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.
More on MarketWatch and MSN Money:
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- 10 things your office won't say
- Banks bury fees in the fine print
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- New budget fix: Pawn Mount Rushmore?
- Should we all pay more taxes?
The posters on this article appear to have not bothered to read it before expressing their views of the Government.
This, despite the fact that the article is about our personal debt & how we handled it.
It is sad to see that no one seems to realize that the government has not defaulted on its debt, although there are some in the Congress who seem to favor that approach, while many in their personal finances have defaulted, and chosen to be "deadbeats".
How about the fact that I don't owe anything to anyone? Even my mortgage is paid off. Can I thump my chest about that?
Here's a little advice for the "debt ridden." If you can't pay for it, don't buy it. The ONLY exceptions should be a house and a sensible car and you should drive that car as long as you can.
you people are so full of yourselves its ridiculous. The federal deficit isn't from helping the less advantaged in our country. It's from years of senseless wars, excessive military spending, trying to buy allies, and out right fraud and stealing from government funds.
I worked so hard and their giving my tax dollars away. So do millions of us, but helping people in our own society improves life for all, less crime, less hate, less violence.
that what you do for the least of us, is what awaits you.
Accountability has been destroyed by the governemt and media. You are legally allowed, and encouraged, to weasel your way out of any bad decisions you make. Get pregnant -have an abortion, murder somebody - 2 to 5 years is good enough, overspend - file bankruptcy, don't go to work - get entitlements, don't like the contract you signed -don't honor it, don't want to raise your kids - make the schools do it. In business, obama and Geitner even made sure the principal of moral hazard was destroyed.
Obama and his type want everybody to rely on them for everything. Then they can redistribute all of the wealth the way they see fit. Which, in case you have not figured it out yet, is not geared towards rewarding the hard working people who built this country.
I think its time to suspend all the free money we give the indians, hell they have been reimbursed
enough dont you think?
Need to start sending that to another oppressed group-the working white folks!!!!!!!!
...deadbeats? My brother wrote the book. MF're has been sponging off of society from the day he got out of high school and is heading to a "retirement" of sponging off of the rest of us. NEVER in his miserable life has he applied for a job, every job he's worked has been handed to him only to quit when ever conditions aren't "right" for him. He's nearly FIFTY and no bigger POS has ever flopped. When mom dies I have no idea what he plans then. He has NO SS income in the future and the F'er won't even get on food stamps he's so fooking lazy.
Sometimes I just want to pound his head in with a baseball bat and put him out of our misery.......
When you compare my generation to my children's generation notice;
Today if you work hard and sweat you are considered dirty not blessed to have a job.
Many large companies have yelled because they have to pay their worker a living wage while their company is making huge profits. There is a push today to have 2 classes. working class and wealthy class and the working class is considered stupid by the wealthy class. No kidding the Greedy part of our society believe they deserve to be elite and their employees provisions are not their concern.
America is a nation of Deadbeats.
The Rich instead of promoting new businesses right here in the U.S., creating jobs, sit back and tell us how much money they give to Charity.
The recent rate of increase in Social Security Disability by the young to avoid work is staggering.
Why do we provide free school lunches to people on food stamps?
Unemployment out to 99 weeks now without any demands for job retraining to collect these benefits.
Student debt for loans now tops 1 trillion dollars. Puts the students iin a lifetime of debt and enriches the retirement beneftis of teachers. IT IS BIG BUSINESSES
Lawyers win, no matter what side they are on they always get paid even if they lose.
Only in America------Instead of Made in America
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