The Perfect Storm

High gas prices are already affecting the US economy, and several other events may be about to combine to create what some are calling the Perfect Storm that could sink this economy and who knows what else before it’s through.

A storm of its own was created on several of the bluish community blogs with a post and lots and lots of comments revealing that a change in law about to go into effect in October may well mean that credit card minimum payments will be instantly doubled.

It’s a change in how the minimum is figured, and you can get the whole ugly story, including many speculations on what it means as well as descriptions of how the credit card situation got so sordid and personal stories of its likely impact here at dkos, but it’s also posted at the Booman Tribune and the European Tribune (the difference in comments is interesting in itself, if you’re not too shell-shocked to notice.)

This is pretty unknown, even among experts and certainly among consumers. Banks are bracing for defaults, but some speculate that the impact in defaults, bankruptcies and curtailed consumer spending and small business investment and other month-to-month activity (often done on credit cards) will be enormous.

Speaking of bankruptcy, a front page story in the New York Times Sunday was front page news all over the country: there’s a rush on declaring bankruptcy before the law changes (also in October, oddly enough), making it essentially impossible for many people to get out of debt.

That’s October---you know, when there’s already Christmas music at the malls.

The prospects for a very bad retail season is only the beginning, the first gales of this perfect storm. The impact of the credit card increases and bankruptcy law changes will continue to gather momentum, and winter heating oil gets into the mix of oil prices. There were stories this weekend about the uncertainty and perhaps exaggeration of Saudi oil reserves, and the oncoming if not imminent decline of oil coming out of the ground.

There were also stories about the likely end of the housing bubble within the next few years, if not sooner. Meanwhile, there are possible stormclouds from the east as a weakening consumer economy and higher interest rates coupled with huge federal deficits and the continuing drain of billions into the Iraq debacle start to worry the banks of China and others who hold so much US government debt, and are therefore the key players in the American dollar.

Economic storms get started partly based on perception, and one bit of bad news sours the mood towards others. An administration in steadfast denial might look increasingly untrustworthy, especially with a prominent Republican Senator (Chuck Hagel) calling the Iraq war another Vietnam and demanding US withdrawal, while several conservative pundits are voicing great displeasure that American blood and treasure may be paying for an Islamic state in Iraq, which is a distinct possibility according to news about the Iraqi constitution now being drafted.

So what happens when credit cards aren’t an option, stocks and bonds are falling, real estate trembles and even dollars and T-bills don’t look secure? That’s part of the perfect storm. It might have been avoided with less greedy banks and less accommodating legislators who refused to pass even a 30% cap on credit card interest, and of course an administration that didn’t start a costly and obscenely unnecessary war, give the treasury away to its crony corporations, and pay the rich with the earnings of generations of working Americans (which is what they do when the Social Security fund is routinely raided to pay for deficits.)

Do we even have to add health care costs, which drain the national economy and are a chief reason for so much credit card debt and bankruptcy, and the climate crisis, which is already costing consumers and governments and will only demand more resources summer by summer, year by year.

The people who will get hurt the most are probably the least responsible for this storm, especially if they didn’t vote for Bush. But it doesn’t matter. We may all reap the whirlwind.