On Mon, 9 Feb 2009 22:46:11 -0500, "Ed Huntress"
wrote:


"Ignoramus17377" wrote in message
m...
On 2009-02-10, F George McDuffee
wrote:
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.

I find this graph to be fascinating, and very thought provoking, but
cannot yet come to good conclusions, or perhaps I am in denial.

Note that this graph does not include a) government debt and b)
commercial debt. The commercial debts are very prone to becoming
economically unmanageable if further deleveraging occurs, even more
than household debts.

If you want to see more graphs of this kind of data than anyone could want,
go to the St. Louis Fed's research site. They're using mostly Census and BEA
data, but they have an excellent interactive system for showing it all
graphically.

http://research.stlouisfed.org/fred2/

For example, looking at the finer graph for the data you pointed to above...

http://research.stlouisfed.org/fred2/series/TDSP?cid=97

...you'll see a downturn in the trend, but then a small uptick over the past
couple of months. Based on the trendline, my guess is that you're seeing the
effects of declining employment in the uptick.

But it's too small to identify it as a trend. It could be a year-end
accounting phenomenon. In any case, that Fed site is an economic data
junkie's wet dream. d8-)
=========
Thanks -- I like original source data.


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).