On Mon, 09 Feb 2009 17:51:24 -0600, Ignoramus17377
wrote:

From Barron's:

http://igor.chudov.com/tmp/Debt-Service.jpg
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Thanks for the link -- I missed this one.

This should give everyone a shot of colds p*** to the heart when
you consider the possibility of deflation, which to some extent
is already occurring, i.e. wage cuts.

With debt service at these levels, even a slight downturn in
employment will be serious, and if serious deflation kicks in on
top of that it will be catastrophic as wages will fall while the
debts remain as denominated.

We have never seen these types of debt service levels. as a
percentage of income since the depth of the last depression
[1935]. Unfortunately, if we have even a moderate deflation, the
ratios will be considerably higher that the depression.

No one knows what a 20-25 % of income as debt service will
produce, other than huge numbers of bankruptcies with devastating
impact on the CDOs based on credit card receivables, student
loans, vehicles, and of course residential/commercial mortgages.

Interesting that one of the "solutions" to the Detroit auto
crisis is to deflate wages. Good thinking.....
Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).