A question for the leading economic experts in the group....

[Anonymous]

The rhetoric on a collapsing U.S. economy or a massive drop in the DOW seems to have increased as of late (say the past year).  With respect to credit cards and FICO, what would this mean if it did happen?  Would CCC shut down whole operations, not give out new cards, reduce everyone's limit, lower min pays?  Would FICO collapse if 80% of the American public could not pay their CC bills.  I like discussing "what if" scenarios and this in no way endorses any one prediction of the country's future economic condition.

[pipeguy]

Not sure this belongs in SmorgasBoard, because its an interesting discussion.

#1: Study the reasons and results of the 2007-09 financial crisis and what happened with consumer credit aka credit cards and mortgages

#2: Study the Nixon administration with wage & price controls

#3: Study the Carter administraton with the oil embargo and credit card / mortgage rates (Mortgages capped at 16-18%)

Biggest threat today is not the stock market, thats a fixed game that makes money going up or down with hedge funds and futures driving prices, not consumer interest. Our biggest threat is the federal debt, currently $18.2  trillion with yearly interest payments of $245 Billion at next to nothing interest rates. IF interest rates increase to market value of say 3-4 percent, interest alone will exceed $1,000,000,000.00 (one trillion dollars) which is greater than 100% of the current discresionary federal budget or about the same amount of money spent every year on social security, medicare, medicaid, obamacare, CDC (HHS and everything they do has a budget of just under $1T).

If you think about it, it's not that different than over extending your own budget with Zero percent promotional rates expiring and leaving you enough debt that it exceeds your cash flow and 100% of your income.