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Tuesday, January 8, 2013

'Debt is Good'- So Sayeth the Debtee

Today the Associate Press reported that consumer debt is on the rise...

And treated it as a good thing.

"The Federal Reserve said Tuesday that consumers increased their borrowing in November by $16 billion from October to a seasonally adjusted record of $2.77 trillion.  Borrowing that covers autos and student loans increased $15.2 billion. A category that measures credit card debt rose just $817 million"

Yes this was treated as good...

There's many ways one can play with numbers to make something appear positive or negative.  Let's take the auto loans for example.. It went up which means people are able to afford new cars which means there's jobs a plenty allowing people the financial means to get the car of their dreams..

And so on..and so on..
There's other ways to look at it..  For instance, since 72 month loans are now the norm whereas once only credit deadbeats took out loans for that length, it means a vehicle purchased in November 2012, will likely not be fully paid off until October, 2018..

We know time flies but... 72 months is still 72 months..

Now many cars are also leased which means 3years of payments and having nothing left by lease end but a high disposition fee to return the car that most drivers didn't realize or forgot they had to pay, followed by ultimately another lease..then another...

Nothing in this nation could survive without the continual acquisition of more debt.   Not even the nation itself..

The student loan debt totals over $1 Trillion...  Does government advise people to do the smart, prudent thing which is to NOT attend a university unless you're truly motivated and have a clear plan to get a degree in a field that is in need and hiring?

No.. It makes too much profit off the subsidized loans, even with the continual rise in defaults..  And why not love it, when unlike uncollateralized debt like credit cards which one can discharge in bankruptcy, a student loan stays with one forever..

So what was that figure again?  How much do all Americans collectively owe?

Oh yes.. $2.77 Trillion

The US has a total population of 310 million but we doubt any of this debtload is held by kiddies.  We're too moral and ethical a nation for that cruelty--  we wait until their empty, impressionable minds turn 18.

For perspective, in 2009 the Federal Government i.e. IRS took in a grand total of $2.1 Trillion in tax revenues.  So not only do we not bring in enough money to pay off what we owe to our creditors, but based on 2009 figures, we'd only have been able to pay 75% of the Total US population debt.

And this was treated by the AP as good...

People don't save.. Oh they may try to but the deck is way stacked against..

Between low interest rates to entice people to spend and borrow and deprive savers a rate of return commesurate with inflation's increase, how can the everyday person stand a chance?

Usually they can't so they either have to contract their lifestyles or increase debtload to keep up with a more accustomed standard of living.

A nation and its economy that survives and thrives on debt accumulation is ultimately like a human body that can only function with a daily intake of sugar and sweets..

Eventually there is a crash.