The first thing to go is judgement, they say.

      Credit cards are handy to have for traveling, or online, but that’s about it. I’ve had one for 40 years and never had an outstanding balance, even when laid off and without a pay cheque. If it isn’t an option…..

    • BuySome says:

      “Come gather consumers wherever you shop, We submit that your bubble will be likely to pop, And the value of cheap goods will certainly drop, For this time..everything’s different. And the sound that you hear calls the last trolley stop, Hear the bells, they are a clangggg..ing.” Apologies to Bob Dylan.

    • josap says:

      I’ve gained 12 lbs. Hubby loves to cook and cooks well.

      We have gotten take away maybe 4 times since Feb. Saving lots of money. We are now having groceries delivered, which is a bit more expensive. The infection rates here are insanely high.

      • Zantetsu says:

        I’ve lost 23 lbs. But that’s mostly because Covid work at home prompted me to buy an under-desk treadmill and I walk at least 15 miles per day at a 4% grade while working (and reading Wolf Street!). I’m climbing a small mountain every day. My friend now calls me “the sherpa”.

  16. makruger says:

    The more I read stories like this, the more I want to shift a larger percentage of my stock and bond investments to international rather than domestic holdings. At this rate it won’t be long until my portfolio is 100% international (ex-US).

  17. Michael Gorback says:

    At the end of 2021 the car photo above will show people living in it.

    • Engin-ear says:

      Pffffff :)

      And a tax assessor staying close by and trying to figure out the fair value of this new age shelter?

  18. Khowdung Flunghi says:

    “the bank makes money because it gets paid a fee from the merchant for each purchase.”
    This is the part that kills me – we have to PAY to spend our “money”. Yeah, I get convenience, but if I understand the process, the merchants are REQUIRED to charge the same price for items whether you pay cash or use a card – part of the “terms and conditions” to provide the card option.
    There seems to be something of a “soft ban” on cash during the pandemic…guess that let’s the CC mafia rake in a little more.

    • Ethan in NoVA says:

      When you pay for government things they often charge a service fee for credit cards. Also in Florida I noticed there were cash/credit prices on the gas pumps. I wish more businesses would push back against the cash/credit same price thing.

      • RightNYer says:

        A lot of businesses have decided the risk of having a lot of cash is not worth the 2%. Not only do you risk robbery and employee skimming, but you also have to pay an armored car service to take your cash at the end of the day. If I was running a retail business, I’d make it credit/debit only and just incorporate the 2% fee into my business model.

        • falconflight says:

          Some of us wouldn’t frequent your establishment based on that model. Yes, I will continue to shout into a hurricane.

        • RightNYer says:

          And I’d be happy not to have the business of boomers who spend 15 minutes holding up the line while painstakingly counting out their bills and coins.

  19. rip says:

    Who are all of these people buying all of these things, especially the big ticket items, in the worst job loss event in the history of the USA? I don’t get it. Something is not adding up here. I watched the 2008 meltdown in real time with the small businesses shuttering, the cars and trucks for sale that nobody wanted to buy, the houses sitting on the market with nary a lookie loo. What is going on here?

    • josap says:

      In 2008 they saved the banks because of “trickle down”.

      This time they are trying “trickle up”. Handing out money to the commoners to pay their bills to the banks to pay off credit card debt. Of course other bills and the ability to shop for the kids, buy groceries etc. In the end, the banks still get the money.

      When people are paid enhanced unemployment they don’t qualify for SNAP, Sec 8 housing or other programs funded by the government. That has to be a lot of savings in one hand but paid out with the other hand.

      • QQQBall says:

        josap.. no, they are trying to inject money directly into the economy and increase money velocity. Paying down debt with the handout has the reverse effect.

      • rip says:

        I don’t see in your comment where you answered my question. You gave an example of people who are paying off credit cards but not buying houses, cars, etc.

  20. Say It Aint So says:

    Many of these comments are similar to 2008…and many folks who had money did not invest from 2008 until now and missed the biggest Bull Run…due to concerns about a Federal Reserve with no oversight….Wolf, what is going to be the catalyst to trigger the sell off? If the Fed, as currently perceived, can continue to inject the money supply what causes the turnaround? So many more people will be flooding into the Bitcoin and other investments in search of yield but no one can pinpoint when the flood gates open to the sell off? Not looking for a specific date but am interested in what sings to look for? Anyone?

  21. RightNYer says:

    I fear that this is the beginning of the end of the American experiment. Never before has there been a blatant “Vote for me and I’ll give you money” in the U.S. Congress. Sure, there were indirect transfer payments, but nothing like this, and no one vandalizing Congresspeople’s houses.

    We’re heading toward a total collapse or a guerilla civil war. Not sure which.

    • Xabier says:

      No, not civil war, probably just the same old crap and rising low-level crime, like Europe – that will be bad enough…….

      • RightNYer says:

        The decline in the dollar and the corresponding decrease in the standard of living may be enough to radicalize more people. It doesn’t take a lot. Look how two idiot kids were able to bring Boston to its knees with a pressure cooker.

        • Swamp Creature says:

          Look what 1 Serbian college students did in Sariyevo on June 28th 2014 to bring on a War that killed 20 million

        • RightNYer says:

          I think you mean 1914 :)

        • Swamp Creature says:

          Yep, 1914

          The gap between the haves and have nots has never been greater. The pandemic made the gap wider. We’re like the Balkans in 1914

          In the book “Sleepwalkers” written by a British Historian, Europe stumbled into WWI because their leaders were asleep at the switch. We’re now in the same state 100 years later. The Spanish Flu was 100 years ago. One spark could ignite a complete breakdown in civil order in the US. We came close this summer. Now, with this new administration, half asleep and out of touch the probability of something bad happening is even greater.

      • Anthony A. says:

        Remember, a couple of guys blew up a Fed building in Oklahoma a while back….

        There are lots of nut cases out here and anything can happen. If I was a politician in DC, I would be wearing a bulletproof vest if I went out in public. Or just wouldn’t show my face.

        • RightNYer says:

          Yup, that’s what I mean when I say “guerilla civil war.”

          We won’t have an 1861 style civil war again. It’ll be more of warring radicalized factions doing targeted attacks.

    • Bobber says:

      It will very interesting to see how this pans out. I can’t imagine the fiscal profligacy can last more than a couple years, or the USD will tank hard.

      Some hard decisions lay ahead, the markets will force them to be made.

      Of course, they’ll do the least possible to avert a crisis, but that will still require a lot.

      • RightNYer says:

        Agreed. The fact is, the value in the dollar as the reserve currency, i.e. the “full faith and credit of the United States” relies on an assumption that the U.S. will eventually try to pay its bills and tax its people to pay for its consumption. Now that we’ve done everything possible in the past 10 years to thoroughly discredit that assumption, I don’t see this lasting beyond 2030, and that’s being generous.

      • Swamp Creature says:

        When the US dollar tanks, Inflation and interest rates will go up, and you can kiss the real estate boom goodby. End of Story.

    • Swamp Creature says:

      Both

  22. Martha Careful says:

    FYI, back in August:

    ““By adding this 1/2 percent tax on all refinance transactions in the midst of a pandemic, the FHFA and GSEs are harming our economic recovery,” NAMB President Rocke Andrews said. “This mistake in policy needs to be reversed immediately.”

    The fee assessed by the government sponsored enterprises adds a 50 basis point increase to the refinance mortgages it purchases, but the mortgage giants don’t charge borrowers directly since they don’t originate loans. This fee is placed on the lender, which then has the option of passing on the charge to the borrower or eating the cost.”

    I was also digging around for refi stuff and prepayment stuff, related to people paying off debt, but no obvious smoking cigar — FRED doesn’t seem to have anything (yet) but I assume, some people that get stimulus funds, do put the fun money to use by paying off debts. Of course prepayment risk is a huge deal for banks that depend on predictable cash flows

    Any help out there, always appreciated

    • Swamp Creature says:

      Instead of the 1/2% tax, re-finances be put on hold during this pandemic. Doing a refinance transaction requires a lot of risky interactions. Properties have to be inspected, repairs made by contractors etc. Properties can have sick people inside and are loaded with viruses that have a shelf life of weeks.

      If they want to lock down the economy then lock down this needless activity.

  23. Trailer Trash says:

    I remember when only the Mafia charged 25% interest. Did the Mafia buy the banks, or did the banks buy the Mafia?

    I suspect they are the same people, going back to the fortunes that were made during the Prohibition era.

    Sounds like maybe the Fed is starting to worry that the banking parasites have finally killed the host, and the parasites might go hungry. They have zero concern for the host, an attitude they may come to regret.

    • VintageVNvet says:

      TT,
      Last I heard, the real mob boys charged 25 per cent interest PER WEEK!
      Old days in US Navy and many job places the interest was ” (payback) $7 for $5 loan, anytime until next payday.” Guys would stand just outside the pay line both situations.
      May have changed now a days,, as I am way out of touch with either one of these finance sources now, though have used both ”back in the day.”

    • PointreyesMaven says:

      Like this?
      “By her own admission in a 2008 Q & A with the New York Times, Secretary of Commerce nominee Penny Pritzker acknowledged as many as 1600 depositors lost $6000 on average–or roughly $10 million overall–due to her family’s Superior Bank failure. The losses were the result of years of subprime lending and overvaluing its residual interests after failing to discount to present values, future cash flows that were subject to credit losses.”

      She now lives in West Marin and her grandkids been nailed selling drugs at a private Marin school leading to the firing of the headmistress etc. Corruption, the gift that goes on giving.

  24. All consumer debt is a payday loan. Why not give everyone a lifetimes worth of earnings at birth? Someday (soon) we will spend credit, not money. Reagan had it right, if the world wants to lend us all this cash? Take that as a five star credit rating! Just a question of where consumer gadgetry ends and real economic investment begins. If someone said, there is no government budget, and here is your windfall. How much do you want to spend on national defense? In that moment consumer credit is synonymous with the right to vote, which brings up the problem of voter suppression. If you live under a freeway bridge you still have the right to vote, but how many of them do?

  25. James Mattingly says:

    Hi Wolf –
    I read you every day and understand about 50% of the content, but I’ve still learned a lot. As a recent retiree and victim of the Fed’s savings destruction scheme, I don’t have a donation but I do recommend you whenever possible.

    I wanted to give you some credit for inspiring the writing of this song and video on YouTube

    You can look it up as James Mattingly Somebody’s making Money (But It Ain’t Me) if you don’t like links. I don’t expect this to make it into your comments feed but I wanted you to know that you are having a creative impact on your readers. Cheers!

  26. Tom S. says:

    So, if a bank gets in trouble they will not be permitted to fail, they will just let the Fed buy their assets and become a pseudo government entity?

    Just trying to make sense of how it would work since some of the securities that banks own have 30 year maturity dates. The Fed’s position is still that they haven’t printed money if they unwind their balance sheet eventually.

  27. Crush the Peasants! says:

    If the gubberment is giving you free money, it makes sense to re-establish your credit reserve by paying down your balance with the Manna Money.

  28. James says:

    Re some of the comments about renters/borrowers/=Consumers, I know for an absolute FACt
    That my niece & Hubble & 10 yr old son have NOT PAID RENT for 7 years in Brookyln NY nor have any of the other tenants in the 4 story, 24 unit building! Why? Because of some laws in Brookyln that ” protect the tenants” her hubbie graduated from Yale. What really amazes me is that her father in law was the PRESIDENT OF THE ABA. (American Banking Association) & owns a house in the “Vine” an island for very wealthy people off the coast of MA. Go figure.

  29. Anthony says:

    It’s put me in the mood to watch the Big Short again tonight….lol

  30. breamrod says:

    no wonder congress won’t expand the give away to 2000. Folks would just pay their debts, the banks would suffer and Powell would find a new way to frown! And the elites think the great unwashed are dumb! Not

  31. Engin-ear says:

    A great story about how lack of confidence and opportunities for household reduces the consumption and the credit card debts.

    This phenomenon should be temporary though.

    Meanwhile, the real value of the assets sitting on the books of banks is a big question mark – what it is and how it will evolve.

    • WES says:

      Engin-ear:

      Listed on the bank’s asset side of their ledger; Taxpayers.

      On the banks liability side; Consumers.

      Some day the banks will find out to their horror, that Taxpayers and Consumers are the same people!

  32. otishertz says:

    I have a hard time figuring out the emotions of the Fed, whether they are frazzled or happy. I think they are just greedy.

    I wonder what they will do if a massive revaluation occurs and blows up all the pension and other funds that rely on continual price appreciation based on nothing but vapor.

    • Heinz says:

      Fed creatures, like most of the ‘elites’ in government, academia, and business running society today are pompous fools who through hubris think they know what is best for us (but especially for their own self-interest).

      They are not particularly smart at all in the sense of common sense and wisdom, though they are clever enough to use social connections, degrees, and gaming the system to get what they want.

      I believe most of our elite class is essentially amoral and borderline sociopaths.

  33. Yort says:

    Peter Boockvar understand that “when” the fed loses control of this grand human inflation experiment, inflations is the kryptonite to the J-Pow Supeman omnipotence fairy tale…

    Per CNBC:

    “They’re purposely inflating a bubble and then rooting for the exact thing that pops it,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “There’s this idea that central banks are constantly in control of things. If there’s one thing that will change that, it’s the kryptonite of higher inflation.”

  34. Ron says:

    Back in depression my grandparents had saved 800$ to buy a farm bank couldn’t pay so gave them 80 acre farm but other guy lost out stopped chaos simple solution to a bad situation

  35. Lisa_Hooker says:

    Far too many run their lives on cash flow and not a balance sheet. When the inflow ends the outflow continues.

    • Sam says:

      CA property wealth guru mantra is ”price doesn’t matter, payment(s) does”.

      Sacramento based, made 250 offers in ’20. Had 20 counter offers.
      Did not buy one SFR in ’20. Feels (subjective) that ’22 is when the deals will occur.

      Conveys that major WS firms are spooling up to scoop up foreclosures:
      No multi units (apts/condos), min. 3/2 SFR’s that are < 20 yrs. old.

  36. JM says:

    Jack Ma claimed that banks in China are scammers at a public conference and has been missing for two months since October 2020

    I understand that no one has but repeated the same at a public conference in the Western world

  37. Swamp Creature says:

    Truist Bank just adverised its service to sell customers stocks right out at their neighborhood bank. What ever happened to the Volcker Rule where commercial banks were suppose to stay out of the stock market? We’re back to 2008 all over again.

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