So far, credit card debt is holding up remarkably well, The Economist tells us. Goldman Sachs (NYSE:GS) says losses from credit card debt could reach US$99 billion - if the problems in subprime leak over to the credit card industry.
No problem so far...customers are still paying...which is a bit surprising, since you'd expect the consumer to be getting a little behind.
From the housing market comes this little note from an Australian reporter:
"The last one out of Cleveland, please turn out the lights," writes Paul Barry. Says Barry of the Ohio city:
"...the streets are lined with empty houses, dead gardens and demolition notices pinned to the front doors. One in 20 homes are now in foreclosure."
Turning to the dollar, The Economist quotes an unreliable source, your editor:
"The long term value of all paper currencies is zero. That is the fond saying of Bill Bonner, goldbug and publisher of the Daily Reckoning, a contrarian financial newsletter."
Readers take note: we are talking about all paper currencies, not just the dollar. We guessed that the dollar would fall to US$1.50 to the euro. So far, it's gotten about a penny short of the milestone. But it looks to us as though the dollar may want to correct...meaning, go up. In the long run, it is worthless trash. But so are the others. Which of them becomes trash first...well, we wish we could say. At this point, we don't have an opinion. Will the dollar go up...or down? We don't know. But we certainly wouldn't want to keep our wealth in it.
The dollar's value comes in some measure from the fact that it is the world's leading brand. That seems to be changing. The greenback seems to be going out of style. Already, in the film American Gangster hip- hop musician Jay-Z flashes a wad of cash. The cash is 500-euro notes, not dollars. The big euro bills are already a favorite of drug dealers. Soon, they will probably be everyone else's favorite too.
Meanwhile, as predicted here...corporate profits are falling. Bloomberg says there's a recession in corporate earnings, and "the economy might be next," continues the report.
"The earnings recession has already arrived," says a Merrill economist, "We are going to see an economic recession in '08."
Bill Bonner
The Daily Reckoning Australia
P.S. to get The Daily Reckoning direct to your inbox sign up to our free e-mail newsletter or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.
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About the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Comment by barry broome on 9 December 2007:
Here in U.S. everyone is living beyond their means. There is no group or agency devoted to explaining to people not to spend money - stop purchasing - save, save, save. Our economy is propped up on borrowed money and will crash sooner or later.
Comment by christina on 13 December 2007:
Hey, do you want to hear something funny? I went ot my local library to get some copies of the economist, but the librarian said that theyd on't keep it any more because nobody was interested in reading it. How bout that! You can get a book on anything you like in the world except what matters. Do you want to know how to read an aura- hey no problem, they've got that. Do you want to know how to juggle, right this way is a book if you want it, but none of the masses want to read about economics. What I find highly ironic is that when depressions hit, suddenly the whole world and his dog wants to learn all about economics, and discuss it over the dinner table. People can't be bothered reading about economics now, but very soon they will all get a crash course in economics whether they like it or not, in the form of a credit contraction. And just wait till that happens, suddenly "economics" will be the "in" thing to read about and to talk about. But until that happens people will still be content to read such riveting topics such as "Does my bum look big in this?" (when the depression hits you wont have a fat bum at all don't worry), and "What is the latest colour for this seasons clothing?" (PS-when the depression hits even a potato sack will be in fashion, so don't worry too much about whether you've got the latest look or not)
Comment by BxCapricorn on 24 December 2007:
I'm also kind of shocked that the Federal Reserve knows a U.S. Recession, as indicated by this paper...
http://www.federalreserve.gov/Pubs/feds/2007/200757/200757pap.pdf
shows that the recession will happen. Why is letting it happen so hard for them to do? Lately, as I've checked my blog stats, my post on the Yield Curve is the top post! I seems that some people do care, but the majority just want to be entertained, and libraries, competing with the Internet, are complying with the wishes of the masses.