Credit and the consumer Reviewed in New Issue of Money and Markets
Jupiter, Fla. (PRWEB) April 3, 2008 -- Jack Crooks takes a closer at the conditions in the credit market in the U.S. in this issue of Money and Markets. Mr. Crooks examines the credit market and the average U.S. consumer.
The credit market is taking no prisoners. Many major banks and institutions are running into problems that they're unable to hide from. In fact, many of the skeletons they've tucked away in the depths of their balance sheets are beginning to emerge. The U.S. has already witnessed billions of dollars worth of write-downs. Many are convinced there's a lot more where those came from, too.
The current tightness in the credit markets is no secret. And no move to alleviate the iced-up market is working. The Federal Reserve has tried every possible fix:
? They've slashed their Fed Funds rate by three percentage points in roughly eight months.
? They've implemented money auctions through their lending facilities.
? They've opened up their discount window to banks and primary institutions, accepting practically anything as collateral for loans.
? And they've even stepped in on an individual basis to spot JPMorgan Chase on their bailout of Bear Stearns.
Lenders are being given access to affordable money, but they're stopping the flow dead in its tracks. Instead of passing that money along to would-be borrowers, they're using it to seal up the holes left from the losses they suffered when an era of irresponsible lending practices came to a grinding halt. One of the most noticeable changes is the end of blockbuster mergers, acquisitions, and buyouts.
Over the last 20 years, consumption has become the biggest growth engine in the United States. Currently, consumption accounts for roughly 70% of U.S. gross domestic product. Up until this point, the U.S. consumer has relied on debt to fuel spending. But this reliance is starting to bite. Consumers can't even go to a baseball game these days without being offered a credit card application. Credit card companies are dishing out cards as fast as they can because consumers are using them for even the smallest of purchases. No longer are credit cards reserved to pay for necessary emergencies.
The amount of household's that have to use credit to pay their bills is rising faster than their income. In other words, it's getting harder and harder for consumers to even make the minimum payments towards their credit cards and car loans. Worse yet, credit is tightening up for many consumers. And keep in mind, through much of this expansion of credit, U.S. consumers have had their housing wealth to fall back on when times got tough. But housing is nose-diving and consumers are being dragged out onto the ledge.
"This is all part of a classic boom/bust credit cycle. When times are good, borrowers and lenders both feel a false sense of security. Standards grow ridiculously lax, lending is fueled by greed and hubris, and borrowing grows too quickly. Then, when times change, the security screen swings open, revealing mountains of debt. All parties become strapped for cash; credit tightens up and sucks growth from all corners of the economy. This is precisely why the U.S. dollar could barely sustain a five-day rally," Crooks states.
To read this issue online, please visit:
http://www.moneyandmarkets.com/Issues.aspx?US-Dollar-Should-Remain-Weak-on-Consumer-Crunch-1603
About JACK CROOKS & MONEY AND MARKETS
John (Jack) Crooks is the founder and president of Black Swan Capital, an independent advisory firm specializing in foreign exchange and currency markets investing for retail and institutional clients. A seasoned financial advisory with nearly 20 years of investment experience, Mr. Crooks uses both quantitative and qualitative approaches to determine the fundamental driving force(s) behind the movement of the currency, capital, and commodities markets. He is the editor of Weiss Research's latest investment offerings, World Currency Alert and World Currency Options, which were launched in August 2007.
Mr. Crooks also founded Ross International Asset Management, a discretionary money management firm specializing in global stock, bond, and currency asset management for retail clients. Previously, he was general manager of Plexus Trading, where he specialized in currency futures and commodities trading. During his successful career, Mr. Crooks served as chief currency and futures strategist of M2 Futures Inc., an investment boutique headquartered in Chicago, as well as vice president of Global Strategic Research for an international investment boutique, where he was responsible for providing daily advice and global strategy analysis.
Prior to entering the investment arena, Mr. Crooks held various corporate finance positions. He has written extensively on the subject of global currencies and international economics and has been published in Asian Times, Futures Magazine, Barron's, Bloomberg, Dow Jones Newswire, and across many financial websites. He has also appeared on Bloomberg TV and CNBC.
Mr. Crooks holds a bachelor's degree in finance from Florida State University and a master's in business administration from the University of North Texas.
Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.
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