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US might be a 'nation of deadbeats'

Americans have been paying down debt but walking away from more.

By MSN Money Partner Jan 15, 2013 12:49PM

This post comes from Brett Arends at partner site MarketWatch.

 

MarketWatch logoPresident Barack Obama said on Monday that "we are not a nation of deadbeats," but instead a people who "pay our bills."

 

Image: WorriedMan (© Corbis)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.

 

More on MarketWatch and MSN Money:

 

430Comments
May 23, 2013 2:51PM
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The telling line is at the top.

"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."

What happened in that same five years?  The Bush administration and big business plunged America into near depression with the resultant loss of millions of jobs.

Where was this author's mind when he wrote this?  Was he too busy counting his stocks and bonds dividend's.

Jan 18, 2013 3:35PM
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Govt is run by special interests so it all is going to defy logic.

 

For households, this country -- the instant gratification nation -- cannot pay its own bills because there are only so many adults and lots of overage-children whose parents will not throw them out. Thes brats just create the New America of wants, demands and entitlement. The govt follows suit, it's a huge group of whiny-kids who can order their own raises, make huge demands for their wants and have no way to pay for it all.  

Jan 16, 2013 5:22PM
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Democracy fails when we take from those who are willing to work and give to those who would not....a quote from Thomas Jefferson.  This country is falling very fast because we have a president who is rewarding the have nots and sticking it to the haves.  The haves are not putting any of their money into the system because they are protecting what they have earned through hard work and responsible decisions.  Obama demonizes success and rewards laziness and poor decisions, thus we are now a nation of deadbeats on the downward spiral.

Jan 16, 2013 4:49PM
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well why waS MY POST DELETED DID I OFFEND SOMEONE?? WELL YOU KNOW WHAT IT SOUNDS LIKE FROM HERE  WAAAAAAAAAAAAAAAAAAAAAA!!!!!!!!!!!!??IF EVERY ONE WOULD STOP DEPENDING ON EACH OTHER  AND JUST BE SELFISH!!<<. OH WAIT>> THATS WHATS HAPPENING!!!! NEWS FLASH IF YOU THINK YOU MUST BE SO SELFISH AND  GREEDY THAT YOU DESTROY THOSE LESS FORTUNATE THEN YOU THEN GUESS WHAT,THOSE MONEY GREEDY CORP. NEED US POOR PEOPLE TO SURVIVE AND TIMES ARE CHANGING WE ARE TIRED OF  IT .. .  ITS GETTING TO A STUPID RIDICULES POINT!! I AM BOYCOTTING ALL PRODUCTS THAT HAVE RAISED THERE PRICES AND REDUCED THERE QUANTITY SO LOOK OUT//// THE GREEDY///  //WILL FALL>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>!  
Jan 16, 2013 4:37PM
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When you lose your job and cannot find another to equally replace it, debt will pile up and default. Unemployment in this country will continue to get worse but not necessarily for the reason/s you might think. Technology is eliminating our jobs and doing so at an ever increasing pace. Sixty (60) minutes just had a segment on this very topic and it was a little scary. Technology is taking over many jobs that humans had been doing and there is no end in sight. We are being replaced by robotic machines and AI software. What will we do to make a living when technology has completely saturated the workplace?  Two MIT specialist said and I quote: "That is the 64 thousand dollar question". 

Jan 16, 2013 4:04PM
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I'm all for letting people stand on their own.  Or in many cases, fall. 

 

I have had roommates, lived with family, had ramen 3 meals a day, and worked two jobs at a time. 

 

I have a house, I live how I want, I pay my bills, and the world keeps on working.

 

I eat out, drink name brand soda, buy the latest games and books. 

 

I save money, I put away so I can have what I want. 

 

If I can, anyone can.

Jan 16, 2013 4:00PM
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The deadbeats are the ones  getting govermaant assistance and the tax payers foot the bill  for those who could work but don't want to as long as they get a check by Obamas govermant.
Jan 16, 2013 3:45PM
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Stupidity in this idiot know no bounds.  Sad part is he believes his own words, because he is too stupid to know any different.  That's what happens when society tells people like him, that they are really doing a good job, when in fact he sucks.
Jan 16, 2013 3:40PM
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can some one explain how a write off makes a debt dissappear?
Jan 16, 2013 3:15PM
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So many comments from people spewing crap form the ****.  Get your facts straight and bring your opinions back to earth.  What the hell is this 47% number, that's not bad compared to the amount of idiots we have in this country. 
Jan 16, 2013 3:13PM
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This administration would love a nation of deadbeats, with their hands out! That's exactly what they are aiming for: more people dependent on government=more government control over their lives.  In fact, they are doing everything in their power to make sure that happens.  Meanwhile, our economy is down and disposable income is shrinking for most of us, this administration is counting on us to be too concerned with out own immediate situation so (they think) we won't notice them trampling over the constitution and interfering with our individual liberties.  The citizens of this country need to wake up and realize that our freedoms are being systematically taken away for the alleged "greater good".  Greater good?  Decided by whom?  Obama? Congress?  What makes you think that they are any smarter than any of you?? Very insidious what's going on.
Jan 16, 2013 3:11PM
Jan 16, 2013 3:09PM
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the government likes to spend money.money it doesn't have.

hasn't passed a budget in over 1300 days.no wonder the credit keeps on getting down graded.

Jan 16, 2013 3:08PM
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TODAY 1/16   "Treasury Secretary Timothy Geithner says the government has begun borrowing from the federal employee pension fund to keep operating without surpassing its debt limit."

Hey Timmy, how about paying back the SS Fund while your at it.
Jan 16, 2013 3:05PM
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A  LOT of the people who you call deadbeats are either older than 40, are unemployed or have been unemployed "too long",  or have criminal records even though they repaid their debt to society, they still have a record. Most of them would love to work if someone would hire them.If  you or your employers won"t hire them than don"t complain about their government "handouts". They are people just like you and me who need money to live.
Jan 16, 2013 3:02PM
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Well Red121212:

No, I am not what they are talking about what-so-ever, and where did you get that idea? I pay my bills, and you want to know how I do that. I work at all kinds of different things to get the job done, I paint houses for Realtors, I am an artist, I sing, even recorded my own music down in North Carolina where the Backstreet Boys records, which I might say when I copy-write my music, they wanted to buy my songs. It took me 7 years to buy my first house, worked 7 days a week to do that, I went to Beauty School, got the highest grade anyone has ever received, and was elected to be a teacher (which is by election only). I have a BA in business, I am an accountant, I can sew, and have worked as a professional seamstress. I can drywall, change oil, plugs, change a flat tire, and I graduated with a 3.68 GPA. Now am I that person you are talking about? I come from a huge family, extremely poor, you could compare me with Oprah's background, except we had 25 people living in one house. I own two houses, a company van, and a 2009 Rio, and did this all on my own. I have a DJ/KJ business for 15 years, and have been named the Queen in my town. Do you see a dead-beat here that doesn't take responsibility for as reckless debtor?

Jan 16, 2013 2:45PM
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We truly are becoming the deadbeat nation. Do nothing say nothing. A bunch of ninnies lead by an even bigger ninnie. Give me some more free stuff.
Jan 16, 2013 2:35PM
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a democracy cannot exist as a permanent form of government.once the voters discover that they can vote themselves largess from the public treasury. from that moment on, the majority always votes for the cadidates promising the most benefits from the public treasury with the results that a democracy always collapes over loose fiscal policy, always followed by a dictatorship. the average age of the worlds greatest civilizations has been 200 years "great nations rise and fall. the people go from bondage to spiritual truth,to great courage, from courage to liberty, from liberty to abundance, from aboundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence from dependence back to bondage "  so people where do you think we are today?
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