Consumer credit, the next big blow

Household debt at European families has increased many times over the last few years. Surprisingly enough, while the press seems to be fully aware as to the causes that prompted subprime problems, very few see that consumer credit potentially represent an even more serious cause for concern. Everything, from appliances to cars is these days bought on borrowed money, Italy first. Firms that provide credit to consumers are still able to borrow at near Libor interbank rates and lend money to consumers at rates that are often close to 10%. At some point, given credit market conditions, these institutions will have to pay much hugher rates while delinquency rates will increase as disposable income keeps shrinking. What is remarkable is that central banks, including Bank of Italy, are doing nothing to stop the industry.

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