It's not the government's debt, stupid, it's your own

[Wonky Pundit]

Some people just dont understand the economy

No one understands the economy. Some of us are smart enough to realize that, the rest believe the idiots that tell them they get it.

This is not an economics thread, it's a religious thread for the Church of Doom'n'Gloom and everyone's singing their favorite hymns "All is Lost" and "Ain't it Awful." Rev. Wonky Pundit reads from the sacred CNN text the following:

every neighbor of yours is sitting on a pile of debt (most likely living in it -- in an upside down house) and can't spend. In turn, banks are sitting on portfolios of bad debt...

Pure fanatical mindless religion.

Of course from an economics standpoint it's not true, but I'm not sure if Rev. Wonky and CNN know they're lying or they're just that stupid. Reality of course (you know like, actual loan balances and bank accounts) is that some of our neighbors owe money to banks and some of them own the banks, and while our average neighbor may owe $45,194, he's also got $234,307 stashed away so even after paying off all debts he's still got $189,113.

fwiw, that goofy debt/gdp number is total debt divided by GDP = $53T/$15T = over three hundred percent. That $53T debt is the $13T that households owe plus the $40T businesses owe, and it's owed to you and I and our neighbors and our businesses. This stuff is all in the latest Fed Flow of Funds Report --it's a 497 KB pdf but they got other format choices on this page. Total debt is on page 60 and household balances are on page 104.

Aside from the fact that you're a troll, so what? Debt is debt. It discourages investment. Or did the school from which you earned your Cracker Jack diploma fail to mention that?

See, I can do it too.

 

[Spoonman]

No one understands the economy. Some of us are smart enough to realize that, the rest believe the idiots that tell them they get it.

This is not an economics thread, it's a religious thread for the Church of Doom'n'Gloom and everyone's singing their favorite hymns "All is Lost" and "Ain't it Awful." Rev. Wonky Pundit reads from the sacred CNN text the following:

every neighbor of yours is sitting on a pile of debt (most likely living in it -- in an upside down house) and can't spend. In turn, banks are sitting on portfolios of bad debt...

Pure fanatical mindless religion.

Of course from an economics standpoint it's not true, but I'm not sure if Rev. Wonky and CNN know they're lying or they're just that stupid. Reality of course (you know like, actual loan balances and bank accounts) is that some of our neighbors owe money to banks and some of them own the banks, and while our average neighbor may owe $45,194, he's also got $234,307 stashed away so even after paying off all debts he's still got $189,113.

fwiw, that goofy debt/gdp number is total debt divided by GDP = $53T/$15T = over three hundred percent. That $53T debt is the $13T that households owe plus the $40T businesses owe, and it's owed to you and I and our neighbors and our businesses. This stuff is all in the latest Fed Flow of Funds Report --it's a 497 KB pdf but they got other format choices on this page. Total debt is on page 60 and household balances are on page 104.

Aside from the fact that you're a troll, so what? Debt is debt. It discourages investment. Or did the school from which you earned your Cracker Jack diploma fail to mention that?

See, I can do it too.

you are the troll

 

[uscitizen]

[Note for the dense: The title references Jim Carville's campaign advice to Clinton: "It's the economy, stupid." Don't take it personally.]

Below is a chart that lists government and private debt from 1870 to the present. (Private debt, of course, includes both businesses and consumers.)

The most immediate consequence of such a huge private debt load is this:

Essentially this chart means that every neighbor of yours is sitting on a pile of debt (most likely living in it -- in an upside down house) and can't spend. In turn, banks are sitting on portfolios of bad debt -- potential defaults -- and hoarding cash. In turn again, businesses have no interest in hiring, investing or spending in a world of uncertain buyers. There's your economic recession ... stagnation ... potential depression ... right there.

Source

silly wabbit, it cannot be our fault, it must be the governments fault and the other party in government at that
Wait a minute! Who elects the government?
Ohh my....

 

[expat_panama]

...Aside from the fact that you're a troll...

Ooops, my bad! One thing I did not want here was a squabble among friends, please let me immediately apologize for letting my lame sense of humor and over active sarcasm get in the way because this stuff's too important to get sidetracked.

You are absolutely right in bringing it up and CNN is absolutely wrong in how they're playing it. Their take is household's debt is some three and a half times the GDP and it's leaving banks "sitting on portfolios of bad debt." Look at where CNN's taking it's $53T ($15T GDP times 3-1/2) of debt from, it's page 60 of the Fed's latest Flow of Funds Report (links in previous post):

...so what? Debt is debt. It discourages investment...

Hey, investment is debt!

Any time a business finances a new plant with 10 thousand new jobs it sells bonds, and they owe money. When they pay it back and investors put the money in the bank, it becomes a debt banks owe to the investors. It's there in the right column for Q1 of 2011. That total $52.6T is the $14.1T sum of Financial Sector debt (bank accounts) + plus non-financial $36.3T (equal parts household, business & gov't) + $2.2T owed to foreigners.

 

[Wonky Pundit]

...Aside from the fact that you're a troll...

Ooops, my bad! One thing I did not want here was a squabble among friends, please let me immediately apologize for letting my lame sense of humor and over active sarcasm get in the way because this stuff's too important to get sidetracked.

Agreed, and thanks for the apology. On this board, they're about as rare as geysers among the sand dunes.

You are absolutely right in bringing it up and CNN is absolutely wrong in how they're playing it. Their take is household's debt is some three and a half times the GDP and it's leaving banks "sitting on portfolios of bad debt." Look at where CNN's taking it's $53T ($15T GDP times 3-1/2) of debt from, it's page 60 of the Fed's latest Flow of Funds Report (links in previous post):

Not sure how you infer that this table alone is what the author is basing his estimate of household debt on. Even if it is, it leaves us wondering what the rest of the numbers since 1870 look like...

...so what? Debt is debt. It discourages investment...

Hey, investment is debt!

Any time a business finances a new plant with 10 thousand new jobs it sells bonds, and they owe money. When they pay it back and investors put the money in the bank, it becomes a debt banks owe to the investors.

Yes and no. Consumer debt is never an investment. Not to mention that business decisions aren't always perfect, and once in a while debt ends up losing a company money instead of making it money.

 

[expat_panama]

...Not sure how you infer that this table alone is what the author is basing his estimate of household debt on...

How I infer it is not important. Where the pundit got his $53T debt number is important. This CNN piece is like the Yahoo rant last week where the writer got his econ data all wrong and Yahoo had to pull the story. It happens a lot because good journalists are not necessarily good economists. Something else that's happening here is you say you're not sure about the link between the pundit and the Fed both saying total US debt is $53T, and yet you're not openly reconsidering your strong opinions on debt.

...Consumer debt is never an investment...

Banks buy up consumer debt all the time and they profit enough with 95% of the loans that the 5% delinquency rate is not a barrier. The fact that 19 out of 20 consumers end up having new money to pay off debt with interest means most consumers (like the bankers) are better off after the transaction than before.

 

[Wonky Pundit]

...Not sure how you infer that this table alone is what the author is basing his estimate of household debt on...

How I infer it is not important. Where the pundit got his $53T debt number is important. This CNN piece is like the Yahoo rant last week where the writer got his econ data all wrong and Yahoo had to pull the story. It happens a lot because good journalists are not necessarily good economists. Something else that's happening here is you say you're not sure about the link between the pundit and the Fed both saying total US debt is $53T, and yet you're not openly reconsidering your strong opinions on debt.

Okay, I can see at this point how the author got to the $53T (the table was kind of hard to read without my latest prescription - I'm getting old), and I also agree that this number does not paint a complete picture. However, that so many households have so much more debt than assets is clearly a huge economic problem.

...Consumer debt is never an investment...

Banks buy up consumer debt all the time and they profit enough with 95% of the loans that the 5% delinquency rate is not a barrier. The fact that 19 out of 20 consumers end up having new money to pay off debt with interest means most consumers (like the bankers) are better off after the transaction than before.

I should have been more clear about this.

Debt is not an investment unless one is borrowing to pay for something that will make them more money than the cost of the debt. (For the bankers, it's a poor investment unless the risk is low.) Also, the fact that a particular group of consumers can pay their debts on time does not make them financially better off than they were before borrowing.

 

[Avorysuds]

Some people just dont understand the economy

Says the person that has probably not had a job most of their adult life.

 

[Wonky Pundit]

Some people just dont understand the economy

Says the person that has probably not had a job most of their adult life.

Most people who have jobs don't understand the economy.

 

[expat_panama]

...that so many households have so much more debt than assets is clearly a huge economic problem...

That sure is what we hear in the news, but news people are paid to make everything look terrible because most of their customers want stuff to complain about. Reality is that Americans as a whole have been doing very well. Over the past 2-1/2 years since the beginning of 2009 we've reduced total household debt by about $300 billion while total private asset values have soared $8,400 billion. People say it's the worst recovery ever but it's left us over eight trillion dollars richer.

...the fact that a particular group of consumers can pay their debts on time does not make them financially better off than they were before borrowing.

Please remember that this "particular group" happens to be the overwhelming majority of Americans --19 out of 20. I'm thinking of a typical residential block of homes with 20 households where all but one pays their debts on time. I'd call that a good neighborhood.

My feeling is that doom'n'gloom career complainers who say 95% success isn't enough will eventually have to say just how many is enough.

 

[Wonky Pundit]

...that so many households have so much more debt than assets is clearly a huge economic problem...

That sure is what we hear in the news, but news people are paid to make everything look terrible because most of their customers want stuff to complain about. Reality is that Americans as a whole have been doing very well.

If correct, that would suggest there's no reason to complain about Obama's handling of the economy.

Over the past 2-1/2 years since the beginning of 2009 we've reduced total household debt by about $300 billion while total private asset values have soared $8,400 billion. People say it's the worst recovery ever but it's left us over eight trillion dollars richer.

Whoa there, patner! That $8,400 billion hasn't been an increase in household assets, now has it? I'm betting that the overwhelming majority of it is corporate assets.

Also, How much of that debt reduction came out of default? Does that $300 billion account only for what's been paid off?

...the fact that a particular group of consumers can pay their debts on time does not make them financially better off than they were before borrowing.

Please remember that this "particular group" happens to be the overwhelming majority of Americans --19 out of 20. I'm thinking of a typical residential block of homes with 20 households where all but one pays their debts on time. I'd call that a good neighborhood.

Of course. The question, again, is whether those 19 of 20 are better off financially as a result of having borrowed and paid off debt, rather than from other factors.

 

[expat_panama]

...Americans as a whole have been doing very well.

If correct, ...

We need to stop there and decide what is real and what isn't because we have facts here and we don't have to put up with uncertainty or ignorance.

We can't just simply decide on faith that everyone's in debt because when it comes to the economy we can and must know for sure what it is that we're saying. In church there's so much we can never know so we're forced to go on faith, but in business choosing faith over facts is stupid.

I suggest we agree that what's real here is that some pundit said American households owe $53T to banks, and that he got the number from some consulting firm. We also know that the fed says $53T includes what banks owe households and that household debt's less than a third of the total. From that we can tell the pundit's a moron and that Americans are much better off than the US-bashing pundit is letting on.

 

[Zander]

The "great deleveraging" has only just begun. Expect hardship and suffering until government gets the hell out of the way. If the politicians had done the opposite of what they did (cut spending instead of stimulus) we would have already recovered. Instead we've only slowed down the inevitable and extended the pain for a longer time.

 

[LordBrownTrout]

Paid mine off. Pay with cash when I need something. It's a nice feeling to not have some bank leveraging you.

 

[Wonky Pundit]

...Americans as a whole have been doing very well.

If correct, ...

We need to stop there and decide what is real and what isn't because we have facts here and we don't have to put up with uncertainty or ignorance.

We can't just simply decide on faith that everyone's in debt because when it comes to the economy we can and must know for sure what it is that we're saying. In church there's so much we can never know so we're forced to go on faith, but in business choosing faith over facts is stupid.

I suggest we agree that what's real here is that some pundit said American households owe $53T to banks, and that he got the number from some consulting firm. We also know that the fed says $53T includes what banks owe households and that household debt's less than a third of the total. From that we can tell the pundit's a moron and that Americans are much better off than the US-bashing pundit is letting on.

I might be prepared to accept your suggestion, as long as you don't run from the original question.

 

[expat_panama]

...I might be prepared to accept your suggestion...

Your thoughts are what's important here, I can listen to my own suggestions on my own time.

...as long as you don't run from the original question.

Thanks, but your thoughts are too important to hinge on whether or not I'm running from your question.

At any rate, the article you began this thread with said households can't pay back the $53T they owe banks. Seeing how ridiculous the idea is, I'm surprised CNN hasn't pulled it yet the way Yahoo yanked a similar one a few weeks ago.

 

[Wonky Pundit]

...I might be prepared to accept your suggestion...

Your thoughts are what's important here, I can listen to my own suggestions on my own time.

...as long as you don't run from the original question.

Thanks, but your thoughts are too important to hinge on whether or not I'm running from your question.

At any rate, the article you began this thread with said households can't pay back the $53T they owe banks. Seeing how ridiculous the idea is, I'm surprised CNN hasn't pulled it yet the way Yahoo yanked a similar one a few weeks ago.

Everyone's thoughts are important, expat.

You said "Americans as a whole have been doing very well" and offered some evidence to support it. At the moment, I'm supposing for argument's sake that this statement is accurate. So, to rephrase my question to you, is it reasonable to criticize President Obama's handling of the economy in light of the fact that Americans have been doing so well?

I am genuinely interested in your answer to the above question.

 

[expat_panama]

"...is it reasonable to criticize President Obama's handling of the economy in light of the fact that Americans have been doing so well?

Now that is one super question, and since "Obama's-handling-the-entire-economy" is a change of topic from "households-owe-banks-$53T" I took the liberty of starting this thread here: http://www.usmessageboard.com/econo...ealth-soaring-9t-thank-obama.html#post3829539

 

[Neubarth]

I HAVE NO DEBT!!!

You leveraged indebted assholes need to let your stuff go back to your creditors so prices will drop & I can buy up some good stuff. Quit having the Fed print up money to pay for your stupidity.

I keep on telling you that the FED does not print money. The US Treasury prints our greenbacks and tries to keep enough in circulation to meet the needs of the citizens. As the population goes up, the amount of money in circulation usually goes up as that green paper is a means of facilitating exchange of produce, products and services.

 

[Wonky Pundit]

"...is it reasonable to criticize President Obama's handling of the economy in light of the fact that Americans have been doing so well?

Now that is one super question, and since "Obama's-handling-the-entire-economy" is a change of topic from "households-owe-banks-$53T" I took the liberty of starting this thread here: http://www.usmessageboard.com/econo...ealth-soaring-9t-thank-obama.html#post3829539

Thanks for picking it up. Now I'll be happy to return to the original topic.

I concede that there's good reason to suspect that the $53T in debt is not a completely accurate figure. That said, would you still agree that the total amount of private debt (household and business) far exceeds that of Washington's?