Thursday, March 05, 2009

Credit Cards and Retail.

Two quotes from James Quinn's editorial at struck my eye (the link is broken).  One about credit cards, the second about retail:

1) The credit card wasn’t invented until 1967. Americans have adapted quite well to this new fangled American invention. Since 1970 revolving credit debt has increased by 26,000%, from $3.7 billion to $963.5 billion. Over this same time frame GDP grew by 1,430%. These statistics prove to me that America has maintained its standard of living by using credit cards.

2) The managements of most retailers in the United States are not prepared for $1.3 trillion less consumer spending per year. Their little expansion models were built upon an existing over inflated demand extrapolated at 5% or greater growth for eternity. We know how well bank models worked out. The good news is that retailer expansion models will not bring down the financial system. The bad news is that thousands of retailers will go bankrupt because they planned their businesses based upon false assumptions. Any retailer that used leverage to expand based on faulty pie in the sky assumptions is headed to retail heaven.