Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Millions of “Subprime Consumers” Getting Credit Cards; What Could Go Wrong?

  by    2   0

We’ve said before that the growing level of debt in the US is the elephant in the room we are going to have to address at some point. We’ve talked about the massive government debt and the drag it puts on the US economy. We’ve talked about the crushing weight of student loan debt – increasing at a rate of about $2,726 per second. We’ve talked about the mounting corporate debt, doubling since 2008.

And then there is personal debt.

credit-cards26-lg

Americans are burning up the plastic. Credit card balances are on track to hit $1 trillion this year. That is getting close to the all-time peak of $1.2 trillion hit in July 2008, just as the financial crisis was intensifying.

And it’s not just credit card debt. Auto loan balances eclipsed the $1 trillion mark in the first quarter of this year.

According to a Wall Street Journal report, credit card companies are enjoying the boom:

Credit cards are one of the few business lines working for banks right now. Low interest rates have hurt margins on ordinary lending, and a combination of tougher regulation and volatile markets has crimped profits in trading. But banks’ card operations are benefiting from low delinquency rates and could become even more profitable if interest rates rise. Card issuers are trying to capitalize on the good times by raising customers’ credit limits, giving out more cards and pumping up perks.”

Download SchiffGold’s Free White Paper: Why Buy Gold Now?

In a recent conference call with investors, Capital One CEO Richard Fairbank said, “We’ll continue to take this opportunity as far as it will take us.”

Indeed.

Until the inevitable crash.

Consider this little tidbit from the WSJ report:

The boom has been driven by steady economic conditions and an improving job market that have made creditworthy consumers less reluctant to take on debt. In addition, lenders have signed up millions of subprime consumers who previously weren’t able to get credit.”

Of course, there could be another reason for the debt surge. People can’t makes ends meet. As we’ve reported, the job market is not really improving. Much of the jobs growth is being driven by people taking on multiple part-time jobs. And as Peter Schiff put it in a recent interview on Fox Business, the economy is a mess.

But no matter the reason, the fact is all of this debt is unsustainable. Lending money to “subprime consumers who previously weren’t able to get credit” is a recipe for disaster. And did you notice that the credit card companies are salivating over higher interest rates? Don’t forget there are debt-saddled people on the other side of that equation who are looking at higher payments. Looks like they might have to start looking for yet another part-time job.

Like all bubbles, this debt bubble will burst. And it’s not going to be pretty.

Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning more about physical gold and silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!


Related Posts

Recession Warning: US Small Businesses Struggling to Pay Rent

In another sign of a struggling economy, small businesses are having an increasingly hard time paying rent. According to Alignable’s November Rent Poll, 41% of US small businesses reported they couldn’t pay their rent in full and on time in November. That was a 4 percentage-point increase from the previous month.

READ MORE →

War on Cash: India Rolling Out Retail Pilot Program for Digital Rupee

We recently reported that the Federal Reserve plans to launch a 12-week pilot program in partnership with several large commercial banks to test the feasibility of a central bank digital currency (CBDC). The US isn’t alone in experimenting with digital currency. India is working on developing a digital rupee and recently announced the second phase […]

READ MORE →

China Likely Stockpiling Gold to Minimize Dollar Dependence

China is likely quietly stockpiling gold in a bid to further minimize its dependence on the US dollar.

READ MORE →

Silver Demand on Pace for Record Year

Silver demand is on pace to hit record levels in 2022, driven by new highs for physical investment, industrial demand, jewelry, and silverware production, according to the Silver Institute’s Interim Silver Market Review.

READ MORE →

Wealthier Shoppers Flocking to Walmart as Inflation Bites

Walmart recently announced better-than-expected third-quarter sales growth. This may seem like great economic news until you realize the reason behind the retailer’s big jump in sales. As it turns out, wealthier shoppers are flocking to Walmart to make ends meet as rising prices squeeze pocketbooks.

READ MORE →

2 thoughts on “Millions of “Subprime Consumers” Getting Credit Cards; What Could Go Wrong?

  1. Mark says:

    They trying anything to survive and for them creating new money is for free.
    so who is next one to get credit?

  2. Larry says:

    No wonder why today I got an unsolicited credit limit increase on my Chase card; doubling the limit I’ve had for the last ten years.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Call Now