I don't know if I buy it; after all, if we should have learned anything about the impact of general scarcity and price fluctuations we should have learned it back in the 70s. Funny story, but in the face of rising gas prices and long lines at the pump, my Grandfather had it in his head that he could build his own supply stock of gas. Something of a personal Strategic Petroleum Reserve. Apparently, there is an art to storing oil and gas. Every heard the term "water and oil don't mix?" There is some truth to that, and he found out the hard way when water condensed inside his storage tank, ruining his well-planned reserve. Rather than change his behavior, he looked for a temporary shortcut.
With regard to consumer credit, experts have long predicted that the consumer debt market would explode. In this I include consumer real estate debt. Obviously the mortgage market problems are well documented, and consumers indeed have buckled under the pressure of increases to the interest rates on their ARMs and HELOCs. There are now signs that the credit card market may suffer similar consequences. What are the experts saying? That we may now see a permanent change in consumer behavior when it comes to the use (and abuse?) of credit.
I suppose a real, and strategic question for all credit unions to address is whether these experts are correct in their assumptions. Are we really seeing a metamorphosis? Will American consumers truly alter, forever, their behavior when it comes to oil, and more importantly, credit?
Banks, and certainly credit unions, have ridden a solid wave of consumer spending to record profitability and growth over the last few years. In one recent planning session, a management team member described it as being able to run on auto pilot. You could grow double-digits without having to do much of anything. Obviously the current situation has changed that perspective. We now need, more than ever, deft management skills, steely nerves, and modified expectations.
The question remains, however. When the dust settles, will we be dealing with a changed consumer? Will they borrow reluctantly? Will they define value based on fixed rates versus variable rates with low teasers? Will they shop around more for the best deal? Will they ask for less credit?
I am looking forward to the fall planning season, which begins in earnest within the next two weeks. I imagine that these questions will drive the discussions of our clients around the country. I wish I knew the answer to what lies ahead, but predicting consumer behavior is a tricky thing. The best we can do is discuss, debate, and make the best, most informed decisions possible.
If that doesn't work, I can always corner the market on petroleum reserves. I think I have a storage tank around here somewhere.
