Debt addicted US consumers are out of control. I read that the current US debt to income ratio rose to 131% recently and they now owe $2,100,000,000,000. In April, consumers kept piling onto the fire. High gas prices? No worry - charge it! Housing prices dropping and still want that Hummer? Take out another loan! Your neighbors going to Tahiti? Well, damn it, keep up and charge that trip to Hawaii!!
Yup, we all know how this will end. Badly.
U.S. consumers took on an extra $10.6 billion in debt in April, the most in 10 months, the Federal Reserve reported Wednesday.
Total outstanding consumer credit in April rose by 5.9% to $2.170 trillion, the Fed said.
Revolving debt like that on credit cards rose by $3 billion, the most in seven months, the Fed said.
Nonrevolving debt like automobile loans, meanwhile, rose by $7.6 billion, or 6.7%, the central bank reported.
June 10, 2006
Rule #1: When you find yourself in a hole, quit digging. Americans: Still digging
Subscribe to:
Post Comments (Atom)
27 comments:
You don't understand, Keith.
That was last month. Now the CC statements have arrived and the consumers will pay them off.
Won't they?
you're joking right?
Of course.
These numbers are so important. How deep is the hole, how much hole does the average consumer/family have under them, etc. HELOC to the rescue?
No thanks. Better to live debt-free, and that includes excessive mortgage debt.
How come with all the "tightening" thats SUPPOSED to be going on from the Fed on down, the free money is still flowing like crazy. What gives! Loan companies are closing up and those that are left are giving it away more than ever!
Keep borrowing Amerika, I need the MONEY!
We must continue at this burn rate. Otherwise the US economy will stall and fall back to earth like a tonne of shit. Get out there and buy a 42inch plasma on credit today, it is your duty as a patriot. New spinners on your hummer will surely make you look oh so cool while preserving the American way of global hegemony.
stuck in so pa
You are right, the only way a credit based expansion can continue is with ever increasing amounts of credit/liquidity injected into the system. Bernanke knows this all too well, but there is nothing he and the other central bankers can do but play along because the only alternative is a worldwide crash of historic proportion.
The Fed will talk tough on inflation while his buddies in China, Japan, and Korea provide whatever funds we need to borrow. Mortgage rates will be at historic lows by the end of the year.
Keith, you make the assumption that people are taking out debt for idiotic luxuries like Hummers and the moral equivalent thereof.
What if they aren't?
What if this is just to get through to next month without foreclosure?
I just lost my funding at work. Health insurance is extra $1000/month for self and wife who doesn't have own insurance. My mortgage is $1500. (Bought in 2000, in SD no less).
I'm selling off stocks etc but other people don't have that luxury. What if they have children? School? College? Dentistry? Gasoline? Auto Insurance? Homeowner Insurance?
cheap crap from china is cheaper than ever---but necessities of life are more expensive than ever.
A Plasma TV (unlike a hummer) isn't that expensive relative to all that and will last 5-10 years.
Agree with post - Americans are borrowing for current expenses
I think it is more than anecdotal that I have seen a number of people lately being "maxed out" on the credit cards at places like Walmart and Target and RiteAid!. . .I was in line behind a young woman who was buying $12 work of shampoo, etc. at RiteAid, and she went through two cards before she found one that worked. . .same thing happened at Target - a woman couldn't use her Target card because maxed out, so she used her Visa and told the clerk, "I think I still have some credit on that one." She was buying some cleaning supplies - very routine stuff. I suspect the high gasoline prices, and healthcare co-payments (assuming you even HAVE healthcare) are killing Americans.
Our newest neighbor just bought a house for $495K that zillow.com says is worth $420K. Even though he bought at the peak of the bubble, he's not worried. How do I know? Because he bragged to me about using his HELOC for $25K worth of landscaping (the builder sold the house with none).
He and the wifey drive SUVs too large to fit in their garage (!), and whenever I see him, I'm reminded of that TV commercial about the smiling fool "in debt up to his eyeballs".
Pull your credit report at "free credit report". I am certain that most married men have no idea the debt they are in via their wives. (Shoes, endless credit cards, dresses, purses, makeup, jewelry, second mortgs., etc).I worked collections and the wives always controlled the checkbook. When the husbands did find out about the debt, they thought only their wives owed it, not them.
to control wife's spendings, i have no joint acocunt (she's been nagging about since got married as she wants to handle daily expenses). She uses her own CCs to buy anything for herself or the family. I'm the bread winner. if I don't agree of a purchase, I tell her to return it. She does most of the time. I give up when I don't want the headache.
Here's an interesting Debt music video.
http://www.youtube.com/watch?v=7_lBInijFH0
Credit card debt is a good thing to watch. The foreclosure rate will track this number with a 6-12 month lag.
It's not just women who can't handle money. I have to deal with everything, because my husband doesn't think it's important to pay bills. When I married him, I had the unpleasnt task of realizing his house was in "preforclosure", and fixing it. I constantly have to set limits on his spending.
thanks all for your comments. It made me realize that my view of overconsumption (as seen in Scottsdale and London especially) isn't the view of reality.
The view of reality is more likely credit cards to pay for electricity bills. Debt to buy food.
Why?
BECAUSE TOO MUCH DAMN MONEY IS GOING TO HOUSING
See my new post and comment please
Most people i know are making good money in construction, pharm sales, and other ventures. Low debt and living well. To much gloom and doom. Americans live better now then ever in the history of this country. Lots of jobs, going on endless vacations etc.
It's just the opposite between myself and my soon-to-be wife. I'm the one making sure the bills get paid because she doesn't want to deal with it. When we started dating 5 years ago, she had almost $25K in credit card debt and another $20K in student loans. We've got the CC debt below $10K now and we always set debt reduction targets for each year. It will be more difficult going forward because our upstairs tenant moved out and we have to compensate for the rental loss. Luckily when we bought our place, the PITI was only 20% of our gross income. I consciously made a decision not to bite off more than we could chew, because I wanted my girlfriend's debt to get to a reasonable level before we start raising a family. I'm pretty sure there are plenty of families out there who didn't think this through before they bought a house.
foobeca
Lance Lewis, a hedge fund manager, made some interesting comments about economic growth last year. Using the government's published numbers for the current account deficit, budget deficit, and money supply growth, he makes a good case that 31% of GDP in 2005 was from "borrowed money". Think about that -- nearly $4 trillion in so-called economic activity was from people moving pieces of paper around! Nothing of lasting value was produced, and no debt was paid as a result of this "work", yet it was added to GDP.
This problem is so incredibly bad, no one in power dares admit the truth. If even 20% of that funny money leaves the system, we will have a crash of historic proportions.
Hi, I was out blogging and found your site. It certainly got my attention and interest. I was looking for Cases information and even though this isn't a perfect match I enjoyed your site. Thanks for the read!
Comment
Hello Friend! I just came across your blog and wanted to
drop you a note telling you how impressed I was with
the information you have posted here.
Keep up the great work, you are providing a great resource on the Internet here!
If you have a moment, please make a visit to my term structure of interest rates site.
Good luck in your endeavors!
Hey Fellow, you have a top-notch blog here!
If you have a moment, please have a look at my automobile insurance adjuster site.
Good luck!
This is an excellent blog. Keep it going.You are providing
a great resource on the Internet here!
If you have a moment, please take a look at my automobile insurance company ratings site.
Have a great week!
Your blog I found to be very interesting!
I just came across your blog and wanted to
drop you a note telling you how impressed I was with
the information you have posted here.
I have a bad carolina credit mortgage north
site.
Come and check it out if you get time :-)
Best regards!
Your blog I found to be very interesting!
I just came across your blog and wanted to
drop you a note telling you how impressed I was with
the information you have posted here.
I have a series e savings bonds
site.
Come and check it out if you get time :-)
Best regards!
When your in a hole to deep to get out of, the only way out is to dig UP!
Post a Comment