OUT OF MONEY. TOO-SMALL-TO-SAVE


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Almost 15 million credit-card holders entered formal “hardship” programs in April to defer or reduce their payments, according to the Transunion credit-reporting agency. Almost three million auto loans were placed in similar programs.
The troubled credit card accounts total about 3 percent of those Transunion tracks, 100 times more than the 0.03 percent a year earlier. The rate of ailing vehicle loans has risen sevenfold from 0.5 percent to 3.5 percent year on year.
The dollar value of credit card and auto loan debt were in record territory early this year. Massive job losses resulting from the economic shutdown are pushing millions of debtors toward outright default.
In addition, about 840,000 personal loans, or 3.6 percent, are in jeopardy, according to Transunion.
Borrowers whose credit ratings slip will find it harder to purchase on credit in the future, likely slowing any national economic recovery.
Also in April, delinquent mortgages increased by 1.6 million, according to analysis firm Black Knight.
That brought the delinquency rate to 6.45 percent of all mortgages, more than doubling March’s 3.06 percent rate. This is the largest single-month increase on record, and it triples the record set during the Great Recession in late 2008, Black Knight reported.
Going Bust
As many as 47 percent of small businesses shuttered by the economic shutdown will not survive until 2021 if the crisis lasts four months, according to a recent survey of 5,800 small-business owners.
They will not be able to reopen despite the U.S. government’s Paycheck Protection Program (PPP), which has loaned more than $669 billion to small businesses thus far.
The reason: 75 percent of a PPP loan must be used to meet payrolls. Usually, that does not leave enough funds for shuttered businesses to pay rent, utilities, and other fixed costs, which cannot be met without trade from customers.
The PPP has no way to discern and prioritize businesses facing imminent closure above those where interruptions are mild or temporary.
Congress has “spent more money on” the PPP “than anyone has ever spent on a small-business program in world history but it hasn’t changed the trajectory of permanent small-business closures,” said John Lettieri, president of the Economic Innovation Group, a business think tank.
“The loss of thousands of small and medium-size businesses would… limit the strength of the recovery when it comes,” warned Jerome Powell, chair of the U.S. Federal Reserve.
The “Restart Act,” a bill being introduced in the U.S. Senate with bipartisan support, addresses the problem by offering small businesses loans covering six months payroll and operating capital. The loans carry a low interest rate and would be paid back over seven years with no payments due for the first 12 months.
TREND FORECAST: As we continue to note, along with Trends Journal contributor Gregory Mannarino, that the “Bigs” – from retail to manufacturing to real estate, will gobble up the “smalls,” thus monopolizing numerous business sectors.
As we have detailed, the vast majority of the government bailout programs and Fed’s money-pumping schemes have enriched the rich at the cost of We the People.

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