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.
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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- Should we all pay more taxes?
What we as a people need to do is demand that the government STOP giving our hard earned tax dollars away! I'm not talking about getting rid of Welfare, but limit it. Some States have required that they be drug tested. This is a start. They need to go through the files and see how many recipients are living in the same house, same apartment. It has become GENERATIONAL! Two, three and sometimes four generations all on welfare, all in the same home.
MORE SO, the American people HAVE to demand that we STOP giving monies to Foreign Nations! Obama is giving Egypt how many BILLIONS of dollars? How many billions to how many countries? How much of our National debt could be paid off with these monies?
Before I'll buy the kids next door shoes, I make sure MY kids have shoes!
Why does MSN only blame the GOP and completely ignore the debt that this president has incurred since becoming our leader. Why does MSN focus only on the GOP and how they will not deal with the debt limit all the while ignoring that this president acts like a dictator and DEMANDS that they do what he say's. HE will not work with anyone, just like the first time we went through the debt limit crisis. If we don't get it through our thick heads that we have a SPENDING problem then we are doomed. The dem's. will once AGAIN tell us that the mean old GOP will take away your SS and you won't be getting your checks and we will buy it again and NOTHING will change as we merrily go off the fiscal cliff never to return.
Does anyone have COMMON SENSE?!!!! As in the book "pamphlet" by Thomas Paine. That's what made this country great. Wouldn't it be curious to know how many "public servants" (joke!) have read it? And what their criticisms would be if they did. (If they could, I mean. I have come to the conclusion that most of them are illiterate because intelligence doesn't mean anything anymore, does it?) I am not a political person, just a healthy one so I have something to add....
You Know You Live In A Country Run By Idiots If….
you are punished and fined for choosing to be healthy and choosing not to be a burden to society, never having to go to the doctor or have insurance while people who eat fast/processed food everyday have hundreds of thousands of dollars surgeries that get sent to insurance companies that other people pay for and not the patient.
Definitions are NOT subjective. Why does freedom mean something totally different for someone else than it does for me? Poor education?
We are not immortal, we never will be. Don't be a burden to others because you like cheeseburgers and soda. An apple a day...
Did anyone ever think that is a way we are deadbeats, too?
This is what you get when you vote for lawyers instead of business people to be in office.
WILL people ever learn the the Govt is a business... so much money coming in, so much going out.
When you spend more than you bring in. Your BUSINESS FAILS. ie the Govt fails.
One Question: Where would we ( the U.S.) be if we could not print our on money?
But I don't get it - if we save instead of spend, we're accused of ruining the economy. Remember Bush's tax rebates to "stimulate" the economy - we were told it won't help if we used our rebate to pay off credit cards. I'm not quite sure how finance "experts" have the nerve to scold about debt - they're part of the problem because they pimp out debt to make money for the banking industry.
I'm in the used vehicle sales business in California. I have to disagree with several points in this article, yet I have to say spot on with some of it also. Young couples, struggling with finances, working and going to school at the same time are usually the the most responsible attitude when it comes time for their car payments. They may not always be on time with their payments, but they make a far better effort then most. The worst at making their payments are the senior citizens and Those that get large amounts of free money from the government because most have no shame about reneging on their contracts because everything is given to them. The absolute worse, and every dealership will agree is the single mother of any age.
I wonder what the next scam will be to get average wage people to prop up the economy for "them". "They" will succeed as long as "you" continue to point fingers in the wrong direction.
Let's not discuss Trump, Hostess, Enron, mining companies and the other corporate deadbeats that declare bankruptcy, often multiple times. The corporate deadbeats that walk away form their debt and obligations. The corporate deadbeats that raid employee pension funds and shaft employees for salaries and pensions. The corporate deadbeats that destroy the environment and walk away leaving a superfund site for me to pay for. No those are such honorable and responsible people. No wonder individuals see not problem with emulating the rich and the corporations that walk away form their responsibilities.
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