The business pages continue to fascinate these days. Credit is back in style scarcely a month after the ‘perfect storm’ August meltdown that reestablished the law of gravity in the housing finance market. It’s amazing that the financial world can adjust to these disturbing developments with such aplomb and find a spin that suits their interests, like the way Bush regularly discovers ‘progress’ in Iraq.
The money shovelers cried for relief from the Fed a few weeks ago when a flood of bad loan packages jerryrigged out of stacks of bad mortgages threatened to unleash panic selling. And the Fed obliged in September with a big rate cut to bail out the financiers.
But lo and behold, things now are worse than ever for the average Joe. After dipping into their inflated housing values with equity loans, Friday’s figures show that consumers now are turning back to their credit cards of all things—just the kind of hara-kiri move the financial counselors tell you to avoid.
If I read these stories right, people who used to get home equity cash at 8 or 9% are instead using credit card debt for which they’ll pay 18 or 20% or more, not to mention late fees and penalties, thus improving their chances of slipping down the hidey-hole of insolvency.
So two months after the recent crunch, the average household budget is more leveraged than ever, and the full ripple effects of the home-building collapse haven’t yet kicked in. I can’t make sense of the statistics, but there’s something disturbing about the way our entire economic edifice is built upon this mountain of greater and greater debt, especially given its very recent totters.
Or as George Bush would say, Well, that failed. Let's try it again!
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