Living Economics

You Got (Credit Card Solicitation) Mail!
The volume of credit card solicitations is an indicator of the cycle of credit expansion and credit contraction.

Like millions of other Americans, you may be an unwelcome target of relentless credit card solicitations. But the number of solicitations actually opens a window for you to the economic status of the US economy. Specifically, a flood of solicitations means that the card issuers are trying to extend credit indiscriminately whether you can afford to have more credit lines or not. If you actually applied for more cards and charge expensive items on them without the means to pay off the balance every month, you are inadvertently aiding and abetting the economy to load up on consumer debt and drive down its household saving rate. Conversely, if the volume of solicitations drops appreciably, you are witnessing a process of credit contraction amidst an economic recession to recover from the earlier credit binge.

The economic recession may even cost your own job. But the first-line victim of solicitations contraction is the United States Post Office. The bottom line of the USPS is directly linked to the volume of solicitations which fell from 8 billions in 2006 to a projected 1.5 billions in 2009. The loss of postage revenue was substantial and partly explained the proposal to reduce the number of mail delivery days to cut costs.

In retrospect, a lot of the economic prosperity prior to the current recession has been the result of unsustainable credit expansion in the form of subprime credit-card loans, auto loans, and housing mortgage loans. Many mortgage loans were extended to borrowers who could not possibly service them without the housing bubbles that kept driving up housing prices. These loans were made because the issuers could earn fat fees and sell off their risky loans to unsuspecting global investors with too much money to burn.

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