US might be a 'nation of deadbeats'
Americans have been paying down debt but walking away from more.
This post comes from Brett Arends at partner site MarketWatch.
President Barack Obama said on Monday that "we are not a nation of deadbeats," but instead a people who "pay our bills."
Really?
A close look at the data reveals a very different story -- and one that gets far too little airing in public discourse.
Far from paying our bills, the current generation of Americans -- or some of them -- have set records for default which probably have no parallel in the history of the human race. During the last five years, U.S. individuals have walked away from a staggering $585 billion in mortgages, credit card debts and other personal loans. That works out at about $6,000 per household.
And if the numbers are to be believed, there is probably a lot more to come.
Turn on any news program devoted to the economy and you will doubtless hear some Wall Street blowhard telling you that American households have been "repairing their balance sheets" and paying down their debts. They make it sound so virtuous, and they often then segue into sneering remarks about those degenerate Greeks and other Europeans who don't behave in the same responsible way.
The truth is very different. According to the Federal Reserve, U.S. household debt peaked five years ago at a gigantic $13.8 trillion. Since then it has declined to $12.9 trillion -- a decline of about 7%. To put that in context, household debts today still exceed those seen at the end of 2006, near the peak of the bubble. They are three times what they were in 1998.
Furthermore, the majority of that reduction hasn't come from people paying off their loans, but from banks writing them off.
The total debt reduction from the peak, says the Fed, is $954 billion. Loan write-offs, at $585 billion, account for 60% of that. In other words, for all the chest-thumping about how Americans are repairing their balance sheets and how we aren't a nation of deadbeats, in the past five years Americans have walked away from $3 in debt for every $2 they've paid off.
In the first quarter of 2010 alone, about 13% of all credit card debt was just written off.
Households weren't alone. Corporations have defaulted on $35 billion to $40 billion in debt per year in recent years, according to Moody's.
Naturally this has occurred even while the federal government has bailed out bankrupt financial institutions, and flooded the economy with massive deficits, low interest rates and free money to make it all easier.
Heaven knows what the situation would have looked like under a system of honest money.
It's easy to get too sanctimonious. Once a country gets itself into a disastrous debt hole, write-offs may be the only sensible way out. After all, for every reckless borrower there was also a reckless lender. If a debt is not going to be repaid, a policy of "extend and pretend," let alone, say, debtors' prison, is not going to help. So maybe deadbeat economics is the way to go.
But let's go easy on the chest-thumping.
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You pay your mortgage faithfully, denying yourself the newest big screen TV while your neighbor defaults on his mortgage (while buying iPhones, TV 's and new cars) and the government forgives his debt and reduces his mortgage (with your tax dollars).
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
Not fair to make judgment of this, until you see what the Fire Chief says!!!!
In South Los Angeles , a 4-plex home was destroyed by a fire.
A Mexican family of six, all welfare recipients and gang members,
Lived on the first floor, they died.
An Islamic group of seven welfare cheats,
All illegally in the countryfrom Kenya , lived on the second floor,
And they, too, all perished in thefire.
6 LA, Hispanic, ****ers, & ex-cons,
Lived on the 3rd floor and they, too, died.
A lone, white couple lived on the top floor.
The couple survived the fire.
Jesse Jackson, John Burris and Al Sharpton were furious!!
They flew into LA and met with the fire chief, on camera.
They loudly demanded to know,
Why the Blacks, Black Muslims and Hispanics,
All died in the fire and why only the White couple lived?
The Fire Chief said,
"They were at work"
1) Only in America could the rich people - who pay 86% of all income taxes - be accused of not paying their "fair share" by people who don't pay any income taxes at all.
2) Only in America could people claim that the government still discriminates against black Americans when they have a black President, a black Attorney General, and roughly 18% of the federal workforce is black while only 12% of the population is black
3) Only in America could they have had the two people most responsible for our tax code, Timothy Geithner, the head of the Treasury Department and Charles Rangel who once ran the Ways and Means
Committee, BOTH turn out to be tax cheats who are in favor of higher taxes.
4) Only in America can they have terrorists kill people in the name of Allah and have the media primarily react by fretting that Muslims might be harmed by the backlash.
5) Only in America would they make people who want to legally become American citizens wait for years in their home countries and pay tens of thousands of dollars for the privilege while we discuss letting anyone who sneaks into the country illegally just 'magically' become American citizens.
6) Only in America could the people who believe in balancing the budget and sticking by the country's Constitution be thought of as "extremists."
7) Only in America could you need to present a driver's license to cash a check or buy alcohol, but not to vote.
8) Only in America could people demand the government investigate whether oil companies are gouging the public because the price of gas went up when the return on equity invested in a major U.S. oil company (Marathon Oil) is less than half of a company making tennis shoes (Nike).
9) Only in America could the government collect more tax dollars from the people than any nation in recorded history, still spend a Trillion dollars more than it has per year - for total spending of $7-Million
PER MINUTE, and complain that it doesn't have nearly enough money.
10) Only in America could politicians talk about the greed of the rich at a $35,000.00 a plate campaign fund-raising event.
11) Only in America can a man with no background, no qualifications and no experience ... and a complete failure at his job ... be reelected.
Less than three hours later, the President of the United States issued an executive order BLOCKING THE ENTIRE STATE OF ARIZONA 'S ACCESS to the the Federal Database that would allow such checks. The only State or Local entity EVER to be blocked.
One hour after that (which means they had it all ready in advance), the Department of Justice went live with a toll-free number, a web site, and ads, ASKING FOR PEOPLE TO REPORT BEING "RACIALLY PROFILED" because of this ruling, so they - THE U.S. JUSTICE DEPARTMENT - can file "Civil Rights" lawsuits against the Police Departments, Sheriffs, Cities, Counties and State of Arizona .
In other words, the American Citizens of the State of Arizona are going to be sued for vast sums of money, BY THEIR OWN FEDERAL GOVERNMENT, for enforcing a law that The Supreme Court UNANIMOUSLY held as constitutional.
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