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US Household Debt Surpasses 2008 High

nytimes.com

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Re: US Household Debt Surpasses 2008 High

#71

Post by ryandamm »

dmix wrote: post #27
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 f…

Where the capital goes is distinct from the fact that it's coming in the first place.

No one is choosing to misallocate capital, which then drives foreign investment. The dynamic that makes more sense to me is: foreign entities want to invest in the US, they deploy capital here, and that creates liquidity (lower interest rates, etc) while also increasing the debt load.

How that capital gets allocated is a function of domestic dynamics (political, economic, etc) -- but the fact that there is capital to allocate is, as I note, exogenous.

Re: US Household Debt Surpasses 2008 High

#72

Post by yuhong »

ryandamm wrote: post #54
yuhong wrote: post #31

Earlier quoted context omitted.

The US economy has been based on debt since the 1970s. The more debt increases, more goods gets imported from other countries. One other important debt is government debt, which was one of the reasons we got off the gold standard in the first place. The more government agencies such as the NSA spends, the more money gets printed. Now you see why Medicare can't negotiate drug prices too. Of course, I suspect that thin…

Well, my point (and Pettis's) is that causality runs the other way: we have debt in the US because non-US entities (individuals, businesses, and governments) continue to invest money here. That investment results in spending in excess of production, i.e., debt. It plays out in government spending, household debt, corporate debt, and the exact distribution is a function of internal dynamics. But the entire amounts mus…

I like to think more in terms of the trade deficit and budget deficit.

Re: US Household Debt Surpasses 2008 High

#73

Post by ceejayoz »

subterfudge4 wrote: post #65
fwefwwfe wrote: post #47

Earlier quoted context omitted.

Because the initial increase in pay and lifetime increase in earnings is well worth it. Why do so many people get car and house loans they take more than 2 years to pay off?

If it is worth it then why complain so much ?

Because it doesn't necessarily have to cost that much. There are world-class universities in Europe, Australia, Japan, etc. that don't cost $60k+ a year.

Re: US Household Debt Surpasses 2008 High

#74

Post by sologoub »

NTDF9 wrote: post #9
encoderer wrote: post #5

Earlier quoted context omitted.

Also no mention of "share of GDP". Basically, the article is rubbish.

Share of GDP seems important. Why is this rubbish?

Not the OP, but I think the comment meant that without inflation adjustment and proper ratios, you can't draw correct conclusions.

The nominal number is big, but 2008 number is today's dollars would have been $14.17 trillion, or 11.3% higher than the current debt reported.

Re: US Household Debt Surpasses 2008 High

#75

Post by opportune »

masterleep wrote: post #28
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.

I think this is true with regards to loans and grants that are independent of the university, but not for direct subsidizing of the education through the university. That is, I think you're right that guaranteeing large loans and things like Pell Grants simply incentivizes universities to increase their prices by that much.

However, what should/could be done, is states could do what they've been supposed to do this whole time and begin actually covering students' tuition directly. Unfortunately most states don't increase tertiary education spending YOY at a rate fast enough to cover the increasing costs and enrollment numbers. So the burden falls on the federal government, which gave us this terrible debt-based system

Re: US Household Debt Surpasses 2008 High

#76

Post by godtoldmetodoit »

rrggrr wrote: post #21

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 st…

What economic growth policies could we enact that would result in 5-6% GDP growth? From my admittedly limited understanding, that seems to be quite the stretch.

Re: US Household Debt Surpasses 2008 High

#77

Post by snappyTertle »

nnfy wrote: post #36
ericd wrote: post #22

Earlier quoted context omitted.

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 th…

The prices have spiked because loans are guaranteed by the government and unforgivable, which creates a situation where loans are given to more individuals, which leads to a greater demand for college, and a resulting price increase. This is a problem caused by government, not a lack of funding.

Exactly...sounds eerily similar to the way housing was inflated by government. People then blame greedy capitalists and ask for even more government intervention :(

Re: US Household Debt Surpasses 2008 High

#78

Post by duncan_bayne »

shriphani wrote: post #58
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…

I found this comment on Quora: Through 1992, the top 50 colleges in the USA got together each year to collude on: amount of tuition base salary for assistant professors preventing any bidding wars for applicants Then the Federal government sued and put a stop to that. However, by that point the tuition was way out of whack and the private elite colleges are still allowed to increase tuition at a rate that is above th…

Welcome to the vicious cycle of Government intervention.

"Well we threatened a bunch of people with violence until they behaved against their own judgement. Turns out this led to all sorts of problems. Better do some more threatening to correct it."

In addition to being moral, a free market avoids this sort of feedback loop.

Re: US Household Debt Surpasses 2008 High

#79

Post by fratlas »

austenallred wrote: post #70
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 sure feels like a bubble to me. I don't know how many friends I have with six figures of student loans and no career, but it's a lot. Considering that those loans don't even go away with bankruptcy, it's waaaay too many. I've noticed that younger students are starting to realize how much risk there is in something like that and shy away when my generation didn't. Maybe it's that I grew up in a "striving" middle cl…

Your last paragraph describes the Australian university system. Government foots the bill to invest in your education, you pay it back gradually (and not until you're earning enough for it not to hurt).

Re: US Household Debt Surpasses 2008 High

#80

Post by alistairSH »

runT1ME wrote: post #53
irrational wrote: post #40

Earlier quoted context omitted.

Because there are almost no jobs available that pay more than minimum wage that do not require a college degree.

Except, you know...software engineer, IT, DevOps, Infosec, WebDev, etc.

1. Those are a very small portion of the total available jobs. Even if every 18 year old had the aptitude, there aren't enough of those jobs.

2. It's a LOT easier to get into all of those fields with a relevant degree. As noted elsewhere, a degree is a strong signal that you can perform at least some of the work.

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