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Americans Hold Over $4.1T in Consumer Debt

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Re: Americans Hold Over $4.1T in Consumer Debt

#101

Post by angry-hacker »

bdcravens wrote: post #89
aaronblohowiak wrote: post #53

Earlier quoted context omitted.

You are comparing pre-tax income (USA) and post-tax (UK)! You also mixed your units. TO use net-adjusted disposable income, USA has 41k USD and UK 28k USD. Also, you'd need to adjust for the benefits you get from your government/employer (Health insurance) for a fair comparison. While American workers earn more than UK workers, that does not necessarily imply that the total cost of employment for UK employers is lowe…

> you'd need to adjust for the benefits you get from your government/employer (Health insurance) for a fair comparison Indeed. My out of pocket for medical care this year is $19k (and that's with one of the "gold" plans)

But how much is it compared to your salary? I pay 33% of my income just for Healthcare. Or well, government just takes it :)

Re: Americans Hold Over $4.1T in Consumer Debt

#102

Post by bdcravens »

angry-hacker wrote: post #101
bdcravens wrote: post #89

Earlier quoted context omitted.

> you'd need to adjust for the benefits you get from your government/employer (Health insurance) for a fair comparison Indeed. My out of pocket for medical care this year is $19k (and that's with one of the "gold" plans)

But how much is it compared to your salary? I pay 33% of my income just for Healthcare. Or well, government just takes it :)

I won't give exact numbers, but somewhere between 10% and 33%. :-)

But for a typical developer, that would be in the neighborhood of 20%.

Re: Americans Hold Over $4.1T in Consumer Debt

#104

Post by walshemj »

dpweb wrote: post #52
NumberSix wrote: post #30

The United States has a total resident population (as of January 23, 2017) of 324,420,000 people (about 324 million). Source: https://en.wikipedia.org/wiki/Demographics_of_the_United_Sta... Thus, $4.1 trillion in consumer debt works out to $12,638 per person. The Gross Domestic Product (GDP) in the United States was worth 18036.65 billion (about $18 trillion) US dollars in 2015. That is about $55,424 per person. Note…

The important thing really is the financial fragility of the American household. Millions of people know that they are one unexpected event away from insolvency. GDP doesn't mean anything to them. Consumer debt just puts them more at risk.

In the UK recently they found that almost 25% of the population had less than £100 in savings

Re: Americans Hold Over $4.1T in Consumer Debt

#105

Post by jeffdavis »

brandmeyer wrote: post #90
cylinder wrote: post #60

Earlier quoted context omitted.

Looking at principal balances is all wrong. GDP means nothing in this instance either. What matters, and what lenders look at, is debt serviceability. Lenders don't want principal paid back, ideally you just keep paying interest for life. Let's say median household: Income: $4000/mo Rent: $1500/mo Other necessities: $2000/mo Let's say $500/mo "disposable." It's from this that the interest needs to be paid to service…

> What matters, and what lenders look at, is debt serviceability. Quite true. But it also implies something else: Because the disparity of income levels in the US is so broad, just talking about the problem in terms of national totals and averages is useless. Show me the problem divided up by quantiles of the population, maybe even log-scaled as you get closer to the top, and then I might believe that there's a probl…

Don't look at quantiles, look at people over time. Quantiles conflate poor working families with middle-class college students.

Re: Americans Hold Over $4.1T in Consumer Debt

#106

Post by jordache »

NumberSix wrote: post #30

The United States has a total resident population (as of January 23, 2017) of 324,420,000 people (about 324 million). Source: https://en.wikipedia.org/wiki/Demographics_of_the_United_Sta... Thus, $4.1 trillion in consumer debt works out to $12,638 per person. The Gross Domestic Product (GDP) in the United States was worth 18036.65 billion (about $18 trillion) US dollars in 2015. That is about $55,424 per person. Note…

GDP has little correlation with individual's ability to create monetary wealth.

Re: Americans Hold Over $4.1T in Consumer Debt

#107

Post by sokoloff »

graeme wrote: post #71
NumberSix wrote: post #30

The United States has a total resident population (as of January 23, 2017) of 324,420,000 people (about 324 million). Source: https://en.wikipedia.org/wiki/Demographics_of_the_United_Sta... Thus, $4.1 trillion in consumer debt works out to $12,638 per person. The Gross Domestic Product (GDP) in the United States was worth 18036.65 billion (about $18 trillion) US dollars in 2015. That is about $55,424 per person. Note…

>It is difficult to evaluate credit card debt because credit cards have increasingly become the substitute for cash in the United States. How much of the debt is extremely short term and essentially represents what used to be cash transactions? Indeed, I've often wondered this. If someone has an average $3000 credit card balance that they pay off in full when due, are they listed as having $3000 in consumer debt on a…

That's exactly how it shows on my credit report, so I'd assume "yes". (Source: I'm refinancing my house, so I happen to have a recent credit report pulled as part of that.)

Re: Americans Hold Over $4.1T in Consumer Debt

#108

Post by sokoloff »

nugget wrote: post #64
grandalf wrote: post #33

Earlier quoted context omitted.

More likely we'll see more forms of non-dischargable consumer debt. This is debt which is not discharged when someone declares bankruptcy. Every time you hear a politician advocating more student loans (rather than more affordable higher ed), one of the reasons they do this is because student loans are non-dischargeable. Think about someone who is 18 and takes on lots of debt. There would be very little reason not to…

There are debt forgiveness programs like PSLF that I expect to become wildly more popular in the future. We're only ever a Presidential election away from dramatic changes to student loan treatment.

And with that the risk of the permanent destruction of the market for student lending in the future, meaning college will go back to being a upper-class game.

Re: Americans Hold Over $4.1T in Consumer Debt

#109

Post by incongruity »

ericd wrote: post #94
FullMtlAlcoholc wrote: post #93

Earlier quoted context omitted.

> convince otherwise rational people to make an irrational decision This is a myth that economics will not let go of. Almost all human decisions are influenced by emotions. Here's two examples: [A] Would you rather receive $49 or have a 50% of receiving $100? - The rational decision would be to choose the 50% chance since your expected value would be $50. Most people go for the $49, humans are irrationally risk-avers…

Reducing variance is worth real money to people, since the marginal utility of the first dollar is much higher than the 1000th.

Adding to that - it's the flaw of averages at work in many of those examples. The listed "expected value" in some of those examples could never actually be a real outcome of the examples - it is completely rational to opt to take a 500 loss rather than risk a 1000 loss if you have, say, only 750 to your name and cannot be overdrawn (see debtors prison or whatever incentive one would like to imagine). The expected value of the $500 loss only happens in one option. In the $0 or $1000 loss, if you had repeated draws over time it would indeed trend towards an average of a $500 loss but in a single draw situation, you can never achieve the average so you absolutely must view it as different from the flat $500 loss and compare that to your imagined circumstances in this thought exercise.

Re: Americans Hold Over $4.1T in Consumer Debt

#110

Post by geomark »

ericd wrote: post #94
FullMtlAlcoholc wrote: post #93

Earlier quoted context omitted.

> convince otherwise rational people to make an irrational decision This is a myth that economics will not let go of. Almost all human decisions are influenced by emotions. Here's two examples: [A] Would you rather receive $49 or have a 50% of receiving $100? - The rational decision would be to choose the 50% chance since your expected value would be $50. Most people go for the $49, humans are irrationally risk-avers…

Reducing variance is worth real money to people, since the marginal utility of the first dollar is much higher than the 1000th.

Yes. There are many cases where a lower expected value is a rational trade off for reduced variance.
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