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US Household Debt Surpasses 2008 High

nytimes.com

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Re: US Household Debt Surpasses 2008 High

#21

Post by rrggrr »

Keep in-mind this household debt is above and beyond each household's share of their municipal, county, state and federal debt.

If you live in LA County, CA:

- about $4,200 in State Debt.

- roughly another $4,000 or in LA County debt.

- $161,000 in federal debt.

- $16,000 in credit card debt on average.

- Car loan, home payment, etc.

And on average your savings are minimal. Most importantly, if this isn't you, its still someone you'll be bailing out through higher taxes and/or some other shared burden.

Ironically, the more indebted we become the more dependent we are on our government to address the problems widespread indebtedness creates. This may explain why efforts to enact economic growth policies that restore 5-6% GDP growth are met with all talk and no action in most state capitals and Washington, D.C. Its almost as if they wish to intentionally drive the the country over the fiscal cliff.

Re: US Household Debt Surpasses 2008 High

#22

Post by ericd »

bariereefwozere wrote: post #16
manacit wrote: post #10

I don't know if it's a "bubble" (I am not qualified to say that), but I can't imagine that the current trend with student loans will continue. Looking at the numbers for someone entering college in 2017, it feels nearly predatory what a good portion of private and out of state colleges are charging. Even with financial aid, $30-40k a year for 4-5 years is insane. I was fortunate enough to have parents who made saving…

> it feels nearly predatory what a good portion of private and out of state colleges are charging From an outsiders (AU) perspective, it sounds very depressing for youngsters - massive student loans and then you need to jump on the mortgage treadmill (unless you're lucky). It almost sounds to the point where individual students could pay for personal tutors with the amount of cash they're spending* (or borrowing then…

iirc US and state government funding for public universities has decreased severely, which has caused tuition to spike up. That's probably at least one major factor in the hikes - what taxes used to pay for, now individuals pay for directly.

Except that the top marginal tax rates also used to be much, much higher, so it was subsidized by the rich.

But then, there are also many more people going to college now, and there aren't any new Ivy League schools being minted.

If it gets bad enough, the pressure to find alternative ways to educate will build up until we find a good alternative route.

Re: US Household Debt Surpasses 2008 High

#24

Post by rrggrr »

tacct142 wrote: post #6

Excellent. Which group of poor decision makers will I get to bail out soon (oh, students, superb!) while reading my daily "The Death of the Middle Class" article?

You will be bailing our your State's underfunded pension first, most likely. If not your State then some other State when their debt is federalized.

Re: US Household Debt Surpasses 2008 High

#25

Post by btilly »

This is very worrisome. This is ballooning student debt. And unlike other forms of debt, you don't get to discharge student debt in bankruptcy.

So..plan a career, get higher education, have your plans disrupted, and your life is ruined with no escape. Enjoy the 21st century.

What is really sad is that there is no evidence that colleges are providing a better product. In fact the switch to grad students and adjunct faculty means that the actual delivery of their education should be cheaper. (Of course universities are getting less efficient, so it isn't. But the cost of classroom instruction time is not what is going up...)

Re: US Household Debt Surpasses 2008 High

#26

Post by ianai »

tsunamifury wrote: post #13
manacit wrote: post #10

I don't know if it's a "bubble" (I am not qualified to say that), but I can't imagine that the current trend with student loans will continue. Looking at the numbers for someone entering college in 2017, it feels nearly predatory what a good portion of private and out of state colleges are charging. Even with financial aid, $30-40k a year for 4-5 years is insane. I was fortunate enough to have parents who made saving…

Just because you find the price of college irrational, doesn't mean that the market will automatically correct it. If the past years and crashes have proved anything, its that the market will stay irrational until it crashes.

It doubly blows my mind considering campuses now compete against online colleges. There are definitely important differences between the two experiences. But you still have to weigh the two against one another. At some point that should undercut the costs.

As far as being a bubble...there's definitely overvaluation. I think the term "bubble" is both too small and too narrow focused for what's going on right now. People just voted in Trump because they want work. I don't know how society corrects all of this, and it all feels related.

Re: US Household Debt Surpasses 2008 High

#27

Post by dmix »

ryandamm wrote: post #20

An alternative view, and one I happen to subscribe to: a balance sheet analysis shows that US debt must go up over time to support exogenous capital flows. Whether US debt grows in the housing sector, student loans, revolving debt, etc is a function of internal, domestic dynamics (including laws, local economic structure, etc). But the total capital flow into the US exceeds the outflow; that money ends up on a balanc…

It's just as likely the moral hazards of yesterday were never properly dealth with, market corrections didn't properly happen during the downturn, and we're seeing a continuation of misplaced capital. ie, far too much going into residential real estate and student loans, not enough being invested in business. I remember reading that small/medium business growth and capitalization has flatlined as the housing market flourished.

In Canada where we have a similar housing crisis nearing a peak SMB growth actually declined recently.

The thing people often forget with these 'bubbles' is that it's not just risky because people lose money in their investments, but it's a massive misallocation of capital away from productive assets. Productive things like job growth and developing new industries and expanding old ones, to increase job growth and wages... which the US desperately needs, as the whole NAFTA/globalization debate highlighted.

Re: US Household Debt Surpasses 2008 High

#28

Post by masterleep »

manacit wrote: post #10

I don't know if it's a "bubble" (I am not qualified to say that), but I can't imagine that the current trend with student loans will continue. Looking at the numbers for someone entering college in 2017, it feels nearly predatory what a good portion of private and out of state colleges are charging. Even with financial aid, $30-40k a year for 4-5 years is insane. I was fortunate enough to have parents who made saving…

The more the government subsidizes higher education, the more expensive it becomes.

Re: US Household Debt Surpasses 2008 High

#30

Post by rrggrr »

ryandamm wrote: post #20

An alternative view, and one I happen to subscribe to: a balance sheet analysis shows that US debt must go up over time to support exogenous capital flows. Whether US debt grows in the housing sector, student loans, revolving debt, etc is a function of internal, domestic dynamics (including laws, local economic structure, etc). But the total capital flow into the US exceeds the outflow; that money ends up on a balanc…

Yes. Pettis. Anyone on HN commenting on economics must read Pettis. In very brief his simplified thesis: One country's public policy decision to subsidize export-led growth requires another country's public policy decision to also subsidize that growth through import consumption and debt. The accounts must balance.
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