So: Less New Hampshire, more wonkery! We've just learned that credit card debt increased at an 11.3% annual rate in November. In 2005, it increased at a 3.1 percent rate. Why the jump? As Dean Baker says, "People borrow against their credit cards when they can't borrow against their homes. It looks like a lot of people can't borrow against their homes." Households have, for some time, been trying to preserve their normal consumption patterns. When those patterns outgrew their incomes, or their incomes dropped, they began borrowing against their homes for the money. Now that home equity is tumbling -- indeed, equity to value is expected to dip below 50 percent for the first time in history -- they can no longer borrow against their homes. So they're borrowing against their credit. That's not sustainable either. Soon enough, they'll exhaust that cash flow, and when they do, the economic contraction will be all the worse, as they'll not only need to curtail spending, but curtail it by significantly more in order to pay off accumulated debts. This does not look good.
