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Strategies & Market Trends : Waiting for the big Kahuna
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To: Joan Osland Graffius who wrote (7307)10/25/1997 6:38:00 PM
From: Investor2  Read Replies (1) of 94695
 
RE: " It is my opinion credit card debt is a social welfare system. The credit card companies will charge high enough interest so they cover their losses and make a profit."

Interesting view point - I had not thought of the credit card debt problem as a social welfare system, but it sounds logical.

Consider this scenario: The number of people receiving "social welfare" in the form of forgiven credit card debt (i.e., bankruptcy) continues to increase. This causes credit card companies to charge much higher interest rates to those that pay their bills over time. In fact, the interest rates get so high that the people who pay their bills either stop making purchases on credit or declare bankruptcy themselves. Suddenly (or gradually), the credit card companies' cash inflow stops and they go out of business. All of the investors in the credit card companies loose much or all of their investments. What happens next? Is this remotely possible?

Best wishes,

I2
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