A buddy of mine called me this afternoon.
He's not what I'd describe as poor or destitute. He owns several properties, although he's frustrated that none of them will sell. He owns more than one car and has the means to take vacations. My friend is a real estate broker in another state, but has been spending most of his time in the Twin Cities during the past several months.
My friend called to chat. He's quite bearish about the economy and has dabbled in the stock market, shorting mortgage company stocks like Countrywide and speculating in commodities futures. He complained to me rather bitterly that he paid nearly eighty bucks to put premium gasoline in his Jaguar today. And he fretted over being unable to sell either of the two homes he owns in the Minneapolis Saint Paul metro area.
He wanted to refinance one of his properties, but apparently was unable to get a mortage. He said to me "I've got no problem getting credit cards, lots of them. But nobody wants to give me a mortgage. At least the bank sent me another credit card to tide me over for awhile".
My friend talked about his other friends and family members, many of whom are having trouble with the slow national economy. He said, "most of the people I know are just loading up credit cards, shopping for food and gasoline and waiting for things to get better. They don't know what else to do".
People used to make fun of loan sharks. In movies and on television, loan sharks were portrayed as sleazy, ill-mannered, shady characters who lent money at outrageous rates and beat people up when they didn't pay.
Today, the loan sharks in our society wear finely-tailored custom suits and Italian silk ties and $350-a-pair shoes. They're still doing business the same way they always have. And these manicured, well-fed, finely-shod loan sharks of today have the nerve to go on television, in front of Congress, and threaten that they will turn off the short-term credit tap unless they are permitted to continue charging obscene "default rates" and to play various other games with consumers.
Make no mistake about it, what they're doing is still loan sharking. The credit card companies and the banks that back them haven't learned a thing from what is going on. And they're still pushing credit at young people, college students, the middle class and the elderly. They don't want the consumer to get out from under their short-term debt burden. And the mortgage crisis has given them yet another weapon to use against the American public.
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Sooner or later that bubble is going to burst too. Too many people have been living on credit cards.