Interesting graph
- Thread starter Martin
- Start date
all debt is not bad.
Greenspan apparently is not worried about those numbers. You can have more debt at lower interest rates.
Or debt that allows you to grow finacially(college loans).
Or debt that gives you a place to stay(rent vs own).
Or debt that allows you to get to work(car loans).
All debt is not bad.
Also realize that it is not difficult to reach 100% debt load. Houses are not cheap, but given the option of 1000 in rent or 1000 on a mortgage, debt is not a bad deal at all.
lozina
Lifer
- Sep 10, 2001
- 11,711
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That's true only because of the lousy situation we are currently in. In the late 70's my father worked as a maintenence worker in the local GM plant. He bought a house that was 110k (approx. 3x his income). Today, I work as a software developer in the city. If I wanted to buy that same house, It's value now is over 14x my income...
Some property values have skyrocketed. I am currently a software developer and our house is only slightly more than 1x family income about 2x of my income alone. Affordable housing still exists.
Hayabusa Rider
Admin Emeritus & Elite Member
- Jan 26, 2000
- 50,879
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The problem will be when interest rates rise and households which just make payments no longer can. This has the potential to be very bad.
Incomes seem to be rising fast enough to keep debt in check. These are not historically high deficts this country is having once they are adjusted for inflation.
incomes are rising? WTF?
Wages rose at 2.4% in the last year. Inflation rose at 2.1%
Have you seen that chart linked in the OP???
Wages rose at 2.4% in the last year. Inflation rose at 2.1%
Have you seen that chart linked in the OP???
The Greenspan putt
"...
The Fed?s pace will also depend on how America?s households respond to its putting. By cutting rates so savagely from 2001 to last year, it openly invited households to borrow, and they heartily accepted. Their debts now total about 115% of their disposable income. Wednesday?s decision may not add greatly to the cost of servicing this burden?more than 70% of household debt is made up of fixed-rate mortgages?but it will discourage new borrowing. One of the most important sources of demand for the American economy, the uninhibited spending of unearned money, may thus begin to dwindle. Unless earned income or foreign demand replaces it, the economy will slow. And America?s households may finally turn to the unfinished business that the last, mild recession never took care of: namely, a savings rate of little more than 2% of disposable income.
..."
A savings rate of only 2% is very poor.
What is it, do people expect the gubberment to take care of them? Who gave them that silly idea?
Personally, I'm saving at about 11%, before matching, right now and expect to increase that a few percent as soon as one kid gets out of college.
"...
The Fed?s pace will also depend on how America?s households respond to its putting. By cutting rates so savagely from 2001 to last year, it openly invited households to borrow, and they heartily accepted. Their debts now total about 115% of their disposable income. Wednesday?s decision may not add greatly to the cost of servicing this burden?more than 70% of household debt is made up of fixed-rate mortgages?but it will discourage new borrowing. One of the most important sources of demand for the American economy, the uninhibited spending of unearned money, may thus begin to dwindle. Unless earned income or foreign demand replaces it, the economy will slow. And America?s households may finally turn to the unfinished business that the last, mild recession never took care of: namely, a savings rate of little more than 2% of disposable income.
..."
A savings rate of only 2% is very poor.
What is it, do people expect the gubberment to take care of them? Who gave them that silly idea?
Personally, I'm saving at about 11%, before matching, right now and expect to increase that a few percent as soon as one kid gets out of college.
Hayabusa Rider
Admin Emeritus & Elite Member
- Jan 26, 2000
- 50,879
- 4,268
- 126
Much depends on where you live. Houses that were selling for less than 200k here 5 years ago are 600k+. Fixxeruppers at 450. This is not the neighborhood of the rich and famous. There is no place to buy cheaper around here.
I'm amazed at the excuses people make for idiotic behavior.
Buying a car you can afford makes a lot of sense. Buying a car you cannot afford then adding some chrome 20" spinners does not. Low interest rates do NOT change how much car you can truly afford. It changes your perception of what you can afford. Further, these 72 and 84 month payment schedules are utterly ridiculous.
I have two friends living in a SF SOMA apt that they paid 450k for several years ago. She makes 6-figures and he does as well . . . but they are balking at the going rate for 1000 sq ft homes in SF.
College loans are sound investment (typically) but many college kids graduate with thousands of dollars in credit card debt. That's a horrible way to start out.
As for the federal government, it would be a different story if we were "investing" billions of deficit dollars in improving education, sustainable healthcare, mass transit, new technologies for energy independence . . . instead we are pissing billions away on farm subsidies, fossil fuel subsidies, pharmaceutical industry subsidies, and defense contractor handouts. In the meantime, the coming tsunami of old arse sickly Boomers begging for Cialis is really gonna sux for those of us that will pay the bills.
Oh and don't forget paying the interest on the GROWING debt.
Buying a car you can afford makes a lot of sense. Buying a car you cannot afford then adding some chrome 20" spinners does not. Low interest rates do NOT change how much car you can truly afford. It changes your perception of what you can afford. Further, these 72 and 84 month payment schedules are utterly ridiculous.
I have two friends living in a SF SOMA apt that they paid 450k for several years ago. She makes 6-figures and he does as well . . . but they are balking at the going rate for 1000 sq ft homes in SF.
College loans are sound investment (typically) but many college kids graduate with thousands of dollars in credit card debt. That's a horrible way to start out.
As for the federal government, it would be a different story if we were "investing" billions of deficit dollars in improving education, sustainable healthcare, mass transit, new technologies for energy independence . . . instead we are pissing billions away on farm subsidies, fossil fuel subsidies, pharmaceutical industry subsidies, and defense contractor handouts. In the meantime, the coming tsunami of old arse sickly Boomers begging for Cialis is really gonna sux for those of us that will pay the bills.
Oh and don't forget paying the interest on the GROWING debt.
Yeah, a whopping 0.3%. How fast is that debt rising? At a much faster rate. Go look at the chart again. I think you keep missing the point.
and without know the interest rates attached to that debt, I cant make full judgement on if is a bad situation getting worse, or a bad situation getting better. My debt load greatly increased 2 years ago when I got a house, but things are getting financially better for me. This is impossible according to yourself.
According to greenspan he is not worried about the rising debt, as it is being offset by wealth created in the housing market
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