U.S. debt load falling at fastest pace since 1950s

[RandomGuy]

No, it's not what you think, and this explains, far more than anything the executive or legislative branch has done, why the economy is spluttering along.


WASHINGTON (MarketWatch) — Everyone knows America has too much debt. What they don’t know is that things are getting better, not worse.

Little by little, our economy is reducing its debt burden, slowly repairing the damage caused by 10, 20 or 30 years of excess.

If you want to know why economic growth has been so tepid, here’s your answer. Four years after the storm hit, the economy is still deleveraging. And it’s very hard for any economy to grow when everyone is focused on increasing their savings.

Total domestic — public and private — debt as a share of the economy has declined for 12 quarters in a row after surging over the previous decade.
The rapid rise in federal debt over the past four years has distracted us from the big picture. The level of public debt is indeed worrisome, but it’s not as big a worry as the economy’s total level of debt — public and private.

Although we have a whole cottage industry devoted to warning us about the dangers of too much public debt, we don’t have any comparable Cassandras telling us about the dangers of too much private debt. Yet the history of the past 30 years (or 300) clearly shows that too much debt, of whatever variety, can pose a systemic risk to the national and global economies.

As much as we hear politicians, pundits, tea-party patriots and the Congressional Budget Office obsessing about government debt, it was excessive private debt — not public debt — that caused the 2008 financial meltdown. And it was private debt — some of it since transferred to the public — that lies behind the current European debt crisis. (Greece is unique in having a public sector that ran up spending while its private sector is rather conservative.)

As the political rhetoric about the federal deficit has heated up, we’ve lost sight of the progress that’s been made in bringing total debt back under control. The U.S. is actually doing much better than you’d think if you just listened to the conventional fears about how we’re rushing headlong into a debt Armageddon.

In fact, since the recession ended in June 2009, total U.S. debt has risen at the slowest pace since they began keeping records in the early 1950s. While Washington has taken on a lot of debt since then, the private sector has paid off, written off or dumped on the government almost as much.

As a share of the economy, debt has plunged as a consequence of rapid deleveraging by families, banks, nonfinancial businesses, and state and local governments. The ratio of total debt to gross domestic product has fallen from 3.73 times GDP to 3.36 times.

In the 11 quarters since the recession officially ended, total domestic debt has risen by just $702 billion, or 1.4%. By contrast, in the 11 quarters before the recession began, in those bubble years of 2005, 2006 and 2007, total debt increased by $10.7 trillion, or 28%.

And it wasn’t just the U.S., other advanced economies were adding on to their debt loads as well, with most of the debt taken out by the private sector.

Debt was growing at an unsustainable pace, but it was fueling the U.S. and global economies.

Economists who have studied the impact of indebtedness have found that low levels of debt are essential to growth, but that high levels of total outstanding debt can hurt an economy. Beyond a tipping point, adding on more debt will reduce growth over the long run, even if it inflates a bubble in the short run.

“At low levels, debt is good. It is a source of economic growth and stability,” concluded Stephen Cecchetti, M.S. Mohanty and Fabrizio Zampolli, economists for the Bank of International Settlements, in a paper presented at the Federal Reserve’s Jackson Hole conference last August. “Beyond a certain point, debt becomes dangerous and excessive,” and can lead to increased volatility, financial fragility and slower growth. It can even bring down the real economy with it, as we have seen. Read the BIS paper, “The Real Effects of Debt.”

Cecchetti and his co-authors found that growth can be impaired once nonfinancial corporate debt hits about 90% of GDP, or when household debts hit 85% of GDP, or when public debts hit about 85%.

In the U.S., household debt has now fallen to 84% of GDP from a peak of 98%. Nonfinancial corporate debt has fallen to 77% from a peak of 83%. Financial sector debt has plunged from 123% of GDP to 89%. Public debt has risen to 89% from 56%.

The deleveraging process in the private sector still has a ways to run, not based on some economists’ rule of thumb, but based on what real people are actually doing. Banks and households are still slashing their debt, while nonfinancial companies are beginning to borrow again, but only a little, according to the latest data from the Federal Reserve’s flow of funds report. Take a look at the flow of funds.

According to a study by McKinsey published earlier this year, U.S. households may have two more years of deleveraging left before their debts are sustainable again.

If McKinsey is right, the U.S. economy may have to endure a couple more years of slow growth.

Rex Nutting is a columnist and MarketWatch's international commentary editor, based in Washington.





http://finance.yahoo.com/news/u-debt-load-falling-fastest-040045522.html

It isn't oil prices, but a very welcome paring down of our collective private sector debt.

Pick who you want in November, just don't harbor any illusions it will make a shit's worth of difference to the economy for the next couple of years, unless it is another Tea Party run, in which case, you can expect a good chance that US sovereign debt gets downgraded again.

A combination of higher energy prices, together with this will extend the tepid growth of the US economy, IMO.

[CosmicCowboy]

So, individuals and companies are doing the right thing...it's the Federal Government that is fucking up...

[coyotes_geek]

I'd say it's more like those who can't print their own money are acting one way and those who can print their own money are acting another.

[boutons_deux]

... which is as they should.

[coyotes_geek]

Seems to me like the ones who can print their own money are the ones in the most trouble.

[CosmicCowboy]

I'd say it's more like those who can't print their own money are acting one way and those who can print their own money are acting another.

That's true. And we are printing the hell out of it too...Up 400% since Obama took office.

[mercos]

So, individuals and companies are doing the right thing...it's the Federal Government that is fucking up...

You are giving individuals and companies way to much credit. They didn't have a choice in having their debt loads go down. When housing prices began to plummet, individuals lost the greatest source of borrowing power they had. The gravy train came to a stop. Companies couldn't take on more debt because of the lockup in the credit markets caused by the financial crisis. This deleveraging is a consequence of the Great Recession, not something the private sector did willingly.

[CosmicCowboy]

You are giving individuals and companies way to much credit. They didn't have a choice in having their debt loads go down. When housing prices began to plummet, individuals lost the greatest source of borrowing power they had. The gravy train came to a stop. Companies couldn't take on more debt because of the lockup in the credit markets caused by the financial crisis. This deleveraging is a consequence of the Great Recession, not something the private sector did willingly.

I dunno about that. I started about 10 years ago de-leveraging....I'm in the process of going to the opposite extreme now and refi and take 75% of the equity out of my house and go long again for 30 years. Mortgage interest rates (manipulated by the fed) are just too stupidly low. I'm gonna do a big addition on my home and bet that the house appreciates at a higher rate than the interest I am paying (especially after deducting it from my income tax) and enjoy it while I am doing it.

[boutons_deux]

That's true. And we are printing the hell out of it too...Up 400% since Obama took office.

Interest payments, Repug wars, tax expenditures, and deficit really handed Barry a huge pile of shit in Jan 09.

[RandomGuy]

So, individuals and companies are doing the right thing...it's the Federal Government that is fucking up...

People are shoving money at short term treasuries at rates below inflation, and the rates on the US Sovereign debt we are incurring are at historic lows. That means the demand for that debt is so great people are willing to explicitly lose a little money.

We should be borrowing MORE at the Federal level, not less, especially given the massive infrastructure debt we are running up.

The longer we wait the more expensive that will become to fix.

After this private deleveraging has run its course, we can expect growth to pick back up to historic norms, and that will more than pay for any low-rate debt we have rung up in the last few years.

[RandomGuy]

You are giving individuals and companies way to much credit. They didn't have a choice in having their debt loads go down. When housing prices began to plummet, individuals lost the greatest source of borrowing power they had. The gravy train came to a stop. Companies couldn't take on more debt because of the lockup in the credit markets caused by the financial crisis. This deleveraging is a consequence of the Great Recession, not something the private sector did willingly.

Partly.

The analysis I have seen elsewhere says that it is partly the fact that banks are not as willing to lend, and partly that people are much more reluctant to borrow.

Either way bodes well for a few years from now.

[boutons_deux]

We should be borrowing MORE at the Federal level, not less, especially given the massive infrastructure debt we are running up.


In spite of the silly low rates, investors, home and abroad, are pouring into Treasuries. It's the perfect time to for the US to sell bonds and use the money for a few $T in stimulus.

[mercos]

I dunno about that. I started about 10 years ago de-leveraging....I'm in the process of going to the opposite extreme now and refi and take 75% of the equity out of my house and go long again for 30 years. Mortgage interest rates (manipulated by the fed) are just too stupidly low. I'm gonna do a big addition on my home and bet that the house appreciates at a higher rate than the interest I am paying (especially after deducting it from my income tax) and enjoy it while I am doing it.

Risky move. Home values may not appreciate as highly as they did during the housing bubble again. That bubble was fueled by high demand due to relaxed lending practices. In fact, contraction could (and probably will) occur again at a future date.

[CosmicCowboy]

Risky move. Home values may not appreciate as highly as they did during the housing bubble again. That bubble was fueled by high demand due to relaxed lending practices. In fact, contraction could (and probably will) occur again at a future date.

Homes in SA are appreciating at 5% on average and my property is a really unique property. When I'm done I'll have a tricked out 4000sf house on 2 mostly wooded acres with huge oak trees (except for the barn and riding arena) less than two miles outside of 410 on the Northside near I10 and the med center. I think it will appreciate faster than 5% and the right person will scratch ink for a shitload of money when i finally decide to sell.

[CosmicCowboy]

After tax the interest rate is 3%. I'll bet the house will appreciate faster than that.

[boutons_deux]

The Great Recession Drove Median Family Wealth To Its Lowest Level Since 1992

American families’ median wealth dropped from $126,400 in 2007 to $77,300 in 2010, according to a new survey of consumer finances from the Federal Reserve. The 39 percent drop brings average net worth to the same rate as it was in 1992, due mostly to a significant plunge in the worth of families’ homes. Despite some signs that the economy is stabilizing, the Fed points out that this type of recovery has not yet begun to affect the results of their consumer survey — indicating that American households are still struggling to regain their footing after the recession

http://thinkprogress.org/economy/2012/06/11/497642/median-wealth-1992/

Meanwhile, the 1%'s share of national income continued to increase rapidly.

[Wild Cobra]

So, individuals and companies are doing the right thing...it's the Federal Government that is fucking up...
Par for the course.

[Wild Cobra]

I dunno about that. I started about 10 years ago de-leveraging....I'm in the process of going to the opposite extreme now and refi and take 75% of the equity out of my house and go long again for 30 years. Mortgage interest rates (manipulated by the fed) are just too stupidly low. I'm gonna do a big addition on my home and bet that the house appreciates at a higher rate than the interest I am paying (especially after deducting it from my income tax) and enjoy it while I am doing it.
Careful...

You are a prime example of the rich getting richer, and the poor getting poorer.

Too bad they don't understand it's because you make wise decisions, and the poor don't.

[Wild Cobra]

People are shoving money at short term treasuries at rates below inflation, and the rates on the US Sovereign debt we are incurring are at historic lows. That means the demand for that debt is so great people are willing to explicitly lose a little money.

We should be borrowing MORE at the Federal level, not less, especially given the massive infrastructure debt we are running up.

The longer we wait the more expensive that will become to fix.

After this private deleveraging has run its course, we can expect growth to pick back up to historic norms, and that will more than pay for any low-rate debt we have rung up in the last few years.
Absolutely no.

We already have too much national debt being burdened on my children their children, etc.

It needs to stop.

Do you really want to make our current situation marginally better by borrowing from the futures prosperity?

[Wild Cobra]

Risky move. Home values may not appreciate as highly as they did during the housing bubble again. That bubble was fueled by high demand due to relaxed lending practices. In fact, contraction could (and probably will) occur again at a future date.
Long term, they will go up again. Right now, borrowing on a house and putting it in a well diversified stock portfolio would probably pay off real big.

[Agloco]

Homes in SA are appreciating at 5% on average and my property is a really unique property. When I'm done I'll have a tricked out 4000sf house on 2 mostly wooded acres with huge oak trees (except for the barn and riding arena) less than two miles outside of 410 on the Northside near I10 and the med center. I think it will appreciate faster than 5% and the right person will scratch ink for a shitload of money when i finally decide to sell.

From 2011 to 2012 we lost an average of 4% on our houses. I think its a wise move on your part to borrow while rates are low. I wouldn't set my expectations at anything beyond enjoying the new digs though.

[TeyshaBlue]

Careful...

You are a prime example of the rich getting richer, and the poor getting poorer.

Too bad they don't understand it's because you make wise decisions, and the poor don't.

Newsflash. The rich make poor decisions as well. Stupid fuck.

[RandomGuy]

Careful...

You are a prime example of the rich getting richer, and the poor getting poorer.

Too bad they don't understand it's because you make wise decisions, and the poor don't.

Or in other words:


"the poor don't make good decisions"

There you have it.

The worst form of judgmental prickdom possible.

If you are poor, you automatically make bad decisions. You are poor because you are morally flawed in some way.

I have little doubt that had you been alive in '32 Weimar Germany, you would have enthusiastically voted for the NASDAP. I would go so far as to say you would have helped shove people into rail cars a few years later. I dont' say that lightly.

That kind of amorality drives the kinds of right wing politics in acendency in the US.

At least you are clear about being amoral.

[CosmicCowboy]

From 2011 to 2012 we lost an average of 4% on our houses. I think its a wise move on your part to borrow while rates are low. I wouldn't set my expectations at anything beyond enjoying the new digs though.

You can't go by median price. You have to break it down by neighborhood. Houses on the south and west side are losing value, houses on the near northside are appreciating at double digit rates in some areas.

http://www.zillow.com/local-info/TX-San-Antonio-home-value/r_6915/

[RandomGuy]

From 2011 to 2012 we lost an average of 4% on our houses. I think its a wise move on your part to borrow while rates are low. I wouldn't set my expectations at anything beyond enjoying the new digs though.

At some point, the inventory of overbuilt new houses will be absorbed by population growth.

Houses will start appreciating again. It remains to be seen when that will be tho'. The 10 trillion dollar question, so to speak.

Imagine how fucked Ireland is. I heard on NPR they went so apeshit that they built about one house for every person in the country.


From 1991 through 2010, Ireland built 933,000 homes, nearly doubling its housing stock. (Even with Ireland’s growing population, that worked out to 1.5 new homes for every new household, according to government data.) Construction came to account for 14 percent of the economy as banks funneled the majority of their loans to real estate and politicians instituted tax breaks to spur building in every corner of the country.

Read more here: http://www.mcclatchydc.com/2012/06/06/151386/housing-boom-left-ireland-littered.html#storylink=cpy

We may have it bad, but if you want to move to Ireland, it is going to be really really cheap for decades.

Hell, I may consider retiring there if the housing doesn't literally fall over from disuse by then..

[boutons_deux]

Imagine how fucked Ireland is. I heard on NPR they went so apeshit that they built about one house for every person in the country.



Ireland, like Spain, has a bankers' problem, not a citizens' problem. The greedy banks sold too many products (construction loans and mortgages) to too many people, inflating a house building bubble. Nobody forced them. It's 100% the bankers' fault.

[TeyshaBlue]

Ireland, like Spain, has a bankers' problem, not a citizens' problem. The greedy banks sold too many products (construction loans and mortgages) to too many people, inflating a house building bubble. Nobody forced them. It's 100% the bankers' fault.

Ummm...somebody had to ask the banks for those loans, right?

[TeyshaBlue]

When you're building 1.5 houses for each person in the country, you simply cannot lay it at the feet of the bankers entirely. Developers/Builders need to take a huge hit for this.

[TeyshaBlue]

That being said, any banker with a room temp IQ should've seen the build up for what it was.

[boutons_deux]

Ummm...somebody had to ask the banks for those loans, right?

In the relationship borrower-lender, whom do you think has the most power, info, lawyers, accountants, loan application verifiers?

Since when does simply asking for a mortgage qualify for, succeed in obtaining a mortgage?

[TeyshaBlue]

I was referring mainly to the developers and builders which I made pretty clear in a subsequent post.

In which case, the developers are not innocent waifs waiting to be preyed upon by evil bankers.

[boutons_deux]

builders are liable for the construction loans. They shouldn't take out the construction loan if they don't have buyers. If builders build without themselves qualifying the buyer (beyond his down payment), then fuck 'em.

All this shit is sourced back to the financial sector, which runs the planet.

[scott]

That's true. And we are printing the hell out of it too...Up 400% since Obama took office.

Uhh... what?

Surprised no one called out this tidbit yet.

Just so I'm clear, you are stating that the Money Supply has increased 400% since January 2009?

[scott]

http://articles.businessinsider.com/2011-03-08/markets/29988183_1_money-supply-reserves-qe2

[CosmicCowboy]

Uhh... what?

Surprised no one called out this tidbit yet.

Just so I'm clear, you are stating that the Money Supply has increased 400% since January 2009?

Fed purchases of US debt up 450%


On Jan. 28, 2009, a week after Obama’s nomination, the Fed owned $302 billion in U.S. Treasury securities. On April 25, 2012, the latest date reported, the Fed owned five and a half time that much in U.S. Treasury securities--$1.668 trillion.

That is an increase from January 2009 of $1.366 trillion—or 452 percent.

Under Obama, the Federal Reserve has become the single largest owner of U.S. government debt. When Obama entered office, entities in the People’s Republic of China were the largest holders, followed by entities in Japan. At the end of January 2009, China owned $739.6 billion in U.S. government debt and Japan owned $634.8 billion.

[Drachen]

http://articles.businessinsider.com/2011-03-08/markets/29988183_1_money-supply-reserves-qe2

thanks

[boutons_deux]

So USA is paying interest on Treasuries to the Fed, instead of China, etc.

Pretty cool

[CosmicCowboy]

So USA is paying interest on Treasuries to the Fed, instead of China, etc.

Pretty cool

It would be if the Fed hadn't just printed those dollars out of thin air to buy those bonds. The money that comes from China and Japan etc. are real dollars in circulation.

[boutons_deux]

when the US govt buys Treasuries, it spends the money (aka real dollars).

The root problem now is not that situation, but that the 1% is blood-sucking up so much of the national income (and not spending it), while the 99% is not getting enough national income (the pie) to consume the economy upward.

If the more of the national income was going to the 99%, they'd be spending it and stimulating the velocity of money, the general weatlh.

[Wild Cobra]

when the US govt buys Treasuries, it spends the money (aka real dollars).

The root problem now is not that situation, but that the 1% is blook-sucking up so much of the national income (and not spending it), while the 99% is not getting enough national income (the pie) to consume.

If the more of the national income was going to the 99%, they'd be spending it and stimulating the velocity of money, the general weatlh.
So is it your contention that the 1% somehow render the money useless?

Here I was under the assumption, that no matter where the money flows, it still flows.

You don't mean that they are burning it do you?

[CosmicCowboy]

when the US govt buys Treasuries, it spends the money (aka real dollars).



The US government doesn't buy treasuries. The US government sells treasuries. The US has to sell more treasuries to fund it's bloated spending than private investors want to buy at the current rate of return, so the Fed waves it's magic wand and *creates* a new trillion dollars to soak up the difference, ultimately devaluing all the other dollars in circulation.

[EVAY]

The Credit squeeze that was partly responsible for the size of the Recession has not gone away altogether. That is one of the reasons that the only way that people can get their financial houses in order is to de-lever. They can't get credit unless they are in pretty good shape vis-a-vis debt load.

Now why has the credit squeeze not gone away entirely? Because Bernanke et.al. had used the lowering of the cost of borrowing as the grease that kept us out of recessions or that minimized the pain of the recessions for at least since the days of GHW Bush. The last time debt costs were increased quickly and by a substantial amount was during the tenure of GHW Bush. The country went into a recession that LOTS of folks all over, and EVERY republican in the land, denounced as a political ploy by the Fed to give the White House to the other Party.

Since then the Fed has been paranoid about increasing borrowing costs or even not DECREASING costs when the economy was heading for a recession. The result of that continual easy credit was the bubbles that defined the economy throughout the 90's and the first decade of the the new millennium. That easy credit had more to do with the over-borrowing than anything else, including the housing policies of Republicans and Democrats combined.

The reason it is different now? The borrowing rate is damn close to zero!! And it has been at that low level since the George W. era. They can't lower it anymore.

That is why credit is still tight, why the economic recovery has been as slow as it has, and why the Quantitative Easing has not been more inflationary than it has been to date.

I am actually happy that the debt reduction in households and companies is occurring. It wouldn't be happening if people were able to borrow more. It is only happening because the Fed has shot every arrow in its quiver and 'happily' there aren't any more 'easy credit' arrows.

This is really little to do with politics, but no one in either party wants to believe that...so they won't.

[boutons_deux]

no, the 1% don't spend 100% of their income, while the VAST majority of the 99% do.

[z0sa]

:lol boutons
:lol wishes he lived in Europe

[boutons_deux]

The US government doesn't buy treasuries. The US government sells treasuries. The US has to sell more treasuries to fund it's bloated spending than private investors want to buy at the current rate of return, so the Fed waves it's magic wand and *creates* a new trillion dollars to soak up the difference, ultimately devaluing all the other dollars in circulation.

yeah, right of course. govt borrows money by selling bonds.

the dollars aren't devalued unless their is inflation, and there isn't any inflation worth talking about now, just as Krugman et al predicted, proving yet again the deficit/inflation hawks to be wrong.

[scott]

Fed purchases of US debt up 450%


On Jan. 28, 2009, a week after Obama’s nomination, the Fed owned $302 billion in U.S. Treasury securities. On April 25, 2012, the latest date reported, the Fed owned five and a half time that much in U.S. Treasury securities--$1.668 trillion.

That is an increase from January 2009 of $1.366 trillion—or 452 percent.

Under Obama, the Federal Reserve has become the single largest owner of U.S. government debt. When Obama entered office, entities in the People’s Republic of China were the largest holders, followed by entities in Japan. At the end of January 2009, China owned $739.6 billion in U.S. government debt and Japan owned $634.8 billion.

This is a problem, why?

[scott]

The US government doesn't buy treasuries. The US government sells treasuries. The US has to sell more treasuries to fund it's bloated spending than private investors want to buy at the current rate of return, so the Fed waves it's magic wand and *creates* a new trillion dollars to soak up the difference, ultimately devaluing all the other dollars in circulation.

Except the Fed hasn't "created" a new trillion dollars. As explained here. http://articles.businessinsider.com/2011-03-08/markets/29988183_1_money-supply-reserves-qe2

[EVAY]

Except the Fed hasn't "created" a new trillion dollars. As explained here. http://articles.businessinsider.com/2011-03-08/markets/29988183_1_money-supply-reserves-qe2

This is truly a superb explanation. And it says it quite clearly. Thank you.

[CosmicCowboy]

Sorry Scott, I thought you were smarter than that. My mistake.

Comparing our situation to China is hardly relevant.

They have a huge population bubble working through the pipeline and can afford and actually need to expand their currency.

Saying "well they can do it, why can't we?" is definitely an apples and oranges comparison. Plus, your source is old. So 2011. Ask him now if he is still comfortable with the Fed infinitely printing money.

[boutons_deux]

With the corps sitting on $2T cash, that's $$ that aren't in circulation.

deficit hawks can GF themselves. the priority now, short term, is to get 8% down to 4% unemployment. even there, as today's report shows, middle class earners dropped a lot more than lower class earners, ie, good job are gone. The VRWC/UCA war on employees is being won and will continue indefinitely.

[Wild Cobra]

no, the 1% don't spend 100% of their income, while the VAST majority of the 99% do.
Maybe that's why they can't get ahead...

[Wild Cobra]

With the corps sitting on $2T cash, that's $$ that aren't in circulation.

deficit hawks can GF themselves. the priority now, short term, is to get 8% down to 4% unemployment. even there, as today's report shows, middle class earners dropped a lot more than lower class earners, ie, good job are gone. The VRWC/UCA war on employees is being won and will continue indefinitely.
How are they sitting on the money?

Are you suggesting they have cash money, sitting in a vault someplace so it's useless, until they take it out?

[Wild Cobra]

no, the 1% don't spend 100% of their income, while the VAST majority of the 99% do.
I spend less than 80% of my money.

Am I in the 1%?

[FuzzyLumpkins]

I spend less than 80% of my money.

Am I in the 1%?

No because service technicians do not rake in enough to be considered the top 1% of income earners in the US. People that do have that kind of wealth do not change parts off a checklist for a living.

What you do has no bearing on the US at large and that is a very good thing. You are just one of 300,000,000 of us.

[Wild Cobra]

No because service technicians do not rake in enough to be considered the top 1% of income earners in the US. People that do have that kind of wealth do not change parts off a checklist for a living.

What you do has no bearing on the US at large and that is a very good thing. You are just one of 300,000,000 of us.
Idiot.

I was pointing out a flaw in ShazBot's words that imply the 99% of us spend all their earnings.

Will you stop biting my ankle every chance you get? you are just annoying.

[boutons_deux]

"imply the 99% of us spend all their earnings"

no flaw, except in your statement, a few years ago household debt was 113% of household income, so the aggregate spent more than all their earnings. Almost all of the 99% have NO SAVINGS, which I think is record among industrial countries, because they spend it all, and more.

[Wild Cobra]

"imply the 99% of us spend all their earnings"

no flaw, except in your statementm, a few years ago household debt was 113% of household income, so the aggregate spent more than all their earnings. Almost all of the 99% have NO SAVINGS, which I think is record among industrial countries, because they spend it all, and more.
And who's fault is that?

[FuzzyLumpkins]

Idiot.

I was pointing out a flaw in ShazBot's words that imply the 99% of us spend all their earnings.

Will you stop biting my ankle every chance you get? you are just annoying.

He said most. You are one person amongst 300,000,000. You are not a trend setter. Your just a partschanger with a keyboard.

Thats not a flaw. You are not like most people. That much should be obvious even to your dumb ass.

What do majority mean?

[Wild Cobra]

He said most. You are one person amongst 300,000,000. You are not a trend setter. Your just a partschanger with a keyboard.

Thats not a flaw. You are not like most people. That much should be obvious even to your dumb ass.

What do majority mean?

And I said "are you suggesting." I asked if he was "implying."

What the fuck is wrong with you, tearing apart everything someone says and spinning it.

Did I claim to be any type of a trend setter? Your assumptions and responses to assumed meaning is really something.

Fuck you.

[FuzzyLumpkins]

I spend less than 80% of my money.

Am I in the 1%?

That's what you said, dumbass. And no not everyone, just you. Quit inserting supposition for fact and being generally glib about your stupidity and I will stop.

[Wild Cobra]

That's what you said, dumbass. And no not everyone, just you. Quit inserting supposition for fact and being generally glib about your stupidity and I will stop.
I just don't know what to say about your utterly stupid assumptions.

Yes, I said that.

I was asking that stupid question in response to his stupid statement to make him think about his words. I addressed that, and you come back with it again?

Are you so stupid you thought it was a serious question... OMG.... How fucking dumb...

Why are you so focused of attacking me any way you think you can?

Just how evil are you?

Don't you have anything better to do?

[FuzzyLumpkins]

I just don't know what to say about your utterly stupid assumptions.

Yes, I said that.

I was asking that stupid question in response to his stupid statement to make him think about his words. I addressed that, and you come back with it again?

Are you so stupid you thought it was a serious question... OMG.... How fucking dumb...

Why are you so focused of attacking me any way you think you can?

Just how evil are you?

Don't you have anything better to do?

:cry:cry:cry:cry I wasn't serious :cry:cry:cry:cry

And no I don't just attack you anyway I think that I can. I just go after your stupidity and ignorance. Not everything you say falls under that but sometimes it certainly feels that way.

[Wild Cobra]

:cry:cry:cry:cry
No, i just can't believe your stupidity.

[scott]

Sorry Scott, I thought you were smarter than that. My mistake.

Comparing our situation to China is hardly relevant.

They have a huge population bubble working through the pipeline and can afford and actually need to expand their currency.

Saying "well they can do it, why can't we?" is definitely an apples and oranges comparison. Plus, your source is old. So 2011. Ask him now if he is still comfortable with the Fed infinitely printing money.

The article isn't about China. Are you on bath salts?

So you ARE suggesting that our money supply has increased 450%?

What exactly is your argument? You seem to be falling into the trap of equating fiscal policy with monetary policy, when the two are not necessarily related.

[boutons_deux]

Credit Card Debt Cut: The Reason May Surprise You

A Federal Reserve study showing that Americans lost wealth in the Great Recession turned up another, perhaps more surprising, result: Credit card debt fell sharply.

"The percentage of families using credit cards for borrowing dropped over the period; the median balance on their accounts fell 16.1 percent" between 2007 and 2010, the report concluded.

The data appeared Monday in the Survey of Consumer Finances, a widely followed source of information about the financial condition of American families.

The Fed study turned up two particularly dismal measures of financial health:

1) Median family income fell 7.7 percent, to $45,800 in 2010 from $49,600 in 2007.

2) Median family net worth fell 38.8 percent, to $77,300 in 2010 from $126,400 in 2007.

So if income and net worth were tumbling, wouldn't people have been borrowing more to put food on the table and shoes on the kids?

To the contrary, "the decreased prevalence of credit card debt outstanding was widespread and noticeable across most of the demographic groups," the Fed study found.

Translating from Fed-speak to English, that means just about everyone owed less on their credit cards.

Back in 2007, 46.1 percent of families had credit card debt, with a median balance of $3,100. In 2010, after the Great Recession had flattened families' finances, only 39.4 percent had credit card balances, with a median balance of $2,600.

While it's encouraging to see families carrying less debt, economists say the improvements don't reflect good news, such as a surge of income for paying off bills. Rather, the decline shows lots of people filed for bankruptcy to clear out their old debts.

"People took on too much debt," says Nigel Gault, chief U.S. economist for IHS Global Insight. Then when they lost jobs in the recession, many of them headed to bankruptcy court. "They defaulted and the debt just got wiped out," he says.

Seeing all of those bankruptcy filings, lenders became much less willing to dish out credit cards. "Lenders are being much more careful now," Gault says.

And so are consumers. So many people lost their jobs in the recession — or saw family members and neighbors lose paychecks — that they have become less willing to run up their credit cards, he said. "Everyone has become less willing to take on debt," Gault says.

There's a hint of a silver lining. Now that credit card debt has been reduced, many consumers may be in better shape to bounce back in coming years. Wiping out old debts "was just something that had to be done before we could move forward," Gault says.

http://www.npr.org/2012/06/12/154868285/credit-card-debt-cut-the-reason-may-surprise-you?sc=17&f=1006

WC, tell us again how the 99% don't in the majority spend 100% of the income. They actaully spend overall more the 100%

[CosmicCowboy]

The article isn't about China. Are you on bath salts?

So you ARE suggesting that our money supply has increased 450%?

What exactly is your argument? You seem to be falling into the trap of equating fiscal policy with monetary policy, when the two are not necessarily related.

No I did not suggest the money supply increased 450%.

I'm saying the fed is funding our current deficits by (simplistically) printing money.

The money supply is obviously larger than 1.668 trillion (the amount of deficits the Fed has essentially funded by buying treasuries)

[CosmicCowboy]

And the article explicitly compared monetary expansion between the US and China and placed the bulk of the blame for higher commodity prices (which feels like inflation) on China for expanding it's money supply much faster than the US...of course, China's population and GDP is expanding much faster than the US as well...which he ignored...

[CosmicCowboy]

Scott, I understand that you are formally trained in economics and I'm not (my degree was in architecture/engineering) so we may be approaching this from a different position.

You really don't find it a little alarming that the Fed is having to purchase that much debt to keep interest rates artificially low while we will continue to run trillion dollar deficits as far as the eye can see? How far down the road can we realistically kick that can?

[scott]

I'm saying the fed is funding our current deficits by (simplistically) printing money.



Thanks for clarifying.

I'd heavily dispute this assertion (and if I weren't about to go on vacation, I'd provide data to help back it up). It is one component, but not nearly the largest one. If it were, we'd have significant inflation, which we don't.

Ceteris paribus, the Fed can't simultaneously stabilize our currency and finance massive budget deficits with an expansionary monetary policy.

[scott]

Scott, I understand that you are formally trained in economics and I'm not (my degree was in architecture/engineering) so we may be approaching this from a different position.

You really don't find it a little alarming that the Fed is having to purchase that much debt to keep interest rates artificially low while we will continue to run trillion dollar deficits as far as the eye can see? How far down the road can we realistically kick that can?

I'm in agreement, I just disagree with the notion that the Fed is doing anything in this instance that should alarm us. What is alarming is our fiscal policy (run by Congress and the President), IMHO, not our monetary policy (run by the Fed).

Edit: Meant to say I'm in agreement as far the "kicking the can down the road" goes. It's time to stop playing the "pass the hat to future generations" game. But it's not exactly a new one. Since 1934, the United States government has managed a Budget Surplus a meager 12 times.

[boutons_deux]

"It's time to stop playing the "pass the hat to future generations" "

Bullshit. Heavy govt spending now to get people back to work (and paying taxes and buying shit) is what is needed.

More austerity now in a deep depression (for the 99%) will deepen and prolong the Banksters' Great Depression, esp disastrous for the "future" generation now leaving HS and college with extremely poor job prospects.

As Krugman pointed out last week, we now have a Repug economy (taxes cut heavily, govt spending way down vs past decades) and it sucks (for the 99%). Gecko and a Repug Congress would be a financial, human disaster for USA since they have announced that they will enforce more of the Repug austerity economy.

[scott]

"It's time to stop playing the "pass the hat to future generations" "

Bullshit. Heavy govt spending now to get people back to work (and paying taxes and buying shit) is what is needed.

More austerity now in a deep depression (for the 99%) will deepen and prolong the Banksters' Great Depression, esp disastrous for the "future" generation now leaving HS and college with extremely poor job prospects.

As Krugman pointed out last week, we now have a Repug economy (taxes cut heavily, govt spending way down vs past decades) and it sucks (for the 99%). Gecko and a Repug Congress would be a financial, human disaster for USA since they have announced that they will enforce more of the Repug austerity economy.

"Stop passing the hat" != Austerity

You = the liberal Wild Cobra. Go play on your Jump to Conclusions Mat.

GFY

[scott]

Since I'm leaving now, I'll add this tidbit.

I have little interest in cheerleading for the Red Team or the Blue Team.

There are times when increase spending is called for, there are times when less spending is called for. There are times when higher taxes are called for, there are times when lower taxes are called for.

We have a situation now where we not only need a balanced budget, but we need a budget with a prolonged, sustainable surplus. Time for the United States Government to pay off all the Credit Cards is racked up in it's 20's. Insert whatever belt-tightening cliche you prefer here.

Quite simply, spending needs to be reeled in across the board and effective tax rates (taxes paid / total income) need to be increased, across the board.

A solution so simple that every American can do it in their personal lives.

[boutons_deux]

"spending needs to be reeled in across the board and effective tax rates (taxes paid / total income) need to be increased, across the board"

Spending (consumerism) accounts for 70% of the US economy. try again.

govt spending is at a historic low, but being dominated by greedy health care and MIC corps, both untouchable.

taxes simply can't be raised due to 100% obstructionism by the Repugs, esp in the shitty Senate.

[scott]

"spending needs to be reeled in across the board and effective tax rates (taxes paid / total income) need to be increased, across the board"

Spending (consumerism) accounts for 70% of the US economy. try again.

govt spending is at a historic low, but being dominated by greedy health care and MIC corps, both untouchable.

taxes simply can't be raised due to 100% obstructionism by the Repugs, esp in the shitty Sentate.

A conversation about Government Budget Deficits isn't talking about consumer spending, congrats on failing to have a grasp on context.

Government spending needs to be reeled it. Taxes need to be higher. Your dogmatic beliefs otherwise are the Ying to the Republican Obstructionism Yang on taxes.

[boutons_deux]

When consumer/business spending is down, tax receipts are down, so the deficit goes up since much of govt spending is structural not elective.

[scott]

When consumer/business spending is down, tax receipts are down, so the deficit goes up since much of govt spending is structural not elective.

Revenue is dynamic, and spending can be too. Only 12 times since 1934 have we managed a balanced budget. Not acceptable.

[boutons_deux]

"dynamic, and spending can be too"

tell that to the MIC (whose consumption of tax $$ only goes up).

and try that "dynamic" with the tax expenditures for the 1%, the UCA, loopholes, deductions (eg mortgage), bullshit write offs.

[scott]

"dynamic, and spending can be too"

tell that to the MIC (whose consumption of tax $$ only goes up).

and try that "dynamic" with the tax expenditures for the 1%, the UCA, loopholes, deductions (eg mortgage), bullshit write offs.

lol this is why no one engages you in real conversation. You're incapable of having it without relying on non-sequitous bouton-speak.

[RandomGuy]

Sorry Scott, I thought you were smarter than that. My mistake.

Comparing our situation to China is hardly relevant.

They have a huge population bubble working through the pipeline and can afford and actually need to expand their currency.

Saying "well they can do it, why can't we?" is definitely an apples and oranges comparison. Plus, your source is old. So 2011. Ask him now if he is still comfortable with the Fed infinitely printing money.

If you had bothered reading the links, you would have the answer to that question already.

China will be facing a huge proble outside their population bubble in that they are very very badly allocating capital.

Much of their current growth is built on quicksand.

The world is making much of China's rise, and views it as the most important economy, so when their bubble pops, and it is looking increasingly like it will, it will get ugly.

They have overbuilt steel capacity that will collapse commodity markets when that capacity goes unused or folds in on itself.

[RandomGuy]

And the article explicitly compared monetary expansion between the US and China and placed the bulk of the blame for higher commodity prices (which feels like inflation) on China for expanding it's money supply much faster than the US...of course, China's population and GDP is expanding much faster than the US as well...which he ignored...

China's population is not expanding faster than the U.S.

Their population is due to start shrinking within a couple of decades, and will consequently very rapidly age.

China's industrialization will accelerate their trend of declining birthrates.

[RandomGuy]

Revenue is dynamic, and spending can be too. Only 12 times since 1934 have we managed a balanced budget. Not acceptable.

A certain amount of new debt per year is not exactly a bad thing, overall.

I would point out that a lot of investment funds, insurance companies, and banks, rely on having a supply of treasuries around.

That said, we do need to pare it down a bit. My gut says the U.S. government is crowding out private sector borrowing somewhat, although there is a huge demand for it over private sector borrowing/lending.

We just need to keep new borrowing at a rate generally lower than inflation, and let the debt's value decay through sheer inflation.

[CosmicCowboy]

China's population is not expanding faster than the U.S.

Their population is due to start shrinking within a couple of decades, and will consequently very rapidly age.

China's industrialization will accelerate their trend of declining birthrates.

It is numerically.

I agree they are going to have long term demographic issues but the bubble is not through the snake yet. They currently have to add 25 million jobs and grow their economy at 8% + just to maintain the status quo on unemployment.

[scott]

A certain amount of new debt per year is not exactly a bad thing, overall.

I would point out that a lot of investment funds, insurance companies, and banks, rely on having a supply of treasuries around.

That said, we do need to pare it down a bit. My gut says the U.S. government is crowding out private sector borrowing somewhat, although there is a huge demand for it over private sector borrowing/lending.

We just need to keep new borrowing at a rate generally lower than inflation, and let the debt's value decay through sheer inflation.

The issuance of debt is not necessarily tied to budget deficits. We don't need endless deficits to issue debt, in fact we can issue debt while having permanent surpluses.