Think the estimated subprime debt load carried by the big international banks is big, at $1 trillion?
How about this: Americans now owe nearly as much – a record $915 billion – on their credit cards alone.
And defaults and delinquencies in the credit card sector are piling up – which means big banks are on the hook, again. More sand in the gears for the global economy.
Credit card companies wrote off 4.58 percent in payments between January and May, almost a third more than in the same period in 2006, according to Moody’s Investors Service. As a result, lenders such as Citigroup, Bank of America, and American Express, among others already reeling from the subprime mortgage disaster, are being further weakened.
from the New York Times:
By the time traders in New York were at their desks, economic reports issued in Washington showed consumer spending was flat in January after adjusting for inflation. Then a bellwether report on Midwestern business activity unexpectedly fell to its lowest level in more than six years, and a survey showed consumer confidence declined to a 16-year low.
If that was not pessimistic enough, Wall Street’s attention was soon riveted by a report from analysts at UBS that estimated losses to the financial system from securities backed by mortgages and other debts would total $600 billion. Until recently, many analysts had been forecasting losses in the neighborhood of $400 billion — a figure that the dwindling band of optimists in the financial markets once dismissed as vastly overblown.
“There is not any one news item that I can point to,” said Douglas Peta, chief investment strategist at J. W. Seligman & Company in New York. “We know that there is paper out there that we can’t trust. We don’t know exactly who owns it and how much. And we don’t know how they are valuing it.”
At Democracy Now, Amy Goodman interviews a Nobel Laureate economist on the true cost of the war in Iraq:
AMY GOODMAN: You testified yesterday before Congress.
JOSEPH STIGLITZ: That’s right. And this was one of the big points, that in every other war there has been what you might call shared sacrifice. Some people obviously sacrifice more, putting their lives at risk, but everybody was asked to sacrifice. This is the first time that, at the time we went into war, we actually cut taxes, rather than raised taxes. And even as we were cutting taxes, we already had a very large deficit. So that means this war has been totally financed by deficit. And that’s really been the trick that the Bush administration—it wanted people to think that there were no economic trade-offs. We could have a war for free.
JUAN GONZALEZ: And those deficits, the financing came increasingly from abroad, right?
JOSEPH STIGLITZ: Very much so, at least 40 percent from abroad. So that means that Americans will be paying those abroad interest and—the other aspect of that that’s really important to realize is that while we were saving zero, or household saving went down to zero, the government had negative saving and we were borrowing, the pools of wealth that were being created were in the Middle East, China. So when we have an economic problem, like the fact that Citibank and Merrill Lynch had to be bailed out, they had to turn to these others, to the sovereign wealth funds that were held by other countries, and that makes us more dependent on abroad.
AMY GOODMAN: Who is profiting from this war?
JOSEPH STIGLITZ: Well, actually, there are two big gainers in this war and only two: the oil companies and the defense contractors. And you see that where the pools of wealth are being created. One of the big pools of wealth are in the Middle East, the countries that are the oil exporters. We are transferring hundreds of billions of dollars from American consumers, businesses, to the oil exporters. You can look at it as simple as that.