They go on to state "One of the main factors in the slowdown in growth has been a weakening of consumer activity."
Well DUH! The Federal Reserve has been increasing borrowing costs as the economy has picked up pace, lifting the Prime Rate 17 times in a row to 5.25%, the highest level in more than five years.
Folks with ARMs (Adjustable Rate Mortgages) or variable interest rate credit cards with balances on them are feeling the pinch! American consumers now owe about $1.7 trillion in credit card and other debts -- an amount roughly equal to the gross national product of England and Russia combined. On average, Americans spend most of what they earn, and in some cases, a little bit more. Add to that fragile mix that since June 29, 2006, the WSJ Prime Rate has been about 8.25% (source http://www.bankrate.com)
More of everyone's paycheques are being spent on the cost of money borrowed. Many of us are having to borrow in order to make ends meet, thanks to strongly increasing costs of petrol, electricity, oil, and such.
Smart individuals are cutting back wherever possible to pay off debt before it gets even worse for them, folks with ARMs are re-financing at fixed rates (if they can!) Not-so-smart folks are simply living a simpler lifestyle than they are accustomed to, not looking down the road ahead.
What would happen if you vowed off of credit cards for a month? Could you do it? This does not include "debit cards" or "Chip and PIN" cards that debit a cash account, such as a bank card where you are not "borrowing" against a line of credit.
People in modern countries have become accustomed to being able to charge virtually whatever they want, with no ramifications until their credit line reaches it's max. Then the trouble starts -- interest rates go up, and trying to consolidate your debt into a manageable figure with manageable interest becomes impossible without using equity in your home, vehicle(s) or other real property -- unless you're among the 37 million people in the United States considered to be "poor."
In an article in The Observer, they state that "Americans have always believed that hard work will bring rewards, but vast numbers now cannot meet their bills even with two or three jobs. More than one in 10 citizens live below the poverty line, and the gap between the haves and have-nots is widening.
Under President George W Bush an extra 5.4 million have slipped below the poverty line. Yet they are not a story of the unemployed or the destitute. Most have jobs. Many have two.
Many believe it is the changing face of the US economy. Tulsa has been devastated by job losses. Big-name firms like WorldCom, Williams Energy and CitGo have closed or moved, costing the city about 24,000 jobs. Now Wal-Mart embodies the new American job market: low wages, few benefits.
[This begs the question, if we all know Wal-Mart is hurting us, why is Wal-Mart successful? DUH! Because we're shopping there!!]
Well-paid work only goes to the university-educated. Many others who just complete high school face a bleak future. In Texas more than a third of students entering public high schools now drop out. These people are entering the fragile world of the working poor, where each day is a mere step away from tragedy."
The Real Danger, Found Only In The Fine Print
For anyone with a minimum level of education, the lines are being drawn -- middle class Americans are/have been turned into the new poor in the United States. The new form of discrimination and slavery hasn't been based on the colour of your skin, it's all based on money. If you happen to be in the class deemed as "poor", you will pay a hell of a lot more for everything. Your interest rates (finance charges) will be higher, as you are considered a risk. Miss a payment, your rates could go up even more (even if the payment you miss unrelated to the creditor) -- read the "fine print" on your credit card agreement (which is always subject to change in a heartbeat, unless you "opt-out" of a contractual change.) For further research: How to read a credit card offer.
Further reading: The High Cost of Being Poor, written by Barbara Ehrenreich, the author of "Bait and Switch: The (Futile) Pursuit of the American Dream."
The Terrorist Threat of Paying Your Credit Card Balance is an amusing, yet scary story about some folks that paid down some debt on their JCPenney Platinum MasterCard - they were told that the amount they had sent in was much larger than their normal monthly payment and if the increase hits a certain percentage higher than that normal payment, Homeland Security has to be notified. And the money doesn't move until the threat alert is lifted.
Big Brother is watching the poor!
Well, think about it. People without hope are some of the most dangerous people out there! In an excerpt from a commentary about fundamentalism and the connection to terrorism, firstname.lastname@example.org writes: "Why fundamentalism? Because a people without hope, without any ability to 'be individuals, to be citizens in their own country' - subject to repressive dictatorships, and levelled to one mode of life, without power, without a voice - are without hope. They turn to the metaphysical realm, which promises and promises...hope."
Don't misunderstand me, I'm not speaking of the homeless or that crazy cat-lady -- I'm speaking of your average, formerly middle-class, white American male, whose income has not kept up with their lifestyle and they feel trapped. More so now than ever before, thanks to Bush signing the biggest rewrite of U.S. bankruptcy law in a quarter century in 2005, making it harder for debt-ridden Americans to wipe out their obligations. Bush said “Bankruptcy should always be a last resort in our legal system,” and “If someone does not pay his or her debts the rest of society ends up paying them.” --- Hummm, Society or corporations?
As DuctapeFatwa writes an entry in his blog, that "One man's conspiracy is another man's business plan":
We all know the most sensible way to use credit cards: pay off your balance every month. Use the card as a convenience, don't fall into the trap of buying things you can't afford, don't think of it as an emergency savings account, and whatever you do, don't charge up a big balance and get yourself into the position of struggling just to pay off the interest.In my opinion, and quite a few others, most white-collar crime is committed simply out of desperation, while others argue that "White-collar crimes are about greed and self-aggrandizement, and while those things may be deeply compelling, they are fundamentally different from hunger, addiction or desperation." I guess your point of view depends on how much money you have!
That's all terrific advice, and for folks lucky enough to be able to afford to follow it, it works. You get all the advantages of the card without any of the pitfalls.
But for an increasing number of Americans, it's just not that simple. Of course there are the Big 3 - medical treatment, divorce, job loss - and the fact that those big 3 are such a windfall for credit card companies should have been a red flag all by itself... read more
Further reading: Confessions of a Cybermule: John Dillinger was a bank robber whose tool of trade was a machine gun. But in today's cybercrime era, the weapon of choice for "John Dillinger" is an MSR206, a card-writing machine used for encoding bank account numbers and other data onto the magnetic stripe of bank credit and debit cards. read more
So, where does that leave us? What can we do?
Well, once school of thought is that is every "poor" person stopped paying their credit cards all at once, our nation's economy would collapse and everyone would be better off. Billy boy writes:
"It's time to march on equifax headquarters and make blood flow red in the corporate offices of these infidels... No seriously, the only thing screwing everything up is people with good credit. If everyone stopped paying their bills what good would a credit rating be? unite people!!! It's like the bell curve....if everyone flunks there still has to be some A's and B's right on!!!
Cute idea, but it simply wouldn't work... It's like the "Don't buy petrol on Tuesdays" spam mail that keeps circulating the 'net. You're better off trying to follow the advise outlined here.