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Not a good sign- micro loans for gas/groceries

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  • Not a good sign- micro loans for gas/groceries


    ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero


    Two months ago, President Biden read off of a teleprompter: "I’ve built a strong ec- — we’ve built a strong economy with a strong job market."

    Two months later, and cash-strapped Americans are using micro-loans to afford gas and groceries amid crippling inflation.

    As Bloomberg reports, Swedish fintech company Klarna Bank - whose bread & butter has been loans for smartphones and other consumer electronics - has seen a flood of applications for staples such as food and gas. They provide interest-free loans that allow people to spread payments out over multiple installments, and makes money charging retailers a small per-transaction fee, and from interest on longer-term loans.

    "I noticed that I could buy essentials with it, and not have to pay everything up front. And it wouldn’t affect my pocket as much," said Linda Cruz, a 37-year-old mother of four from a small town near San Antonio, Texas.
    Linda Cruz, a mother of four from a small town near San Antonio, Texas, started out using Klarna’s interest-free loans for occasional, large purchases -- like a new air conditioning unit after hers died during a heat wave last summer. But as prices started to rise for essentials, she started using it for groceries, too.

    Cruz, 37, a bail bonds agent and her family’s sole earner, is paid bi-weekly and said Klarna is a useful budgeting tool, letting her take care of her bills when she gets a paycheck. -Bloomberg

    Meanwhile, Klarna just closed an $800m round of financing at a $6.7bn post-money valuation - a fraction of the nearly $46 billion valuation it achieved last year - so perhaps this Bloomberg article is simply marketing a new niche for the 17-year-old lender that says it's "embraced the shift in the way people use its credit."
    Klarna, run by co-founder and Chief Executive Officer Sebastian Siemiatkowski, has struck partnerships with gas companies such as Chevron Corp. and developed an app that can be used in physical stores at retailers, like Walmart Inc. and Target Corp., as it hunts for new users. But interest rates for its own debt are rising and Klarna’s burning through hundreds of millions of dollars per quarter, making the company more vulnerable to defaults from customers living paycheck-to-paycheck.

    "This puts pressure on the Klarna model," according to Warwick Business School professor John Colley, who adds that as the disposable wealth of the company's users shrinks, "Klarna will be sat there with substantial bad-debt risks. Their customer base is likely to be sub prime anyway."


    Implications for the overall economy?? "Strong, robust economy" my arse!!!

    As an aside, I try to mentally take note and avoid going to Walmart around the first of the month (ebt leaches) and on Sundays after church (old folks standing everywhere in the way talking), but the couple of times outside of then that I have been there in the last month, I've remarked to my wife how desolate of people it seems to be.

    Walmart is probably a pretty good indicator of overall economy situation for average folks.
    Boris- "He's famous, has picture on three dollar bill!"

    Rocky- "Wow! I've never even seen a three dollar bill!"

    Boris- "Is it my fault you're poor?"

  • #2
    I avoid going to the Walmart superstore, although I occasionally go the the Walmart neighborhood market to pick up bread, milk, etc. There aren't as many shoppers as I used to see, and those I see are buying very little. They probably look at my cart and think the same thing. I make a list and try to stick close to it. Today's Publix run was cannelini beans (an exchange for a bag that I found weevils in), a turkey sub for my husband, and keto ice cream for me - and that's all I bought. I'm no longer shopping; I'm just beelining to the items I need, looking at nothing else, and getting out. Lots of times, I remove items from the list if I can't justify the cost of buying them.

    I'm not at the point where I would even consider a micro-loan (or any loan) to get everyday items. I did charge the new roof to my bank card, but paid it off less than a week later. I haven't had to pay $0.01 in interest in years. I hate being in debt - and I wish DC felt the same way. That anyone could claim we have a strong, robust economy illustrates how out of touch our gubmint is with the reality of everyday life. I fear it's all about to come crashing down on us, and if Klarna's debt interest is getting out of control, it may come crashing down on them too.

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