The New Frugality Continues

Last week, Tess and I talked about my theme that a half-century of borrow-as-much-as-possible and spend-as-much-as-possible may be coming to an end. More and more people will embrace a New Frugality where the phrase "can I afford it" replaces the mantra "I want it now."

The reason for the change goes beyond current household pressures of falling home prices, soaring energy bills, and big debt payments. The main factor behind the New Frugality is that lenders have suddenly realized that consumers with lots of debt are risky borrowers.

Today's Wall Street Journal had a news piece that supports the thesis that lenders will force consumers to embrace thrift.

Credit Cards Are Playing Harder to Get
Amid Rising Delinquencies,
Banks Get Pickier, Raise Fees;
Direct-Mail Pitches Decline
By JANE J. KIM
February 5, 2008; Page D1

The stricter lending standards come as many banks recently reported earnings and disclosed surprisingly large losses from their consumer businesses. Among the problems: higher credit-card delinquencies and losses. The banks expect the problems to get worse as the economy slows.

Imagine, the average consumer could find not only their mailbox free of credit card solicitations---but that their credit limit has been cut.