Christmas Shopping Records – First Quarter Hard Economic Bust

Is it possible? Probable?

At the risk of seeing bears in the face of a herd of bulls, here’s a theory:

If we see a huge Christmas retail season (both brick and mortar and online), don’t be surprised to see equally huge default rates come the end of January, February and March, as the balances created in the spirit of the season go 30, 60 and 90 days past due. Just ask yourself, would someone about to have their mortgage forclosed on be more likely to scrimp at the holidays, or just blow the rest of their (never to be repaid) credit card’s avalable balance on a feel-good?

I think the answer is clear on that one, because too many of us don’t treat money and avalable credit as the same thing. In fact they’re not the same thing at all, but should be treated the same. If one is frugal, they are frugal with credit as well as with cash.

Let’s face it, even the naysayers are admitting real estate’s a problem. Prices are falling everywhere, and most intelligent observers admit there is inflation in our economy. The number of people on the edge of foreclosure, wondering how much longer they will be living in the house they could never afford in the first place, have to be figuring that once there’s a mortgage foreclosure on their credit report, some credit card problems they’ve walked away from can’t add more insult to their FICO. My opinion is there will be many cards that default at the credit limit, adding even more fuel to the banking and financial industry’s woes.

Technorati Tags: Depression, Economics, Recession

Posted in Economy