"jim" wrote in message
...
Scout wrote:



Seems more like
You are the one that is palming stuff off on the future.

Your generation didn't pay the govt debts of the last generation
and the next generation won't pay the govt debts of today

Not by my choice, but those that simply keep pushing the problem down the
line.....watching it grow larger and larger and larger.


The problem is not the federal debt.
The private sector amassed $24 trillion in debt from 1998-2008

How much of that is mortgages?

--
Ed Huntress


(in case you are weak in math that is $80,000 per citizen)

and then in 2008 the assets against which they had borrowed
all that money suddenly dropped in value by $15 trillion

(again if you can't divide that is a loss of $50,000 per person)

whoops

And as much as you would like to blame the govt for the
mess we are now in - it aint the govt that caused that mess to
happen
And it aint the govt that is causing the aftermath of the mess

Right now the US private sector is so shell-shocked from what
happened that few are borrowing and huge numbers are trying to
get out of debt by repaying loans with whatever they can spare
Private sector borrowing has become negative and
saving has increased by a factor of 3.

this is a graph shoeing what the private sector borrowed per
year for the last 60 years:
http://tinyurl.com/4x9zcgu


Unfortunately when the nation is mostly paying back debts
and saving there is considerably less money available to buy
the goods and services that keep Americans employed
So, in case you haven't noticed, the result has been
lots of people lost their jobs
And again the govt didn't cause that to happen
and
about all the govt can do is to keep up its spending level
to make up for some
of the decline in spending from the private sector
so that even more won't lose their jobs

This federal deficit spending is going to keep on
happening as long as the private sector is deleveraging
To balance the budget now would be gruesome




If I had my way the federal government wouldn't be able to borrow money
except in an emergency and then they would have to sell bonds to the
public.

Tell it to the founding fathers. They gave the govt
authority to borrow as much as it deems appropriate

But as I said you are looking at the wrong problem
And when you think the problem is something that it is not
you will always arrive at the wrong answer

That way if we don't consider it an emergency then we don't have to loan
them the money. Checks and Balances.

Well I don't know what qualifies as an emergency...

But if the government does not continue to borrow and spend
the nation will go into a recession
and if the US balances the budget for long there will
be a depression

Right now at our current rate of growth China will be
richer than the US in 30 years
If you succeed in balancing the budget in the US today, China
will be ahead of the US in less than 5 years

That is what we are talking about leaving our grandchildren

Ed Huntress wrote:

"jim" wrote in message
...
Scout wrote:



Seems more like
You are the one that is palming stuff off on the future.

Your generation didn't pay the govt debts of the last generation
and the next generation won't pay the govt debts of today

Not by my choice, but those that simply keep pushing the problem down the
line.....watching it grow larger and larger and larger.


The problem is not the federal debt.
The private sector amassed $24 trillion in debt from 1998-2008

How much of that is mortgages?

Depends on what you mean.

Household mortgages were little less than 1/3 of the total debt
Compare that to a drop in household owner equity in real estate of
about $7 trillion near the end of 2008 so the net amount borrowed
from 1998-2008 is only a little more than the value lost in the crash
There has been no recovery in housing

There was also couple trillion in small business real estate loans

Not sure how much debt was added to the base mortgages
by various schemes to bundle and resell mortgages by lenders

About half the total private debt was acquired by the financial
sector which tripled its debt from 1998-2008 to a sum almost 100%
of US GDP before the roof caved in.

Can't tell you precisely how all the financial sector debt breaks
down or how much of that debt was related to betting on mortgages.

-jim


--
Ed Huntress


(in case you are weak in math that is $80,000 per citizen)

and then in 2008 the assets against which they had borrowed
all that money suddenly dropped in value by $15 trillion

(again if you can't divide that is a loss of $50,000 per person)

whoops

And as much as you would like to blame the govt for the
mess we are now in - it aint the govt that caused that mess to
happen
And it aint the govt that is causing the aftermath of the mess

Right now the US private sector is so shell-shocked from what
happened that few are borrowing and huge numbers are trying to
get out of debt by repaying loans with whatever they can spare
Private sector borrowing has become negative and
saving has increased by a factor of 3.

this is a graph shoeing what the private sector borrowed per
year for the last 60 years:
http://tinyurl.com/4x9zcgu


Unfortunately when the nation is mostly paying back debts
and saving there is considerably less money available to buy
the goods and services that keep Americans employed
So, in case you haven't noticed, the result has been
lots of people lost their jobs
And again the govt didn't cause that to happen
and
about all the govt can do is to keep up its spending level
to make up for some
of the decline in spending from the private sector
so that even more won't lose their jobs

This federal deficit spending is going to keep on
happening as long as the private sector is deleveraging
To balance the budget now would be gruesome




If I had my way the federal government wouldn't be able to borrow money
except in an emergency and then they would have to sell bonds to the
public.

Tell it to the founding fathers. They gave the govt
authority to borrow as much as it deems appropriate

But as I said you are looking at the wrong problem
And when you think the problem is something that it is not
you will always arrive at the wrong answer

That way if we don't consider it an emergency then we don't have to loan
them the money. Checks and Balances.

Well I don't know what qualifies as an emergency...

But if the government does not continue to borrow and spend
the nation will go into a recession
and if the US balances the budget for long there will
be a depression

Right now at our current rate of growth China will be
richer than the US in 30 years
If you succeed in balancing the budget in the US today, China
will be ahead of the US in less than 5 years

That is what we are talking about leaving our grandchildren

"John R. Carroll" wrote:

Ed Huntress wrote:
"jim" wrote in message
...
Scout wrote:



Seems more like
You are the one that is palming stuff off on the future.

Your generation didn't pay the govt debts of the last generation
and the next generation won't pay the govt debts of today

Not by my choice, but those that simply keep pushing the problem
down the line.....watching it grow larger and larger and larger.


The problem is not the federal debt.
The private sector amassed $24 trillion in debt from 1998-2008

How much of that is mortgages?

http://www.federalreserve.gov/econre...nd20091231.htm

Select the range of your choice.
What matters isn't the debt "amassed".
It's the value and ability to repay.

As long as you don't run up against the fallacy-of-composition

Anybody in a crowded theater can easily walk out the exit, but
that doesn't mean you are safe in concluding that
everybody in the crowded theater can exit at the same time

An individual's ability to repay can be thwarted if
everybody decides to repay at the same time

If everybody decides to pinch pennies and pay down debt and
save for a rainy day you end up with a recession where it becomes
difficult for anybody to pay off their mortgage and housing
values fall as more try to sell than are willing to buy

And nobody wants to create new mortgages based on housing stock
that may lose value at a faster rate than interest rates
They may as well rent and put the money in savings account where
it won't lose value

Car sales, appliance sales and other retails sales of goods and
services fell off a cliff in 2008 and that happened not because the
government imposed some draconian tax or regulation.
There was no Tsunami or earthquake or hurricane
There was no mass epidemic of disease

The reason sales fell sharply and so many jobs that
depended on those sales were lost was simply because
a huge percentage of the population at once said to themselves:

"Oh ****, I better stop buying things and start paying down debt"

-jim





--
John R. Carroll

"John R. Carroll" wrote:


Car sales, appliance sales and other retails sales of goods and
services fell off a cliff in 2008 and that happened not because the
government imposed some draconian tax or regulation.
There was no Tsunami or earthquake or hurricane
There was no mass epidemic of disease

The reason sales fell sharply and so many jobs that
depended on those sales were lost was simply because
a huge percentage of the population at once said to themselves:

"Oh ****, I better stop buying things and start paying down debt"

That doesn't even make sense.

It doesn't have to make sense but it does describe what happened.

It is undeniable that household borrowing habits, saving habits and
spending habits all abruptly changed.





People stopped buying because their disposable income went into the toilet.
There has been downward pressure on wages - wage deflation - going on in the
US for decades now.

That doesn't describe what happened
sales fell
through the floor in one month not over decades

And borrowing habits and saving habits changed just as abruptly
And they haven't changed back as the usually do in a recovery


For decades declining real income has largely been
offset by borrowing. And borrowing was regarded as benign because
the assets behind the borrowing were always
expected to stay ahead of debt

Here is a chart comparing Household real estate equity to
total household liabilities:
http://tinyurl.com/3jtwb9a

For 50 years things were in balance as owner equity
stayed usually a little ahead of debt keeping the difference
a little above zero

Looking at the chart
it is pretty obvious why people no longer believe that
real estate will always increase in value
that belief was what was behind the willingness to borrow
when that disappeared the willing to borrow disappeared
And that happened rather suddenly




Prices of the things people want and need, on the other hand, have been
rising steadily.

Health care costs and tuition are both good examples.
What people increasingly did to support thier standard of living was
refinance their homes and pull cash out to pay for things.
This had a number of advantages. The first of which is that mortgage
interest is tax deductable.
Sending kittle Joohnie to college was easier when you could pay for it with
a mortgage and deduct the interest.
Better yet, you could opt for a negative amortization, adjustable rate loan
and have the flexibility of chosing your monthly payment for a couple of
years.
As long as that mortgage could be refinanced when the teaser rate ran out,
you were good.
There was a downside. ARM's typically have a huge prepayment penalty before
a three year period but this is actually a feature if you are Wall Street,
and not a bug.
This is what predatory lending practices really look like - not payday
loans.

Between 2004 and 2007 as much as three quarters of the new mortgage market
was cash out refi's.
Half of all mortgages were ARM's of the 2/28 variety with loan to value
ratio's of 100 percent.

That is all true, but it is also water over the dam at this point



A cyclical slowdown coupled with an overheated housing market caused an
abrupt halt to rising home values.
In 2007, ARM's that were beginning to reset couldn't be refinanced because
there wasn't enough equity or the home owner had lost a job.
That left people with mortgages that either couldn't be paid or a cash
vampire that sucked up every single bit of disposable income when the
payment increased 20 or 30 percent.

Consumer demand hit the wall hard.
Foreclosures began to increase and a self reinforcing cycle began that ended
up manifesting itself in September of 2008 in collapse of fFnancial Services
and the Banking industry.
There are more than 2 million homes in foreclosure as I write this.
Nearly half af all mortgages in the US are supporting an asset with less
value than the loan.
Commercial and residential mortgages continue to suck the life out of our
economy and will do so until the markets clear and loan to value ratios come
back into line.
Something that could take as long as a decade or more.

It wasn't, and isn't a case of "Oh ****, I better stop buying things and
start paying down debt".

But it was exactly that.

But it doesn't matter how you want to explain it
the bottom line is
that households continue to not borrow
they continue to save at a much higher rate and that
translates into a lot less to spend to support jobs.
And if the government joins that austerity party it will
be a death spiral

-jim