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:
- Can Bieber make prepaid cards cool?
- 10 things your office won't say
- Banks bury fees in the fine print
- Smart Spending on the go: Get our app for Android or iPhone
- New budget fix: Pawn Mount Rushmore?
- Should we all pay more taxes?
"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.
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.
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.
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.
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.
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?
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
ABOUT SMART SPENDING
LATEST BLOG POSTS
The Consumer Financial Protection Bureau's complaint database highlights the worst problems people have with collectors.
VIDEO ON MSN MONEY
BLOGS WE LIKE
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'