Why Credit Cards Matter So Much
Sharon December 2nd, 2008
Yesterday put the nail in the coffin of a move from recession (small “r”) to Depression (capital “D). Two pieces of news that were absolutely essential came out - and no, neither one was that we’ve been in a recession since last year, or that last week’s stock market rally was yet another sucker rally. The first was the observation that McDonalds is now the second-largest merchant vendor on credit cards - that is, people are now buying their Big Macs on plastic - in part because they don’t have the cash. Credit card balances have risen enormously in the last few weeks, as people attempt to keep going through the holidays:
Commercial bank exposure via the total amount of credit card loans outstanding has risen more in the last 10 weeks than it did in the previous 10 months cobined. Moreover, the growth in the last 10 weeks — $32.3 billion, or roughly $600 million per shopping day — represents nominal growth of 9.3%, or 48.3% annualized over the last 10 weeks. According to American Express, delinquencies on credit payments rose to 4.1% of all credit outstanding in the third quarter, up from 2.5% in 2007, with Bank of America’s rate rising even more steeply - to 5.9% for the period. Moreover, the pool of loans deemed uncollectable rose to a high 6.7% in the third quarter, soaring from 3.6% last September. What consumer spending there is has been fueled in part by credit card: The second-largest merchant-vendor for credit card use is now McDonalds. This suggests that many consumers are in serious distress if they need to get their $4 Big Mac and fries with a credit card.
The second is the news that credit card companies are planning to pull 2 trillion dollars of personal and small business credit lines over the coming months, to reduce their risk:
The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.
“In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent.”
Almost all of the consumer spending we’ve done in the last few days has been done on credit. In November and December, retailers see more than 40% of their annual sales - and since the average American comes out of the holiday season with more than $800 in credit card debt, it is safe to say that retailers in general are dependent on an annual payback that is then amortized over mos tof the year in the form of personal credit. That is, the consumer spending economy, 70% of our total economic activity, is utterly dependent on consumer credit. And whether that’s a good thing or not, the destruction of consumer credit lines will bring about a shift in consumer spending that makes the present economic woes looks petty.
But there’s more to it than that - Americans have seen real wages decline, and have depended heavily on credit, and as unemployment rises and companies cut benefits, pensions and retirement savings disappear, they will depend on their credit more, not less. The credit card allows them to even out uneven income streams - and millions of Americans have them. Either they rely on uneven overtime, on tips, on seasonal boom and bust cycles, or as small business owners and contractors whose payment comes in irregularly.
When unemployment strikes, right or wrong, the expenses go on the credit card. When hours are cut back or paycuts proposed, the credit card covers the inevitable emergency car repairs or medical bills. Yes, people should have saved. Yes, running up credit card debt you aren’t certain you will be able to pay off is dangerous. But it is also the case that saving has been enormously discouraged, and reliance on credit has become a cultural norm, even a cultural pressure. Cards poured out like water. Couples who arrived with a downpayment at a mortgage meeting were told to keep their cash and take out a 100% loan. Companies made huge sums of money by persuading ordinary people to put their money in the markets and that growth could never end. Yes, there is personal responsibility here, but the situation was not of each person’s personal making, and there is plenty of blame to go around.
In difficult times, the American policy is to rely on credit as a reserve source, as a substitute for savings. And that reserve is about to be pulled out from under them. And for the best reasons - the ability to pay is declining rapidly. Most Americans have no idea how they would pay off their debt in this economy - and my bet is that most of them won’t. Past recessions have been survived by increasing debt and sitting tight until things got better. Now, we can’t increase debt, and we can’t sit tight, and it will be a long time before things get better - much longer than most people forsee. You only have to look at the bank’s own reasoning here - they are withdrawing their credit lines because they don’t believe that a boom will come along and allow people to pay off before they are forced to default. They know that reducing credit on this scale will hurt them too - but their own internal analyses have convinced them that they are in more danger by loaning than they are by not loaning. Given the huge role of consumer credit in the economy, that’s one big shift.
What is certain is that without credit, the recession will hit a lot harder, a lot faster than it has. Personal spending will drop a whole lot more. People who were getting at least Big Macs will stop having them to eat. Moreover, with reduced credit lines, people will be forced rapidly to assess their situation - the transition between unemployment and foreclosure, between a bad year and homelessness, between getting by and going hungry, between surviving a medical crisis and being bankrupted by it - will be much, much shorter.
Yes, building up credit card debt has been bad for us. But it has also functioned to delay our reckoning, to keep marginal participants in the economy going, to keep the economy going even as far as it has been. And without large open credit lines, life as we know it will shift. Suddenly, small businesses won’t be able to buy inventory on credit - and many of those businesses will close. Travellers whose balances are near their new, dramatically lowered limit will not travel, because they can’t reserve a car, a hotel room or a plane ticket. People will stop shopping online. And the kids whose daily meal, tragically enough, was the Big Mac (and we should remember that one out of every three Americans eats daily in a fast food restaurant) won’t eat.
Sharon
- economy
- Comments(120)
Just wondering, but I know we use our debit (which is also a credit/VISA) card for almost everything, as opposed to walking around with cash or checks. Do you think that kind of useage might be included in the figures, making the numbers so high?
Still, a very disheartening world we are living in. Thanks for the heads up.
Yay. Exactly, Sharon - we’re right on the same page. You probably remember my attempt to get people out with pitchforks, a few weeks ago.
http://littlebloginthebigwoods.blogspot.com/2008/10/action-time-again.html
I’ve been intending a long post on it again- but am overwhelmed at the moment, so I’m delighted you tackled it.
A major reason to prevent the credit card companies from doing this is very simple- it can be the one last factor that pushes a family over the edge. The ability to spread payments out over time can be critical when income is irregular. Lots of folks struggling to hang on CAN - if their credit stays exactly as it is. They’re paying their bills. But the moronic “rating agencies” - those stellar institutions who have been wrong about everything for years now- rate them a risk, so they get cut. Bingo- bankruptcy. Helps no one.
Congress has some legislation in the works; not adequate, but something. In addition, Consumer’s Union has an initiative;
http://tinyurl.com/6×537m
There’s a cute song video there, too.
No, I don’t think so - this includes only outstanding balances, which by definition, debit cards don’t have.
Sharon
Very scary stuff, and we pay off a single credit card in full every month. We have no outstanding debt other than our mortgage, and we’re still making extra principle payments each month, but this stuff gives me the willies.
I do wonder though about that $2 trillion of credit being cut. Some of that will probably be ours. We have several credit cards that we’ve held on to for years and years but never use. For all I know that could represent $100k in credit that’s available to us. If it’s cut, it won’t affect either us, or the economy, because it hasn’t been actively tapped in more than 5 years. So I wonder what portion of this $2 trillion reduction would be made up of credit lines such as these. I would guess the percentage would be in the high single digits, but I really don’t know.
Credit cards, like most other objects in life or technology, are not evil in themselves or good in themselves. People use them to go too deeply into debt and also give gifts to charities, like local food banks, online!
CC are only as good or as bad as the people who use them for their own purposes. charities have always told me that donations of money on credit cards is always cheaper for them than sending out envelopes and information hoping to get people to contribute with checks through the mail.
Thanks for posting again today, sharon after posting the post on saving energy cooking.
cheers,
Shamba
I have a friend who uses her credit card for emergency car repairs, home repairs ;who essentially has no recourse to have these things repaired without her credit card. She does not see that the 300.00 payment she makes every month; to make the minimum payment, has her trapped and vulnerable to severe hardship if she should loose her publicly funded job.
Gosh, I pray for her every time she tells me about another big expense.
So this Christmas I am making her a box of food stuffs( for food storage) with many of the articles from this blog. With a serious just in case. She is last to be hired and never knows from one fiscal year to the next whether she will have a job. With the state of Maine having to make another 80 million budget cut ( the third this year) it doesn’t look good.
[…] Casaubon’s Book » Blog Archive » Why Credit Cards Matter So Much Yesterday put the nail in the coffin of a move from recession (small “r”) to Depression (capital “D). Two pieces of news that were absolutely essential came out - and no, neither one was that we’ve been in a recession since last year, or that last week’s stock market rally was yet another sucker rally. The first was the observation that McDonalds is now the second-largest merchant vendor on credit cards - that is, people are now buying their Big Macs on plastic - in part because they don’t have the cash. Credit card balances have risen enormously in the last few weeks, as people attempt to keep going through the holidays: […]
Great post detailing the essence of the current financial mess. Our whole economy floats on a sea of credit. Pull the credit plug and it all goes down the drain. I fear the worst is yet to come. My wife and I have been trying to get our financial house in order. It’s tough. Medical bills. Increased living expenses and no increased wages. Unexpected expenses are what really hurt us.
Bruce
Sharon, I have learned so much from your blog, and from the comments from your readers. Thanks so much for all your efforts on our behalf. I especially appreciate today’s post about credit, and would like to ask you to please address the subject of mortgages. My partner and I lost our home when a tornado hit us this past May. We are, therefore, out of necessity, building a new home, and are getting ready to arrange for a mortgage to pay off our construction loan. My question is this: do you think it is wiser to put as much cash down to reduce the monthly payments, or do you think it’s wiser to hold onto the cash and take out a larger loan. We’re trying to look at the long term implications here, and would appreciate your opinion. What would you do if this was your decision? Anyone else want to comment? Thanks so much. — Rosalie
Good post, Sharon. Read your “About” page. You’ve an interesting past. I enjoy reading your blog from time to time. Your posts are intelligent and succinct. Nice friend this Deb, eh? I can’t stand the tech side of blogging.
I think we’re all in for something far worse than a depression. I think the entire fractional reserve banking system — a ponzi scheme — will collapse. We’ll be forced to barter temporarily. Now is a good time learn to farm and establish local community ties.
Wow, thanks Sharon. My head just keeps reeling from all this stuff. What with the economic stuff happening and a possible quick change of government up here in Canada, I’m just very unsettled and tense.
We’ve been whittling our debt down fairly well, but still have some outstanding (small-ish mortgage, moderate car payment, line of credit which will be paid off within the next three months). We have very little savings other than RRSPs though, and we can’t touch those without big tax penalties. But I do have food to eat and a woodpile, for which I am grateful.
Rosalie,
I am sure Sharon will ask you many more questions, like how secure are your jobs, how secure is that relationship, and many more, in order to give an opinion.
Meanwhile, about credit cards, if you can pay them off each month, and especially if you get a rebate on purchases, they can be a great convenience. And for me, they keep me from frittering away money on small things. I tend to not put small purchases (less than $10) on a card, and rarely have much cash in my wallet, so I tend to avoid buying a coffee or a snack or little things I don’t really need.
I use my credit card for gasoline (so I don’t have to enter the building and stand in line to pay) and for groceries (again, so I don’t have to stand in line–we have self-checkouts at the grocery store). I also use my credit card to make bulk purchases of wheat, honey, etc. from Utah. Then I pay the entire bill at the end of each month. I don’t think it’s a good idea to just let the card sit there “dead” year after year because they might take it away from you since they’re making no money off of you. Every once in awhile, I throw them a bone–if the monthly balance is really low, I’ll let it ride and later pay that $3 or $4 interest charge… just to whet their beak. My card is totally convenient and I sure don’t want to lose it.
Pony,
Let’s say that our jobs and relationship are secure, we have no debt, and all else is stable and “rosy”. Then the question comes down to what is the better choice: take out the mortgage and keep the cash, or use our cash savings and take out a smaller loan? I would be happy to hear any and all comments. I’m just trying to shake up my thinking on this issue, as we must make a decision soon. Thanks, all!
Rosalie, I’m obviously not Sharon but this is what I would do (what we did, actually); reserve the savings you are comfortable with, which for me is 1 year of expenses (mortgage; taxes; insurance; set-aside for home repair; plus the barebones of whatever else you spend money on. I think the usual advice is 6 months expenses). Put the rest into your downpayment, as much as you can manage.
The other thing to think about with a mortgage is if the house could be a productive asset instead of an expense -the first five years, we rented out rooms in our house, so the net expense was a lot lower. And those are the years when overpayments on your mortgage make the most difference.
Thanks, Rosa. A year of funds in reserve sounds like a good idea. And we are also putting food by, as I imagine many of us who visit Sharon’s blog are. Anyone else willing to share what they did, or would do in our situation?
I would agree with Rosa that a large down payment is a good idea. One of the primary arguments against large downpayments is the opportunity cost of sinking money that could profitably be used elsewhere into a house. I don’t see a lot of easy opportunities out there though. The lower payment allows for more flexibility over the long run as you pay off the mortgage in terms of the other things that happen in life (loss of job, sickness, pregnancy, death, etc.). In addition, if you have to move you are less likely to be underwater on your mortgage should prices continue to fall. In such a situation you could still lose money, but it would be money already paid, not new funds that had to be brought to closing (this argument is partly psychological as it is easier for me to accept losing money in this way). I don’t like paying interest. So the smaller the balance the less interest you pay. With a small enough balance you could go 15, 10, or even 5 years instead of the regular 30. Finally, I hope a fixed rate loan with no jingle bell goes without saying.
[…] 2, 2008 in credit crunch, debt, junk food Via the all-knowing Sharon Astyk comes this pretty scary fact: The second-largest merchant-vendor for credit card use is now […]
I already had my only credit card pulled from me last year; the company I had it through is one of the ones that needed bailing out so I guess the fact that I was making more than the minimum payments and still had plenty of credit left on it meant that I might actually USE it and create more debt load for them.
I’m still paying it off; I had it set up for automatic payments but they pulled the option from their site and didn’t bother to let anyone know so my interest got jacked up to 30%. It’s infuriating but as soon as it’s paid off (which would be in 4 months if I made large payments but I’d rather invest in my house repairs) it will be one more monkey off my back.
I anticipate my husband’s credit card will be one of the ones cancelled; we haven’t used it in nearly two years for anything substantial although it carries a hefty balance…buying two laptops on credit wasn’t probably the smartest thing he could have done.
I just hope we both keep our jobs long enough to pay all our extra debt off.
I swear, Sharon, you are definitely keeping the fire to my feet regarding my goals for self sufficiency!! Every time I think well, it’ll be OK, I still have a little time you post another article that has me remotivated.
I have just one credit card, and I pay it in full every month. It’s a convenience for me, though I could as easily use the debit card from my credit union. I realize I’m an anomaly in general, though perhaps not among the readership here.
I was listening to NPR on the way to my weekly dinner with my Mom tonight, and on Marketplace, the guy the host was interviewing said what I thought was the dumbest thing I’ve heard all week: that we ‘probably haven’t reached the end of the foreclosure crisis’. Well, DUH! And it came to me that if I could offer one bit of advice to those who are presently making their house payments but are fearful about whether they’ll continue to be able to do so, it’d be this: turn off your television, go outside, and plant a garden. Voila - food budget drops, more money available for savings or making house payments. I realize this only applies to folks who own homes (and presumably have at least a teaspoon of soil associated with said homes) but that would be my advice. Drop the cable service… stop seeing ads for stuff you “need”… get exercise and eat healthier, thus reducing potential medical costs - and, it’s green! Oh well. Preaching to the choir here, I know.
And amid all this, my friend and her husband went out for a dinner they couldn’t afford because it was her birthday and he thought ’she deserved it’. Will she still think so when the credit card bill comes? *argh* I think some people are just so hidebound that they are plain unable to see what’s right in front of them. If it’s too difficult, it must not be real, so they ignore it.
I think there is an upside to this in a way—
I hope people are finally WAKING UP and realizing that you shouldn’t eat big macs if you have to charge them! The downside is the debt burden that people are carrying. Just today, this very day, a coworker of mine gave me her sad story of wanting out of an unhealthy, unhappy relationship but said she couldn’t because she couldn’t pay the bills without his income.
What baffles me is that our country is all about keeping up this credit facade. Just listen to financial “guru” Suze Orman. She tells you to protect your credit score no matter what. There was a time not that long ago, that I worried more about paying my outrageous credit card bill minimum before buying groceries and basic essentials! CRAZY! I was more worried about that glorious FICO score than I was being sensible about life.
I’m not saying default…by far and large I am not saying that. I think we are all responsible to pay our debt, no matter how stupidly we got into them. But paying $300 minimums on credit cards to save your “glorious credit” and not eating properly because you have no grocery money?
Makes no sense. And it is time people wake up from this credit stuff altogether and start living in their true means. (I know I am preachin’ to the choir here! not sure the Jewish equivalent of that saying, but well, you get the point!)
TheNormalMiddle - I so agree with you about the “FICO” score! We are in credit card debt to the tune of about 10K and I make the miniumum payment +$50, on time every month and have had a spiritual change of heart about ever using them again. But, I’m sorry, my tax return and any other money I can scrape together I save for a rainy day or unexpected expenses. If the economy completely collapses, it is pay our rent and eat first - the credit card companies be damned…they can have my precious FICO score, at that point I’ll keep my cash - priorities are priorities. Don’t get me wrong, this is my responsibility and I would love to pay it off, but not at the risk of not having a roof over our heads (:
I definately am one of those people who are just “Waking Up” I hope its not too late.
Those financial “guru’s” are always telling people pay down debt first. I disagree. I believe the order should be:
1. Pay the minimum on the charge cards… and instead focus on saving a full three months worth of income in an emergency account.
2. …then put at least three months food, water, toilet paper, etc. into your food storage/provisions (six months to a year is even better).
3. Then up turn back towards upping your emergency fund to six month’s worth of income.
4. After your food storage/provisions are set and you have six months income set aside–then devote every spare penny you come across to paying off all remaining debt.
Do you waste a bit of interest money along the way? Sure you do. But you gain peace-of-mind knowing you have an emergency fund and food for the family. The credit card companies are not going to care if you and your family go hungry or have to walk 15 miles to work when you can’t afford to fix your car. So, give them the minimum, pay that bit of interest, and buy yourself some peace of mind while you pay down the debts.
Susan said: “I swear, Sharon, you are definitely keeping the fire to my feet regarding my goals for self sufficiency!! Every time I think well, it’ll be OK, I still have a little time you post another article that has me remotivated.”
Wow, is that ever the truth. I’ve been reading Sharon’s blog since it started, having followed her over from the RunningOnEmpty2, Yahoo email group. It’s been five years now that I’ve been reading these kinds of Peak Oil/social crisis blogs and email lists on a daily basis, and commenting and contributing to them myself too. Yeah, it’s been tiring in many ways, but where would my family or I be without the daily infusion of the ever-so-helpful thinking and prodding that Sharon and the rest of this type of community has offered in all of that time? Otherwise, I dare not think of ill-informed or prepared my little circle of the world could have been as of tonight if not for this type of community. *Gulp.*
However, mentally reviewing the past five years also makes me think of the insistent yammering *I’ve* been doing now for five years too - at home, at work, and in the local community in my own way, spreading word of what trouble could be coming and what we have to do about it - and then doing it. As helpful as Sharon et al have been, do not underestimate your own, perhaps more local, contribution to this preparation effort as well.
Thank you all.
About that FICO score. As the credit card companies start to push your credit limits down on your cards or cancel them outright, this action will immediately impact your FICO score - negatively. There are small business owners who have had their limits reduced only to find that as their credit scores fall lower, and lower they are no longer in the right credit “zone” for being approved for bank loans to continue operating their business.
This increasing of interest rates and lowering of credit limits by the credit companies will actually contribute to a faster default rate by consumers. If consumers are having trouble paying cash for a big mac, or are just paying the minimum due each month, but are actually hanging on and not defaulting using this strategy, how is raising their interest rate (and thereby raising their minimum due) and shrinking their credit limit going to suddenly make them more able to pay? Instead they will default SOONER, because they are too close to the edge and that last slam pushed them over into the default zone. Banks and credit card companies have become their own worst enemy.
Some say that they want to do all this to get a fast tally of what the bulk of their defaults will be so they know how much more to ask from the bailout money. grrrrr.
We run one bankcard only which at present is suffering from car repairs…sigh! It was paid off before that. I still hope to get it zeroed by Christmas at which point it will be canceled and replaced by a debit card.
Then we have to start on the taxes and the small overdraft. I don’t think there will be a holiday this year. But then there hardly ever is. Which means that when we do get a holiday everyone appreciates it thoroughly. (There’s always a plus somewhere
We haven’t touched the house equity which is over 65% so we won’t go underwater anytime soon and that is some comfort. I hope we never need to!
viv in nz
Sharon — On your first comment — I am not so certain the credit card usage is up at McDonalds for the reason most people do not have cash. Don’t get me wrong times are very tight for many. However, I think people are using credit cards for small purchases because they have been trained not to do so. You get points or cash back or some perk for each purchase so…use the card.
What many do not understand is if you credit cards for the smallest purchases the credit card companies do begin to wonder what type of financial situation the cardholder is in. So…carry cash and use it on the small purchases.
The other thing to be aware of is the credit card purchases are carefully tracked by the issuers. Cash and checks are not…
I love your work — Keep up the great job —
Elizabeth
The FICO score also matters for getting a job. A lot of employers are checking it now. I guess they think it determines how good of an employee you’ll be. I’ve had some credit issues since losing my last full-time job -sorry, credit card company, but paying the mortgage was more important, and because of that, I’ve lost two jobs in the past month. They refused to hire me because my credit has dropped and things are so bad now they can be really picky over whom they hire.
As a small business owner, I’ve definitely noticed the surge in clients paying by credit card. To the folks that are still using cards because it is convenient, or so they can get the perks that come from using it, I hope they realize it is the merchants who are paying the cost for these perks, and small businesses get charged more. The big box stores get a volume discount from the credit card companies, and thus have yet another advantage over us little guys.
Please, as we all move toward a more local economy, let’s do our business with the Mom & Pop shops that are struggling to survive, and remember that the 2 or 3% of the sale that might otherwise go to some evil credit card megagiant (and therefore, most likely, out-of-state) will make a huge difference to the person behind the counter. That person in all likelihood is either the owner, or someone whose job is, unfortunately, tenuous at best. ( I value each of my employees tremendously, but when TSHTF, I know there will be difficult decisions to be made.)
As for our business, we are fairly liquid; only have a car payment, and enough inventory to get us through the holidays w/o getting into our cards. Our personal finances are a little trickier, as we have only our mortgages to worry about - damn we should not have bought that rental property! Does anyone want to buy a house near the beach? Oh, sorry, wrong crowd for that, huh!?
Elizabeth, I agree that there’s been a general pressure towards credit card usage - at the same time, however, I think the McDonalds shift is fairly recent. I think it does imply that people are having trouble scaring up cash.
Rosalie, I think Rosa got it just right - a large downpayment is good, but don’t put all your liquidity there. And make sure you are likely to have equity in the future - I worry about people buying houses right now, simply because paying for the rest of your life more than your house is worth is not a great way to go.
Sharon
A Big Mac is $3.50; a Big Mac menu is between $6-$7. You can eat for a LOT less.
A regular sandwich in a small shop should not cost more than
$2.50 and will feed you much more than a Big Mac.
If you have a home, eating at home costs infinitely less: almost nothing, in fact, in comparison. A pound of pasta costs less than a dollar and will feed one person for four meals. Two pounds of flour also costs about a dollar and will feed one person for a week!
The truth is, Americans don’t want to change their over-indulgence in every greedy fattening habit they have — well, now they will just have to, and it will do them much good.
At least they may get slimmer.
Dear Frounder,
You are dead right about cooking at home being cheaper — but that assumes that you have place to cook. It’s true you can buy cheaper food at other restaurants, but, again, that assumes you can get to one. Ditto for a grocery store.
MEA
The thing that makes me sad is that people will reach for the credit card before they will ask for help.
I’m sure some of my neighbors are going to bed hungry, or are facing foreclosure, because they will not ask their family, friends, church, or neighbors for help. I’ve had friends disappear for a year and then resurface once they get their feet under them, because they didn’t want to be the kind of person who lives on your couch or eats dinner at your house without reciprocating.
Wow…just Wow….Sharon. I think you have hit it right on the head. TSHTF will be really showing up in Jan or Feb. I have been wondering why we are still receiving that flood of CC offers in the mail while everyone is screaming about a credit flow crisis! I guess it took a little longer for the credit crisis to pinch the individual consumer through limited credit offers and spending limits. At Target on Monday I was asked to open an account and of course I said no. Then I asked the clerk if credit was being approved. She said she’d signed 5 people that morning! I have a feeling that places like Target are issuing credit just to get sales up and don’t give a rats bottom if it gets repaid….just so long as their holiday sales numbers stay up. They and everybody else can put off the day of reckoning until after the Holidays…including the US government.
Man, how screwed are we? Peter Schiff is predicting the possible collapse of our currency….Could it be?
Thank you all for your comments. I value your advice, and will use it. Believe me, I wish we weren’t in this position (having to replace our lovely old home), but with the mortgage payment our only debt, I’m hoping we can make it through the hard times. We have 5 acres of good dirt and good water (we are installing a rainwater collection system to supplement our well), and a roof over our head. So, even though we are both approaching 60, I think we’ll be OK. We realize we are luckier than most, and give thanks daily for our blessings.
Your comments about credit card usage have made me rethink our habit of putting everything on the card and paying it off each month. In our efforts to support the small businesses in our area, I think we will be going back to cash and putting the card away. I heartily agree that we must do all we can to support merchants and services in our communities. Thanks, again for your kind words.
Fronduer, you are forgetting that most Americans have no idea how to cook. None, whatsoever. The majority can not make beans and rice. That is what is going to make this recession so much worse than the last ones.
Rosa a lot of people also have no one to ask for help, or don’t want to appear as a loser -which is how this society treats anyone who needs any sort of help.
Food stamp usage is way up in my town. The local office has had to extend their hours because of the number of applicants.
Rebecca, you’re right, most people don’t know how to cook anymore, but they also don’t have time. My two oldest sons for example - one’s an FAA certified airframe/powerplant mechanic - one’s a caregiver - must both work two jobs to make ends meet.
My oldest, because when his student loans came due he was suddenly having about $500 more a month in outgoing which although it’s a good job, isn’t good enough to pay that too; he drives an 87 nissan which is paid off and can’t go over 40 due to the front end being shot.
My middle son, because he just doesn’t make enough money taking care of people, so he works as a courier also — putting about 200 miles a day on his car while he still can’t afford tires…when does either of them have time to cook? They both get home between 10 and 11 pm most nights, fall into bed, and get up at 6 to do it all over again, six days a week.
I think many many people are in this same boat. I myself work 4 days a week, 12 1/2 hour days with an hour drive each direction, so that I can make enough in overtime to pay for the maintenance things that need to be done on our house while I can.
“Fronduer, you are forgetting that most Americans have no idea how to cook. None, whatsoever. The majority can not make beans and rice. That is what is going to make this recession so much worse than the last ones.”
LOL! Actually, rice and beans are about all that I know how to cook. (Okay, yes, I’m exaggerating, but you get the drift.) I still virtually never eat out and cook from scratch. I don’t make fancy meals, but they provide the calories and the nutrition, and it’s tasty enough for me, so…
I did use to eat out a fair amount, and I used to eat a lot out of cans etc., but then budget constraints and an increased health awareness made me change my ways. I originally had very little idea how to cook; I learned on the fly, by myself. I guess others will follow suit once credit gets pulled from under their feet. Start with very simple meals, and then learn until your skill set can meet your taste buds’ expectations.
Hi, Sharon- I made this comment way yesterday- but because it had a couple URLs in it, it got kicked somewhere; it’s still saying “awaiting moderation.” This is a topic that’s important to me, as you know. I’ll try again:
————–
Yay. Exactly, Sharon - we’re right on the same page. You probably remember my attempt to get people out with pitchforks, a few weeks ago.
I’ve been intending a long post on it again- but am overwhelmed at the moment, so I’m delighted you tackled it.
A major reason to prevent the credit card companies from doing this is very simple- it can be the one last factor that pushes a family over the edge. The ability to spread payments out over time can be critical when income is irregular. Lots of folks struggling to hang on CAN - if their credit stays exactly as it is. They’re paying their bills. But the moronic “rating agencies” - those stellar institutions who have been wrong about everything for years now- rate them a risk, so they get cut. Bingo- bankruptcy. Helps no one.
Congress has some legislation in the works; not adequate, but something. In addition, Consumer’s Union has an initiative;
There’s a cute song video there, too.
Frondeur, less than a kilo of flour for a week is a recipe not just for malnutrition but for starvation. We need to think not in terms of what people could survive short-term but in terms of what is a minimal sustainable diet (which means one you can keep up for months without suffering reduced work productivity or ability to study, increasing your risk of chronic illness, or just wanting to kill yourself).
My DH and I are now pretty well under 60 a week for grocery and household products (we no longer eat out at all), which is $4.29 per person per day, or less than the Big Mac meal. That still includes some relative luxuries as well as labor-saving items like canned beans, although it does not count gas or electricity for cooking. Depending on how far you have to drive out of your way and how long to wait in line, it may actually be possible to make something at home in less time than it takes to go get fat-food! But many of us who were never trained to cook don’t know how to find the extra time required to cook while one is learning, or what to start with. The how-to-boil-water sort of cookbook has never seemed to systematically provide the kind of training required to feed a household on a low food budget while holding a job. (Hey Sharon, how’d you like to write another book?)
Cooking is one of those places where community is key. Mostly I learned by cooking with Food Not Bombs - everyone knows how to make one or two things, and when you get a group of 5 people and a pile of disparate ingredients, you’re going to learn how to make one of them.
Do that every week for a few years and you’re set.
And I think I taught a few things too - how to efficiently cut a canteloupe, how to make gravy out of anything (one of the main things I learned from my mom).
It’s a learning process for everyone on the skill spectrum. We had one roomate who we taught how to make mashed potatos, no joke, and one of the FNB cooks I worked with sometimes was a professional pastry baker.
I worked for years in the financial world. What I learned there would take volumes. I always knew something was “rotten in denmark” but didn’t understand it for years. I went back to college and got a degree in economics and politics. The bottom line is this. I will never have a mortgage again as long as I live. Period. When one really understand the economic system and how it works, the veil is lifted and the light bulb comes on. Talk about an OMG moment!I could go on and on about it but google the video “Money as Debt”. That is one piece of the puzzle. Another is the “Money Masters”. These help explain what is happening and what has happened to our economies. Read your history as well. Both Lincoln and Kennedy were murdered. Both had executive orders in the works to nix the federal reserve system and have the government use their own currency instead of borrowing money at INTEREST from the bankers.
Do you understand that the bank does not “lend money”? They do not. When you sign a mortgage note, you create your own “loan”. This bankers sham is one of the greatest hoax’s in our history and few people in this country really understand what it is about and how it works, let alone what it’s effect are on ordinary people, why you can never get ahead, why you are subject to boom bust cycles, etc. Why your wages are stagnant and have been for years. Bush senior made the comment once that it is a good thing the public doesn’t understand banking, or they would hunt him down and lynch him and his buddies. I am paraphrasing, but essentially thats what he said. Public hangings indeed. Maybe we need a little “French” with our fries.
Rosa that’s very wise. We all need to get to know people — and some of what they know — and we need to do it now.
Lydia, I think some of us are starting to see what you’re talking about. 401k’s, stock market, credit cards with 29% APRs, etc.–all ways for TPTB to get their hands on the money we’ve earned. The markets don’t always go up but go up and down in cycles; in fact it appears only the lucky who’ve been at the right ages at the right times have ever been able to pull their money out and retire when it was an “up” time.
My wife and I use two cards for the vast majority of our purchases and pay them off in full at the end of each month. Just got my “rewards” from American Express which was nearly $800 for the past 12 months. That’s not chump change. Since I know people will inquire, that’s about $60k in charges on an no-fee card, and not a cent in finance charges or interest.
Credit cards require dicipline, something most Americans are sorely lacking. Too many people have the “I want it now” attitude and have used credit to get it. Living within our means is something all American’s need to learn ASAP. If cutting up the card helps you get there, so be it. Just don’t blame the credit card for your lack of dicipline.
One more note - I do not charge at small businesses. The cards get used for a lot of business travel, personal travel, large retailers like Target & Costco, online purchases and for gasoline and groceries. The flower shop down the street and the neighborhood cafe get cash. Places like the Farmers Market only accept cash. Don’t castigate all high volume credit card users.
Couple thoughts-
The Fed was established in 1913, long after Lincoln’s night at the theater.
Also, we noticed that if we paid off a credit card at the end of the month we weren’t really debt free, but had borrowed one month’s worth of stuff from our future wages. I don’t like the guillotine feeling.
A couple of thoughts tonight: I’m hearing two friends of mine talking about how depressed they can feel because of financial concerns and how it and the ecconomy is getting darker and darker and how the future works. One day last week we went out to lunch on their lunch hour at a local cafeteria where we only bought drinks cause we took our lunches with us, cheered us all up that day. I think the bleakness that lies ahead is oppressing a lot of us, including me some days, and I’m really of an optimistic nature.
Local charities and Christmas giving here has an edge to it that I haven’t heard in previous years. Our tv stations and lots of business have food drives, toy drives etc like most communities do. But this year the emphasis of “desperately needing your help this year” is more than last year anyway. All kinds of people at this time of year have always badly needed helpt but this year it truly seems “desperate” in the tone of voice and words asking for help this year.
January is always a reality check for me after happy thoughts and maybe fantasies of the Christmas season. I don’t have too many fantasies as an adult like I did as a kid but this year reality check will include the bitter winter and spring ahead of us as a nation and I fear what happens in 2009 after the glow of holidays and the hope fullness of the inauguaration is gone.
Peace to you all,
Shamba
“Also, we noticed that if we paid off a credit card at the end of the month we weren’t really debt free, but had borrowed one month’s worth of stuff from our future wages.”
That’s how I always saw the matter. One of the reasons I don’t have a credit card. It would be too easy to fall into the debt trap. As it is, if I’m short on cash, I have no option other than belt tightening, and if absolutely necessary, borrowing from friends. (And when you borrow from a real human being, rather than a credit card company, then obviously, you pay him/her back as soon as you possibly can.) I like being 100% debt free.
Anyone stupid enough to by McDonalds on credit deserves to be living in a cardboard box. I would be all for this karmic justice, if it weren’t for the fact that these idiots will be used to turn the US into the 4th reich. Just wait and see. These people have only just begun their folly. It is bad enough they have to be blithering idiots, but the next step is forcing their idiocy onto everyone else.
No one deserves to live in a cardboard box.
As Dave Ramsey says regarding credit cards: if you play with snakes, you will eventualy get bitten. Get rid of credit cards, debt, and only buy if you have the cash to pay for it. This financial house of cards (franctional reserve bank, fiat money) is going to fail just as they all have in the history of mankind. Why do you think our founding fathers were against central banks and fiat money? They knew the dangers and also saw it first hand here in the original colonies. I would also say keep a good supply of cash onhand as well. There is already talk about declaring “banking holidays” soon. Obama has already asked his supporters to bear with him as he has to take actions that they will not like.
Thomas
Not only does nobody deserve to live in a cardboard box, nobody has the right too, either - police routinely go around rousting out homeless encampments, either for the perceived good of the people living there or for the convenience of richer people. It’s worse in places where the living is better - that is, there’s more police repression in places where it’s warmer and there’s more free food, because those things draw poor and homeless people.
Up here, it’s 20 degrees. In a month or two it will be -10 for a week or more. Calling the police on someone who has made a livable camp for themselves on a freeway right-of-way or an unused section of a park, or on squatters living in an otherwise-unoccupied house, can kill them. (Sometimes, it gets them necessary services or mental health interventions, but it’s a crapshoot.)
“Autre motif d’orgueuil, que d’ tre citoyen! Cela consiste pour les
pauvres soutenir et conserver les riches dans leur puissance et
leur oisivit . Ils y doivent travailler devant la majestueuse galit
des lois, qui interdit au riche comme au pauvre de coucher sous les
ponts, de mendier dans les rues et de voler du pain.”
–Le Lys Rouge, Anatole France, 1894
(a different Elizabeth from the one above). I have two credit cards that I keep in an envelope at home. I used to carry them with me, but would end up using them as an excuse to buy lunch. Luckily, I never got over my head with them. One is paid off, the other has a small balance that will be paid off within a few months.
Rosalie, we are in almost the exact same situation. We have property and are getting ready to take on a small mortgage to build our house, also. I take comfort in the fact that, even though taking on a mortgage is risky now, I will feel so much more secure on our little acreage than I do at our house in town. My fruit trees are already doing so well out there! I need to be out there!
Jade, Yes the Fed was established in 1913. But the controversy over who would issue the nations currency started long before the Fed came into being. The Federal Reserve Act was just the culmination of what the bankers had been trying to do for a while. Again I say read your history before you discount Lincoln’s murder as having nothing to do with the money system.
Lydia, is there a book or two you recommend reading?
A worthwhile credit card: REI, which is a coop. Running all my routine purchases - food, gasoline, etc. - through my REI credit card means that the annual rebate which I can redeem for merchandise is pretty significant. Last year I acquired a good down sleeping bag and a strong battery powered lantern. The year before a tent and before that a portable GPS. My next one will be used to acquire solar battery chargers and an emergency radio, maybe with a hand crank, for when the grid goes down. The electricity in my area (suburban DC) went down several times last summer for hours when the weather was nice (not stormy or hot), for no apparent reason.
I grew up in a poor family, and learned from sheer necessity the ability of making do and having to wait for things, long ago…
Too much credit sets us up for a BIG fall, and its been put off for years..
One very sad example
is HELOC
years ago it was known as “borrowing against your home”, an act of desparation..
The same factors that “re-educated” thrift and prudence into “credit is same as savings” has set us up.
Our Grandparents knew better. Let’s at least learn from history!!
My youth: Third or fourth hand cars, house was added onto as kids came along with a final of 950 sq ft, garden out back, wood heat, third hand furniture, vacations were a luxury big time, did our own maintenance on whatever, etc. NO DEBT!!!! I saw all this coming three decades ago and have been considered a “doomer” ever since. As my sister says, too depressing. But I read and listen to the panic stricken fifty year old children who haven’t ever known anything other than “I want what I want when I want it”. Or as a man I know says: “I don’t care what I pay for it”. Frankly, I have little, if any, sympathy for those today. Way too much excess. Last summer I was on an Alaskan Ferry talking with a couple from Australia. Their comment: “We cannot believe the excess everywhere”. What I would so much like to hear now is, learn responsibility, learn to manage money, learn to make decisions, learn about life. All I hear is crying and whining about who did what to who and why everyone is an innocent victim of somebody, somewhere. The truth is we’ve become a nation of cheats and liars at every level. Well folks, the school of hard knocks is open. Come on in!! By the way, my house is paid for, two used cars paid for, no debt of any kind, wood stove going right now, savings in Treasuries and a whole lot of peace of mind.
What a wonderful world! Soon there will be LESS:
1. Traffic
2. Traffic ‘Accidents’
3. Pollution
4. Resource Use
5. Mindless Consumerism
and there will be MORE:
1. TIME for personal development
2. QUIET for meditation (2012 is only four years away)
Just gotta know, who’s number one if MacDonald’s is number two… or do we just assume it’s gotta be…. WAL-MART!!!
John at 3:18 - yes, my grandparents also knew better. The best financial advice I ever heard came from my grandmother: pay cash, or go without. A philosophy to live by, and one we are about to rediscover.
Even though I paid off my cc every month, I was so shocked by the crash that I paid it off completely and shreaded it. Just symbolic, I know, but I have a different feeling now paying everything with cash or debit card. A poster above got me wondering if small merchants pay a fee on debit cards. If so, I will simply pay cash.
Ray, yes, merchants who accept debit cards get dinged. There’s a break point between debit and credit where they get dinged less by credit than debit but dinged they get either way.
For that reason, I’ve been learning how to plan my purchases in advance and to make sure I have suitable cash with me. Weaning myself off debit card use has been difficult but I’m getting better at having available cash. I rarely write checks and barely use my credit card to begin with. I haven’t quite gotten to the point of cashing my paychecks when I get them but I figure I’m heading in that direction.
Kerri in AK
I learned of PeakOil which led me to economics which lead to politics which leads to getting your act together.I appreciate you efforts Sharon but am unsure wether you or I or anyone can really make a difference at this point in time.I hope you can and will continue reading your blog always.The world is so different now(nothing is honest)the recovery from this time will take a generation at a time that we have to rely on the said generation to pay (college,school,their elders). From what I have seen of the younger generation..I do NOT see it happening. I enjoy all your writing I hope you never stop”)
this is a joke. men no longer provide for the home, which some say makes men lower then infidels, and women work outside the home, so banks and retailers and renters and homeowners charge these dumb pimped out women couples twice as much the rate and the dinks, double income no kids, work twice as hard for nothing and since the dumb women do not cook they esad, eat shyte and die. now thier credit cards will be yanked. what fools and what predators that prey on these fools, usa needs cradle to grave socialism to care for all its dummies, dumb stupid children in big gross adult bodies.
The whole economy and money system is a fraud run by Criminal scum gangsters who use the Police as mob enforcers and hide behind a tatally ludicrous, so called, Law system. It’s all a joke. Banks create money out of thin air. Let’s pay them back with thin air. Scum. Pay these criminals NOTHING. They need hanging.
I’m going to go out on a limb and suggest that everyone consider one last credit card purchase. Get yourself a good, sturdy bicycle capable of carrying several bags of groceries. If you are elderly or in some way health impaired consider getting an electric bike to help you along the way.
For those of you who have families with children or are larger than two consider purchasing a trailer or a specially made “cargo bike.” Should you really get up against the wall a good bike has an expense of about $50/monthly including purchase while a car will cost you about $150/mo. sitting insured in your driveway and never driven.
I can strap a case of apples and a fifty lb. sack of rice on my Xtracycle modified cruiser. Or two small kids or one large one. The ability to get food, water or wood home without using gasoline could become a survival issue.
It’s not just about gasoline either. Last winter during a four-day power outage the gas stations couldn’t pump gas without electricity. The one station in town with power was quickly pumped dry by people from outlying areas buying generator fuel.
Having been recently in the position of having to sell a truck to pay rent I can tell you for a fact that the market value of your car or truck is less than you think if you can’t arrange loans like the dealer can. That valued tool can become a steel albatross awfully fast. Meanwhile in a pinch a $2K bike under you in a survival situation is worth far more to you than a $2k debt is to the credit card company. A good bike will get you where the bus service won’t and bad bikes fall apart when you most need thm.
Check it out yourself. Search terms are: cargo bike, longtail bike, xtracycle and bakfiets.
My grandparents only spent what they could actually pay for and they ended up leaving a good legacy for my parents. Maybe it is time we reverted to the old ways of reusing, recycling, prudent spending and valuing the things we had. Bottom line, If you dont have the cash, dont buy non essentials and in that is a big car, a large house, too many clothes, too much to eat.
I am glad this credit crisis is happening. people need to wake up . we are wayyyyy too spoiled and selfish and full of crap. many of us thing who the hell we are and have this holier then thou attitude as if we are deserving of everything. these are the same type of people that have lived their lives spending on money they dont have and now they will be the first to suffer. they wont get to use their credit cards to get the natural high it gives them , thy wont be able to pay any more utility bills to cover their butts , no more vacations ………they will loose their homes because they wont be able to use their house as a bank as well . . .so all these credit hores are screwed in every way and they deserve everything they have coming to them . i have read in different articles that women who own homes and are single , ( whether by choice or divorce ) are becoming house prostitutes . they are selling themselves in their own home just to make the payments they need to survive. its wild to think what women will do when they have their backs against the wall ….and for the men who are struggling , they will look to steal , scam in any way they can …. so why dont we talk about the after effects of when people begin to loose everything ? lets talk about how far a person will go when they see no light at the end of the tunnel ? these are topics worth talking about ! because they are real and right in front of us , yet no one talks about the horrors that are ahead of many families and children ………..
Re the credit card thing and small merchants: It costs about 5k for the machine, then you pay a monthly fee to some of the companies and a percentage of each purchase. That’s why so many so small companies don’t take them.
Looks like it’s time for the junkies to kick their bad habit. Painfull as it may be; in the long run this will be blessing.
Credit Cards are demonic.
ps - why anyone eats that crap at MacDonalds is beyound sound thinking anayway.
My ONLY debt is a house payment. I yanked all of my money out of stocks back in 2002 and got a fed gov job (read job security). All of my retirement is in fed gov bonds, FDIC accounts, gold and silver coins and ammo. I’m set. Bring the D-word on. I’ve got the food and water stocks as well and my family is consolidating their assets. We also know how to plant a garden. When “they” turn on the meat grinder we will be ready for it.
Jason
Sharon, You’ve written one of the most insightful posts I’ve seen on the financial mess.
Beginning in January, 2009 is ground zero for financial destruction for many in America. No one will escape. The interconnectedness of the world’s economic systems will now come down to the macro level. Currency collapse seems possible and even cultural collapse. I live in an affluent area. People here seem to feel that as long as they have money coming in from their investments or pensions or what ever and don’t have debt they are okay with what’s coming. There is still an air of, ” I’ve done the right thing so I will be okay.” -This seems to me to be somewhat of a disconnect given what has happened worldwide in even the strongest and most self-sufficient economies.-”If I can hold out long enough, I’ll be okay.” For those that are still strong, it seems just a matter of time. The question is; how long a time?
Thank you for the great article. I wonder if anyone can give me some advice on a really tough situation I am in?
I own a small business (Luxury business , facials, massage etc.) the first things to eliminate in times like these. I have nearly $80k in cc debt for the business. I pay as much as I can every month trying to get them paid off for the last three years now. Never late or over my limit once. 780 fico. Business was going along well for the past 3 yrs. and as of this past Sept. business has nearly vanished. The other day I went to the mail collected one of my credit card statements and my minimum payment had tripled. I nearly had a heart attack. I then noticed that my 11.34% rate for the past 3 yrs had risen to 35%. I was barely getting by before but now, I am sitting here knowing I will not be able to pay these bills anyone. I have worked so hard at my business and now I feel I am a victim of our sick government and their horrible mismanagement. Can I get a few opinions on what you would do in my situation. I feel my options are to BK the business (I’m Sole Proprioter and scared my personal finances will be affected) or should I just stop paying and walk away? Both are terrible options but I just don’t know what to do. I appreciate any feed back. Thank you!
Bad enough the Amerikans are stuffing their maws with faster poo food at McFondles Clown Burgers, but using their credit cards there demonstrates how truly $ick Amerika has become. Too many consumers in corp-rat fascist Amerika; not enough citizens. And this explains how George W. Bush, a dry drunk $ociopath, was $ellected (and then re-$ellected) to become the warmongering cowboy president of a bankrupt and dying empire. Indeed! WHERE THERE IS NO INSIGHT, THE PEOPLE PERISH! And so… the Amerikan people shall now endure the collective karma that they have engendered. Enjoy!
I don’t know how much credit I can give to an author who fail to see that McDonald’s is the second biggest merchant vendor for credit cards uses not because people are they are using consumer debt to buy their Big Macs, but instead are using their bank’s debt cards as credit cards. In fact, if the author ever went to a McDonald, they would quickly realize that McDonald’s only use plastic as credit, and never as debt.
I also think a lot of older people fail to see is that most people in my generation (25-35 year olds) are learning the scam debt really is. Over the last ten years, I’ve noticed a general reduction of people wanting to go in debt to buy things. People in my age group seam to be waiting to live more in their wage, save more, and spend less on stuff then the people before us. I think one reason could be that once all the 35-45 year olds bought their homes, my age group couldn’t buy homes without crazy loans which lead to this whole mess.
The world is slowly moving away from debt and that move will be a painful one as we have relied on it to be the foundation of our economy for the last 30 years. I sure that one outcome of this depression will be 50 years of reduce credit usage until a generation forgets the lessons my generation is learning about debt.
Survival is based on how you use debt. If you depend on it, you will die. If you don’t have it, you will decline. If you it as a tool, you will prosper.
To: In need of advice: DO NOT walk away from your debt, they WILL come after you. Call them and try to negotiate lower payments & interest; cancel the card if you can. I had a very high Visa bill from Citibank, after missing one payment due to emergency surgery last year the mim payment skyrocketed into the entire balance. I could never catch up. I went to RESQDEBT and they got me a smaller mim payment and no more interest, I’ll be paid off in 3 yrs. This deb negotiation co even waived the balance of their fee for me. It’s still tough will other bills and all but this group is great. Ask for Brandon at 800-319-1619 and tell them Jean Bush sent you. You can contact me at jbush@lycos.com if you want to talk further.
I have never had a mortgage or any debt in my life and the reason why is this: I waited until I was 30 before getting married. By that time I had saved enough to buy a house outright.
And don’t even think of having children unless you are debt free. To burden children with poverty is a form of abuse.
I now regard debtors in somewhat the same vein as drug addicts, smokers, drinkers, porn addicts. Weak and stupid!
Fred, you are an insensitive idiot; a good majority of people are in debt because of a sudden life changing event: medical, divorce or job loss. The more you scorn the “new poor” the greater the karmic chance of something happeing to you. Good luck with your snotty little life.
in need of advice, you need a lawyer’s advice. There may be a free or sliding scale legal clinic where you live that can help you.
It depends if the credit card is yours or the businesses, and what your credit agreement is, and how you incorporated, and a bunch of other stuff.
I will give you some emotional advice though: if you have to let the business go bankrupt to save your personal assets, try not to let it make you feel bad about yourself. Protecting investors from debt is what the concept of incorporation is for.
Gov. wants credit card issuers to cut back on credit by giving said banks cash and cash promises to weather any eventualities that may befall them. Not to unfreeze credit markets. I know this because I sat in on the private hearings.
Thanks for the advice Rosa and Jean. The unfortunate thing is I never put the business in an LLC so I’m afraid they can come after my house and retirement??
Businesses in my shopping center are dropping like flies. I don’t know what the credit cards companies are going to do with all this defaulted debt?
I truly believe Peter Schiff and Gerald Celente know what they are talking about and what we are about to see in the very near future and if that’s the case we will all be standing in food lines and trying to stay alive. These are very distressing times.
Good luck to everyone!
Jade, in Lincoln’s time and after there were a number of attempts made by the Federal Reserve private banker cartel to foist fractional reserve banking a/k/a a central bank, on the American people. 1913 just happened to be the year they finally succeeded. Do you also know that 60% of your property taxes and income taxes go to the Queen of Eng.?
Those of you who have faith in Christ/God, start incorporating fasting into your regular daily routine. Try cutting out, say, one meal per day. Not only will you save money on food, you will likely at least stabilize your weight too. Surprising how little food we actually need. Pray to God more as you do this.
Matter of fact, back a few months ago I asked the good Lord to be my office manager. Ever since I did that, work assignments have come in regularly and my money comes in too. My calender is always arranged so that work does not pile up and get out of control and if something cancels, something else calls in. I am self-employed, so my paychecks vary according to my outstanding invoices. I’ve never wanted for money really, but as things get tighter and tighter cash wise around the globe, I know it’s only a matter of time before even attorneys begin having a tough time meeting their bills. Many big law firms have let go of many many lawyers and entire clerical and legal staff because their big bank clients, real estate, construction, business clients have fallen on hard and harder times. Now begin the lawsuits between these behemoth banks, Wall Streeters, brokerage houses, and other financial institutions. Long as they sue each other, I’ll be working. My Office Manager is seeing to that for me.
I have no credit cards - hate ‘em. Some things I do in cash, some things with debit, so there’s never some balance hanging over my head. Mortgage is almost paid off, so I got a lot of equity. Now to find a good Christian hubby and head for the hills.
Sharon has done an excellent job of describing how I ran my small business, using CCs in place of savings.
Now my business is gone, I’m unemployable due to a trashed credit rating, the IRS has a lien on everything I have and everything I will have, and I ask for spare change for a living.
I am laboriously saving up, CASH, for a banjo so I can make the move up from street beggar to street musician - I expect a lot more beggars to enter the street scene soon, and I think I have a knack for music.
We are truly entering the Greater Depression.
Fred,
That comment was really uncalled for. I mean, yes, some people got into debt because they were stupid as hell; but then, some people get cancer/stroke/diabetes, or get into an accident, through sheer stupidity, but hardly means that everyone afflicted with one of these should be considered an inferior human being. Geez.
Yes the D word is the proper one to use now.
Depression is here ,I believe we will see a major war perhaps even ww3 .Because that would be the way to get people off of talking about the economy and would also be a way to escape the worst effects of a Depression.
Americans should be in the streets with guns.
they just signed away 10 trillion of tax payer money
to fix banks not worth an aggregate of 3 trillion.
so where is the other 7 trillion going go?
no answers no oversight and corruption left and right.
[…] Sharon Astyk: “Yesterday put the nail in the coffin of a move from recession (small “r”) to Depression (capital “D). Two pieces of news that were absolutely essential came out - and no, neither one was that we’ve been in a recession since last year, or that last week’s stock market rally was yet another sucker rally. The first was the observation that McDonalds is now the second-largest merchant vendor on credit cards - that is, people are now buying their Big Macs on plastic - in part because they don’t have the cash. Credit card balances have risen enormously in the last few weeks, as people attempt to keep going through the holidays. [. . .] The second is the news that credit card companies are planning to pull 2 trillion dollars of personal and small business credit lines over the coming months, to reduce their risk.” […]
Nobody in a sane country should have to go into debt because of illness. I have always lived in UK and Canada where national health systems have been in place my entire life.
Americans have stupidly spent their wealth on wars and as such should all be classified as terrorists. Bring on the karma!
“Nobody in a sane country should have to go into debt because of illness.”
Well, great. So what’s a person to do if s/he lives in an ‘insane’ country?
Look, I have no debt either, not a penny. And while this is partially due to the fact that I made some smart choices, in other ways, it was simply a matter of good luck. I mean, yes, people who are drowning in debt because they couldn’t tell the difference between oatmeal and electronics, or between rent and exotic vacations, and instead considered all of the above to be ‘necessities’, are idiots. But so many others got there through sheer bad luck, and as the saying goes, there but for the grace of God go I.
This report does not just point out the economic woes of the American citizen, and how they will not be able to fall back on their credit cards to get them through it as in the past.
It more importantly, points out the fact that Americans are Totally Brainwashed for the up and coming Cashless Society.
For people to buy their Big Mac’s with a credit card, this truly gives all a witness showing the effects of the brainwashing power of the elite.
Visa’s goal is 2012. The commercials demonizing cash and check users are working perfectly.
They even have a Cashless Monopoly Game out now that brainwashed parents will rush out and get their children during the holiday.
Not realizing that it is to prepare their children for the Cashless Society.
Yes, and to also dumb down their children by having the computer do all of their adding and subtracting for them.
Anyone who wants to know where this is leading only needs to read Revelation 13 v 17 in their Bible to see that No One will be able to BUY or SELL.
Unless you bow to the government/beast who has been showing his great appetite lately by taking over all of these banks, mortgages, policies etc.
The powers at be can only control citizens in such a way, if all transactions Go Through the Computers, like at McDonalds.
They control the satellites that control the computers.
Just how long until its a chip in your head or hand?
Wake up people, wake up.
BW, you hit the nail on the head!! That’s why I am asking, knowing what is coming what should I do???
NO CREDIT cards.
debit cards. cash, only
[…] Everybody should read this article. Sharon Astyk has done a fine job. Almost all of the consumer spending we’ve done in the last few days has been done on credit. In November and December, retailers see more than 40% of their annual sales - and since the average American comes out of the holiday season with more than $800 in credit card debt, it is safe to say that retailers in general are dependent on an annual payback that is then amortized over mos tof the year in the form of personal credit. That is, the consumer spending economy, 70% of our total economic activity, is utterly dependent on consumer credit. And whether that’s a good thing or not, the destruction of consumer credit lines will bring about a shift in consumer spending that makes the present economic woes looks petty. […]
God! I am scared to death! We owe about $5,000 in debt and are still paying on a house that we are buying from a predatory creditor! Our contract said it was a $65,000 house and we have paid over $120,000 and they won’t close until we have paid $200,000! My husband is ill and we are just ataying alive! Pray for us@
spot-on analysis. card companies are slashing credit lines as we speak. jp morgan unexpectedly closed 3 cards i had - those 3 cards had exactly $0.00 in total balances vs. $18,000 in potential credit; & i have an excellent credit rating! this is happening to a lot of people i know. my business is doomed, soon to join my doomed credit. maybe not such a bad thing after all.
To: “In need of advice…”
Call and work out a plan with your “secured” debts. For the unsecured credit cards - blow them off, for now or forever; unless you lied excessively about your income on credit applications. Unsecured debt is just that to the issuing company - unsecured. It was a risk for them; all they can do is call & hound you. And you can request that they stop calling you, or just change your phone number.
Come Jan 1 I will be debt free. That’s right! I’m engineering a personal bailout. I will not pay any of my credit accounts after this month. Nope, don’t have to, don’t want to and ain’t going to!. I don’t care about a credit score. If I don’t have cash, I don’t buy anymore. The banksters have been robbing all of us for a hundred years thru usery laws, fiat money, the FED (which is private), the IMF and the IRS. This is my revolution. I’m not paying anymore interest and will do my best to avoid as many of the dozens of taxes out there. I refuse to be a slave for the Illuminati, NWO, banksters, puppets and politicians. I am not fodder to be slaughtered slowly.
To Brain & sickandtired: What do you plan to do when they take you to court and garnish your wages?????? They can do it.
[…] why credit cards may be important. But… no wonder the savings rate has been a negative percent! Published […]
Crooked Private Central Banks + Brainwashing TV Set + Living Beyond Means = Disaster!
Those who pay off the credit card balance in full each month are still living on credit. That balance paid in January is for a life lived in December. If the monetary inflows stop suddenly, then breaking even means you don’t live (eat, heat, clothe) in February. It is surprising how many are lulled into a sense of superiority by this act. It is cult behavior. The shopping cult. Tell me you pay 2 months ahead on your charge account. Tell me you are also 100% debt free ( no mortgage, no car loan.) I won’t be impressed. Why should I be? That ought to be normal behavior.
I’m one of those completely exposed people. I bought a property the year of 9/11 for my small gallery business. then the gas system failed, the bathroom failed & my income dropped by over 50%. I’ve been using up all my assets since then. my credit cards are now 3 months unpaid, and my mortgage is next. did I say I work 3 jobs? one pays $10/hour…and I have a college BA and strong work ethic. it’s as they said, credit was an illusion for pay. and then Wall Street & real estate investment got all the money, which is now gone.
when citigroup calls, I congratulate them on their free bailout. but there’s none for me, and they acquired an asset with $20 billion of our money. something wrong here…..but they only have money when we pay. I say let the credit card companies re-invent their own future….after all, they need us more than we need them. we need each other more than those corporations.
Sites like this provide much needed encouragement, information and support to people. But please consider that if our precarious economic situation turns for the worst, access to the internet may become impaired. Please ensure that you interact with and develop a sound support group with those in your community so you can maintain your closeness with like-minded individuals should the internet ever go down.
Re: credit cards -
I was at my sister’s at Thanksgiving and all the kids were playing Monopoly. I walked over to take a look and was literally frozen by what I saw - it is not only cashless now (they use a bank card) but it is nothing but sports fields, Disneyland and Hollywood. OMG !!!! When I was a kid, Monopoly taught me the value of money. A couple $1 didn’t seem like much but you would learn that a few $1 made a $5, and a couple of $5 made a $10, etc. I learned the value of a dollar pretty quick. These kids were just laughing and frantically feeding their plastic card into a machine without even checking their balance. This next generation is going to be damned to debt hell !!! Moreover, as a kid I played the game acquiring wealth by investing in sound enterprises like railroads, energy and water utilities and rental properties. These kids only have sports, Mickey Mouse and celebrities to stare at. When I pointed out what I saw to the parents there they just shrugged and said “Oh, it’s just a game.” That’s the sickest game I’ve ever witnessed - that’s nothing but predatory and manipulative. Corporate influence over our kids has gone too far, America. We as citizens need to monitor or children’s activities better and teach them that debt is not wealth or we will do nothing but hand them over to a life of financial slavery.
I have never owned a TV in my life and obviously have not played a board game in many decades, but has not anyone else noticed this ??? I still can’t get over it.
[…] More… […]
[…] More… […]
To: In Need of Advice and others in trouble: a bankruptcy filing will still allow you to keep your house and a car and will put a foreclosure on hold - legally called a “stay” - even though the Bush bankruptcy bill written by the credit card industry took away the possibility of a full discharge of all debt from anyone who still has any significant income. Even when new businesses are incorporated or started as an LLC, banks usually make the owner guarantee the loans personally, so it is unlikely that would have made any difference to a new start-up. You shouldn’t just stop paying, because the credit card co. will not hesitate to obtain a judgment and then enforce the judgment lien against any property you own. If you are married and own your home as a tenancy by the entireties, the credit card co will not be able to touch it if your husband did not sign off on the credit for you business. The longer you can delay any action by the credit card co. is found time. Don’t hesitate to see a lawyer with expertise in bankruptcy and taxes.
I really appreciated the article
and all of the comments and help
that people offered each other.
My husband is very ill and we have huge debt.
Health care may be free, in Canada,
but not if you have chronic illness
and want to get well. Then you pay.
If you want to start getting well so you have
the energy and ability to think,
to get through these times,
read a few books by Gabriel Cousens, M.D.:
“There is a Cure for Diabetes:
The 21+ Day Program” and
“Green Rainbow Live-Food Cuisine”.
If we all have to go through this,
we might as well attempt to bring ourselves,
and whatever part of the planet we can affect,
more into balance.
Here’s a free website of writings
and photographs that my husband and I host:
http://ecophysics.org
And if anyone wants to talk further,
I can be reached at ecohealth@honouredliving.org
Thank you for all your insights!
Thanks everyone. I’m meeting with an attorney on Wednesday.
In need - I agree, you need to talk to a lawyer. If you call legal services, they should be able to help you find a referral. And for you and Carol and Jennifer - you are in my prayers. I had a period in graduate school where things were pretty dire financially, and I remember so acutely how afraid I was. I hope that you can find a good way out - make sure you understand the law, and do what you need to.
I have been a bit distracted and not following this thread, but let me be clear to some of my less kind readers - make your points civilly and without unnecessary meanness, or they will be deleted.
Sharon
I have been paying off my credit cards every payday. I have about five left. Over the last two months I have received letters from credit cards companies either canceling my unused cards, or lowering my credit balances on my remaining cards to their present balances or $100, whichever is lower. I have not been late on any of my payments.
If I have any type of emergency I will just be out of luck.
I think the middle class is intentionally being taken down and destroyed by taking away any form of liquidity.
The New Word Order is making its move big time. It will be the haves and have nots, a technocratic feudalism. I guess we have to destroy the useless eating elite before they destroy us, and there’s a lot more of us than them.
We needed the opposite of the bailouts, and credit in the last decade - we needed savers.
Saving was/is punished. Credit holders were rewarded.
In reality the interest rate should be at 15% or more. To encourage saving interest has to be at least at the level of real inflation, which was around 13-18%, but might be less now that the cost of gasoline is hitting the floor.
Was this caused by the NWO? You bet it was. It everyday schmoes like myself were able to ascertain in 2003 a housing bubble and the inability for debitors to pay, why weren’t the papers reporting this? Why wasn’t the government?
Credit and Usury are some of the worst peacetime sins visited on mankind, and not a single person responsible will serve even a day of jail time.
You people are making me sick. Im reading, oh i pay off my credit card every month and oh i have a years worth of money saved away. Well guess what Morons. What do you think is going to happen when the crash/depression really hits? 1st off, you have been good sheep BUT its not you to be worried about it’s the 50% plus people who have no money saved and are maxed out on the cards. when the full blown crash hits. half the people in the USA are going to run out of money and then what do you think will happen? they for sure are not going to sit out in the cold with no food or home. They are going to riot, Thats right they are going to freak out and come to your house, They will be so hungry that they will do anything to get your foo