As I Was Saying...

I certainly saw this coming.

Following the lending freakout by banks regarding lending to businesses and corporations, it was only a matter of time before they stopped lending to you and me in the form of credit cards.

The U.S. credit card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.

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 or credit-card lines to decline by 45 percent."

Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co represent over half of the estimated U.S. card outstandings as of September 30, and each company has discussed reducing card exposure or slowing growth, Whitney said.

A consolidated U.S. lending market that is pulling back on credit is also posing a risk to the overall consumer liquidity, Whitney said.

So at a time when both consumers and the overall economy might need the credit a little more than in the past, the lenders are going to pull back.

It may well be true that many of us have more credit than we need (I do) and use more credit than we should. On the other hand, if consumers are demonstrating their ability to repay (I am--I pay more than the minimum each month and pay my cards off on a regular basis), a 45% decline comes across as punitive. Perhaps that won't be across the board. Perhaps it will be decided on a case-by-case basis. But I doubt it.

This plan might be good for the lenders, but "sharp declines in consumer spending" certainly won't be good for the economy.

And I voice my concern once again about what this will do to our credit scores, which are determined in large part by the ratio between the credit we use and the credit we have. Cut our lines by 45% and suddenly some of us are much closer to kissing the max than we were previously. Having changed nothing about our spending or paying habits, we may find ourselves with lower credit scores.

The game is stacked against us.

(Hat tip to Petulant at Shakesville.)

Bitty and Marine Son Do Their Part to Save the Economy

By buying this, the Canon Digital Rebel XSi 12.2 MP Digital SLR Camera with EF-S 18-55mm f/3.5-5.6 IS Lens:

And in my case an expensive zoom lens to go with it (but I got $100 off for buying them together).

I'd been looking at the Nikon D60 and D40 for a while. A friend has the D40, and this is what started my jonesing for a camera upgrade. I have a really nice Kodak point & shoot, but I hate indoor flash photography. As a result, I end up with a lot of blurry photos because I turn off the flash and then the exposure is slower and I can't hold the camera still enough.

Now that I'm up to five grandchildren and I'll be spending Christmas with three of them, I decided to buy that Nikon. I was going to do it this weekend.

Then I talked to Marine Son yesterday.

He was on the verge of buying the Canon, based on friends' recommendations and internet research he'd done. This morning I remembered that Daughter has a Consumer Reports membership and had shared her access info with me. So I went to the CR site, where I learned that, in this class, CR rates only a Pentax model higher and only by a hair, and when I looked at the ratings in the various categories, I agreed that the Canon was the better choice (Canon rated higher in image quality and ease of use).

So I bought the camera.

Then I emailed Marine Son.

He emailed back.

He bought it just after midnight from another vendor. He got the camera for $107 cheaper than I did, but he didn't get the zoom lens, on which I saved $100. So I'm satisfied.

We'll have a lot to talk about over Christmas as we teach each other how to use our new cameras.

And I think we'll annoy the juice out of Teenage Grandson who's exactly at that age (almost 14) where he absolutely hates having endless photos taken of him.

Won't it be fun?

Is it January yet? Or, I Wonder What the AP Really Thinks of W?

Today my homepage offers an AP news story recapping the "summit of the 21-nation Asia-Pacific Economic forum," Bush's last visit to this gathering.

And this is the accompanying photo:






Photo:
Wearing a traditional Peruvian poncho, President George W. Bush gestures as Japan's Prime Minister Taro Aso stands below before the official group photo of the 16th summit of the Asian Pacific Economic Cooperation, APEC, in Lima, Sunday, Nov. 23, 2008. (AP Photo/Lawrence Jackson)





I really have nothing to add. Picture, thousand words, etc.

Is This Where the Sacrificing Begins?

I'm -- so far -- fortunate in this economic crisis. I guess. I have a job and can pay my bills. There have been down sides: like everyone else, my food and other costs have risen (although inexplicably, gas expenses have plummeted). I canceled plans to both buy a new car and build a backyard shed because I expect little-to-no income next summer due to decreased enrollment at My School. Therefore, the summer belt will be really tight.

But so far I'm ok. (A little superstitious about putting that in writing, though!)

I get a raft of junk in the mail every day. I deal with the good stuff and the urgent stuff right away, and then once a week -- or less often -- I open, sort through, recycle or shred the rest. Yesterday I was hard at work on this annoying task and opened an envelope from one of the companies with which I have a credit card to find a letter notifying me that my card has been canceled because I haven't used it lately.

Maybe this is normal. Maybe this happens in good times -- I don't know. I've never had a card canceled before over a zero balance. This was my only American Express card. Maybe that had something to do with it. Or maybe it's this company's way of reducing its risk, although it seems strange to go after the ones who pay the bills.

Last weekend, I was online at my Lowe's account and asked for an increase in my credit line because they hadn't yet processed a large payment I'd made, and they had a 12 month no-interest deal in place. I needed to buy the last of my kitchen cabinets and a few other final expenses on the kitchen, and I wanted to take advantage before the deal expired last Sunday. I received an instantaneous doubling of my credit line, more than I wanted or needed, but fine. The "experts" say that the available-credit-to-used-credit ratio is extremely important in determining credit scores. The larger the gap the better. And this is one of the reasons I'm angry about that other card's being canceled.

I've seen another change in my available credit in the last week. I have two Lowe's cards, and the company links them on the website. One is a store card only, and the other is a small Visa that I haven't used in a while (again, no balance). I went online yesterday to pay on the store card and noticed that my credit limit on the unused card had been cut in half. Perhaps this was because they raised the limit on the other card; perhaps it was because of the non-activity.

This is an unnerving trend.

I have another card from the company that canceled my AmEx card. It hasn't had a balance since March, and it's one of my oldest cards. This is another thing the credit experts say: keep those old cards open (and active) because it makes you look good to have long-established credit. So the next financial errand I run, I'll use that card, wait a week or two, and then pay off the balance. They'll have to find some other pretense for canceling that one. Worse, I have a fistful of cards without balances. Again, I want them primarily to establish myself as a responsible person, worthy of credit but not maxing out my cards. I guess I'll have to rotate them around -- buy groceries on one, then pay it off. Pay for gas on another -- then pay it off.

I wonder if what's happening now in the larger economy will in any way impact how credit scores are determined -- especially if companies are going to be canceling cards and lowering credit limits. Probably not. As our "available balances" plummet -- if this is how it's going to be done -- we may see our credit scores drop. I hope not. But even if we as individuals change our good habits not one whit, I have an uneasy feeling we're going to pay the price anyway.

Edit: Maybe this isn't exactly about the current economy after all, but instead one company's odd business practices. I found this on "Ripoff Report" and it's about the same company that closed my account:

This is the most ridiculous thing I have ever heard. You must use your credit card constantly or it will be cancelled. I opened this account in 1987 & my credit limit was 14,900+. The last item I charged was $293 in September of 2007.

I receive a letter telling me the account was cancelled due to inactivity. I tried to access this account online & it was closed also. I ran my credit bureau and it stated that I closed the account. NOT!!!

When I called and asked to speak to a supervisor the response I got was that at their discretion any inactivity from 6 months to a year can be cancelled. I told them I had 6 months inactivity and it was a 20 year old account & I wanted it reactivated. They flat out refused & told me I had to reapply.

My account had been zeroed out for about 6 months, too. You better believe I used my other card with these people, my much older one, yesterday...

A Definitive Solution to the Economic Crisis

Today I received the email below. I'm not in a hurry for myself, so I sent it on to six friends, but the thing you can really thank me for is that I sent it to my Uncle Sam. Assuming he opens his mailbox today and sends it on to 12 (I know for a fact that Uncle Sam has at least twelve friends), the economy should be back on track by Sunday.

You're welcome.

Money Coming Your Way! Tag...you're it!



Money Angel
This is a money angel Pass it to 6 and be rich in 4 Days.
Pass it to 12 and be rich in 2 Days.
I am not joking. You will find an unexpected windfall. If you delete it, you will never know!

Economic Observations from Someone Who Has Never Taken an Economics Class

I'd like to take out a smallish loan to finish all the small-to-medium nuisance projects around the house. I can afford to pay it back since, probably unlike most, I don't have a mortgage (nanny nanny boo boo!). But I fear losing my job, even though that fear is probably pretty irrational. Or maybe not.

Since I'm not taking out the loan, I'm not buying the materials or hiring the craftsmen.

Since I'm not buying the materials or hiring the craftsmen, HD and Lowe's aren't getting my money, and the craftsmen aren't getting hired to do my projects. Therefore, they don't get my money.

Since no one's getting my money, the economy is that much worse because the sales at HD & Lowes are down, and they have to lay off someone. And the craftsmen can't make their truck payments, so their trucks get repo'd and now they can't work.

And because the HD employees and the craftsmen can't run around and spend money, thereby paying taxes into the state coffers, funding at My School is cut even more drastically and enrollment dips even more.

And then maybe I don't have a job any more.

Clearly the only way to save my job is to take out a loan.

(And I say this in only partial jest...)