The worst credit crisis in our lifetime has already begun, with banks facing losses bigger than during the Great Recession of 2008. American consumers are going to be deeply hurt by it too. From now on, getting loans and accruing credit card debt is going to cost you even more. Last week, after reporting earnings, several major banks announced they will no longer lend money at the same rates they have been in recent years. They are going to be more wary about who they lend to, how much they lend, and the terms of what they lend. With the number of bad loans rapidly surging, and the decline of the commercial real estate market threatening to trigger a wave of defaults, many financial institutions are at risk of collapsing. That’s why they are now taking drastic measures to prevent even bigger losses from happening in the months ahead. 
However, considering the current outlook for debt delinquencies and defaults, particularly as more shoppers and businesses turn to credit to stay afloat, many of these institutions sitting on thin ice are likely to sink before the end of the year. That’s what analysts with the Federal Reserve of New York predicted in a new blog post. Notably, the credit card market is starting to show its cracks as more Americans fall into financial hardship.
Now that we just entered the fourth quarter, the average credit card interest rate jumped to a shocking, all-time record of 24.45%. Some cards — retail store cards, in particular — charge more than 30%, as revealed by Ted Rossman, an industry analyst for CreditCards.com. Those massive rates are responsible for sinking 22% of credit card users in the U.S. deeper into debt each month, Clever Real Estate reported. In fact, between January and September, U.S. cardholders paid $163.89 billion in credit card interest and fees.
At the same time, the number of people missing payments is going through the roof. In the past year, 43% of Americans have missed at least one credit card payment. Right now, 5.08% of credit card balances are in serious delinquency or at least 90 days past due, the Fed reported. That marked the biggest increase since the second quarter of 2022 when the rate was at 3.52%.
Issuers need to be very cautious about rising credit card and loan delinquencies and defaults because they have a much bigger fish on their plate: Commercial Real Estate. Although consumer debt alone can put small and mid-size banks at risk, big banks that lend millions of dollars to the construction of commercial buildings are in serious danger of going under. 
This is not just a nightmare scenario for consumers but for U.S. businesses too. It’s precisely when a company has a couple of orders canceled on them and the business goes to its local bank and asks for a line of credit to see them through, but the bank says “no” that struggling businesses turn into failing businesses. There’s a much higher risk of bankruptcies happening when lending conditions tighten. 
Simply put, if banks don’t tighten lines of credit for consumers and businesses, they risk facing steeper losses, and a potential failure. But if they reduce lending, they put businesses at risk of collapsing and defaulting on bank loans, which also puts them at risk of potential failure. And on of everything else, these institutions are vulnerable to an even bigger financial blow stemming from commercial real estate. It seems that no matter what they do, at the end of the day, the outcome is going to be disastrous for everyone….(read more)

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The worst credit crisis of our lifetime is looming on the horizon, and its impact on the standard of living in America is likely to be devastating. As the COVID-19 pandemic continues to wreak havoc on the economy, millions of Americans are already struggling to make ends meet, and the situation is only set to worsen as the credit bubble finally burst.

The root of the impending crisis lies in the excessive debt that has been accumulated by individuals, businesses, and the government alike. Over the years, easy access to credit has led to a culture of living beyond one’s means, fueling an ever-growing mountain of debt. As a result, the average American has become increasingly reliant on credit to maintain their standard of living, with many turning to loans and credit cards to cover basic expenses.

Unfortunately, this unsustainable reliance on credit means that any disruption to the economy can have catastrophic consequences. The COVID-19 pandemic has caused millions of people to lose their jobs, leaving them unable to make their debt payments. This has put immense strain on the financial system, and as a result, lenders are becoming increasingly reluctant to extend new loans or lines of credit.

As the credit market tightens, individuals and businesses alike are finding it increasingly difficult to access the funds they need to survive. This has created a vicious cycle, in which a lack of credit leads to decreased consumer spending, declining business revenues, and further job losses. If left unchecked, this cycle has the potential to collapse the economy and plunge the country into a full-blown recession.

The collapse of the credit bubble will also have a profound impact on the standard of living in America. With credit becoming scarcer and more expensive, the average American will find it increasingly difficult to afford basic necessities such as housing, healthcare, and education. Additionally, the increasing cost of borrowing will lead to higher interest rates, making it more expensive for individuals to finance large purchases such as homes and cars.

Furthermore, the collapse of the credit bubble will likely lead to a wave of bankruptcies and foreclosures, as individuals and businesses are unable to meet their debt obligations. This will not only lead to widespread economic hardship but also have a lasting impact on the financial well-being of millions of Americans.

In conclusion, the worst credit crisis of our lifetime is on the horizon, and its impact on the standard of living in America is likely to be severe. As the credit bubble finally bursts, the country is set to experience widespread economic hardship, with millions of Americans struggling to make ends meet. If policymakers do not take decisive action to address the root causes of the crisis, the standard of living in America will suffer a dramatic decline, with long-lasting implications for the country as a whole.