Another Credit Crisis

The next shoe to drop… credit cards?

By the time this is all over, another 14% of the $1.9 trillion U.S. consumer debt market will default, the IMF predicted over the weekend. That’s another $266 billion in coming losses for American mega banks. The IMF (not known for their worst-case scenario forecasts) expects $172 billion in similarly soured loans in Europe.

Of those bad consumer loans, credit card defaults are rising fast. Credit card charge-offs, loans that banks don’t expect to ever be repaid, have risen to a record 10.7%. Moody’s, the steward of this particular data, says charge-offs will continue to rise until unemployment begins to abate. By their estimate, joblessness will peak at 10% next year and credit card charge-offs will top 13%… both rosy projections. (more)