ENDLESS DEBT 11-30-2017

Franklin advised us to “be neither a lender or a borrower.” I think the two fatal mistakes our founding fathers made in writing the US Constitution, were the failure to require a balanced budget, and the failure to impose term limits on elected officials. I suspect this was due to their belief in the natural dignity of man. Whether they really didn’t think men would abuse the power of the purse, or whether they didn’t understand human nature means people will feather their own nest, I don’t know. What I do know is if they had read Polyibus, the ancient writer who described the fall of the Athenian Republic, which they may have, they would have realized the point at which elected officials realize they can take money from one group, and give it to another, in order to gain political power, is when the political collapse starts. Lenin’s famous quote that “Capitalism will spend itself to death,” reflects the fatal flaw of Democracy; namely, the creation of an urban mob, dependent on the state, and giving power to those politicians who provide benefits to said mob. This is the current state of the American Republic: the cycle of benefits for the mob, enacted by politicians in return for even more political power, is well entrenched in 2017.

I think I will call this “macro economics,” because it reflects the government view of things with large scale benefit programs solely designed to enrich, and empower, the political class. Soaking the rich is an accurate term to describe this. What is called “microeconomics” refers to individual economic actions in my opinion. This refers to individual decisions to go into debt in order to maintain a personal lifestyle of living beyond your means. This is also widespread in the American Republic of 2017. Franklin would be laughed at today if he went on a talk show and said people should live within their means, and they should only spend what they make. They should also save some of their money, which his making that statement would result in hysterical laughter from the studio audience. At any rate, the self discipline required to either save, or live within your budget, is sadly lacking in America these days.

The link below indicates fiscal prudence on the individual level is just not something the American people do these days. The entire economic system is designed to get people into debt, keep them in debt, and suck them dry of all assets for the benefit of the elites. I am talking about the private banking cartel known as the Federal Reserve, which is neither a federal agency, or a reserve agency. The sold purpose of the Federal Reserve is to loot the public and private wealth of the American people to enrich the ten private banks that make billions on the interest payments the US government pays for its own money. The US Constitution actually defines money as it is listed in it.

Doomer Doug, a.k.a. Doug McIntosh now has a blog at www.doomerdoug.wordpress.com
My end of the world e book “Day of the Dogs” will soon be available for sale at smashwords. The url is
https://www.smashwords.com/books/view/267340 It is also at the following url



US Household Debt Is Rising 60% Faster Than Wages, And One Rating Agency Is Worried

Tyler Durden's picture

In a report released today by DBRS titled “Consumer debt and debt burden”, the rating agency which is best known for keep Italian debt eligible for ECB monetization at the peak of the European banking crisis, looks at the latest Quarterly Report on Household Debt and Credit issued by the NY Fed (discussed here previously) which showed that consumer debt for the third quarter of 2017 was approximately $12.96 trillion, representing an increase of $116 billion over the second quarter of 2017. The debt level for the first three quarters of 2017 has continued to increase above the previous record debt level which was established in the third quarter of 2008 as shown in Exhibit 1 below.

DBRS also highlights that not only did total debt levels increase, but their composition changed as highlighted in Exhibit 2 below.

The good news: total mortgage debt has decreased since 2008, to $8.743 trillion from $9.29 trillion, but as of the third quarter of 2017, still accounts for 67.5% of overall consumer debt.

The bad news: since 2008, the growth in total debt has been attributable to the auto loan and student loan sectors. Auto loan debt has increased by 50% since 2008, to slightly over $1.2 trillion from approximately $800 billion. The most dramatic growth rate, as Zero Hedge readers know well, has been in student loan debt which has grown by 122% since 2008, to $1.357 trillion from $611 billion.

But a bigger concern flagged by DBRS is that the growth in consumer debt is raising concerns when viewed in the context of the existing wage stagnation hampering the current economic environment. The rating agency cites a paper published in October 2017 by the Harvard Business Review which stated that the inflation-adjusted hourly wage has grown by only 0.2% per year since the mid-1970s and labor’s share of income has decreased to its current level of 57% from 65%.

Meanwhile, in the second quarter of 2017, wages were only 5.7% higher than they were a decade earlier. In comparison, the Federal Reserve Bank of New York/Equifax data shows that consumer debt growth over the same period was 9.3%.

In other words, the purchasing power of US households has been largely a function of rapidly rising debt, which over the past decade has risen 60% faster than wages.

There is another concern: while overall delinquency rates have stabilized in recent years, the one stubborn outlier remains student debt, where 90+ day delinquencies have risen to more than 10%.

This is a problem because as Bloomberg’s Lisa Abramowicz writes, considering that GOP tax overhaul may eliminate tax deductions on interest on student loans, this debt load could become even more onerous.

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